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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): June 29, 1999
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 333-75489 13-3526694
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
One New York Plaza 10292
New York, New York (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (212) 778-1000
No Change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets
Description of the Notes and the Mortgage Loans
Prudential Securities Secured Financing Corporation registered
issuances of up to $1,500,000,000 principal amount of Mortgage-Backed Notes on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Act"), by the Registration Statements on Form S-3
(Registration File No. 333-75489) (as amended, the "Registration Statement").
Pursuant to the Registration Statement, ABFS Mortgage Loan Trust 1999-2 (the
"Trust") issued approximately $218,900,000 in aggregate principal amount of its
Backed Notes Certificates (the "Notes"), on June 30, 1999. This Current Report
on Form 8-K is being filed to satisfy an undertaking to file copies of certain
agreements executed in connection with the issuance of the Certificates, the
forms of which were filed as Exhibits to the Registration Statement.
The Notes were issued pursuant to an Indenture (the
"Indenture") attached hereto as Exhibit 4.1, dated as of June 1, 1999, between
ABFS Mortgage Loan Trust 1999-2 (the "Trust") and The Chase Manhattan Bank, in
its capacity as indenture trustee (the "Indenture Trustee"). The Notes consist
of two classes of senior notes, the Class A-1 Notes (the "Class A-1 Notes") and
the Class A-2 Notes (the "Class A-2 Notes", and, collectively with the Class A-1
Notes, the "Class A Notes") and two class of Trust Certificates (the "Trust
Certificates"). Only the Class A Notes were offered. The Notes initially
evidenced, in the aggregate, 100% of the undivided beneficial ownership
interests in the Trust.
The assets of the Trust consist primarily of fixed-rate,
closed-end, conventional, monthly pay, generally fully amortizing, business and
consumer purpose residential home equity or commercial loans (the "Mortgage
Loans") secured by first or second lien mortgages or deeds of trust (the
"Mortgages") on real properties (the "Mortgage Properties"). The Mortgaged
Properties securing the Mortgage Loans consist primarily of single family
residences (which may be detached, part of a two-to four-family dwelling, a
condominium unit or a unit in a planned unit development).
Interest distributions on the Class A Certificates are based
on the Notes Principal Balance thereof and the then applicable Mortgage-Backed
Rate thereof. The Mortgage Rate for the Class A-1 Notes is 7.130% per annum. The
Mortgage-Backed Rate for the Class A-2 Notes is variable.
The Class A-1 Notes and the Class A-2 Notes have original Note
Principal Balances of $197,010,000 and $21,890,000 respectively.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated June 23, 1999 and the
Prospectus Supplement dated June 25 filed pursuant to Rule 424(b) (5) of the Act
on July 1,1999.
Item 7. Financial Statements, Pro Forma Fiancial Information
and Exhibits.
(a) Not applicable
(b) Not applicable
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(c) Exhibits:
1.1 Underwriting Agreement, dated June 10, 1999, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
1.2 Indemnification Agreement, dated as of June 25, 1999, among
Prudential Securities Secured Financing Corporation,
Prudential Securities Incorporated, American Business Credit,
Inc., HomeAmerican Credit, Inc. d/b/a Upland Mortgage, New
Jersey Mortgage and Investment Corp., ABFS 1999-2, Inc., and
Financial Security Assurance Inc.
4.1 Indenture, dated as of June 1, 1999, between ABFS Mortgage
Loan Trust 1999-2 and The Chase Manhattan Bank, as indenture
trustee.
4.2 Unaffiliated Seller's Agreement, dated as of June 1, 1999,
among American Business Credit, Inc., Home American Credit,
Inc. d/b/a/ Upland Mortgage, New Jersey Mortgage and
Investment Corp., Prudential Securities Secured Financing
Corporation, and ABFS 1999-2, Inc.
4.3 Sale and Servicing Agreement, dated as of June 1, 1999, among
Prudential Securities Secured Financing Corporation, American
Business Credit, Inc., ABFS Mortgage Loan Trust 1999-2, Chase
Bank of Texas, N.A., and The Chase Manhattan Bank.
8.1 Opinion of Dewey Ballantine LLP, Counsel to Prudential
Securities Secured Corporation regarding certain tax matters.
10.1 Financial Guaranty Insurance Policy, dated June 29, 1999.
23.1 Consent of PricewaterhouseCoopers, L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and their
report.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION
As Depositor and on behalf of ABFS
Mortgage Loan Trust 1999-2 Registrant
By: /s/ Evan Mitnick
---------------------------------
Name: Evan Mitnick
Title: Vice President
Dated: July 9, 1999
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EXHIBIT INDEX
Exhibit No. Description
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1.1 Underwriting Agreement, dated June 10, 1999, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
1.2 Indemnification Agreement, dated June 25, 1999, among
Prudential Securities Secured Financing Corporation,
Prudential Securities Incorporated, American Business Credit,
Inc., HomeAmerican Credit, Inc. d/b/a Upland Mortgage, New
Jersey Mortgage and Investment Corp., ABFS 1999-2, Inc., and
Financial Security Assurance Inc.
4.1 Indenture, dated as of June 1, 1999, between ABFS Mortgage
Loan Trust 1999-2 and The Chase Manhattan Bank, as indenture
trustee.
4.2 Unaffiliated Seller's Agreement, dated as of June 1, 1999,
among American Business Credit, Inc., Home American Credit,
Inc. d/b/a/ Upland Mortgage, New Jersey Mortgage and
Investment Corp., Prudential Securities Secured Financing
Corporation, and ABFS 1999-2, Inc.
4.3 Sale and Servicing Agreement, dated as of June 1, 1999, among
Prudential Securities Secured Financing Corporation, American
Business Credit, Inc., ABFS Mortgage Loan Trust 1999-2, Chase
Bank of Texas, N.A., and The Chase Manhattan Bank.
8.1 Opinion of Dewey Ballantine LLP, Counsel to Prudential
Securities Secured Corporation regarding certain tax matters.
10.1 Financial Guaranty Insurance Policy, dated June 29, 1999.
23.1 Consent of PricewaterhouseCoopers, L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and their
report.
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Exhibit 1.1
ABFS EQUIPMENT CONTRACT TRUST 1999-A
EQUIPMENT CONTRACT-BACKED NOTES
SERIES 1999-A
UNDERWRITING AGREEMENT
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UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
June 24, 1999
Ladies and Gentlemen:
Prudential Securities Secured Financing Corporation (the
"Depositor") proposes, subject to the terms and conditions stated herein and in
the attached Underwriting Agreement Standard Provisions, dated June 24, 1999
(the "Standard Provisions"), between the Depositor, American Business Leasing,
Inc. (the "Originator") and Prudential Securities Incorporated, to issue and
sell to you (the "Underwriter") the Securities specified in Schedule I hereto
(the "Offered Securities"). The Depositor and the Originator agree that each of
the provisions of the Standard Provisions is incorporated herein by reference in
its entirety, and shall be deemed to be a part of this Underwriting Agreement to
the same extent as if such provisions had been set forth in full herein; and
each of the representations and warranties set forth therein shall be deemed to
have been made at and as of the date of this Underwriting Agreement. Each
reference to the "Representative" herein and in the provisions of the Standard
Provisions so incorporated by reference shall be deemed to refer to you. Unless
otherwise defined herein, terms defined in the Standard Provisions are used
herein as therein defined. The Prospectus Supplement and the accompanying
Prospectus relating to the Offered Securities (together, the "Prospectus") are
incorporated by reference herein.
Subject to the terms and conditions set forth herein and in
the Standard Provisions incorporated herein by reference, the Depositor agrees
to issue and sell to the Underwriter, and the Underwriter agrees to purchase
from the Depositor, at the time and place and at the purchase price to the
Underwriter and in the manner set forth in Schedule I hereto, the entire
original principal balance of the Offered Securities.
[Remainder of Page Intentionally Left Blank]
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If the foregoing is in accordance with your understanding,
please sign and return to us two counterparts hereof, and upon acceptance hereof
by you, this letter and such acceptance hereof, including the provisions of the
Standard Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter, the Originator and the Depositor.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
---------------------------------
Name:
Title:
AMERICAN BUSINESS LEASING, INC.
By:
---------------------------------
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:
---------------------------------
Name:
Title:
[Signature Page to Underwriting Agreement]
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SCHEDULE I
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Title of Offered Securities: ABFS Equipment Contract Trust 1999-A, Equipment Contract Backed
Notes, Series 1999-A, Class A-1, Class A-2, Class A-3 and Class
A-4.
Terms of Offered Securities: The Offered Securities shall have the terms set forth in the
Prospectus and shall conform in all material respects to the
descriptions thereof contained therein, and shall be issued
pursuant to an Indenture, to be dated as of June 1, 1999, between
the ABFS Equipment Contract Trust 1999-A, as issuer, American
Business Leasing, Inc., as servicer and The Chase Manhattan Bank,
as indenture trustee.
Purchase Price: The purchase price for the Offered Securities shall be 99.65%,
99.65%, 99.65% and 98.259375% of the aggregate note principal
balance of the Class A-1 Notes, Class A-2 Notes, Class A-3 Notes
and Class A-4 Notes, respectively, as of the Closing Date, plus
accrued interest at the rate of 6.025% per annum, 6.650% per annum
and 6.650% per annum, on the aggregate note principal balance of
the Class A-2 Notes, Class A-3 Notes and Class A-4 Notes,
respectively, from, and including June 15, 1999 to, but not
including the Closing Date.
Specified funds for payment of
Purchase Price: Federal Funds (immediately available funds).
Required Ratings of the Class A-1, For the Class A-1 Notes, "P-1", and for the Class A-2, Class A-3
Class A-2, Class A-3 and Class A-4 Notes, "Aaa" by Moody's Investors Service, Inc.
and Class A-4 Notes:
For the Class A-1 Notes, "A-1+", and for the Class A-2, Class A-3
and Class A-4 Notes, "AAA" by Standard & Poor's Ratings Services
Closing Date: On or about June 28, 1999 at 10:00 A.M. eastern standard time or at
such other time as the Depositor, the Originator and the
Underwriter shall agree.
Closing Location: Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New
York 10019.
Name and address of Representative: Designated Representative: Prudential Securities Incorporated.
Address for Notices, etc.: One New York Plaza
New York, New York 10292
Attn: Joseph Donovan
</TABLE>
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STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
June 24, 1999
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") and American Business
Leasing, Inc., a Delaware corporation (the "Originator") may enter into one or
more underwriting agreements (each, an "Underwriting Agreement") that provide
for the sale of designated securities to the several underwriters named therein
(such underwriters constituting the "Underwriters" with respect to such
Underwriting Agreement and the securities specified therein). The several
underwriters named in an Underwriting Agreement will be represented by one or
more representatives as named in such Underwriting Agreement (collectively, the
"Representative"). The term "Representative" also refers to a single firm acting
as sole representative of the Underwriters and to Underwriters who act without
any firm being designated as their representative. The standard provisions set
forth herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. These Standard Provisions shall not be construed as an
obligation of the Depositor to sell any securities or as an obligation of any of
the Underwriters to purchase such securities. The obligation of the Depositor to
sell any securities and the obligation of any of the Underwriters to purchase
any of the securities shall be evidenced by the Underwriting Agreement with
respect to the securities specified therein. An Underwriting Agreement shall be
in the form of an executed writing (which may be in counterparts), and may be
evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of the communications
transmitted. The obligations of the underwriters under these Standard Provisions
and each Underwriting Agreement shall be several and not joint. Unless otherwise
defined herein, the terms defined in the Underwriting Agreement are used herein
as defined in the Prospectus referred to below.
1. The Offered Securities. The Depositor proposes to sell
pursuant to the applicable Underwriting Agreement to the several Underwriters
named therein equipment contract backed notes (the "Securities") representing
indebtedness secured primarily by the property of a trust which consists of two
pledged notes (the "Pledged Notes") which are secured by a pool of receivables
consisting of direct finance leases and commercial loans (the "Contracts"), the
security interests in the underlying equipment (the "Equipment") and certain
related property. The Securities will be issued pursuant to an Indenture (the
"Indenture") by and between ABFS Equipment Contract Trust 1999-A, as issuer (the
"Issuer"), American Business Leasing, Inc., as servicer (the "Servicer") and The
Chase Manhattan Bank, as indenture trustee (the "Indenture Trustee"). The Issuer
will be formed, at the direction of the Depositor, pursuant to the terms of a
Trust Agreement (the "Trust Agreement"), among the Transferors, the Depositor,
and First Union Trust Company, as owner trustee (the "Owner Trustee"). The
Contracts will be by the Originator to ABFS Residual LLC 1999-A and ABFS Finance
LLC 1999-A (together, the "Transferors") pursuant to the terms of a Receivables
Sale Agreement (the "Receivables Sale Agreement"), among the Originator and the
Transferors. The Transferors will, at the direction of the Depositor, contribute
the Contracts to the Issuer pursuant to the terms of a Receivables Pledge
Agreement (the "Receivables Pledge Agreement"), among the Issuer, the Depositor,
the Indenture Trustee, and the Transferors. The Contracts will be serviced by
the Servicer pursuant to the terms of a Servicing Agreement ("Servicing
Agreement"), by and among the Originator, the Transferors, the Servicer, Chase
Bank of Texas, N.A., as collateral agent (the "Collateral Agent"), the Issuer
and the Indenture Trustee. The Class A Notes will have the benefit of a note
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer") pursuant to the terms of an Insurance and Indemnity Agreement
(the "Insurance Agreement") among the Note Insurer, the Originator, the
Transferors, the Issuer, ABFS Special Purpose Management, Inc. (the "Manager")
and American Business Credit, Inc. ("ABC"). The Indenture, Trust Agreement,
Receivables Sale Agreement, Receivables Pledge Agreement, Insurance Agreement
and Servicing Agreement are collectively referred to herein as the "Transaction
Documents".
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The terms and rights of any particular issuance of Securities
shall be as specified in the Underwriting Agreement relating thereto and in or
pursuant to the Indenture identified in such Underwriting Agreement. The
Securities which are the subject of any particular Underwriting Agreement into
which these Standard Provisions are incorporated are herein referred to as the
"Offered Securities."
The Depositor has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File No.
333-52021), including a prospectus relating to the Securities under the
Securities Act of 1933, as amended (the "1933 Act"). The term "Registration
Statement" means such registration statement as amended to the date of the
Underwriting Agreement. The term "Base Prospectus" means the prospectus included
in the Registration Statement. The term "Prospectus Supplement" means the
prospectus supplement specifically relating to the Offered Securities, dated
June 24, 1999. The term "Prospectus" means the Base Prospectus together with the
Prospectus Supplement, as first filed with the Commission pursuant to Rule 424.
The term "Preliminary Prospectus" means a preliminary prospectus supplement
specifically relating to the Offered Securities together with the Base
Prospectus.
2. Offering by the Underwriters. Upon the execution of the
Underwriting Agreement applicable to any Offered Securities and the
authorization by the Representative of the release of such Offered Securities,
the several Underwriters propose to offer for sale to the public the Offered
Securities at the prices and upon the terms set forth in the Prospectus.
3. Purchase, Sale and Delivery of the Offered Securities.
Unless otherwise specified in the Underwriting Agreement, payment for the
Offered Securities shall be made by certified or official bank check or checks
payable to the order of the Depositor in immediately available or next day
funds, at the time and place set forth in the Underwriting Agreement, upon
delivery to the Representative for the respective accounts of the several
Underwriters of the Offered Securities registered in definitive form and in such
names and in such denominations as the Representative shall request in writing
not less than five full business days prior to the date of delivery. The time
and date of such payment and delivery with respect to the Offered Securities are
herein referred to as the "Closing Date".
4. Conditions of the Underwriters' Obligations. The respective
obligations of the several Underwriters pursuant to the Underwriting Agreement
shall be subject, in the discretion of the Representative, to the accuracy in
all material respects of the representations and warranties of the Depositor and
the Originator contained herein as of the date of the Underwriting Agreement and
as of the Closing Date as if made on and as of the Closing Date, to the accuracy
in all material respects of the statements of the officers of the Issuer, the
Depositor and the Originator made in any certificates pursuant to the provisions
hereof and of the Underwriting Agreement, to the performance by the Depositor of
its covenants and agreements contained herein and to the following additional
conditions precedent:
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(a) All actions required to be taken and all filings required
to be made by or on behalf of the Depositor under the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "1934 Act") prior to
the sale of the Offered Securities shall have been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall be in effect; (ii) no proceedings for such
purpose shall be pending before or threatened by the Commission, or by
any authority administering any state securities or "Blue Sky" laws;
(iii) any requests for additional information on the part of the
Commission shall have been complied with to the Representative's
reasonable satisfaction; (iv) since the respective dates as of which
information is given in the Registration Statement and the Prospectus
except as otherwise stated therein, there shall have been no material
adverse change in the condition, financial or otherwise, earnings,
affairs, regulatory situation or business prospects of the Depositor;
(v) there are no material actions, suits or proceedings pending before
any court or governmental agency, authority or body or threatened,
affecting the Depositor or the transactions contemplated by the
Underwriting Agreement; (vi) the Depositor is not in violation of its
charter or its by-laws or in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its properties may
be bound, which violations or defaults separately or in the aggregate
would have a material adverse effect on the Depositor; and (vii) the
Representative shall have received, on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the
Depositor, to the foregoing effect.
(c) Subsequent to the execution of the Underwriting Agreement,
there shall not have occurred any of the following: (i) if at or prior
to the Closing Date, trading in securities on the New York Stock
Exchange shall have been suspended or any material limitation in
trading in securities generally shall have been established on such
exchange, or a banking moratorium shall have been declared by New York
State or federal authorities; (ii) if at or prior to the Closing Date,
there shall have been an outbreak or escalation of hostilities between
the United States and any foreign power, or of any other insurrection
or armed conflict involving the United States which results in the
declaration of a national emergency or war, and, in the reasonable
opinion of the Representative, makes it impracticable or inadvisable to
offer or sell the Offered Securities; or (iii) if at or prior to the
Closing Date, a general moratorium on commercial banking activities in
the State of New York shall have been declared by either federal or New
York State authorities.
(d) The Representative shall have received, on the Closing
Date, a certificate dated the Closing Date and signed by an executive
officer of the Depositor to the effect that attached thereto is a true
and correct copy of the letter from each nationally recognized
statistical rating organization (as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the 1933 Act) that
rated the Offered Securities and confirming that, unless otherwise
specified in the Underwriting Agreement, the Offered Securities have
been rated in the highest rating categories by each such organization
and that each such rating has not been rescinded since the date of the
applicable letter.
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(e) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine LLP, special counsel for the
Depositor, dated the Closing Date, in form and substance satisfactory
to the Representative and containing opinions substantially to the
effect set forth in Exhibit A hereto.
(f) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Servicer, the Transferors and the
Originator, dated the Closing Date, in form and substance satisfactory
to the Representative and counsel for the Underwriters and containing
opinions substantially to the effect set forth in Exhibit B hereto.
(g) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Indenture Trustee, dated the
Closing Date, in form and substance satisfactory to the Representative
and counsel for the Underwriters and containing opinions substantially
to the effect set forth in Exhibit C hereto.
(h) The Representative shall have received, on the Closing
Date, an opinion of counsel for the Issuer and First Union Trust
Company, National Association, as owner trustee (the "Owner Trustee"),
dated the Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters and containing opinions
substantially to the effect set forth in Exhibit D hereto.
(i) The Representative shall have received, on the Closing
Date, an opinion of Dewey Ballantine LLP, special counsel for the
Depositor, dated the Closing Date, with respect to the incorporation of
the Depositor, the validity of the Offered Securities, the Registration
Statement, the Prospectus and other related matters as the Underwriters
may reasonably require, and the Depositor shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(j) The Representative shall have received, on or prior to the
date of first use of the prospectus supplement relating to the Offered
Securities, and on the Closing Date if requested by the Representative,
letters of independent accountants of the Depositor in the form and
reflecting the performance of the procedures previously requested by
the Representative.
(k) The Depositor shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of an
executive officer of the Depositor satisfactory to the Representative
as to the accuracy of the representations and warranties of the
Depositor herein at and as of such Closing Date as if made as of such
date, as to the performance by the Depositor of all of its obligations
hereunder to be performed at or prior to such Closing Date, and as to
such other matters as the Representative may reasonably request;
(l) The Servicer shall have furnished or caused to be
furnished to the Representative on the Closing Date a certificate of
officers of such Servicer in form and substance reasonably satisfactory
to the Representative;
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(m) The Note Insurance Policy shall have been duly executed
and issued at or prior to the Closing Date and shall conform in all
material respects to the description thereof in the Prospectus
Supplement.
(n) The Representative shall have received, on the Closing
Date, an opinion of counsel to Financial Security Assurance Inc. (the
"Note Insurer"), dated the Closing Date, in form and substance
satisfactory to the Representative and counsel for the Underwriters and
containing opinions as to such matters as the Representative may
reasonably request.
(o) On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given of (i)
any intended or potential downgrading or (ii) any review or possible
change in rating the direction of which has not been indicated, in the
rating accorded the Note Insurer's claims paying ability by any
"nationally recognized statistical rating organization," as such term
is defined for purposes of the 1933 Act.
(p) There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since March 31,
1999, of the Note Insurer, that is in the Representative's judgment
material and adverse and that makes it in the Representative's judgment
impracticable to market the Offered Securities on the terms and in the
manner contemplated in the Prospectus.
(q) The Representative shall have been furnished such further
information, certificates, documents and opinions as the Representative
may reasonably request.
5. Covenants of the Depositor. In further consideration of the
agreements of the Underwriters contained in the Underwriting Agreement, the
Depositor covenants as follows:
(a) To furnish the Representative, without charge, copies of
the Registration Statement and any amendments thereto including
exhibits and as many copies of the Prospectus and any supplements and
amendments thereto as the Representative may from time to time
reasonably request.
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(b) Immediately following the execution of the Underwriting
Agreement, the Depositor will prepare a prospectus supplement setting
forth the principal amount, notional amount or stated amount, as
applicable, of Offered Securities covered thereby, the price at which
the Offered Securities are to be purchased by the Underwriters from the
Depositor, either the initial public offering price or prices or the
method by which the price or prices at which the Offered Securities are
to be sold will be determined, the selling concessions and
reallowances, if any, any delayed delivery arrangements, and such other
information as the Representative and the Depositor deem appropriate in
connection with the offering of the Offered Securities, but the
Depositor will not file any amendment to the Registration Statement or
any supplement to the Prospectus of which the Representative shall not
previously have been advised and furnished with a copy a reasonable
time prior to the proposed filing or to which the Representative shall
have reasonably objected. The Depositor will use its best efforts to
cause any amendment to the Registration Statement to become effective
as promptly as possible. During the time when a Prospectus is required
to be delivered under the 1933 Act, the Depositor will comply so far as
it is able with all requirements imposed upon it by the 1933 Act and
the rules and regulations thereunder to the extent necessary to permit
the continuance of sales or of dealings in the Offered Securities in
accordance with the provisions hereof and of the Prospectus, and the
Depositor will prepare and file with the Commission, promptly upon
request by the Representative, any amendments to the Registration
Statement or supplements to the Prospectus which may be necessary or
advisable in connection with the distribution of the Offered Securities
by the Underwriters, and will use its best efforts to cause the same to
become effective as promptly as possible. The Depositor will advise the
Representative, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement or any amended
Registration Statement has become effective or any supplement to the
Prospectus or any amended Prospectus has been filed. The Depositor will
advise the Representative, promptly after it receives notice or obtains
knowledge thereof, of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any preliminary Prospectus or the
Prospectus, or the suspension of the qualification of the Offered
Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose, or of
any request made by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information, and the Depositor will use its best efforts to prevent the
issuance of any such stop order or any order suspending any such
qualification, and if any such order is issued, to obtain the lifting
thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any event
occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact, or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is
necessary for any other reason to amend or supplement the Prospectus to
comply with the 1933 Act, to promptly notify the Representative thereof
and upon their request to prepare and file with the Commission, at the
Depositor's own expense, an amendment or supplement which will correct
such statement or omission or any amendment which will effect such
compliance.
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(d) During the period when a prospectus is required by law to
be delivered in connection with the sale of the Offered Securities
pursuant to the Underwriting Agreement, the Depositor will file, on a
timely and complete basis, all documents that are required to be filed
by the Depositor with the Commission pursuant to Sections 13, 14, or
15(d) of the 1934 Act.
(e) To qualify the Offered Securities for offer and sale under
the securities or "Blue Sky" laws of such jurisdictions as the
Representative shall reasonably request and to pay all expenses
(including fees and disbursements of counsel) in connection with such
qualification of the eligibility of the Offered Securities for
investment under the laws of such jurisdictions as the Representative
may designate provided that in connection therewith the Depositor shall
not be required to qualify to do business or to file a general consent
to service of process in any jurisdiction.
(f) To make generally available to the Depositor's security
holders, as soon as practicable, but in any event not later than
eighteen months after the date on which the filing of the Prospectus,
as amended or supplemented, pursuant to Rule 424 under the 1933 Act
first occurs, an earnings statement of the Depositor covering a
twelve-month period beginning after the date of the Underwriting
Agreement, which shall satisfy the provisions of Section 11(a) of the
1933 Act and the applicable rules and regulations of the Commission
thereunder (including, at the option of the Depositor, Rule 158).
(g) For so long as any of the Offered Securities remain
outstanding, to furnish to the Representative upon request in writing
copies of such financial statements and other periodic and special
reports as the Depositor may from time to time distribute generally to
its creditors or the holders of the Offered Securities and to furnish
to the Representative copies of each annual or other report the
Depositor shall be required to file with the Commission.
(h) For so long as any of the Offered Securities remain
outstanding, the Depositor will, or will cause the Servicer to, furnish
to the Representative, as soon as available, a copy of (i) the annual
statement of compliance delivered by the Servicer to the Indenture
Trustee under the Servicing Agreement, (ii) the annual independent
public accountants' servicing report furnished to the Indenture Trustee
pursuant to the Servicing Agreement, (iii) each report regarding the
Offered Securities mailed to the holders of such Securities, and (iv)
from time to time, such other information concerning such Securities as
the Representative may reasonably request.
6. Representations and Warranties of the Depositor and the
Originator. (a) The Depositor represents and warrants to, and agrees with, each
Underwriter and the Originator, as of the date of the Underwriting Agreement, as
follows:
(i) The Registration Statement including a prospectus relating
to the Securities and the offering thereof from time to time in
accordance with Rule 415 under the 1933 Act has been filed with the
Commission and such Registration Statement, as amended to the date of
the Underwriting Agreement, has become effective. No stop order
suspending the effectiveness of such Registration Statement has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission. A prospectus supplement specifically
relating to the Offered Securities will be filed with the Commission
pursuant to Rule 424 under the 1933 Act; provided, however, that a
supplement to the Prospectus prepared pursuant to Section 5(b) hereof
shall be deemed to have supplemented the base Prospectus only with
respect to the Offered Securities to which it relates. The conditions
to the use of a registration statement on Form S-3 under the 1933 Act,
as set forth in the General Instructions on Form S-3, and the
conditions of Rule 415 under the 1933 Act, have been satisfied with
respect to the Depositor and the Registration Statement. There are no
contracts or documents of the Depositor that are required to be filed
as exhibits to the Registration Statement pursuant to the 1933 Act or
the rules and regulations thereunder that have not been so filed.
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(ii) On the effective date of the Registration Statement, the
Registration Statement and the base Prospectus conformed in all
material respects to the requirements of the 1933 Act and the rules and
regulations thereunder, and did not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; on
the date of the Underwriting Agreement and as of the Closing Date, the
Registration Statement and the Prospectus conform, and as amended or
supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations
thereunder, and on the date of the Underwriting Agreement and as of the
Closing Date, neither of such documents includes any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and neither of such documents as amended or supplemented,
if applicable, will include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the foregoing does not apply to statements or omissions
in any of such document based upon written information furnished to the
Depositor by any Underwriter specifically for use therein.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has been no material adverse change in
the condition, financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Depositor, whether or not
arising in the ordinary course of the business of the Depositor.
(iv) The Depositor has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Delaware.
(v) The Depositor has all requisite power and authority
(corporate and other) and all requisite authorizations, approvals,
orders, licenses, certificates and permits of and from all government
or regulatory officials and bodies to own its properties, to conduct
its business as described in the Registration Statement and the
Prospectus and to execute, deliver and perform these Standard
Provisions, the Underwriting Agreement and the Transaction Documents to
which it is a party, except such as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution by the Underwriter of the Offered Securities; all such
authorizations, approvals, orders, licenses, certificates are in full
force and effect and contain no unduly burdensome provisions; and,
except as set forth or contemplated in the Registration Statement or
the Prospectus, there are no legal or governmental proceedings pending
or, to the best knowledge of the Depositor, threatened that would
result in a material modification, suspension or revocation thereof.
(vi) The Offered Securities have been duly authorized, and
when the Offered Securities are issued and delivered pursuant to the
Underwriting Agreement, the Offered Securities will have been duly
executed, issued and delivered and will be entitled to the benefits
provided by the Indenture, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium and other
laws affecting the rights of creditors generally, and to general
principles of equity (regardless of whether the entitlement to such
benefits is considered in a proceeding in equity or at law), and will
conform in substance to the description thereof contained in the
Registration Statement and the Prospectus, and will in all material
respects be in the form contemplated by the Indenture.
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<PAGE>
(vii) The execution and delivery by the Depositor of these
Standard Provisions, the Underwriting Agreement and the Transaction to
which it is a party are within the corporate power of the Depositor and
none of the execution and delivery by the Depositor of these Standard
Provisions, the Underwriting Agreement and the Transaction Document to
which it is a party, the consummation by the Depositor of the
transactions therein contemplated, or the compliance by the Depositor
with the provisions thereof, will conflict with or result in a breach
of, or constitute a default under, the charter or the by-laws of the
Depositor or any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Depositor or its
properties, or any of the provisions of any indenture, mortgage,
contract or other instrument to which the Depositor is a party or by
which it is bound, or will result in the creation or imposition of a
lien, charge or encumbrance upon any of its property pursuant to the
terms of any such indenture, mortgage, contract or other instrument,
except such as have been obtained under the 1933 Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Offered Securities by the
Underwriters.
(viii) The Underwriting Agreement has been, and at the Closing
Date Transaction Documents to which it is a party will have been, duly
authorized, executed and delivered by the Depositor.
(ix) At the Closing Date, each of the Underwriting Agreement
and the Transaction Documents to which it is a party will constitute a
legal, valid and binding obligation of the Depositor, enforceable
against the Depositor, in accordance with its terms, subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of creditors
generally, and to general principles of equity and the discretion of
the court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
(x) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other action of,
any court or governmental authority or agency is required for the
consummation by the Depositor of the transactions contemplated by the
Underwriting Agreement and the Transaction Documents, except such as
have been obtained and except such as may be required under the 1933
Act, the rules and regulations thereunder, or state securities or "Blue
Sky" laws, in connection with the purchase and distribution of the
Offered Securities by the Underwriters.
(xi) The Depositor owns or possesses or has obtained all
material governmental licenses, permits, consents, orders, approvals
and other authorizations necessary to lease, own or license, as the
case may be, and to operate, its properties and to carry on its
business as presently conducted and has received no notice of
proceedings relating to the revocation of any such license, permit,
consent, order or approval, which singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, results of operations,
net worth or condition (financial or otherwise) of the Depositor.
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(xii) Other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings pending to
which the Depositor is a party or of which any property of the
Depositor is the subject which, if determined adversely to the
Depositor would individually or in the aggregate have a material
adverse effect on the condition (financial or otherwise), earnings,
affairs, or business or business prospects of the Depositor and, to the
best of the Depositor's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(xiii) At the Closing Date or any Subsequent Transfer Date, as
the case may be, each of the Contracts which is a subject of the
Transaction Documents and all such Contracts in the aggregate will meet
the criteria for selection described in the Prospectus, and at the
Closing Date or any Subsequent Transfer Date, as the case may be, the
representations and warranties made by the Depositor in the Transaction
Documents will be true and correct as of such date.
(xiv) At the time of execution and delivery of the Transaction
Documents and on any Subsequent Transfer Date, as the case may be, the
Transferors will have good and marketable title to the Contracts being
transferred to the Issuer at the direction of the Depositor pursuant to
the Receivables Pledge Agreement, free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security interest
(collectively, "Liens"), and they will not have assigned to any person
(other than the Issuer and the Indenture Trustee) any of their
respective right, title or interest in such Contracts and each will
have the power and authority to transfer such Contracts to the Issuer,
and upon execution and delivery to the Issuer of the Receivables Pledge
Agreement, and on any Subsequent Transfer Date, as the case may be, the
Issuer will have good and marketable title to the Contracts free and
clear of any Liens.
(xv) At the time of execution and delivery of the Transaction
Documents, the Depositor will have good and marketable title to the
Offered Securities free and clear of any Liens and will not have
assigned to any person any of its right, title or interest in the
Offered Securities being issued pursuant thereto, the Depositor will
have the power and authority to transfer the Offered Securities to each
of the Underwriters, and upon delivery to each of the Underwriters of
the Offered Securities, each of the Underwriters will have good and
marketable title to the Offered Securities, free and clear of any
Liens.
(xvi) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement, these Standard Provisions, the Transaction
Documents and the Offered Securities have been or will be paid at or
prior to the Closing Date.
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<PAGE>
(b) The Originator represents and warrants to, and agrees
with, each Underwriter and the Depositor, as of the date of the Underwriting
Agreement, as follows:
(i) The Originator has been duly organized and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania.
(ii) The Originator has all requisite power and authority
(corporate and other) and all requisite authorizations, approvals,
orders, licenses, certificates and permits of and from all government
or regulatory officials and bodies to own its properties, to conduct
its business as described in the Prospectus and to execute, deliver and
perform these Standard Provisions, the Underwriting Agreement, and the
Transaction Documents to which it is a party, except such as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution by the Underwriter of the Offered Securities;
all such authorizations, approvals, orders, licenses, certificates are
in full force and effect and contain no unduly burdensome provisions;
and, except as set forth or contemplated in the Prospectus, there are
no legal or governmental proceedings pending or, to the best knowledge
of the Originator, threatened that would result in a material
modification, suspension or revocation thereof.
(iii) The Offered Securities have been duly authorized, and
when the Offered Securities are issued and delivered pursuant to the
Underwriting Agreement, the Offered Securities will have been duly
executed, issued and delivered and will be entitled to the benefits
provided by the applicable Indenture, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency,
moratorium and other laws affecting the rights of creditors generally,
and to general principles of equity (regardless of whether the
entitlement to such benefits is considered in a proceeding in equity or
at law), and will conform in substance to the description thereof
contained in the Registration Statement and the Prospectus, and will in
all material respects be in the form contemplated by the Indenture.
(iv) The execution and delivery by the Originator of these
Standard Provisions, the Underwriting Agreement and the Transaction
Documents to which it is a party are within the corporate power of the
Originator and none of the execution and delivery by the Depositor of
these Standard Provisions, the Underwriting Agreement, and the
Transaction Documents to which it is a party, the consummation by the
Originator of the transactions therein contemplated, or the compliance
by the Originator with the provisions thereof, will conflict with or
result in a breach of, or constitute a default under, the charter or
the by-laws of the Originator or any of the provisions of any law,
governmental rule, regulation, judgment, decree or order binding on the
Originator or its properties, or any of the provisions of any
indenture, mortgage, contract or other instrument to which the
Originator is a party or by which it is bound, or will result in the
creation or imposition of a lien, charge or encumbrance upon any of its
property pursuant to the terms of any such indenture, mortgage,
contract or other instrument, except such as have been obtained under
the 1933 Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Offered Securities by the Underwriters.
(v) The Underwriting Agreement has been, and at the Closing
Date the Transaction Documents to which it is a party will have been,
duly authorized, executed and delivered by the Originator.
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<PAGE>
(vi) At the Closing Date, each of the Underwriting Agreement
and the Transaction Documents to which it is a party will constitute a
legal, valid and binding obligation of the Originator, enforceable
against the Originator, in accordance with its terms, subject, as to
the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of creditors
generally, and to general principles of equity and the discretion of
the court (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
(vii) No filing or registration with, notice to, or consent,
approval, non-disapproval, authorization or order or other action of,
any court or governmental authority or agency is required for the
consummation by the Originator of the transactions contemplated by the
Underwriting Agreement and the Transaction Documents, except such as
have been obtained and except such as may be required under the 1933
Act, the rules and regulations thereunder, or state securities or "Blue
Sky" laws, in connection with the purchase and distribution of the
Offered Securities by the Underwriters.
(viii) The Originator owns or possesses or has obtained all
material governmental licenses, permits, consents, orders, approvals
and other authorizations necessary to lease, own or license, as the
case may be, and to operate, its properties and to carry on its
business as presently conducted and has received no notice of
proceedings relating to the revocation of any such license, permit,
consent, order or approval, which singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, results of operations,
net worth or condition (financial or otherwise) of the Originator.
(ix) Other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings pending to
which the Originator is a party or of which any property of the
Originator is the subject which, if determined adversely to the
Originator would individually or in the aggregate have a material
adverse effect on the condition (financial or otherwise), earnings,
affairs, or business or business prospects of the Originator and, to
the best of the Originator's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
(x) At the Closing Date or any Subsequent Transfer Date, as
the case may be, each of the Contracts which is a subject of the
Transaction Documents, and all such Contracts in the aggregate will
meet the criteria for selection described in the Prospectus, and at the
Closing Date or any Subsequent Transfer Date, as the case may be, the
representations and warranties made by the Originator in the
Transaction Documents will be true and correct as of such date.
(xi) At the time of execution and delivery of the Transaction
Documents to which it is a party, the Originator will have good and
marketable title to the Contracts being transferred to the Transferors
and then from the Transferors to the Issuer pursuant to the Transaction
Documents, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest (collectively,
"Liens"), and will not have assigned to any person (other than the
Issuer and the Indenture Trustee) any of its right, title or interest
in such Contracts or in such Transaction Documents, the Originator will
have the power and authority to transfer such Contracts to the
Transferors, and upon execution and delivery of the Transaction
Documents and delivery of the Contracts to, or on behalf of, the
Issuer, and on any Subsequent Transfer Date, as the case may be, the
Issuer will have good and marketable title to the Contracts free and
clear of any Liens.
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<PAGE>
(xii) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the
Underwriting Agreement and the Transaction Documents and the Offered
Securities have been or will be paid at or prior to the Closing Date.
7. Indemnification and Contribution
(a) The Depositor and the Underwriters.
(i) The Depositor agrees to indemnify and hold harmless each
Underwriter (including Prudential Securities Incorporated acting in its
capacity as Representative and as one of the Underwriters), and each
person, if any, who controls any Underwriter within the meaning of the
1933 Act, against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter or such controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
any preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse each Underwriter and each such controlling person for
any legal or other expenses reasonably incurred by such Underwriter or
such controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided,
however, that the Depositor will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration
Statement, any preliminary Prospectus, the Prospectus or any amendment
or supplement thereto in reliance upon and in conformity with (1)
written information furnished to the Depositor by any Underwriter
through the Representative specifically for use therein or (2)
information regarding the Contracts except to the extent that the
Depositor has been indemnified by the Servicer. This indemnity
agreement will be in addition to any liability which the Depositor may
otherwise have.
(ii) Each Underwriter will indemnify and hold harmless the
Depositor, each of the Depositor's directors, each of the Depositor's
officers who signed the Registration Statement and each person, if any,
who controls the Depositor, within the meaning of the 1933 Act, against
any losses, claims, damages or liabilities to which the Depositor, or
any such director, officer or controlling person may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or
any other prospectus relating to the Offered Securities, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statements or alleged untrue statements
or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Depositor by any
Underwriter through the Representative specifically for use therein;
and each Underwriter will reimburse any legal or other expenses
reasonably incurred by the Depositor or any such director, officer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. This indemnity agreement
will be in addition to any liability which such Underwriter may
otherwise have. The Depositor acknowledges that the statements set
forth under the caption "UNDERWRITING" in the Prospectus Supplement
constitute the only information furnished to the Depositor by or on
behalf of any Underwriter for use in the Registration Statement, any
preliminary Prospectus or the Prospectus, and each of the several
Underwriters represents and warrants that such statements are correct
as to it.
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(iii) In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 7 is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall
be considered the relative benefits received by the Depositor on the
one hand, and the Underwriters on the other, from the offering of the
Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriters'
relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission, and any other equitable
considerations appropriate in the circumstances. The Depositor and the
Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even
if the Underwriters were treated as one entity for such purpose). No
Underwriter or person controlling such Underwriter shall be obligated
to make contribution hereunder which in the aggregate exceeds the total
underwriting fee of the Offered Securities purchased by such
Underwriter under the Underwriting Agreement, less the aggregate amount
of any damages which such Underwriter and its controlling persons have
otherwise been required to pay in respect of the same or any
substantially similar claim. The Underwriters' obligation to contribute
hereunder are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 7, each person,
if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such
Underwriter, and each director of the Depositor, each officer of the
Depositor who signed the Registration Statement, and each person, if
any, who controls the Depositor within the meaning of Section 15 of the
1933 Act, shall have the same rights to contribution as the Depositor.
(b) The Originator and the Depositor.
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(i) The Originator agrees (A) to indemnify and hold harmless
the Depositor, each of its directors, each of its officers who have
signed the Registration Statement, and each of its directors and each
person or entity who controls the Depositor or any such person, within
the meaning of Section 15 of the Securities Act, against any and all
losses, claims, damages or liabilities, joint and several, to which the
Depositor or any such person or entity may become subject, under the
Securities Act or otherwise, and will reimburse the Depositor and each
such controlling person for any legal or other expenses incurred by the
Depositor or such controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus
Supplement or any amendment or supplement to the Prospectus Supplement
or the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
in the Prospectus Supplement or any amendment or supplement to the
Prospectus Supplement approved in writing by the Originator, in light
of the circumstances under which they were made, not misleading, but
only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission relates to the information
contained in the Prospectus Supplement other than the information under
the caption "UNDERWRITING"; this indemnity agreement will be in
addition to any liability which the Originator may otherwise have; and
(B) to indemnify and to hold the Depositor harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the
Depositor may sustain in any way related to the failure of any of the
Originator or its affiliates to perform its duties in compliance with
the terms of the Transaction Documents; the Originator shall
immediately notify the Depositor if a claim is made by a third party
with respect to the Transaction Documents, and the Originator shall
assume the defense of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered
against the Depositor in respect of such claim.
(ii) The Depositor agrees to indemnify and hold harmless the
Originator, its directors and each person or entity who controls the
Originator or any such person, within the meaning of Section 15 of the
Securities Act, against any and all losses, claims, damages or
liabilities, joint and several, to which the Originator or any such
person or entity may become subject, under the Securities Act or
otherwise, and will reimburse the Originator and any such director or
controlling person for any legal or other expenses incurred by such
party or any such director or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus, the Prospectus Supplement,
any amendment or supplement to the Prospectus or the Prospectus
Supplement or the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, but only to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission is other
than a statement or omission relating to the information set forth in
subsection (c)(i) of this Section 7; provided, however, that in no
event shall the Depositor be liable to the Originator under this
paragraph (ii) in an amount in excess of the Depositor's resale profit
or the underwriting fee on the sale of the Notes; this indemnity
agreement will be in addition to any liability which the Depositor may
otherwise have.
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(iii) Promptly after receipt by an indemnified party under
this Section 7(b) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 7(b), notify the
indemnifying party in writing of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve the
indemnifying party from any liability which the indemnifying party may
have to any indemnified party hereunder except to the extent such
indemnifying party has been prejudiced thereby. In case any such action
is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. After notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section 7(b) for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, if the
defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it that are
different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified
party or parties. The indemnifying party shall not be liable for the
expenses of more than one separate counsel.
(iv) In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for in the
preceding parts of this Section 4.04 is for any reason held to be
unavailable to or insufficient to hold harmless an indemnified party
under subsection (i) or subsection (ii) of this Section 7(b) in respect
of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, the indemnifying party shall contribute
to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect
thereof) subject to the limits set forth in subsection (i) and
subsection (ii) of this Section 7(b); provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties
are entitled, there shall be considered the relative benefits received
by the Originator on the one hand, and the Depositor on the other, the
Originator's and the Depositor's relative knowledge and access to
information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Originator and the Depositor agree that it would not
be equitable if the amount of such contribution were determined by pro
rata or per capita allocation. For purposes of this Section 7(b), each
director of the Depositor, each officer of the Depositor who signed the
Registration Statement, and each person, if any who controls the
Depositor within the meaning of Section 15 of the Securities Act, shall
have the same rights to contribution as the Depositor, and each
director of the Originator, and each person, if any who controls the
Originator within the meaning of Section 15 of the Securities Act,
shall have the same rights to contribution as the Originator.
16
<PAGE>
(c) The parties hereto agree that the first sentence of
Section 5 of the Indemnification Agreement (the "Indemnification Agreement")
dated as of the Closing Date among the Note Insurer, the Issuer, the Depositor
and the Underwriter shall not be construed as limiting the Depositor's right to
enforce its rights under Section 7 of these Standard Provisions. The parties
further agree that, as between the parties hereto, to the extent that the
provisions of Section 5 of the Indemnification Agreement conflict with Section 7
hereof, the provisions of Section 7 hereof shall govern.
8. Survival of Certain Representations and Obligations. The
respective representations, warranties, agreements, covenants, indemnities and
other statements of the Depositor and the Originator, its officers and the
several Underwriters set forth in, or made pursuant to, the Underwriting
Agreement shall remain in full force and effect, regardless of any
investigation, or statement as to the result thereof, made by or on behalf of
any Underwriter, the Depositor and the Originator, or any of the officers or
directors or any controlling person of any of the foregoing, and shall survive
the delivery of and payment for the Offered Securities.
9. Termination. (a) The Underwriting Agreement may be
terminated by the Depositor by notice to the Representative and the Originator
in the event that a stop order suspending the effectiveness of the Registration
Statement shall have been issued or proceedings for that purpose shall have been
instituted or threatened.
(b) The Underwriting Agreement may be terminated by the
Representative by notice to the Depositor and the Originator in the event that
the Depositor shall have failed, refused or been unable to perform all
obligations and satisfy all conditions to be performed or satisfied hereunder by
the Depositor at or prior to the Closing Date.
(c) Termination of the Underwriting Agreement pursuant to this
Section 9 shall be without liability of any party to any other party other than
as provided in Sections 7 and 11 hereof.
10. Default of Underwriters. If any Underwriter or
Underwriters defaults or default in their obligation to purchase Offered
Securities which it or they have agreed to purchase under the Underwriting
Agreement and the aggregate principal amount of the Offered Securities which
such defaulting Underwriter or Underwriters agreed but failed to purchase is ten
percent (10%) or less of the aggregate principal amount, notional amount or
stated amount, as applicable, of the Offered Securities to be sold under the
Underwriting Agreement, as the case may be, the other Underwriters shall be
obligated severally in proportion to their respective commitments under the
Underwriting Agreement to purchase the Offered Securities which such defaulting
Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or
Underwriters so defaults or default and the aggregate principal amount of the
Offered Securities with respect to which such default or defaults occurs or
occur is more than ten percent (10%) of the aggregate principal amount, notional
amount or stated amount, as applicable, of Offered Securities to be sold under
the Underwriting agreement, as the case may be, and arrangements satisfactory to
the Representative and the Depositor for the purchase of such Offered Securities
by other persons (who may include one or more of the non-defaulting Underwriters
including the Representative) are not made within 36 hours after any such
default, the Underwriting Agreement will terminate without liability on the part
of any non-defaulting Underwriters or the Depositor except for the expenses to
be paid or reimbursed by the Depositor pursuant to Section 11 hereof. As used in
the Underwriting Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10. Nothing herein shall
relieve a defaulting Underwriter from liability for its default.
17
<PAGE>
11. Expenses. (a) The Depositor agrees with the several
Underwriters that:
(i) whether or not the transactions contemplated in the
Underwriting Agreement are consummated or the Underwriting Agreement is
terminated, the Depositor will pay all fees and expenses incident to
the performance of its obligations under the Underwriting Agreement,
including, but not limited to, (i) the Commission's registration fee,
(ii) the expenses of printing and distributing the Underwriting
Agreement and any related underwriting documents, the Registration
Statement, any preliminary Prospectus, the Prospectus, any amendments
or supplements to the Registration Statement or the Prospectus, and any
Blue Sky memorandum or legal investment survey and any supplements
thereto, (iii) fees and expenses of rating agencies, accountants and
counsel for the Depositor, (iv) the expenses referred to in Section
5(e) hereof, and (v) all miscellaneous expenses referred to in Item 30
of the Registration Statement;
(ii) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriters in
connection with investigating, preparing to market and marketing the
Offered Securities and proposing to purchase and purchasing the Offered
Securities under the Underwriting Agreement will be borne and paid by
the Depositor if the Underwriting Agreement is terminated by the
Depositor pursuant to Section 9(a) hereof or by the Representative on
account of the failure, refusal or inability on the part of the
Depositor to perform all obligations and satisfy all conditions on the
part of the Depositor to be performed or satisfied hereunder; and
(iii) the Depositor will pay the cost of preparing the
certificates for the Offered Securities.
(b) In connection with the transactions contemplated under
this Underwriting Agreement and the Transaction Documents, the Originator shall
promptly pay (or shall promptly reimburse the Depositor to the extent that the
Depositor shall have paid or otherwise incurred): (i) the fees and disbursements
of the Depositor's and the Originators' counsel; (ii) the fees of S&P and
Moody's; (iii) any of the fees of the Indenture Trustee and the fees and
disbursements of the Indenture Trustee's counsel; (iv) any of the fees of the
Owner Trustee and the fees and disbursements of the Owner Trustee's counsel; (v)
expenses incurred in connection with printing the Prospectus, the Prospectus
Supplement, any amendment or supplement thereto, any preliminary prospectus and
the Notes; (vi) fees and expenses relating to the filing of documents with the
Commission (including without limitation periodic reports under the Exchange
Act); (vii) the shelf registration amortization fee of 0.04% of the Note
Principal Balance of the Notes on the Closing Date, paid in connection with the
issuance of Notes; (viii) the fees and disbursements for Deloitte & Touche LLP,
accountants for the Originator; and (ix) all of the initial expenses (not to
exceed $75,000) of the Note Insurer including, without limitation, legal fees
and expenses, accountant fees and expenses and expenses in connection with due
diligence conducted on the Contract Files but not including the initial premium
paid to the Note Insurer. For the avoidance of doubt, the parties hereto
acknowledge that it is the intention of the parties that the Depositor shall not
pay any of the Indenture Trustee's or Owner Trustee's fees and expenses in
connection with the transactions contemplated by this Underwriting Agreement and
the Transaction Documents. All other costs and expenses in connection with the
transactions contemplated hereunder shall be borne by the party incurring such
expenses.
18
<PAGE>
(c) Except as otherwise provided in this Section 11, the
Underwriters agree to pay all of their expenses in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement, including the fees and expenses of their counsel and any
advertising expenses incurred by them in making offers and sales of the Offered
Securities.
12. Notices. All communications under the Underwriting
Agreement shall be in writing and, (i) if sent to the Underwriters, shall be
mailed, delivered or telegraphed and confirmed to the Representative at the
address and to the attention of the person specified in the Underwriting
Agreement, (ii) if sent to the Depositor, shall be mailed, delivered or
telegraphed and confirmed to Prudential Securities Secured Financing
Corporation, One New York Plaza, New York, New York 10292, Attention: Managing
Director-Asset Backed Finance Group and (iii) if sent to the Originator, shall
be mailed, delivered or telegraphed and confirmed to American Business Leasing,
Inc., Balapointe Office Centre, 111 Presidential Boulevard, Suite 127, Bala
Cynwyd, Pennsylvania 19004; provided, however, that any notice to any
Underwriter pursuant to the Underwriting Agreement shall be mailed, delivered or
telegraphed and confirmed to such Underwriter at the address furnished by it.
13. Representative of Underwriters. Any Representative
identified in the Underwriting Agreement will act for the Underwriters of the
Offered Securities and any action taken by the Representative under the
Underwriting Agreement will be binding upon all of such Underwriters.
19
<PAGE>
14. Successors. The Underwriting Agreement shall inure to the
benefit of and shall be binding upon the several Underwriters, the Depositor and
the Originator and their respective successors and legal representatives, and
nothing expressed or mentioned herein or in the Underwriting Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of the Underwriting Agreement, or any
provisions herein contained, the Underwriting Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the representations and warranties of the Depositor and the Originator contained
herein or in the Underwriting Agreement shall also be for the benefit of any
person or persons who controls or control any Underwriter within the meaning of
Section 15 of the 1933 Act, and (ii) the indemnities by the several Underwriters
shall also be for the benefit of the directors of the Depositor, the officers of
the Depositor who have signed the Registration Statement and any person or
persons who control the Depositor within the meaning of Section 15 of the 1933
Act. No purchaser of the Offered Securities from any Underwriter shall be deemed
a successor because of such purchase. These Standard Provisions and each
Underwriting Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
15. Time of the Essence. Time shall be of the essence of each
Underwriting Agreement.
16. Governing Law. These Standard Provisions and each
Underwriting Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
[Signature Page Follows]
20
<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return two counterparts hereof.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
----------------------------------
Name:
Title:
AMERICAN BUSINESS LEASING, INC.
By:
----------------------------------
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:
----------------------------------
Name:
Title:
[Signature Page to Underwriting Agreement Standard Provisions]
21
<PAGE>
Exhibit A
Opinions of Dewey Ballantine LLP,
special counsel for the Depositor
- ------------------------------------------------------------------------------
(1) Each of the Trust Agreement, the Receivables Pledge
Agreement, the Underwriting Agreement and the Standard Provisions (collectively,
with the Indemnification Agreement, the "Documents") constitutes the valid,
legal and binding agreement of the Depositor, and is enforceable against the
Depositor in accordance with its terms.
(2) The Notes, assuming the due execution by the Issuer and
due authentication by the Indenture Trustee and payment therefor pursuant to the
Underwriting Agreement, are validly issued and outstanding and are entitled to
the benefits of the Indenture.
(3) No consent, approval, authorization or order of,
registration or filing with, or notice to, any governmental authority or court
is required under federal laws or the laws of the State of New York for the
execution, delivery and performance of the Documents or the offer, issuance,
sale or delivery of the Notes or the consummation of any other transaction
contemplated thereby by the Depositor, except such which have been obtained.
(4) The Registration Statement and the Prospectus (other than
the financial and statistical data included therein, as to which we are not
called upon to express any opinion), at the time the Registration Statement
became effective, as of the date of execution of the Underwriting Agreement and
as of the date hereof comply as to form in all material respects with the
requirements of the 1933 Act and the rules and regulations thereunder, and the
Exchange Act and the rules and regulations thereunder, and we do not know of any
amendment to the Registration Statement required to be filed, or of any
contracts, indentures or other documents of a character required to be filed as
an exhibit to the Registration Statement or required to be described in the
Registration Statement or the Prospectus, which has not been filed or described
as required.
(5) The registration of the Trust Estate created by the
Indenture under the Investment Company Act of 1940 is not required.
(6) The statements in the Prospectus Supplement set forth
under the caption "DESCRIPTION OF THE NOTES," to the extent such statements
purport to summarize certain provisions of the Notes or of the Transaction
Documents, are fair and accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
the Originator
- ----------------------------------------------------------------------
(1) The Originator has been duly organized and is validly
existing as a corporation in good standing under the federal laws of the United
States and is duly qualified to transact business in the Commonwealth of
Pennsylvania.
(2) The Originator has the requisite power and authority to
execute and deliver, engage in the transactions contemplated by, and perform and
observe the conditions of, each of the Transaction Documents to which it is a
party.
(3) Each of the Transaction Documents to which the Originator
is a party have been duly and validly authorized, executed and delivered by the
Originator, all requisite corporate action having been taken with respect
thereto, and each constitutes the valid, legal and binding agreement of the
Originator, and are enforceable against the Originator in accordance with their
respective terms.
(4) Neither the transfer of the Contracts to the Transferors,
nor the execution, delivery or performance by the Originator of the each of the
Documents to which it is a party (A) conflicts or will conflict with or results
or will result in a breach of, or constitutes or will constitute a default under
or violates or will violate, (i) any term or provision of the charter or by-laws
of the Originator; (ii) any term or provision of any material agreement,
contract, instrument or indenture, to which the Servicer or any of its
subsidiaries is a party or is bound; or (iii) any order, judgment, writ,
injunction or decree of any court or governmental agency or body or other
tribunal having jurisdiction over the Originator or any of its properties; or
(B) results in, or will result in the creation or imposition of any lien, charge
or encumbrance upon the Pledged Property or upon the Notes, except as otherwise
contemplated by the Indenture.
(5) No consent, approval, authorization or order of,
registration or qualification of or with or notice to, any court, governmental
agency or body or other tribunal is required under the laws of the State of New
York or the Commonwealth of Pennsylvania, for the execution, delivery and
performance of each of the Transaction Documents to which it is a party or the
consummation of any other transaction contemplated thereby by the Originator,
except such which have been obtained.
(6) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Originator before any court, governmental agency or body or other tribunal (A)
which, if determined adversely to the Servicer, would individually or in the
aggregate have a material adverse effect on (i) the consolidated financial
position, business prospects, stockholders' equity or results of operations of
the Originator; (ii) the Originator 's ability to perform its obligations under,
or the validity or enforceability of, each of the Transaction Documents to which
it is a party; (iii) any Contract or Equipment, or the title of any Obligor to
any Equipment; or (B) which have not otherwise been disclosed in the Prospectus
and to the best of such counsel's knowledge, no such proceedings or
investigations are threatened or contemplated by governmental authorities or
threatened by others.
<PAGE>
Exhibit C
Opinions of Counsel to
the Indenture Trustee
- ----------------------------------------------------------------------
(1) The Indenture Trustee is a New York banking corporation
duly organized, validly existing and in good standing under the laws of the New
York and has the power and authority to enter into and to take all actions
required of it under the Indenture.
(2) Each of the Documents to which the Indenture Trustee is a
party have been duly authorized, executed and delivered by the Indenture Trustee
and each such Document constitutes the legal, valid and binding obligation of
the Indenture Trustee, enforceable against the Indenture Trustee in accordance
with its terms, except as enforceability thereof may be limited by (A)
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, as such laws would apply in the
event of a bankruptcy, insolvency or reorganization or similar occurrence
affecting the Indenture Trustee, and (B) general principles of equity regardless
of whether such enforcement is sought in a proceeding at law or in equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Indenture Trustee in connection with its execution and delivery of each of the
Documents to which it is a party or the performance of its obligations
thereunder.
(4) The Notes have been duly authenticated and delivered by
the Indenture Trustee.
(5) The execution and delivery of, and performance by the
Indenture Trustee of its obligations under, each of the Documents to which it is
a party do not conflict with or result in a violation of any statute or
regulation applicable to the Indenture Trustee, or the charter or bylaws of the
Indenture Trustee, or to the best knowledge of such counsel, any governmental
authority having jurisdiction over the Indenture Trustee or the terms of any
indenture or other agreement or instrument to which the Indenture Trustee is a
party or by which it is bound.
<PAGE>
Exhibit D
Opinions of Counsel to
the Issuer
- ----------------------------------------------------------------------
(1) The Issuer is a Delaware business trust duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the power and authority to enter into and to take all actions required
of it under the each of the Documents to which it is a party.
(2) Each of the Documents to which the Issuer is a party have
been duly authorized, executed and delivered by the Issuer and each such
Document constitutes the legal, valid and binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms, except as
enforceability thereof may be limited by (A) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, as such laws would apply in the event of a bankruptcy,
insolvency or reorganization or similar occurrence affecting the Issuer, and (B)
general principles of equity regardless of whether such enforcement is sought in
a proceeding at law or in equity.
(3) No consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part of the
Issuer in connection with its execution and delivery of the Documents to which
it is a party or the performance of its obligations thereunder.
(4) The Notes have been duly executed and delivered by the
Issuer.
(5) The execution and delivery of, and performance by the
Issuer of its obligations under each of the Documents to which it is a party do
not conflict with or result in a violation of any statute or regulation
applicable to the Issuer, or the certificate of trust of the Issuer, or to the
best knowledge of such counsel, any governmental authority having jurisdiction
over the Issuer or the terms of any indenture or other agreement or instrument
to which the Issuer is a party or by which it is bound.
<PAGE>
EXHIBIT 1.2
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ABFS 1999-2, INC.
AMERICAN BUSINESS CREDIT, INC.
HOME AMERICAN CREDIT, INC. D/B/A UPLAND MORTGAGE
NEW JERSEY MORTGAGE AND INVESTMENT CORP.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
ABFS MORTGAGE LOAN TRUST 1999-2
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of June 25, 1999
ABFS Mortgage Loan Trust 1999-2
Mortgage Backed Notes Series 1999-2
$218,900,000 Class A-1 and Class A-2 Notes
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions 1
Section 2. Representations, Warranties and Agreements of Financial Security 3
Section 3. Representations, Warranties and Agreements of the Underwriter 5
Section 4. Indemnification 6
Section 5. Indemnification Procedures 6
Section 6. Contribution 7
Section 7. Miscellaneous. 8
EXHIBIT
Exhibit A Opinion of General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of June 25, 1999, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION (the "Depositor"), AMERICAN BUSINESS CREDIT, INC.
(the "Company"), ABFS 1999-2, INC. (the "Seller"), HOME AMERICAN CREDIT, INC.,
D/B/A UPLAND MORTGAGE ("Upland"), NEW JERSEY MORTGAGE AND INVESTMENT CORP.
("NJMIC" and together with Upland, the "Originators"), ABFS MORTGAGE LOAN TRUST
1999-2 (the "Issuer") and PRUDENTIAL SECURITIES INCORPORATED (the
"Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings provided
below:
"Agreement" means this Indemnification Agreement, as amended
from time to time.
"Company Party" means any of the Company, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Depositor Party" means any of the Depositor, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Financial Security Agreements" means this Agreement and the
Insurance Agreement.
"Financial Security Information" has the meaning provided in
Section 2(g) hereof.
"Financial Security Party" means any of Financial Security,
its parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any
indemnification pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Indenture" means the Indenture, dated as of June 1, 1999,
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means The Chase Manhattan Bank.
<PAGE>
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of June 1, 1999, by and among Financial Security, the
Depositor, the Company, the Originators, the Issuer and the Seller.
"Issuer Party" means any of the Issuer, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Losses" means (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other expenses incurred
in connection with investigating or defending any claim, action or other
proceeding which entitle such party to be indemnified hereunder (subject to the
limitations set forth in Section 5 hereof), to the extent not paid, satisfied or
reimbursed from funds provided by any other Person other than an affiliate of
such party (provided that the foregoing shall not create or imply any obligation
to pursue recourse against any such other Person), plus (c) interest on the
amount paid by the party entitled to indemnification or contribution from the
date of such payment to the date of payment by the party who is obligated to
indemnify or contribute hereunder at the statutory rate applicable to judgments
for breach of contract.
"Notes" means the $218,900,000 of the ABFS Mortgage Backed
Notes, Series 1999-2, Class A-1 Notes and Class A-2 Notes, issued by the Issuer
pursuant to the Indenture.
"Offering Circular" means the Prospectus dated June 23, 1999,
including the Prospectus Supplement thereto dated June 25, 1999, relating to the
Notes.
"Offering Document" means the Offering Circular and any
amendments or supplements thereto and any other material or documents delivered
by the Underwriter to any Person in connection with the offer or sale of the
Notes.
"Originator Party" means any of the Originators, their
parents, subsidiaries and affiliates and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other organization or entity
(whether governmental or private).
"Policy" means the financial guaranty insurance policy
delivered by Financial Security with respect to the Notes.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Seller Party" means any of the Seller, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
<PAGE>
"Underwriting Agreement" means the Underwriting Agreement
dated as of June 25, 1999, between the Depositor and the Underwriter in respect
of the Notes.
"Underwriter Information" has the meaning provided in Section
3(c) hereof.
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
Section 2. Representations, Warranties and Agreements of
Financial Security. Financial Security represents, warrants and agrees, as of
the date hereof and as of the Closing Date, as follows:
(a) Organization, Etc. Financial Security is a stock insurance
company duly organized, validly existing and authorized to transact financial
guaranty insurance business under the laws of the State of New York.
(b) Authorization, Etc. The Policy and the Financial Security
Agreements have been duly authorized, executed and delivered by Financial
Security.
(c) Validity, Etc. The Policy and the Financial Security
Agreements constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms, subject,
as to the enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of this Agreement, to principles of public
policy limiting the right to enforce the indemnification provisions contained
herein.
(d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by
Financial Security of the Policy or the Financial Security Agreements, nor the
performance by Financial Security of its obligations thereunder, will conflict
with any provision of the certificate of incorporation or the bylaws of
Financial Security or result in a breach of, or constitute a default under, any
material agreement or other instrument to which Financial Security is a party or
by which any of its property is bound nor violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement, insofar as they
relate to indemnification for liabilities arising under the Securities Act, are
against public policy as expressed in the Securities Act and are therefore
unenforceable).
<PAGE>
(f) Financial Information. The consolidated balance sheets of
Financial Security as of December 31, 1998 and the related consolidated
statements of income, changes in shareholder's equity and cash flows for the
fiscal year then ended, furnished by Financial Security for use in the Offering
Circular, fairly present in all material respects the financial condition of
Financial Security as of such dates and for such periods in accordance with
generally accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments) and since the date of the
most current interim consolidated balance sheet referred to above there has been
no change in the financial condition of Financial Security which would
materially and adversely affect its ability to perform its obligations under the
Policy.
(g) Financial Security Information. The information in the
Offering Circular set forth under the caption "The Note Insurer" (as revised
from time to time in accordance with the provisions hereof, the "Financial
Security Information") is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with respect to a registrant
in connection with the offer and sale of securities of such registrant
registered under the Securities Act. Within such limited scope of disclosure,
however, as of the date of the Offering Circular and as of the date hereof, the
Financial Security Information does not contain any untrue statement of a
material fact, or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading.
(h) Additional Information. Financial Security will furnish to
the Underwriter, the Company, the Seller, the Issuer or the Depositor, upon
request of the Underwriter, the Company, the Seller, the Issuer or the
Depositor, as the case may be, copies of Financial Security's most recent
financial statements (annual or interim, as the case may be) which fairly
present in all material respects the financial condition of Financial Security
as of the dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied except as noted therein
(subject, as to interim statements, to normal year-end adjustments); provided,
however, that, if the Underwriter, the Company, the Seller, the Issuer or the
Depositor shall require a manually signed report or consent of Financial
Security's auditors in connection with such financial statements, such report or
consent shall be at the expense of the Underwriter, the Company, the Seller, the
Issuer or the Depositor, as the case may be. In addition, if the delivery of an
Offering Circular relating to the Notes is required at any time prior to the
expiration of nine months after the time of issue of the Offering Circular in
connection with the offering or sale of the Notes, the Depositor or the
Underwriter will notify Financial Security of such requirement to deliver an
Offering Circular and Financial Security will promptly provide the Underwriter
and the Depositor with any revisions to the Financial Security Information that
are in the judgment of Financial Security necessary to prepare an amended
Offering Circular or a supplement to the Offering Circular which will correct
such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to the
Seller, the Originators, the Depositor, the Underwriter, the Issuer and the
Company on the closing date for the sale of the Notes an opinion of its
Associate General Counsel, to the effect set forth in Exhibit A attached hereto,
dated such closing date and addressed to the Seller, the Originators, the
Depositor, the Underwriter, the Issuer and the Company.
(j) Consents and Reports of Independent Accountants. Financial
Security will furnish to the Underwriter, the Company, the Issuer and the
Depositor, upon request, as comfort from its independent accountants in respect
of its financial condition, (i) at the expense of the Person specified in the
Insurance Agreement, a copy of the Offering Circular, including either a
manually signed consent or a manually signed report of Financial Security's
independent accountants and (ii) the quarterly review letter by Financial
Security's independent accountants in respect of the most recent interim
financial statements of Financial Security.
<PAGE>
Nothing in this Agreement shall be construed as a
representation or warranty by Financial Security concerning the rating of its
insurance financial strength by Standard & Poor's Ratings Services, a division
of the McGraw-Hill Companies Inc., or of its insurer financial strength by
Moody's Investors Service, Inc. or any other rating agency (collectively, the
"Rating Agencies"). The Rating Agencies, in assigning such ratings, take into
account facts and assumptions not described in the Offering Circular and the
facts and assumptions which are considered by the Rating Agencies, and the
ratings issued thereby, are subject to change over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all
material respects with all legal requirements in connection with offers and
sales of the Notes and make such offers and sales in the manner provided in the
Offering Circular.
(b) Offering Document. The Underwriter will not use, or
distribute to other broker-dealers for use, any Offering Document in connection
with the offer and sale of the Notes unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Offering Circular.
Each Offering Document will include the following statement: "The Policy is not
covered by the property/casualty insurance security fund specified in Article 76
of the New York Insurance Law".
(c) Underwriting Information. The following information
constitutes the only information furnished by the Underwriter (the "Underwriter
Information"): (i) the statements set forth in the last two paragraphs on the
front cover page of the Offering Circular regarding market making; (ii) the
statements set forth under the heading "Underwriting"; and (iii) the statements
set forth in materials delivered by the Underwriter to the Depositor within the
meaning of the no-action letter dated May 20, 1994 issued by the Division of
Corporation Finance of the Securities Exchange Commission (the "Commission") to
Kidder, Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and
Kidder Structured Asset Corporation and the no-action letter dated May 27, 1994
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association and filed by the Sponsor with the Commission in the
Current Report or Reports on Form 8-K (the "Form 8-K"). The Underwriter confirms
that such statements (to such extent) are correct.
<PAGE>
Section 4. Indemnification. (a) Financial Security agrees,
upon the terms and subject to the conditions provided herein, to indemnify,
defend and hold harmless each Depositor Party, each Company Party, each Seller
Party, each Originator Party, each Issuer Party and each Underwriter Party
against (i) any and all Losses incurred by them with respect to the offer and
sale of the Notes and resulting from Financial Security's breach of any of its
representations, warranties or agreements set forth in Section 2 hereof and (ii)
any and all Losses to which any Depositor Party, Company Party, Seller Party,
Originator Party, Issuer Party or Underwriter Party may become subject, under
the Securities Act or otherwise, insofar as such Losses arise out of or result
from an untrue statement of a material fact contained in any Offering Document
or the omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was made
in the Financial Security Information included therein in accordance with the
provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Financial Security Party against (i) any and all Losses incurred by them with
respect to the offer and sale of the Notes and resulting from the Underwriter's
breach of any of its representations, warranties or agreements set forth in
Section 3 hereof and (ii) any and all Losses to which any Financial Security
Party may become subject, under the Securities Act or otherwise, insofar as such
Losses arise out of or result from an untrue statement of a material fact
contained in any Offering Document or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in the Underwriter Information included
therein.
(c) Upon the incurrence of any Losses for which a party is
entitled to indemnification hereunder, the Indemnifying Party shall reimburse
the Indemnified Party promptly upon establishment by the Indemnified Party to
the Indemnifying Party of the Losses incurred.
<PAGE>
Section 5. Indemnification Procedures. Except as provided
below in Section 6 with respect to contribution or in Section 7(e), the
indemnification provided herein by an Indemnifying Party shall be the exclusive
remedy of any and all Indemnified Parties for the breach of a representation,
warranty or agreement hereunder by an Indemnifying Party; provided, however,
that each Indemnified Party shall be entitled to pursue any other remedy at law
or in equity for any such breach so long as the damages sought to be recovered
shall not exceed the Losses incurred thereby resulting from such breach. In the
event that any action or regulatory proceeding shall be commenced or claim
asserted which may entitle an Indemnified Party to be indemnified under this
Agreement, such party shall give the Indemnifying Party written or telegraphic
notice of such action or claim reasonably promptly after receipt of written
notice thereof. The Indemnifying Party shall be entitled to participate in and,
upon notice to the Indemnified Party, assume the defense of any such action or
claim in reasonable cooperation with, and with the reasonable cooperation of,
the Indemnified Party. The Indemnified Party will have the right to employ its
own counsel in any such action in addition to the counsel of the Indemnifying
Party, but the fees and expenses of such counsel will be at the expense of such
Indemnified Party, unless (a) the employment of counsel by the Indemnified Party
at its expense has been authorized in writing by the Indemnifying Party, (b) the
Indemnifying Party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnifying Party and one or
more Indemnified Parties, and the Indemnified Parties shall have been advised by
counsel that there may be one or more legal defenses available to them which are
different from or additional to those available to the Indemnifying Party (it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all
Depositor Parties, one such firm for all Underwriter Parties, one such firm for
Company Parties, one such firm for all Seller Parties, one such firm for all
Originator Parties, one such firm for all Issuer Parties and one such firm for
all Financial Security Parties, as the case may be, which firm shall be
designated in writing by the Depositor in respect of the Depositor Parties, by
the Underwriter in respect of the Underwriter Parties, by the Company in respect
of the Company Parties, by the Seller in respect of the Seller Parties, by the
Originators in respect of the Originator Parties, by the Issuer in respect of
the Issuer Parties and by Financial Security in respect of the Financial
Security Parties), in each of which cases the fees and expenses of counsel will
be at the expense of the Indemnifying Party and all such fees and expenses will
be reimbursed promptly as they are incurred. The Indemnifying Party shall not be
liable for any settlement of any such claim or action unless the Indemnifying
Party shall have consented thereto or be in default in its obligations
hereunder. Any failure by an Indemnified Party to comply with the provisions of
this Section shall relieve the Indemnifying Party of liability only if such
failure is prejudicial to the position of the Indemnifying Party and then only
to the extent of such prejudice.
Section 6. Contribution. (a) To provide for just and equitable
contribution if the indemnification provided by any Indemnifying Party is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
Losses arising from any breach of any of its representations, warranties or
agreements contained in this Agreement in such proportion as is appropriate to
reflect (i) the benefits received by such Indemnifying Party relative to the
benefits received by the Indemnified Party or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Indemnifying Party on the one hand and
the Indemnified Party on the other in connection with such Loss; provided,
however, that an Indemnifying Party shall in no event be required to contribute
to all Indemnified Parties an aggregate amount in excess of the Losses incurred
by such Indemnified Parties resulting from the breach of representations,
warranties or agreements contained in this Agreement.
<PAGE>
(b) The relative fault of each Indemnifying Party, on the one
hand, and of each Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the breach of, or alleged breach of,
any representations, warranties or agreements contained in this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, the Underwriter shall be
solely responsible for the Underwriter Information and that, as and to the
extent provided in the Insurance Agreement, the balance of the Offering Document
shall be the responsibility of the Company, the Originators, the Seller, the
Issuer and the Depositor.
(d) Notwithstanding anything in this Section 6 to the
contrary, the Underwriter shall not be required to contribute an amount greater
than the excess, if any, of (x) the purchase prices paid by investors to the
Underwriter for the Notes over (y) the purchase price paid by the Underwriter
for the Notes.
(e) No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
(g) The provisions relating to contribution set forth in this
Section 6 do not limit the rights of any party to indemnification under Section
4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for
under this Agreement shall be delivered to the address set forth below or to
such other address as shall be designated by the recipient in a written notice
to the other party or parties hereto.
<PAGE>
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If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: ABFS Mortgage Loan Trust 1999-2
Mortgage Backed Notes, Series 1999-2
If to the Depositor: Prudential Securities Secured Financing Corporation
One New York Plaza
New York, New York 10292
Attention: Managing Director, Asset-Backed Finance Group
If to the Company: American Business Credit, Inc.
BalaPointe Office Centre
111 Presidential Boulevard
Suite 127
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
If to the Underwriter: Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Attention: Managing Director, Asset-Backed Finance Group
If to the Seller: ABFS 1999-2, Inc.
BalaPointe Office Centre
111 Presidential Boulevard
Suite 127
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
If to the Issuer: ABFS Mortgage Loan Trust 1999-2
c/o First Union Trust Company, National Association
One Rodney Square
920 King Street, Suite 102
Wilmington, DE 19801
Att: Corporate Trust Administration
If to the Originators: Home American Credit, Inc. D/B/A Upland Mortgage
BalaPointe Office Centre
111 Presidential Boulevard
Suite 127
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
New Jersey Mortgage and Investment Corp.
BalaPointe Office Centre
111 Presidential Boulevard
Suite 127
Bala Cynwyd, PA 19004
Attention: Jeffrey Ruben, Esq.
</TABLE>
<PAGE>
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(c) Assignments. This Agreement may not be assigned by any
party without the express written consent of each other party. Any assignment
made in violation of this Agreement shall be null and void.
(d) Amendments. Amendments to this Agreement shall be in
writing signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Indemnifying
Party, (ii) the issuance of the Notes or (iii) any termination of this Agreement
or the Policy. The indemnification provided in this Agreement will be in
addition to any liability which the parties may otherwise have and shall in no
way limit any obligations of the Company, the Depositor, the Seller, the
Originators, the Issuer or the Underwriter under the Underwriting Agreement or
the Insurance Agreement, as applicable.
(f) Counterparts. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By
Name:
Title:
ABFS 1999-2, INC.
By
Name:
Title:
AMERICAN BUSINESS CREDIT, INC.
By
Name:
Title:
HOME AMERICAN CREDIT, INC. D/B/A UPLAND MORTGAGE
By
Name:
Title:
NEW JERSEY MORTGAGE AND INVESTMENT CORP.
By
---------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION
By
---------------------------------------
Name:
Title:
<PAGE>
PRUDENTIAL SECURITIES INCORPORATED
By
---------------------------------------
Name:
Title:
ABFS MORTGAGE LOAN TRUST 1999-2
By
FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION
not in its individual capacity but solely as Owner
Trustee under the Trust Agreement
By
---------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly
organized, validly existing and authorized to transact financial guaranty
insurance business under the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized,
executed and delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding
obligations of Financial Security, enforceable against Financial Security in
accordance with their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy or insolvency of Financial Security
and to the application of general principles of equity and subject, in the case
of the Indemnification Agreement, to principles of public policy limiting the
right to enforce the indemnification provisions contained therein insofar as
they relate to indemnification for liabilities arising under applicable
securities laws.
4. The Policy is exempt from registration under the Securities
Act of 1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the
Policy or the Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of the certificate of
incorporation or the by-laws of Financial Security or, to the best of my
knowledge, result in a breach of, or constitute a default under, any agreement
or other instrument to which Financial Security is a party or by which it or any
of its property is bound or, to the best of my knowledge, violate any judgment,
order or decree applicable to Financial Security of any governmental or
regulatory body, administrative agency, court or arbitrator having jurisdiction
over Financial Security (except that in the published opinion of the Securities
and Exchange Commission the indemnification provisions of the Indemnification
Agreement, insofar as they relate to indemnification for liabilities arising
under the Act, are against public policy as expressed in the Act and are
therefore unenforceable).
In addition, please be advised that I have reviewed the
description of Financial Security under the caption "The Note Insurer" in the
Prospectus Supplement dated June 25, 1999 (the "Offering Document") of the
Depositor with respect to the Notes. The information provided in the Offering
Document with respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be included in a prospectus with
respect to a registrant under the Act in connection with a public offering and
sale of securities of such registrant. Within such limited scope of disclosure,
however, there has not come to my attention any information which would cause me
to believe that the description of Financial Security referred to above, as of
the date of the Offering Document or as of the date of this opinion, contained
or contains any untrue statement of a material fact or omitted or omits to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that I express
no opinion with respect to any financial statements or other financial
information contained or referred to therein).
<PAGE>
EXHIBIT 4.1
INDENTURE
dated as of June 1, 1999
by and between
ABFS MORTGAGE LOAN TRUST 1999-2,
as Issuer
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee
<PAGE>
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.............................................................................................2
Section 1.01. General Definitions.........................................................................2
ARTICLE II THE NOTES; PLEDGE OF SUBSEQUENT MORTGAGE LOANS.........................................................2
Section 2.01. Forms Generally.............................................................................2
Section 2.02. Form of Certificate of Authentication.......................................................3
Section 2.03. General Provisions With Respect to Principal and Interest Payment...........................3
Section 2.04. Denominations...............................................................................3
Section 2.05. Execution, Authentication, Delivery and Dating..............................................3
Section 2.06. Registration, Registration of Transfer and Exchange.........................................4
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes..................................................5
Section 2.08. Payments of Principal and Interest..........................................................6
Section 2.09. Persons Deemed Owner........................................................................8
Section 2.10. Cancellation................................................................................8
Section 2.11. Authentication and Delivery of Notes........................................................8
Section 2.12. Book-Entry Note............................................................................10
Section 2.13. Termination of Book Entry System...........................................................10
Section 2.14. Pledge of Subsequent Mortgage Loans........................................................11
ARTICLE III COVENANTS............................................................................................13
Section 3.01. Payment of Notes...........................................................................13
Section 3.02. Maintenance of Office or Agency............................................................13
Section 3.03. Money for Note Payments to Be Held In Trust................................................14
Section 3.04. Existence of Trust.........................................................................15
Section 3.05. Protection of Trust Estate.................................................................16
Section 3.06. Opinions as to the Trust Estate............................................................17
Section 3.07. Performance of Obligations.................................................................17
Section 3.08. Investment Company Act.....................................................................17
Section 3.09. Negative Covenants.........................................................................17
Section 3.10. Annual Statement as to Compliance..........................................................18
Section 3.11. Restricted Payments........................................................................19
Section 3.12. Treatment of Notes as Debt for Tax Purposes................................................19
Section 3.13. Notice of Events of Default................................................................19
Section 3.14. Further Instruments and Acts...............................................................19
ARTICLE IV SATISFACTION AND DISCHARGE............................................................................19
Section 4.01. Satisfaction and Discharge of Indenture....................................................19
Section 4.02. Application of Trust Money.................................................................20
</TABLE>
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ARTICLE V DEFAULTS AND REMEDIES..................................................................................21
Section 5.01. Event of Default...........................................................................21
Section 5.02. Acceleration of Maturity; Rescission and Annulment.........................................22
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee..................23
Section 5.04. Remedies...................................................................................23
Section 5.05. Indenture Trustee May File Proofs of Claim.................................................24
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Notes...........................24
Section 5.07. Application of Money Collected.............................................................25
Section 5.08. Limitation on Suits........................................................................26
Section 5.09. Unconditional Rights of Noteholders to Receive Principal and Interest......................26
Section 5.10. Restoration of Rights and Remedies.........................................................27
Section 5.11. Rights and Remedies Cumulative.............................................................27
Section 5.12. Delay or Omission Not Waiver...............................................................27
Section 5.13. Control by Noteholders.....................................................................27
Section 5.14. Waiver of Past Defaults....................................................................28
Section 5.15. Undertaking for Costs......................................................................28
Section 5.16. Waiver of Stay or Extension Laws...........................................................28
Section 5.17. Sale of Trust Estate.......................................................................29
Section 5.18. Action on Notes............................................................................30
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the Trust............................30
Section 5.20. Application of the Trust Indenture Act.....................................................30
Section 5.21. Note Insurer Default.......................................................................30
ARTICLE VI THE INDENTURE TRUSTEE.................................................................................31
Section 6.01. Duties of Indenture Trustee................................................................31
Section 6.02. Notice of Default..........................................................................33
Section 6.03. Rights of Indenture Trustee................................................................33
Section 6.04. Not Responsible for Recitals or Issuance of Notes..........................................34
Section 6.05. May Hold Notes.............................................................................34
Section 6.06. Money Held in Trust........................................................................34
Section 6.07. Eligibility, Disqualification..............................................................34
Section 6.08. Indenture Trustee's Capital and Surplus....................................................34
Section 6.09. Resignation and Removal; Appointment of Successor..........................................35
Section 6.10. Acceptance of Appointment by Successor Indenture Trustee...................................36
Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee...........37
Section 6.12. Preferential Collection of Claims Against Trust............................................37
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees......................................37
Section 6.14. Authenticating Agents......................................................................38
Section 6.15. Review of Mortgage Files...................................................................39
Section 6.16. Indenture Trustee Fees and Expenses........................................................40
</TABLE>
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ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS.......................................................................41
Section 7.01. Note Registrar to Furnish Indenture Trustee Names and Addresses of Noteholders.............41
Section 7.02. Preservation of Information; Communications to Noteholders.................................41
Section 7.03. Reports by Indenture Trustee...............................................................41
Section 7.04. Reports by Trust...........................................................................42
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES..........................................42
Section 8.01. Accounts; Investment; Collection of Moneys.................................................42
Section 8.02. Distributions; Statements..................................................................45
Section 8.03. Claims against the Note Insurance Policy...................................................46
Section 8.04. General Provisions Regarding the Distribution Accounts and Mortgage Loans..................48
Section 8.05. Releases of Deleted Mortgage Loans.........................................................49
Section 8.06. Reports by Indenture Trustee to Noteholders; Access to Certain Information.................49
Section 8.07. Release of Trust Estate....................................................................50
Section 8.08. Amendment to Sale and Servicing Agreement..................................................50
Section 8.09. Delivery of the Mortgage Files Pursuant to Sale and Servicing Agreement....................50
Section 8.10. Servicer as Agent..........................................................................50
Section 8.11. Termination of Servicer....................................................................50
Section 8.12. Opinion of Counsel.........................................................................51
Section 8.13. Appointment of Collateral Agents...........................................................51
Section 8.14. Rights of the Note Insurer to Exercise Rights of Noteholders...............................51
Section 8.15. Trust Estate and Accounts Held for Benefit of the Note Insurer.............................52
ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................52
Section 9.01. Supplemental Indentures Without Consent of Noteholders.....................................52
Section 9.02. Supplemental Indentures With Consent of Noteholders........................................53
Section 9.03. Execution of Supplemental Indentures.......................................................54
Section 9.04. Effect of Supplemental Indentures..........................................................54
Section 9.05. Conformity With Trust Indenture Act........................................................54
Section 9.06. Reference in Notes to Supplemental Indentures..............................................55
Section 9.07. Amendments to Governing Documents..........................................................55
ARTICLE X REDEMPTION OF NOTES....................................................................................55
Section 10.01. Redemption.................................................................................55
Section 10.02. Form of Redemption Notice..................................................................56
Section 10.03. Notes Payable on Optional Redemption.......................................................57
</TABLE>
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ARTICLE XI MISCELLANEOUS.........................................................................................57
Section 11.01. Compliance Certificates and Opinions.......................................................57
Section 11.02. Form of Documents Delivered to Indenture Trustee...........................................58
Section 11.03. Acts of Noteholders........................................................................58
Section 11.04. Notices, etc., to Indenture Trustee, the Note Insurer and Trust............................59
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices......................................60
Section 11.06. Rules by Indenture Trustee.................................................................61
Section 11.07. Conflict With Trust Indenture Act..........................................................61
Section 11.08. Effect of Headings and Table of Contents...................................................61
Section 11.09. Successors and Assigns.....................................................................61
Section 11.10. Separability...............................................................................61
Section 11.11. Benefits of Indenture......................................................................61
Section 11.12. Legal Holidays.............................................................................61
Section 11.13. Governing Law..............................................................................62
Section 11.14. Counterparts...............................................................................62
Section 11.15. Recording of Indenture.....................................................................62
Section 11.16. Trust Obligation...........................................................................62
Section 11.17. No Petition................................................................................62
Section 11.18. Inspection.................................................................................63
Section 11.19. Usury......................................................................................63
Section 11.20. Note Insurer Default.......................................................................63
Section 11.21. Third-Party Beneficiary....................................................................63
APPENDICES, SCHEDULES AND EXHIBITS
Appendix I Defined Terms
Schedule l Mortgage Loan Schedule
Exhibit A Form of Note
Exhibit B Form of Subsequent Pledge Agreement
Exhibit C Form of Note Insurer Consent for Subsequent Mortgage Loans
</TABLE>
<PAGE>
CROSS-REFERENCE TABLE
Cross-reference sheet showing the location in the Indenture of
the provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.1
Trust Indenture Act of 1939 Indenture Section
- --------------------------- -----------------
Section 310
(a) (1)........................................ 6.07
(a) (2)........................................ 6.07, 6.08
(a) (3)........................................ 6.13
(a) (4)........................................ Not Applicable
(a) (5)........................................ 6.07
(b)............................................ 6.07, 6.09
(c)............................................ Not Applicable
Section 311
(a)............................................ 6.12
(b)............................................ 6.12
(c)............................................ Not Applicable
Section 312
(a)............................................ 7.01(a), 7.02(a)
(b)............................................ 7.02(b)
(c)............................................ 7.02(c)
Section 313
(a)............................................ 7.03(a)
(b)............................................ 7.03(a)
(c)............................................ 11.05
(d)............................................ 7.03(b)
Section 314
(a)(1)......................................... 7.04
(a)(2)......................................... 7.04
(a)(3)......................................... 7.04
(a)(4)......................................... 7.04
(b)(1)......................................... 2.11(c), 11.01
(b)(2)......................................... 3.06
(c)(1)......................................... 2.11(d), 4.01,
8.02(d), 11.01
(c)(2)......................................... 2.11(c), 4.01,
8.02(d), 11.01
(c)(3)......................................... 8.02(d)
(d)(1)......................................... 11.01(a)
(d)(2)......................................... 11.01(a)
(d)(3)......................................... 11.01(a)
(e)............................................ 11.0 1(b)
- -------------------
* This Cross-Reference Table is not part of the Indenture.
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Section 315
(a)............................................ 6.01(b), 6.01(c)(1)
(b)............................................ 6.02, 11.05
(c)............................................ 6.01(a)
(d)(1)......................................... 6.01(b), 6.01(c)
(d)(2)......................................... 6.01(c)(2)
(d)(3)......................................... 6.01(c)(3)
(e)............................................ 5.15
Section 316
(a)............................................ 5.20
(b)............................................ 5.09
(c)............................................ 5.20
Section 317
(a)(1)......................................... 5.03
(a)(2)......................................... 5.05
(b)............................................ 3.01
Section 318
(a)............................................ 11.07
<PAGE>
This INDENTURE, dated as of June 1, 1999 (as amended or
supplemented from time to time as permitted hereby, this "Indenture"), is
between ABFS MORTGAGE LOAN TRUST 1999-2, a Delaware statutory business trust
(together with its permitted successors and assigns, the "Trust"), and THE CHASE
MANHATTAN BANK, a New York banking corporation, as indenture trustee (together
with its permitted successors in the trusts hereunder, the "Indenture Trustee").
Preliminary Statement
The Trust has duly authorized the execution and delivery of
this Indenture to provide for its Mortgage Backed Notes, Series 1999-2 (the
"Notes"), issuable as provided in this Indenture. All covenants and agreements
made by the Trust herein are for the benefit and security of the Holders of the
Notes and the Note Insurer. The Trust is entering into this Indenture, and the
Indenture Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement
of the Trust in accordance with its terms have been done.
Granting Clause
The Trust hereby Grants to the Indenture Trustee, for the
exclusive benefit of the Holders of the Notes and the Note Insurer, all of the
Trust's right, title and interest in and to (a) the Mortgage Loans in both Pool
I and Pool II listed in the Mortgage Loan Schedule attached as Schedule I to
this Indenture (including property that secures a Mortgage Loan that becomes an
REO Property), including the related Mortgage Files delivered or to be delivered
to the Collateral Agent, on behalf of the Indenture Trustee, pursuant to the
Sale and Servicing Agreement, including all payments of principal received,
collected or otherwise recovered after the Cut-Off Date for each Mortgage Loan,
all payments of interest due on each Mortgage Loan after the Cut-Off Date
therefor whenever received and all other proceeds received in respect of such
Mortgage Loans, any Subsequent Mortgage Loans and any Qualified Substitute
Mortgage Loan, (b) the Unaffiliated Seller's Agreement and the Sale and
Servicing Agreement, (c) the Insurance Policies, (d) all cash, instruments or
other property held or required to be deposited in the Collection Account, the
Distribution Accounts, the Note Insurance Payment Account, the Pre-Funding
Accounts, the Capitalized Interest Accounts and the Cross-collateralization
Reserve Accounts, including all investments made with funds in such Accounts
(but not including any income on funds deposited in, or investments made with
funds deposited in, such Accounts other than the Pre-Funding Accounts, which
income shall belong to and be for the account of the Servicer), and (e) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing
into cash or other liquid assets, including, without limitation, all insurance
proceeds and condemnation awards. Such Grants are made, however, in trust, to
secure the Notes equally and ratably without prejudice, priority or distinction
between any Note and any other Note by reason of difference in time of issuance
or otherwise, and for the benefit of the Note Insurer to secure (x) the payment
of all amounts due on the Notes in accordance with their terms, (y) the payment
of all other sums payable under this Indenture and (z) compliance with the
provisions of this Indenture, all as provided in this Indenture. All terms used
in the foregoing granting clauses that are defined in Appendix I are used with
the meanings given in said Appendix I.
<PAGE>
The Indenture Trustee acknowledges such Grant, accepts the
trusts hereunder in accordance with the provisions of this Indenture and agrees
to perform the duties herein required to the end that the interests of the
Holders of the Notes may be adequately and effectively protected. The Indenture
Trustee agrees that it will hold the Note Insurance Policy in trust and that it
will hold any proceeds of any claim upon the Note Insurance Policy, solely for
the use and benefit of the Noteholders in accordance with the terms hereof and
the Note Insurance Policy. In addition, the Indenture Trustee agrees that it
will acknowledge the Grant on each Subsequent Transfer Date of the related
Subsequent Mortgage Loans pursuant to the terms of the related Subsequent Pledge
Agreement, provided that the conditions precedent to the pledge of such
Subsequent Mortgage Loans contained in this Indenture and in the Sale and
Servicing Agreement are satisfied on or prior to such Subsequent Transfer Date.
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions. Except as otherwise specified or as the
context may otherwise require, the following terms have the respective meanings
set forth in Appendix I for all purposes of this Indenture, and the definitions
of such terms are applicable to the singular as well as to the plural forms of
such terms and to the masculine as well as to the feminine genders of such
terms. Whenever reference is made herein to an Event of Default or a Default
known to the Indenture Trustee or of which the Indenture Trustee has notice or
knowledge, such reference shall be construed to refer only to an Event of
Default or Default of which the Indenture Trustee is deemed to have notice or
knowledge pursuant to Section 6.01(d). All other terms used herein that are
defined in the Trust Indenture Act (as hereinafter defined), either directly or
by reference therein, have the meanings assigned to them therein.
ARTICLE II
THE NOTES; PLEDGE OF SUBSEQUENT MORTGAGE LOANS
Section 2.01. Forms Generally. The Notes shall be
substantially in the form set forth as Exhibit A attached hereto. Each Note may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange on which the Notes may be listed, or as may, consistently
herewith, be determined by the Trust, as evidenced by its execution thereof. Any
portion of the text of any Note may be set forth on the reverse thereof with an
appropriate reference on the face of the Note.
The Definitive Notes may be produced in any manner determined
by the Trust, as evidenced by its execution thereof.
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Section 2.02. Form of Certificate of Authentication. The form
of the Authenticating Agent's certificate of authentication is as set forth on
the signature page of the form of the Note attached hereto as Exhibit A.
Section 2.03. General Provisions With Respect to Principal and
Interest Payment. The Notes shall be designated generally as the "ABFS Mortgage
Loan Trust 1999-2, Mortgage Backed Notes, Series 1999-2".
The Notes shall be issued in the form specified in Section
2.01 hereof. The Notes shall be issued in two Classes, the Class A-1 Notes and
the Class A-2 Notes. The aggregate Original Note Principal Balance of Notes that
may be authenticated and delivered under the Indenture is limited to
$197,010,000 of Class A-1 Notes and $21,890,000 of Class A-2 Notes, except for
the Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, or
9.06 of this Indenture.
Subject to the provisions of Sections 3.01, 5.07, 5.09 and
8.02(a) of this Indenture, the principal of each Class of Notes shall be payable
in installments ending no later than the related Final Stated Maturity Date,
unless the unpaid principal of such Notes become due and payable at an earlier
date by declaration of acceleration or call for redemption or otherwise.
All payments made with respect to any Note shall be applied
first to the interest then due and payable on such Note and then to the
principal thereof. All computations of interest accrued on any Class A-1 Note
shall be made on the basis of a year of 360 days and twelve 30-day months. All
computations of interest accrued on any Class A-2 Note shall be made on the
basis of a year of 360 days and the actual number of days elapsed in the related
Accrual Period.
Notwithstanding any of the foregoing provisions with respect
to payments of principal of and interest on the Notes, if the Notes have become
or been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled, then payments of principal of and interest on the Notes shall be made
in accordance with Section 5.07 hereof.
Section 2.04. Denominations. The Notes shall be issuable only
as registered Notes in the denominations equal to the Authorized Denominations.
Section 2.05. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Trust by an Authorized Officer of
the Owner Trustee, acting at the direction of the Certificateholders. The
signature of such Authorized Officer of the Owner Trustee on the Notes may be
manual or by facsimile.
Notes bearing the manual or facsimile signature of an
individual who was at any time an Authorized Officer of the Owner Trustee shall
bind the Trust, notwithstanding that such individual has ceased to be an
Authorized Officer of the Owner Trustee prior to the authentication and delivery
of such Notes or was not an Authorized Officer of the Owner Trustee at the date
of such Notes.
3
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At any time and from time to time after the execution and
delivery of this Indenture, the Trust may deliver Notes executed on behalf of
the Trust to the Authenticating Agent for authentication, and the Authenticating
Agent shall authenticate and deliver such Notes as provided in this Indenture
and not otherwise.
Each Note authenticated on the Closing Date shall be dated the
Closing Date. All other Notes that are authenticated after the Closing Date for
any other purpose hereunder shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for in Section
2.02 hereof, executed by the Authenticating Agent by the manual signature of one
of its Authorized Officers or employees, and such certificate of authentication
upon any Note shall be conclusive evidence, and the only evidence, that such
Note has been duly authenticated and delivered hereunder.
Section 2.06. Registration, Registration of Transfer and
Exchange. The Trust shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Trust
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee is hereby initially appointed "Note Registrar" for
the purpose of registering Notes and transfers of Notes as herein provided. The
Indenture Trustee shall remain the Note Registrar throughout the term hereof.
Upon any resignation of the Indenture Trustee, the Servicer, on behalf of the
Trust, shall promptly appoint a successor, with the approval of the Note
Insurer, or, in the absence of such appointment, the Servicer, on behalf of the
Trust, shall assume the duties of Note Registrar.
Upon surrender for registration of transfer of any Note at the
office or agency of the Trust to be maintained as provided in Section 3.02
hereof, the Owner Trustee on behalf of the Trust, acting at the direction of the
Certificateholders, shall execute, and the Authenticating Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate initial Note Principal Balance.
At the option of the Holder, Notes may be exchanged for other
Notes of any authorized denominations, and of a like aggregate Note Principal
Balance, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Owner Trustee shall
execute, and the Authenticating Agent shall authenticate and deliver, the Notes
that the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Trust, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in the form included in Exhibit A attached hereto, duly
executed by the Holder thereof or its attorney duly authorized in writing.
4
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No service charge shall be made for any registration of
transfer or exchange of Notes, but the Note Registrar, on behalf of the Trust,
may require payment of a sum sufficient to cover any tax or other governmental
charge as may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.07 hereof not
involving any transfer or any exchange made by the Note Insurer.
No transfer of a Note shall be made to the Unaffiliated Seller
or, to the actual knowledge of a Responsible Officer of the Indenture Trustee,
to any of the Unaffiliated Seller's Affiliates, successors or assigns.
The Note Registrar shall not register the transfer of a Note
unless the Note Registrar has received a representation letter from the
transferee to the effect that either (i) the transferee is not, and is not
acquiring the Note on behalf of or with the assets of, an employee benefit plan
or other retirement plan or arrangement that is subject to Title I of the
Employee Retirement Income Security Act or 1974, as amended, or Section 4975 of
the Code or (ii) the acquisition and holding of the Note by the transferee
qualifies for exemptive relief under a Department of Labor Prohibited
Transaction Class Exemption. Each Beneficial Owner of a Note which is a
Book-Entry Note shall be deemed to make one of the foregoing representations.
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes. If
(1) any mutilated Note is surrendered to the Note Registrar or the Note
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (2) there is delivered to the Note Registrar such
security or indemnity as may be required by the Note Registrar to save each of
the Trust, the Owner Trustee, the Note Insurer and the Note Registrar harmless,
then, in the absence of notice to the Note Registrar that such Note has been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust,
acting at the direction of the Certificateholders, shall execute and upon its
delivery of a Trust Request the Authenticating Agent shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a new Note or Notes of the same tenor and aggregate initial
principal amount bearing a number not contemporaneously outstanding. If, after
the delivery of such new Note, a bona fide purchaser of the original Note in
lieu of which such new Note was issued presents for payment such original Note,
the Note Registrar, shall be entitled to recover such new Note from the person
to whom it was delivered or any person taking therefrom, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expenses incurred
by the Trust, the Owner Trustee, the Note Insurer or the Note Registrar in
connection therewith. If any such mutilated, destroyed, lost or stolen Note
shall have become or shall be about to become due and payable, or shall have
become subject to redemption in full, instead of issuing a new Note, the Trust
may pay such Note without surrender thereof, except that any mutilated Note
shall be surrendered.
Upon the issuance of any new Note under this Section 2.07, the
Note Registrar, may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trust, the Indenture
Trustee or the Note Registrar) connected therewith.
5
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Every new Note issued pursuant to this Section 2.07 in lieu of
any destroyed, lost or stolen Note shall constitute an original contractual
obligation of the Trust, whether or not the destroyed, lost or stolen Note shall
be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 2.07 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.08. Payments of Principal and Interest. (a) Payments
on Notes issued as Book-Entry Notes will be made by or on behalf of the
Indenture Trustee to the Clearing Agency or its nominee. Any installment of
interest or principal payable on any Definitive Notes that is punctually paid or
duly provided for by the Trust on the applicable Distribution Date shall be paid
to the Person in whose name such Note (or one or more Predecessor Notes) is
registered at the close of business on the Record Date for such Class of Notes
and such Distribution Date by either (i) check mailed to such Person's address
as it appears in the Note Register on such Record Date, or (ii) by wire transfer
of immediately available funds to the account of a Noteholder, if such
Noteholder (A) is the registered holder of Definitive Notes having an initial
principal amount of at least $1,000,000 and (B) has provided the Indenture
Trustee with wiring instructions in writing by five (5) Business Days prior to
the related Record Date or has provided the Indenture Trustee with such
instructions for any previous Distribution Date, except for the final
installment of principal payable with respect to such Note (or the Redemption
Price for any Note called for redemption, if such redemption will result in
payment of the then entire unpaid Note Principal Balance of such Note), which
shall be payable as provided in subsection (b) of this Section 2.08. A fee may
be charged by the Indenture Trustee to a Holder of Definitive Notes for any
payment made by wire transfer. Any installment of interest or principal not
punctually paid or duly provided for shall be payable as soon as funds are
available to the Indenture Trustee for payment thereof, or if Section 5.07
applies, pursuant to Section 5.07.
(b) All reductions in the Note Principal Balance of a Note (or
one or more Predecessor Notes) effected by payments of installments of principal
made on any Distribution Date shall be binding upon all Holders of such Note and
of any Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, whether or not such payment is noted on such Note.
The final installment of principal of each Note (including the Redemption Price
of any Note called for optional redemption, if such optional redemption will
result in payment of the entire unpaid Note Principal Balance of such Note)
shall be payable only upon presentation and surrender thereof on or after the
Distribution Date therefor at the Corporate Trust Office of the Indenture
Trustee located within the United States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire unpaid
Note Principal Balance of any Note will become due and payable on the next
Distribution Date, other than pursuant to a redemption pursuant to Article X, it
shall, no later than two (2) Business Days prior to such Distribution Date,
telecopy or hand deliver to each Person in whose name a Note to be so retired is
registered at the close of business on such otherwise applicable Record Date a
notice to the effect that:
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(i) the Indenture Trustee expects that funds sufficient to pay
such final installment will be available in the related Distribution
Account on such Distribution Date; and
(ii) if such funds are available, (A) such final installment
will be payable on such Distribution Date, but only upon presentation
and surrender of such Note at the office or agency of the Note
Registrar maintained for such purpose pursuant to Section 3.02 (the
address of which shall be set forth in such notice) and (B) no interest
shall accrue on such Note after such Distribution Date.
A copy of such form of notice shall be sent to the Note
Insurer by the Indenture Trustee.
Notices in connection with redemptions of Notes shall be
mailed to Noteholders in accordance with Section 10.02 hereof.
(c) Subject to the foregoing provisions of this Section 2.08,
each Note delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Note shall carry the rights to unpaid
principal and interest that were carried by such other Note. Any checks mailed
pursuant to subsection (a) of this Section 2.08 and returned undelivered shall
be held in accordance with Section 3.03 hereof.
(d) Each (i) Indenture Trustee's Remittance Report, prepared
by the Indenture Trustee, based solely on the Servicer Remittance Report
delivered to the Indenture Trustee pursuant to the Sale and Servicing Agreement,
and (ii) each report regarding the Mortgage Loans delivered to the Indenture
Trustee by the Servicer pursuant to Section 5.16(b) of the Sale and Servicing
Agreement, shall be delivered by the Indenture Trustee to the Note Insurer, the
Rating Agencies, the Servicer, the Owner Trustee, the Depositor and each
Noteholder as the statements required pursuant to Section 8.06 hereof. Neither
the Indenture Trustee nor the Collateral Agent shall have any responsibility to
recalculate, verify or recompute information contained in any such tape,
electronic data file or disk or any such Servicer Remittance Report except to
the extent necessary to satisfy all obligations under this Section 2.08(d).
Within ninety (90) days after the end of each calendar year,
the Indenture Trustee will be required to furnish to each Person who at any time
during the calendar year was a Noteholder, if requested in writing by such
person, a statement containing the information set forth in subclauses (a), (b)
and (c) in the definition of "Indenture Trustee's Remittance Report," aggregated
for such calendar year or the applicable portion thereof during which such
person was a Noteholder. Such obligation will be deemed to have been satisfied
to the extent that substantially comparable information is provided pursuant to
any requirements of the Code as are from time to time in force.
From time to time (but no more than once per calendar month),
upon the written request of the Depositor, the Servicer or the Note Insurer, the
Indenture Trustee shall report to the Depositor, the Servicer and the Note
Insurer the amount then held in each Account (including investment earnings
accrued) held by the Indenture Trustee and the identity of the investments
included therein. From time to time, at the request of the Note Insurer, the
Indenture Trustee shall report to the Note Insurer with respect to the actual
7
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knowledge of a Responsible Officer, without independent investigation, of any
breach of any of the representations or warranties relating to individual
Mortgage Loans set forth in Section 3.03 of the Unaffiliated Seller's Agreement.
The Indenture Trustee shall also provide the Note Insurer such other information
within its control as may be reasonably requested by it.
Section 2.09. Persons Deemed Owner. Prior to due presentment
for registration of transfer of any Note, any agent on behalf of the Trust
including but not limited to the Indenture Trustee, or the Note Insurer, may
treat the Person in whose name any Note is registered as the owner of such Note
(a) on the applicable Record Date for the purpose of receiving payments of the
principal of and interest on such Note and (b) on any other date for all other
purposes whatsoever, and none of the Trust, the Indenture Trustee or any other
agent of the Trust, or the Note Insurer shall be affected by notice to the
contrary.
Section 2.10. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Note Registrar, be delivered to the Note Registrar and
shall be promptly canceled by it. The Owner Trustee, on behalf of the Trust,
shall deliver to the Note Registrar for cancellation any Note previously
authenticated and delivered hereunder which the Owner Trustee, on behalf of the
Trust may have acquired in any manner whatsoever, and all Notes so delivered
shall be promptly canceled by the Note Registrar. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section 2.10, except as expressly permitted by this Indenture. All
cancelled Notes held by the Note Registrar shall be held by the Note Registrar
in accordance with its standard retention policy, unless the Owner Trustee, on
behalf of the Trust shall direct by a Trust Order that they be destroyed or
returned to it.
Section 2.11. Authentication and Delivery of Notes. The Notes
shall be executed by an Authorized Officer of the Owner Trustee, on behalf of
the Trust, and delivered to the Authenticating Agent for authentication, and
thereupon the same shall be authenticated and delivered by the Authenticating
Agent, upon a Trust Request and upon receipt by the Authenticating Agent of all
of the following:
(a) A Trust Order authorizing the execution, authentication
and delivery of the Notes and specifying the Note Principal Balance and
the Percentage Interest of such Notes to be authenticated and
delivered.
(b) A Trust Order authorizing the execution and delivery of
this Indenture and the Sale and Servicing Agreement.
(c) One or more Opinions of Counsel (which opinion shall not
be at the expense of the Indenture Trustee or the Trust) addressed to
the Authenticating Agent and the Note Insurer or upon which the
Authenticating Agent and the Note Insurer are expressly permitted to
rely, complying with the requirements of Section 11.01, reasonably
satisfactory in form and substance to the Authenticating Agent and the
Note Insurer.
In rendering the opinions set forth above, such counsel may
rely upon Officer's Certificates of the Trust, the Owner Trustee, the
Unaffiliated Seller, the Originators, the Depositor, the Servicer and
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the Indenture Trustee, without independent confirmation or verification
with respect to factual matters relevant to such opinions. In rendering
the opinions set forth above, such counsel need express no opinion as
to (A) the existence of, or the priority of the security interest
created by the Indenture against, any liens or other interests that
arise by operation of law and that do not require any filing or similar
action in order to take priority over a perfected security interest or
(B) the priority of the security interest created by this Indenture
with respect to any claim or lien in favor of the United States or any
agency or instrumentality thereof (including federal tax liens and
liens arising under Title IV of ERISA).
The acceptability to the Note Insurer of the Opinion of
Counsel delivered to the Authenticating Agent and the Note Insurer at
the Closing Date shall be conclusively evidenced by the delivery on the
Closing Date of the Note Insurance Policy.
(d) An Officer's Certificate of the Trust complying with the
requirements of Section 11.01 and stating that:
(i) the Trust is not in Default under this Indenture and the
issuance of the Notes will not result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, the
Trust's Certificate of Trust or any indenture, mortgage, deed of trust
or other agreement or instrument to which the Trust is a party or by
which it is bound, or any order of any court or administrative agency
entered in any proceeding to which the Trust is a party or by which it
may be bound or to which it may be subject, and that all conditions
precedent provided in this Indenture relating to the authentication and
delivery of the Notes have been complied with;
(ii) the Trust is the owner of each Mortgage Loan, free and
clear of any lien, security interest or charge, has not assigned any
interest or participation in any such Mortgage Loan (or, if any such
interest or participation has been assigned, it has been released) and
has the right to Grant each such Mortgage Loan to the Indenture
Trustee;
(iii) the information set forth in the Mortgage Loan Schedule
attached as Schedule I to this Indenture is correct;
(iv) the Trust has Granted to the Indenture Trustee all of its
right, title and interest in each Mortgage Loan; and
(v) as of the Closing Date, no lien in favor of the United
States described in Section 6321 of the Code, or lien in favor of the
Pension Benefit Guaranty Corporation described in Section 4068(a) of
the ERISA, has been filed as described in subsections 6323(f) and
6323(g) of the Code upon any property belonging to the Trust.
(e) An executed counterpart of the Sale and Servicing
Agreement.
(f) An executed counterpart of the Unaffiliated Seller's
Agreement.
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(g) An executed counterpart of the Trust Agreement.
(h) An executed copy of the Insurance Agreement.
(i) An original executed copy of the Note Insurance Policy.
(j) A copy of a letter from Moody's that is has assigned a
rating of "Aaa" to the Notes and a copy of a letter from S&P that it
has assigned a rating of "AAA" to the Notes.
Section 2.12. Book-Entry Note. The Notes will be issued
initially as one or more certificates in the name of Cede & Co., as nominee for
the Clearing Agency maintaining book-entry records with respect to ownership and
transfer of such Notes, and registration of the Notes may not be transferred by
the Note Registrar except upon Book-Entry Termination. In such case, the Note
Registrar shall deal with the Clearing Agency as representative of the
Beneficial Owners of such Notes for purposes of exercising the rights of
Noteholders hereunder. Each payment of principal of and interest on a Book-Entry
Note shall be paid to the Clearing Agency, which shall credit the amount of such
payments to the accounts of its Clearing Agency Participants in accordance with
its normal procedures. Each Clearing Agency Participant shall be responsible for
disbursing such payments to the Beneficial Owners of the Book-Entry Notes that
it represents and to each indirect participating brokerage firm (a "brokerage
firm" or "indirect participating firm") for which it acts as agent. Each
brokerage firm shall be responsible for disbursing funds to the Beneficial
Owners of the Book-Entry Notes that it represents. All such credits and
disbursements are to be made by the Clearing Agency and the Clearing Agency
Participants in accordance with the provisions of the Notes. None of the
Indenture Trustee, the Note Registrar, if any, the Trust or the Note Insurer
shall have any responsibility therefor except as otherwise provided by
applicable law. Requests and directions from, and votes of, such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Beneficial Owners.
Section 2.13. Termination of Book Entry System. (a) The
book-entry system through the Clearing Agency with respect to the Book-Entry
Notes may be terminated upon the happening of any of the following:
(i) The Clearing Agency advises the Indenture Trustee that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities as nominee and depositary with respect to the Notes
and the Indenture Trustee is unable to locate a qualified successor
Clearing Agency satisfactory to the Servicer, on behalf of the Trust;
(ii) The Majority Certificateholders, on behalf of the Trust,
in their sole discretion, elects to terminate the book-entry system by
notice to the Clearing Agency and the Indenture Trustee; or
(iii) After the occurrence of an Event of Default (at which
time the Indenture Trustee shall use all reasonable efforts to promptly
notify each Beneficial Owner through the Clearing Agency of such Event
of Default), the Beneficial Owners of no less than 51% of the Note
Principal Balance of the Book-Entry Notes advise the Indenture Trustee
in writing, through the related Clearing Agency Participants and the
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Clearing Agency, that the continuation of a book-entry system through
the Clearing Agency to the exclusion of any Definitive Notes being
issued to any person other than the Clearing Agency or its nominee is
no longer in the best interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection
(a) of this Section 2.13, the Indenture Trustee shall use all reasonable efforts
to notify all Beneficial Owners, through the Clearing Agency, of the occurrence
of such event and of the availability of Definitive Notes to Beneficial Owners
requesting the same, in an aggregate outstanding Note Principal Balance
representing the interest of each, making such adjustments and allowances as it
may find necessary or appropriate as to accrued interest and previous calls for
redemption. Definitive Notes shall be issued only upon surrender to the
Indenture Trustee of the global Note by the Clearing Agency, accompanied by
registration instructions for the Definitive Notes. Neither the Trust nor the
Indenture Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon issuance of the Definitive Notes, all references herein to
obligations imposed upon or to be performed by the Clearing Agency shall cease
to be applicable and the provisions relating to Definitive Notes shall be
applicable.
Section 2.14. Pledge of Subsequent Mortgage Loans. (a) Subject
to the satisfaction of the conditions set forth in paragraph (b) of this Section
2.14, in consideration of the Indenture Trustee's delivery on the related
Subsequent Transfer Dates to or upon the order of the Servicer, on behalf of the
Trust, of all or a portion of the balance of funds in either Pre-Funding
Account, the Trust shall on any Subsequent Transfer Date pledge, without
recourse, to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, all right, title and interest of the Trust in and to the related
Subsequent Mortgage Loans, including the outstanding principal of, and interest
due on, such Subsequent Mortgage Loans, and all other assets in the Trust Estate
relating to the Subsequent Mortgage Loans. In connection with such pledge, and
pursuant to Section 2.07 of the Unaffiliated Seller's Agreement and Section 2.09
of the Sale and Servicing Agreement, the Trust does hereby also irrevocably
pledge to the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer, all of its rights under the Sale and Servicing Agreement, the
Unaffiliated Seller's Agreement, the related Subsequent Contribution Agreement
and the related Subsequent Transfer Agreement, including, without limitation,
its right to exercise the remedies created by Sections 2.06 and 3.05 of the
Unaffiliated Seller's Agreement for defective documentation and for breaches of
representations and warranties, agreement and covenants of the Unaffiliated
seller contained in Section 3.01, 3.02 and 3.03 of the Unaffiliated Seller's
Agreement.
The amount released from either Pre-Funding Account with
respect to a transfer of Subsequent Mortgage Loans shall be one-hundred percent
(100%) of the Aggregate Principal Balances of the Subsequent Mortgage Loans so
pledged, as of the related Subsequent Cut-Off Date.
(b) The Subsequent Mortgage Loans and the other property and
rights related thereto described in paragraph (a) of this Section 2.14 shall be
pledged by the Trust to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:
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(i) the Unaffiliated Seller shall have provided the Trust, the
Depositor, the Indenture Trustee, the Collateral Agent, the Rating
Agencies and the Note Insurer with an Addition Notice at least two (2)
Business Days prior to the Subsequent Transfer Date, which shall
include a Mortgage Loan Schedule listing the Subsequent Mortgage Loans,
and shall have provided any other information reasonably requested by
any of the foregoing parties with respect to the Subsequent Mortgage
Loans;
(ii) the Unaffiliated Seller shall have caused the Servicer to
deposit in the Collection Account all collections of (x) principal in
respect of the Subsequent Mortgage Loans received after the related
Subsequent Cut-Off Date and (y) interest due on the Subsequent Mortgage
Loans after the related Subsequent Cut-Off Date;
(iii) as of each Subsequent Transfer Date, neither the
Unaffiliated Seller nor the Depositor shall be insolvent, neither shall
be made insolvent by such transfer and neither shall be aware of any
pending insolvency;
(iv) such Subsequent Transfer shall not result in a material
adverse tax consequence to the Trust or the Holders of the Notes;
(v) the related Pre-Funding Period shall not have terminated;
(vi) the Unaffiliated Seller shall have delivered to the
Indenture Trustee an Officer's Certificate confirming the satisfaction
of each condition precedent specified in this paragraph (b) and each
complies with the terms of the Unaffiliated Seller's Agreement,
including each of the representations and warranties made with respect
thereto in Section 3.03 of the Unaffiliated Seller's Agreement;
provided, that each representation in Section 3.03(tt) (other than
clause (v)) may be waived or modified with the prior written consent of
the Note Insurer;
(vii) there shall have been delivered to the Note Insurer, the
Trust, the Collateral Agent, the Rating Agencies and the Indenture
Trustee, Independent Opinions of Counsel with respect to the transfer
of the Subsequent Mortgage Loans substantially in the form of the
Opinions of Counsel delivered to the Depositor, the Note Insurer, the
Trust, the Collateral Agent, the Rating Agencies and the Indenture
Trustee on the Closing Date (i.e. bankruptcy, corporate and tax
opinions);
(viii) the Indenture Trustee shall have received a written
consent from the Note Insurer in the form of Exhibit C hereto;
(ix) the Originators, the Unaffiliated Seller and the
Depositor shall have delivered to the Indenture Trustee an executed
copy of a Subsequent Transfer Agreement, substantially in the form of
Exhibit A to the Unaffiliated Seller's Agreement;
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(x) the Depositor and the Trust shall have delivered to the
Indenture Trustee an executed copy of a Subsequent Contribution
Agreement, substantially in the form of Exhibit G to the Sale and
Servicing Agreement, and
(xi) the Trust and the Indenture Trustee shall have executed a
Subsequent Pledge Agreement, substantially in the form of Exhibit B
hereto.
(c) In connection with the transfer, assignment and pledge of
the Subsequent Mortgage Loans, the Unaffiliated Seller shall satisfy the
document delivery requirements set forth in Section 2.05 of the Sale and
Servicing Agreement.
(d) On each Subsequent Transfer Date upon written instruction
from the Unaffiliated Seller, the Indenture Trustee shall withdraw from the
related Capitalized Interest Account and pay to the Unaffiliated Seller on such
Subsequent Transfer Date the Overfunded Interest Amount for such Subsequent
Transfer Date, as calculated by the Servicer and subject to the approval of the
Note Insurer.
ARTICLE III
COVENANTS
Section 3.01. Payment of Notes. The Servicer, on behalf of the
Trust will pay or cause to be duly and punctually paid the principal of, and
interest on, the Notes in accordance with the terms of the Notes and this
Indenture. The Notes shall be non-recourse obligations of the Trust and shall be
limited in right of payment to amounts available from the Trust Estate as
provided in this Indenture and the Trust shall not otherwise be liable for
payments on the Notes. No person shall be personally liable for any amounts
payable under the Notes. If any other provision of this Indenture conflicts or
is deemed to conflict with the provisions of this Section 3.01, the provisions
of this Section 3.01 shall control.
Section 3.02. Maintenance of Office or Agency. The Indenture
Trustee will always maintain its corporate trust office at a location in the
United States of America where Notes may be surrendered for registration of
transfer or exchange, and where notices and demands to or upon the Trust in
respect of the Notes and this Indenture may be served. Such location shall be
the Corporate Trust Office of the Indenture Trustee.
The Owner Trustee, at the direction of the Majority
Certificateholder, on behalf of the Trust may also from time to time, at the
expense of the Majority Certificateholders, designate one or more other offices
or agencies within the United States of America where the Notes may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, any designation of an office or agency for
payment of Notes shall be subject to Section 3.03 hereof. The Owner Trustee, at
the direction of the Majority Certificateholder, on behalf of the Trust will
give prompt written notice to the Indenture Trustee and the Note Insurer of any
such designation or rescission and of any change in the location of any such
other office or agency.
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Section 3.03. Money for Note Payments to Be Held In Trust. All
payments of amounts due and payable with respect to any Notes that are to be
made from amounts withdrawn from the related Distribution Account pursuant to
Sections 8.02(a) or 5.07 hereof shall be made on behalf of the Trust by the
Indenture Trustee, and no amounts so withdrawn from the related Distribution
Account for payments on the Notes shall be paid over to the Trust under any
circumstances except as provided in this Section 3.03 or in Sections 5.07 or
8.02 hereof.
With respect to Definitive Notes, if the Trust shall have a
Note Registrar that is not also the Indenture Trustee, such Note Registrar shall
furnish, no later than the fifth (5th) calendar day after each Record Date, a
list, in such form as such Indenture Trustee may reasonably require, of the
names and addresses of the Holders of Notes and of the number of Individual
Notes held by each such Holder.
Whenever the Trust shall have a Paying Agent other than the
Indenture Trustee, the Servicer, on behalf of the Trust, will, on or before the
Business Day next preceding each Distribution Date, direct the Indenture Trustee
to deposit with such Paying Agent an aggregate sum sufficient to pay the amounts
then becoming due (to the extent funds are then available for such purpose in
the related Distribution Account), such sum to be held in trust for the benefit
of the Persons entitled thereto. Any moneys deposited with a Paying Agent in
excess of an amount sufficient to pay the amounts then becoming due on the Notes
with respect to which such deposit was made shall, upon Trust Order, be paid
over by such Paying Agent to the Indenture Trustee for application in accordance
with Article VIII hereof.
Subject to the prior written consent of the Note Insurer, any
Paying Agent other than the Indenture Trustee may be appointed by Trust Order
and at the expense of the Trust. The Trust shall not appoint any Paying Agent
(other than the Indenture Trustee) that is not, at the time of such appointment,
a depository institution or trust company whose obligations would be Permitted
Investments pursuant to clause (b) of the definition of the term "Permitted
Investments". The Servicer, on behalf of the Trust, will cause each Paying Agent
other than the Indenture Trustee to execute and deliver to the Indenture Trustee
and the Owner Trustee, on behalf of the Trust, an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section 3.03, that such Paying Agent will:
(a) allocate all sums received for payment to the Holders of
Notes on each Distribution Date among such Holders in the proportion
specified in the applicable Indenture Trustee's Remittance Report, in
each case to the extent permitted by applicable law;
(b) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(c) if such Paying Agent is not the Indenture Trustee,
immediately resign as a Paying Agent and forthwith pay to the Indenture
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Trustee all sums held by it in trust for the payment of the Notes if at
any time the Paying Agent ceases to meet the standards set forth above
required to be met by a Paying Agent at the time of its appointment;
(d) if such Paying Agent is not the Indenture Trustee, give
the Indenture Trustee notice of any Default by the Trust (or any other
obligor upon the Notes) in the making of any payment required to be
made with respect to any Notes for which it is acting as Paying Agent;
(e) if such Paying Agent is not the Indenture Trustee, at any
time during the continuance of any such Default, upon the written
request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent; and
(f) comply with all requirements of the Code, and all
regulations thereunder, with respect to withholding from any payments
made by it on any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in
connection therewith; provided, however, that with respect to
withholding and reporting requirements applicable to original issue
discount (if any) on any of the Notes, the Servicer, on behalf of the
Trust, has provided the calculations pertaining thereto to the
Indenture Trustee and the Paying Agent.
The Trust may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or any other purpose, by Trust
Order direct any Paying Agent, if other than the Indenture Trustee, to pay to
the Indenture Trustee all sums held in trust by such Paying Agent, such sums to
be held by the Indenture Trustee upon the same trusts as those upon which such
sums were held by such Paying Agent; and upon such payment by any Paying Agent
to the Indenture Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note and remaining
unclaimed for two and one-half years after such amount has become due and
payable to the Holder of such Note (or if earlier, three months before the date
on which such amount would escheat to a governmental entity under applicable
law) shall be discharged from such trust and paid to the Trust; and the Holder
of such Note shall thereafter, as an unsecured general creditor, look only to
the Trust for payment thereof (but only to the extent of the amounts so paid to
the Trust), and all liability of the Indenture Trustee or such Paying Agent with
respect to such trust money shall thereupon cease. The Indenture Trustee may
adopt and employ, at the expense of the Trust, any reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or any Paying Agent, at the last address of record for each such
Holder).
Section 3.04. Existence of Trust. (a) Subject to clauses (b)
and (c) of this Section 3.04, the Trust will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware or under the laws of any other state of the United States of America,
and will obtain and preserve its qualification to do business in each
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jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Indenture, the Notes and the other Basic
Documents.
(b) Subject to Section 3.09(g) hereof, and with the prior
written consent of the Note Insurer, any entity into which the Trust may be
merged or with which it may be consolidated, or any entity resulting from any
merger or consolidation to which the Trust shall be a party, shall be the
successor issuer under this Indenture without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
anything in any agreement relating to such merger or consolidation, by which any
such Trust may seek to retain certain powers, rights and privileges therefore
obtaining for any period of time following such merger or consolidation to the
contrary notwithstanding (other than Section 3.09(g)).
(c) Upon any consolidation or merger of or other succession to
the Trust in accordance with this Section 3.04, the Person formed by or
surviving such consolidation or merger (if other than the Trust) may exercise
every right and power of, and shall have all of the obligations of, the Trust
under this Indenture with the same effect as if such Person had been named as
the issuer herein.
Section 3.05. Protection of Trust Estate. (a) The Trust will,
from time to time, execute and deliver all such supplements and amendments
hereto and all such financing statements, continuation statements, instruments
of further assurance and other instruments, and will take such other action as
may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust
Estate as made by this Indenture;
(ii) maintain or preserve the lien of this Indenture or carry
out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Mortgage Loans, the Sale and Servicing
Agreement, or the Unaffiliated Seller's Agreement; or
(v) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee, the Noteholders and the Note Insurer
in the Mortgage Loans and the other property held as part of the Trust
Estate against the claims of all Persons and parties.
(b) The Indenture Trustee shall not, and shall not permit the
Collateral Agent to, remove any portion of the Trust Estate that consists of
money or is evidenced by an instrument, certificate or other writing from the
jurisdiction in which it was held at the Closing Date or cause or permit
ownership or the pledge of any portion of the Trust Estate that consists of
book-entry securities to be recorded on the books of a Person located in a
different jurisdiction from the jurisdiction in which such ownership or pledge
was recorded at such time unless the Indenture Trustee shall have first received
an Opinion of Counsel to the effect that the lien and security interest created
by this Indenture with respect to such property will continue to be maintained
after giving effect to such action or actions.
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Section 3.06. Opinions as to the Trust Estate. On or before
April 30th in each calendar year, beginning in 2000, the Servicer, on behalf of
the Trust, shall furnish to the Indenture Trustee and the Note Insurer an
Opinion of Counsel reasonably satisfactory in form and substance to the
Indenture Trustee and the Note Insurer either stating that, in the opinion of
such counsel, such action has been taken as is necessary to maintain the lien
and security interest created by this Indenture and reciting the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe all such action, if any, that will, in the opinion of such
counsel, be required to be taken to maintain the lien and security interest of
this Indenture with respect to the Trust Estate until May 1st in the following
calendar year.
Section 3.07. Performance of Obligations. (a) The Trust shall
punctually perform and observe all of its obligations under this Indenture and
the other Basic Documents.
(b) The Trust shall not take any action and will use its Best
Efforts not to permit any action to be taken by others that would release any
Person from any of such Person's covenants or obligations under any of the
Mortgage Files or under any instrument included in the Trust Estate, or that
would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the documents
or instruments contained in the Mortgage Files, except as expressly permitted in
this Indenture, the other Basic Documents or such document included in the
Mortgage File or other instrument or unless such action will not adversely
affect the interests of the Noteholders and the Note Insurer.
(c) If the Servicer or the Owner Trustee, on behalf of the
Trust, shall have knowledge of the occurrence of a default under the Sale and
Servicing Agreement or the Unaffiliated Seller's Agreement, the Servicer or the
Owner Trustee, as applicable, shall promptly notify the Indenture Trustee, the
Note Insurer and the Rating Agencies thereof, and, in the case of the Servicer,
shall specify in such notice the action, if any, the Servicer is taking with
respect to such default.
(d) Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Indenture Trustee shall
promptly notify the Note Insurer and the Rating Agencies. As soon as any
successor Servicer is appointed, the Indenture Trustee shall notify the Note
Insurer and the Rating Agencies, specifying in such notice the name and address
of such successor Servicer.
Section 3.08. Investment Company Act. The Trust shall at all
times conduct its operations so as not to be subject to, or shall comply with,
the requirements of the Investment Company Act of 1940, as amended (or any
successor statute), and the rules and regulations thereunder.
Section 3.09. Negative Covenants. The Trust shall not:
(a) sell, transfer, exchange or otherwise dispose of any
portion of the Trust Estate, except as expressly permitted by this
Indenture and the other Basic Documents;
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(b) claim any credit on, or make any deduction from, the
principal of, or interest on, any of the Notes by reason of the payment
of any taxes levied or assessed upon any portion of the Trust Estate;
(c) engage in any business or activity other than as permitted
by the Trust Agreement or other than in connection with, or relating
to, the issuance of the Notes pursuant to this Indenture, or amend the
Trust Agreement, as in effect on the Closing Date, other than in
accordance with Section 11.01 of the Trust Agreement;
(d) incur, issue, assume or otherwise become liable for an
indebtedness other than the Notes;
(e) incur, assume, guaranty or agree to indemnify any Person
with respect to any indebtedness of any Person, except for such
indebtedness as may be incurred by the Trust in connection with the
issuance of the Notes pursuant to this Indenture;
(f) subject to Article IX of the Trust Agreement, dissolve or
liquidate in whole or in part (until the Notes are paid in full);
(g) (i) permit the validity or effectiveness of this Indenture
or any Grant to be impaired, or permit the lien of this Indenture to be
impaired, amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations under this Indenture, except as may be expressly permitted
hereby, (ii) permit any lien, charge, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Estate or
any part thereof or any interest therein or the proceeds thereof, or
(iii) permit the lien of this Indenture not to constitute a valid
perfected first priority security interest in the Trust Estate; or
(h) take any other action that should reasonably be expected
to, or fail to take any action if such failure should reasonably be
expected to, cause the Trust to be taxable as (x) an association
pursuant to Section 7701 of the Code or (y) a taxable mortgage pool
pursuant to Section 7701(i) of the Code.
Section 3.10. Annual Statement as to Compliance. On or before
April 30, 2000, and each April 30 thereafter, the Servicer, on behalf of the
Trust, shall deliver to the Indenture Trustee, the Note Insurer and the
Depositor a written statement, signed by an Authorized Officer of the Servicer,
on behalf of the Trust, stating that:
(a) a review of the fulfillment by the Trust during such year
of its obligations under this Indenture has been made under such
Authorized Officer's supervision; and
(b) to the best of such Authorized Officer's knowledge, based
on such review, the Trust has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a Default in the fulfillment of any such covenant or condition,
specifying each such Default known to such Authorized Officer and the
nature and status thereof.
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Section 3.11. Restricted Payments. The Trust 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 Trust or otherwise with respect to any ownership or equity interest or
security in or of the Trust 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 Trust may make, or cause to be made, distributions
to the Servicer, the Indenture Trustee, the Owner Trustee, the Note Insurer and
the Certificateholders as contemplated by, and to the extent funds are available
for such purpose under this Indenture and the other Basic Documents and the
Trust will not, directly or indirectly, make or cause to be made payments to or
distributions from any Distribution Account except in accordance with this
Indenture.
Section 3.12. Treatment of Notes as Debt for Tax Purposes. For
purposes of federal, state and local income, franchise and any other income
taxes, the Trust will treat the Notes as indebtedness, and hereby instructs the
Indenture Trustee, Payee Agent and the Servicer, on behalf of the Trust to treat
the Notes as indebtedness for all applicable tax reporting purposes.
Section 3.13. Notice of Events of Default. The Servicer, on
behalf of the Trust, shall give the Indenture Trustee, the Note Insurer, the
Rating Agencies and the Depositor prompt written notice of each Event of Default
hereunder, each default on the part of the Servicer of its obligations under the
Sale and Servicing Agreement and each default on the part of the Unaffiliated
Seller of its obligations under the Unaffiliated Seller's Agreement.
Section 3.14. Further Instruments and Acts. Upon written
request of the Indenture Trustee or the Note Insurer, the Owner Trustee, on
behalf of the Trust, will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture.
Whenever the following conditions shall have been satisfied:
(a) either
(i) all Notes theretofore authenticated and delivered (other
than (x) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.07 hereof, and (y) Notes
for whose payment money has theretofore been deposited in trust and
thereafter repaid to the Trust, as provided in Section 3.03 hereof)
have been delivered to the Note Registrar for cancellation; or
(ii) all Notes not theretofore delivered to the Note Registrar
for cancellation,
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(A) have become due and payable, or
(B) will become due and payable at the Final Stated Maturity
Date within one (1) year, or
(C) are to be called for redemption pursuant to Section 10.01
hereof within one (1) year under irrevocable arrangements satisfactory
to the Indenture Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of the Servicer,
and the Servicer, in the case of clauses (ii)(A), (ii)(B) or
(ii)(C) above, has irrevocably deposited or caused to be
deposited with the Indenture Trustee, in trust for such
purpose, an amount sufficient to pay and discharge the entire
unpaid Note Principal Balance such Notes not theretofore
delivered to the Indenture Trustee for cancellation, for
principal and interest to the Final Stated Maturity Date or to
the applicable Redemption Date, as the case may be, and in the
case of Notes that were not paid at the Final Stated Maturity
Date of their entire unpaid Note Principal Balance, for all
overdue principal and all interest payable on such Notes to
the next succeeding Distribution Date therefor;
(b) the Servicer, on behalf of the Trust, has paid or caused
to be paid all other sums payable hereunder by the Trust (including,
without limitation, amounts due the Note Insurer); and
(c) the Servicer, on behalf of the Trust, has delivered to the
Indenture Trustee and the Note Insurer an Officers' Certificate and an
Opinion of Counsel satisfactory in form and substance to the Indenture
Trustee and the Note Insurer each stating that all conditions precedent
herein providing for the satisfaction and discharge of this Indenture
have been complied with;
then, upon a Trust Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then acting
as such hereunder shall, at the expense of the Trust (or of the Servicer in the
case of a redemption by the Servicer pursuant to Section 10.01 hereof), execute
and deliver all such instruments as may be necessary to acknowledge the
satisfaction and discharge of this Indenture and shall pay, or assign or
transfer and deliver, to the Trust or upon Trust Order all cash, securities and
other property held by it as part of the Trust Estate remaining after
satisfaction of the conditions set forth in clauses (a) and (b) above.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Indenture Trustee and any Paying Agent to the
Trust and the Holders of Notes under Section 3.03 hereof, the obligations of the
Indenture Trustee to the Holders of Notes under Section 4.02 hereof and the
provisions of Section 2.07 hereof with respect to lost, stolen, destroyed or
mutilated Notes, registration of transfers of Notes and rights to receive
payments of principal of and interest on the Notes shall survive.
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Section 4.02. Application of Trust Money. All money deposited
with the Indenture Trustee pursuant to Sections 3.03 and 4.01 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 Paying Agent,
as the Indenture Trustee may determine, to the Persons entitled thereto, of the
principal and interest for whose payment such money has been deposited with the
Indenture Trustee.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Event of Default. "Event of Default", wherever
used herein, means, with respect to Notes issued hereunder, any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) if the Trust shall fail to distribute or cause to be
distributed to the Indenture Trustee, for the benefit of the holders of
the Notes, on any Distribution Date, any Interest Distribution Amount,
any Net Mortgage Loan Interest Shortfalls or any Class A-2 Available
Funds Cap Carry-Forward Amount due on the Notes on such Distribution
Date;
(b) if the Trust shall fail to distribute or cause to be
distributed to the Indenture Trustee, for the benefit of the holders of
the Notes, (x) on any Distribution Date, an amount equal to the
Principal Distribution Amount due on the Notes on such Distribution
Date, to the extent that sufficient funds are on deposit in the
Collection Account or (y) on the Final Stated Maturity Date for any
Class of Notes, the aggregate outstanding Note Principal Balance of
such Class of Notes;
(c) if the Trust shall breach or default in the due observance
of any one or more of the covenants set forth in clauses (a) through
(h) of Section 3.09 hereof;
(d) if the Trust shall consent to the appointment of a
custodian, receiver, trustee or liquidator (or other similar official)
of itself, or of a substantial part of its property, or shall admit in
writing its inability to pay its debts generally as they come due, or a
court of competent jurisdiction shall determine that the Trust is
generally not paying its debts as they come due, or the Trust shall
make a general assignment for the benefit of creditors;
(e) if the Trust shall file a voluntary petition in bankruptcy
or a voluntary petition or an answer seeking reorganization in a
proceeding under any bankruptcy laws (as now or hereafter in effect) or
an answer admitting the material allegation of a petition filed against
the Trust in any such proceeding, or the Trust shall, by voluntary
petition, answer or consent, seek relief under the provisions of any
now existing or future bankruptcy or other similar law providing for
the reorganization or winding-up of debtors, or providing for an
agreement, composition, extension or adjustment with its creditors;
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(f) if an order, judgment or decree shall be entered in any
proceeding by any court of competent jurisdiction appointing, without
the consent (express or legally implied) of the Trust, a custodian,
receiver, trustee or liquidator (or other similar official) of the
Trust or any substantial part of its property, or sequestering any
substantial part of its respective property, and any such order,
judgment or decree or appointment or sequestration shall remain in
force undismissed, unstayed or unvacated for a period of ninety (90)
days after the date of entry thereof; or
(g) if a petition against the Trust in a proceeding under
applicable bankruptcy laws or other insolvency laws, as now or
hereafter in effect, shall be filed and shall not be stayed, withdrawn
or dismissed within ninety (90) days thereafter, or if, under the
provisions of any law providing for reorganization or winding-up of
debtors which may apply to the Trust, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Trust
or any substantial part of its property, and such jurisdiction, custody
or control shall remain in force unrelinquished, unstayed or
unterminated for a period of ninety (90) days.
Section 5.02. Acceleration of Maturity; Rescission and
Annulment. If an Event of Default occurs and is continuing, then and in every
such case, but with the consent of the Note Insurer in the absence of a Note
Insurer Default, the Indenture Trustee may, and on request of the Note Insurer,
in the absence of a Note Insurer Default, or, with the prior written consent of
the Note Insurer, the Holders of Notes representing not less than 50% of the
Note Principal Balance of the Outstanding Notes of both Classes, shall, declare
all the Notes to be immediately due and payable by a notice in writing to the
Trust (and to the Indenture Trustee if given by Noteholders), and upon any such
declaration such Notes, in an amount equal to the entire unpaid Note Principal
Balance of such Notes, together with accrued and unpaid interest thereon to the
date of such acceleration, shall become immediately due and payable, all subject
to the prior written consent of the Note Insurer in the absence of a Note
Insurer Default.
At any time after such a declaration of acceleration of
maturity of the Notes has been made and before a judgment or decree for payment
of the money due has been obtained by the Indenture Trustee as hereinafter
provided in this Article V, the Note Insurer, in the absence of a Note Insurer
Default, or the Holders of Notes representing more than 50% of the Note
Principal Balance of the Outstanding Notes of both Classes, with the prior
written consent of the Note Insurer, by written notice to the Trust and the
Indenture Trustee, may rescind and annul such declaration and its consequences
if:
(a) the Trust has paid or deposited with the Indenture Trustee
a sum sufficient to pay:
(i) all payments of principal of, and interest on, all
Outstanding Notes and all other amounts that would then be due
hereunder or upon such Notes if the Event of Default giving rise to
such acceleration had not occurred; and
(ii) 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
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(b) all Events of Default, other than the nonpayment of the
principal of Notes that have become due solely by such acceleration,
have been cured or waived as provided in Section 5.14 hereof.
No such rescission shall affect any subsequent Default or
impair any right consequent thereon.
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee. Subject to the provisions of Section 3.01
hereof and the following sentence, if an Event of Default occurs and is
continuing, the Indenture Trustee may, with the prior written consent of the
Note Insurer, proceed to protect and enforce its rights and the rights of the
Noteholders and the Note Insurer by any Proceedings the Indenture Trustee deems
appropriate to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or enforce any other proper remedy. Any
Proceedings brought by the Indenture Trustee, on behalf of the Noteholders and
the Note Insurer, or any Noteholder against the Trust shall be limited to the
preservation, enforcement and foreclosure of the liens, assignments, rights and
security interests under the Indenture and no attachment, execution or other
unit or process shall be sought, issued or levied upon any assets, properties or
funds of the Trust, other than the Trust Estate relative to the Notes in respect
of which such Event of Default has occurred. If there is a foreclosure of any
such liens, assignments, rights and security interests under this Indenture, by
private power of sale or otherwise, no judgment for any deficiency upon the
indebtedness represented by the Notes may be sought or obtained by the Indenture
Trustee or any Noteholder against the Trust. The Indenture Trustee shall be
entitled to recover the costs and expenses expended by it pursuant to this
Article V including reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel.
Section 5.04. Remedies. If an Event of Default shall have
occurred and be continuing and the Notes been declared due and payable and such
declaration and its consequences have not been rescinded and annulled, the
Indenture Trustee, at the direction of the Note Insurer (subject to Section 5.17
hereof, to the extent applicable) may, for the benefit of the Noteholders and
the Note Insurer, do one or more of the following:
(a) institute Proceedings for the collection of all amounts
then payable on the Notes, or under this Indenture, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Trust moneys adjudged due, subject in all cases to the
provisions of Sections 3.01 and 5.03 hereof;
(b) in accordance with Section 5.17 hereof, sell the Trust
Estate or any portion thereof or rights or interest therein, at one or
more public or private Sales called and conducted in any manner
permitted by law;
(c) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Estate;
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(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee or the Holders
of the Notes and the Note Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all funds
on deposit in each of the Accounts pursuant to Section 5.07 hereof.
Section 5.05. Indenture Trustee May File Proofs of Claim. In
case of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, composition or other judicial Proceeding relative
to the Trust or any other obligor upon any of the Notes or the property of the
Trust or of such other obligor or their creditors, the Indenture Trustee
(irrespective of whether the Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Indenture Trustee shall have made any demand on the Trust for the payment of any
overdue principal or interest) shall, with the prior written consent of the Note
Insurer, be entitled and empowered, by intervention in such Proceeding or
otherwise to:
(a) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Notes and file such
other papers or documents as may be necessary or advisable in order to
have the claims of the Indenture Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel), the Noteholders and the
Note Insurer allowed in such Proceeding, and
(b) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such Proceeding is hereby authorized by each
Noteholder and the Note Insurer to make such payments to the Indenture
Trustee and, in the event that the Indenture Trustee shall consent to
the making of such payments directly to the Noteholders and the Note
Insurer, to pay to the Indenture Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting any of the Notes or the rights of any Holder
thereof, or the Note Insurer, or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder or the Note Insurer in any such
Proceeding.
Section 5.06. Indenture Trustee May Enforce Claims Without
Possession of Notes. All rights of action and claims under this Indenture or any
of the Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Indenture Trustee,
at the direction of the Note Insurer, shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall be for the
ratable benefit of the Holders of the Notes and the Note Insurer in respect of
which such judgment has been recovered after payment of amounts required to be
paid pursuant to clause (a) of Section 5.07 hereof.
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Section 5.07. Application of Money Collected. If the Notes
have been declared due and payable following an Event of Default and such
declaration and its consequences have not been rescinded and annulled, any money
collected by the Indenture Trustee with respect to each Class of Notes pursuant
to this Article V or otherwise and any other monies that may then be held or
thereafter received by the Indenture Trustee as security for such Class of Notes
shall be applied in the following order, at the date or dates fixed by the
Indenture Trustee and, in case of the payment of the entire amount due on
account of principal of, and interest on, such Class of Notes, upon presentation
and surrender thereof:
(a) first, to the Indenture Trustee, any unpaid Indenture
Trustee Fees with respect to such Class then due and any other amounts
payable and due to the Indenture Trustee with respect to such Class
under this Indenture, including any costs or expenses incurred by it in
connection with the enforcement of the remedies provided for in this
Article V;
(b) second, to the Servicer, any amounts required to pay the
Servicer for any unpaid Servicing Fees with respect to such Class then
due and to reimburse the Servicer for Periodic Advances with respect to
such Class previously made by, and not previously reimbursed to or
retained by, the Servicer and, upon the final liquidation of the
related Mortgage Loan or the final liquidation of the Trust Estate,
Servicing Advances with respect to such Class previously made by, and
not previously reimbursed to or retained by, the Servicer;
(c) third, to the payment of Interest Distribution Amounts
then due and unpaid upon the Outstanding Notes of such Class through
the day preceding the date on which such payment is made;
(d) fourth, to the payment of the Note Principal Balance of
each of the Outstanding Notes of such Class, up to the amount of their
respective unpaid Note Principal Balance, ratably, without preference
or priority of any kind;
(e) fifth, to the Note Insurer, as subrogee to the rights of
the Noteholders, (x) the aggregate amount necessary to reimburse the
Note Insurer for any unreimbursed Reimbursement Amounts for such Class
paid by the Note Insurer on prior Distribution Dates, together with
interest thereon at the "Late Payment Rate" specified in the Insurance
Agreement from the date such Reimbursement Amounts were due to the Note
Insurer to such Distribution Date, (y) the amount of any unpaid Premium
Amount for such Class then due, together with interest thereon at the
"Late Payment Rate" specified in the Insurance Agreement from the date
such amounts were due to such Distribution Date and (z) any other
amounts due and owing to the Note Insurer for such Class under the
Insurance Agreement;
(f) sixth, to the payment of any Net Mortgage Loan Interest
Shortfalls of such Class through the day preceding the date on which
such payment is made;
(g) seventh, for payment in respect of the other Class of
Notes, in the priority set forth in this Section 5.07, to the extent of
any shortfall in the payment of the amounts described in clauses (a)
through (f) with respect to such other Class;
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(h) eighth, with respect to the Class A-2 Notes only, to the
payment of any Class A-2 Available Funds Cap Carry-Forward Amount; and
(i) ninth, the remainder to the Holder of Trust Certificate
relating to such Class.
Section 5.08. Limitation on Suits. No Holder of a Note shall
have any right to institute any Proceedings, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) such Holder has previously given written notice to the
Indenture Trustee and the Note Insurer of a continuing Event of
Default;
(b) the Holders of Notes representing not less than 25% of the
Note Principal Balance of the Outstanding Notes of both Classes shall
have made written request to the Indenture Trustee to institute
Proceedings in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture
Trustee indemnity in full against the costs, expenses and liabilities
to be incurred in compliance with such request;
(d) the Indenture Trustee, for sixty (60) days after its
receipt of such notice, request and offer of indemnity, has failed to
institute any such Proceeding;
(e) no direction inconsistent with such written request has
been given to the Indenture Trustee during such sixty (60) day period
by the Holders of Notes representing more than 50% of the Note
Principal Balance of the Outstanding Notes of both Classes; and
(f) the consent of the Note Insurer shall have been obtained;
it being understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders of Notes or to obtain or to
seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders of
Notes.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than 50% of the Note Principal Balances of the
Outstanding Notes of both Classes, the Indenture Trustee shall take the action
prescribed by the group representing a greater percentage of the Note Principal
Balances of the Outstanding Notes of both Classes.
Section 5.09. Unconditional Rights of Noteholders to Receive
Principal and Interest. Subject to the provisions in this Indenture (including
Sections 3.01 and 5.03 hereof) limiting the right to recover amounts due on a
Note to recovery from amounts in the portion of the Trust Estate relating to
such Note, the Holder of any Note shall have the right, to the extent permitted
by applicable law, which right is absolute and unconditional, to receive payment
of each installment of interest on such Note on the respective Distribution Date
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for such installments of interest, to receive payment of each installment of
principal of such Note when due (or, in the case of any Note called for
redemption, on the date fixed for such redemption) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
Section 5.10. Restoration of Rights and Remedies. If the
Indenture Trustee, the Note Insurer or any Noteholder has instituted any
Proceeding to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason, or has been
determined to be adverse to the Indenture Trustee, the Note Insurer or to such
Noteholder, then and in every such case the Indenture Trustee, the Note Insurer
and the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee, the Note Insurer
and the Noteholders shall continue as though no such Proceeding had been
instituted.
Section 5.11. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee, the Note
Insurer or to the Noteholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 5.12. Delay or Omission Not Waiver. No delay or
omission of the Indenture Trustee, the Note Insurer or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article V or by
law to the Indenture Trustee, the Note Insurer or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee, the Note Insurer or by the Noteholders with the prior consent
of the Note Insurer, as the case may be.
Section 5.13. Control by Noteholders. The Holders of Notes
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of both Classes on the applicable Record Date shall, with the consent of
the Note Insurer, have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Indenture Trustee or
exercising any trust or power conferred on the Indenture Trustee; provided that:
(a) such direction shall not be in conflict with any rule of
law or with this Indenture;
(b) any direction to the Indenture Trustee to undertake a Sale
of the Trust Estate shall be by the Holders of Notes representing the
percentage of the Note Principal Balance of the Outstanding Notes
specified in Section 5.17(b)(i) hereof, unless Section 5.17(b)(ii)
hereof is applicable; and
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(c) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction; provided, however, that, subject to Section 6.01 hereof, the
Indenture Trustee need not take any action that it determines might
involve it in liability or be unjustly prejudicial to the Noteholders
not consenting.
Section 5.14. Waiver of Past Defaults. The Holders of Notes
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of both Classes on the applicable Record Date may on behalf of the Holders
of all the Notes, and with the consent of the Note Insurer, waive any past
Default hereunder and its consequences, except a Default:
(a) in the payment of principal or any installment of interest
on any Note; or
(b) in respect of a covenant or provision hereof that under
Section 9.02 hereof cannot be modified or amended without the consent
of the Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Section 5.15. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.15 shall not apply to any suit instituted by the
Indenture Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate Notes representing more than 10% of the
Note Principal Balance of the Outstanding Notes of both Classes, or to any suit
instituted by any Noteholder for the enforcement of the payment of any Interest
Distribution Amount or Principal Distribution Amount on any Note on or after the
related Distribution Date or for the enforcement of the payment of principal of
any Note on or after the Final Stated Maturity Date (or, in the case of any Note
called for redemption, on or after the applicable Redemption Date).
Section 5.16. Waiver of Stay or Extension Laws. The Trust
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension of law wherever enacted, now or
at any time hereafter in force, that may affect the covenants in, or the
performance of, this Indenture; and the Trust (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
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Section 5.17. Sale of Trust Estate. (a) The power to effect
any sale (a "Sale") of any portion of the Trust Estate pursuant to Section 5.04
hereof shall not be exhausted by any one or more Sales as to any portion of the
Trust Estate remaining unsold, but shall continue unimpaired until the entire
Trust Estate shall have been sold or all amounts payable on the Notes and under
this Indenture with respect thereto shall have been paid. The Indenture Trustee
may from time to time postpone any public Sale by public announcement made at
the time and place of such Sale.
(b) To the extent permitted by law, the Indenture Trustee
shall not in any private Sale sell or otherwise dispose of the Trust Estate, or
any portion thereof, unless:
(i) the Holders of Notes representing not less than 50% of the
Note Principal Balance of the Notes of both Classes then Outstanding
consent to or direct the Indenture Trustee to make such Sale; or
(ii) the proceeds of such Sale would be not less than the
entire amount that would be payable to the Holders of the Notes, in
full payment thereof in accordance with Section 5.07 hereof, on the
Distribution Date next succeeding the date of such Sale.
The purchase by the Indenture Trustee of all or any portion of
the Trust Estate at a private Sale shall not be deemed a Sale or disposition
thereof for purposes of this Section 5.17(b). In the absence of a Note Insurer
Default, no Sale hereunder shall be effective without the consent of the Note
Insurer.
(c) Unless the Holders of all Outstanding Notes have otherwise
consented or directed the Indenture Trustee, at any public Sale of all or any
portion of the Trust Estate at which a minimum bid equal to or greater than the
amount described in paragraph (ii) of subsection (b) of this Section 5.17 has
not been established by the Indenture Trustee and no Person bids an amount equal
to or greater than such amount, the Indenture Trustee, acting in its capacity as
Indenture Trustee (i) on behalf of the Noteholders and the Note Insurer, shall
prevent such Sale and bid an amount (which shall include the Indenture Trustee's
right, in its capacity as Indenture Trustee, to credit bid) at least $1.00 more
than the highest other bid in order to preserve the Trust Estate on behalf of
the Noteholders and the Note Insurer.
(d) In connection with a Sale of all or any portion of the
Trust Estate:
(i) any Holder or Holders of Notes may bid for and purchase
the property offered for Sale, and upon compliance with the terms of
sale may hold, retain and possess and dispose of such property, without
further accountability, and may, in paying the purchase money therefor,
deliver any Outstanding Notes or claims for interest thereon in lieu of
cash up to the amount that shall, upon distribution of the net proceeds
of such Sale, be payable thereon, and such Notes, in case the amounts
so payable thereon shall be less than the amount due thereon, shall be
returned to the Holders thereof after being appropriately stamped to
show such partial payment;
(ii) the Indenture Trustee may bid for and acquire the
property offered for Sale in connection with any public Sale thereof,
and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting the gross Sale price against the sum of (A)
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the amount that would be payable to the Holders of the Notes as a
result of such Sale in accordance with Section 5.07 hereof on the
Distribution Date next succeeding the date of such Sale and (B) the
expenses of the Sale and of any Proceedings in connection therewith
which are reimbursable to it, without being required to produce the
Notes in order to complete any such Sale or in order for the net Sale
price to be credited against such Notes, and any property so acquired
by the Indenture Trustee shall be held and dealt with by it in
accordance with the provisions of this Indenture;
(iii) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any
portion of the Trust Estate in connection with a Sale thereof,
(iv) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Trust to transfer and convey its
interest in any portion of the Trust Estate in connection with a Sale
thereof, and to take all action necessary to effect such Sale; and
(v) no purchaser or transferee at such a Sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of
any moneys.
Section 5.18. Action on Notes. The Indenture Trustee's right
to seek and recover judgment under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Indenture Trustee, the Note Insurer or the Holders of Notes shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Trust or by the levy of any execution under such judgment upon any portion of
the Trust Estate.
Section 5.19. No Recourse to Other Trust Estates or Other
Assets of the Trust. The Trust Estate Granted to the Indenture Trustee as
security for the Notes serves as security only for the Notes. Holders of the
Notes shall have no recourse against the trust estate granted as security for
any other series of Notes issued by the Trust, and no judgment against the Trust
for any amount due with respect to the Notes may be enforced against either the
trust estate securing any other series or any other assets of the Trust, nor may
any prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Trust. The Noteholders shall have no recourse
against the Owner Trustee, the Indenture Trustee, the Note Registrar, the
Authenticating Agent, the Collateral Agent, the Depositor, the Unaffiliated
Seller, the Servicer or any of their respective Affiliates, or to the assets of
any of the foregoing entities.
Section 5.20. Application of the Trust Indenture Act. Pursuant
to Section 316(a) of the TIA, all provisions automatically provided for in
Section 316(a) are hereby expressly excluded.
Section 5.21. Note Insurer Default. Notwithstanding anything
elsewhere in this Indenture or in the Notes to the contrary, if a Note Insurer
Default exists, the provisions of this Article V and all other provisions of
this Indenture which (a) permit the Note Insurer to exercise rights of the
Noteholders, (b) restrict the ability of the Noteholders or the Indenture
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Trustee to act without the consent or approval of the Note Insurer, (c) provide
that a particular act or thing must be acceptable to the Note Insurer, (d)
permit the Note Insurer to direct (or otherwise to require) the actions of the
Indenture Trustee or the Noteholders, (e) provide that any action or omission
taken with the consent, approval or authorization of the Note Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
such action to any liability hereunder or (f) which have a similar effect, shall
be of no further force and effect and the Indenture Trustee shall administer the
Trust Estate and perform its obligations hereunder solely for the benefit of the
Holders of the Notes. Nothing in the foregoing sentence, nor any action taken
pursuant thereto or in compliance therewith, shall be deemed to have released
the Note Insurer from any obligation or liability it may have to any party or to
the Noteholders hereunder, under any other agreement, instrument or document
(including, without limitation, the Note Insurance Policy) or under applicable
law.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee. (a) If an Event of
Default has occurred and is continuing, the Indenture Trustee shall exercise
such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee need perform only those duties that
are specifically set forth in this Indenture and no others and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may request and conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture. The Indenture Trustee
shall, however, examine such certificates and opinions to determine
whether they conform on their face to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of subsection (b)
of this Section 6.01;
(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; and
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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 pursuant to Sections 5.13 or 5.17
hereof or exercising any trust or power or remedy conferred upon the
Indenture Trustee under this Indenture.
(d) Except with respect to duties of the Indenture Trustee
prescribed by the TIA, as to which this Section 6.01(d) shall not apply, for all
purposes under this Indenture, the Indenture Trustee shall not be deemed to have
notice or knowledge of any Event of Default described in Sections 5.01(e) or
5.01(f) hereof or any Default described in Sections 5.01(c) or 5.01(d) hereof or
of any event described in Section 3.05 hereof unless a Responsible Officer
assigned to and working in the Indenture Trustee's corporate trust department
and having direct responsibility for this Indenture has actual knowledge thereof
or unless written notice of any event that is in fact such an Event of Default
or Default is received by the Indenture Trustee at the Corporate Trust Office,
and such notice references the Notes generally, the Trust, the Trust Estate or
this Indenture.
(e) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it under this Indenture or the other
Basic Documents.
(f) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to the provisions of this Section 6.01.
(g) Notwithstanding any extinguishment of all right, title and
interest of the Trust in and to the Trust Estate following an Event of Default
and a consequent declaration of acceleration of the maturity of the Notes,
whether such extinguishment occurs through a Sale of the Trust Estate to another
Person, the acquisition of the Trust Estate by the Indenture Trustee or
otherwise, the rights, powers and duties of the Indenture Trustee with respect
to the Trust Estate (or the proceeds thereof), the Noteholders and the Note
Insurer and the rights of Noteholders and the Note Insurer shall continue to be
governed by the terms of this Indenture.
(h) The Indenture Trustee, the Collateral Agent or any
successor Collateral Agent appointed pursuant to Section 9.08 of the Sale and
Servicing Agreement shall at all times retain possession of the Indenture
Trustee's Mortgage Files in the State of Delaware or the State of New York (or,
with respect to the Chase Bank of Texas, N.A., as initial Collateral Agent, in
the State of Texas), except for those Indenture Trustee's Mortgage Files or
portions thereof released to the Servicer or the Note Insurer pursuant to this
Indenture, the Unaffiliated Seller's Agreement or the Sale and Servicing
Agreement.
(i) Subject to the other provisions of this Indenture and
without limiting the generality of this Section 6.01, the Indenture Trustee
shall have no duty (A) to see to any recording, filing, or depositing of this
Indenture or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording, filing or depositing or to any rerecording,
refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see
to the payment or discharge of any tax, assessment, or other governmental charge
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or any lien or encumbrance of any kind owing with respect to, assessed or levied
against, any part of the Trust Estate from funds available in the Distribution
Accounts or (D) to confirm or verify the contents of any reports or certificates
of the Servicer delivered to the Indenture Trustee pursuant to this Indenture
believed by the Indenture Trustee to be genuine and to have been signed or
presented by the proper party or parties.
Section 6.02. Notice of Default. Immediately after the
occurrence of any Default known to the Indenture Trustee, the Indenture Trustee
shall transmit by mail to the Note Insurer and the Depositor notice of each such
Default and, within ninety (90) days after the occurrence of any Default known
to the Indenture Trustee, the Indenture Trustee shall transmit by mail to all
Holders of Notes notice of each such Default, unless such Default shall have
been cured or waived; provided, however, that in no event shall the Indenture
Trustee provide notice, or fail to provide notice of a Default known to the
Indenture Trustee in a manner contrary to the requirements of the Trust
Indenture Act. Concurrently with the mailing of any such notice to the Holders
of the Notes, the Indenture Trustee shall transmit by mail a copy of such notice
to the Rating Agencies.
Section 6.03. Rights of Indenture Trustee. (a) Except as
otherwise provided in Section 6.01 hereof, the Indenture Trustee may rely on,
and be protected in acting or refraining to act upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Indenture Trustee need not investigate any fact or matter stated in any such
document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on any such Officer's Certificate or Opinion of Counsel.
(c) With the consent of the Note Insurer, which consent shall
not be unreasonably withheld, the Indenture Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith that it believes to be authorized or
within its rights or powers.
(e) The Indenture Trustee shall be under no obligation to
exercise any of the trusts or powers vested in it by this Indenture or to
institute, conduct or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the Noteholders or the Note Insurer,
pursuant to the provisions of this Indenture, unless such Noteholders or the
Note Insurer shall have offered to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(f) 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 Noteholders or the Note Insurer; provided, however, that if the payment
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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 Indenture, the
Indenture Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to taking any such action.
(g) The right of the Indenture Trustee to perform any
discretionary act enumerated in this Indenture shall not be construed as a duty,
and the Indenture Trustee shall not be answerable for anything other than its
negligence or willful misconduct in the performance of such act.
Section 6.04. Not Responsible for Recitals or Issuance of
Notes. The recitals contained herein and in the Notes, except, with respect to
the Indenture Trustee, the certificates of authentication on the Notes, shall be
taken as the statements of the Trust, and the Owner Trustee, the Indenture
Trustee and the Authenticating Agent assume no responsibility for their
correctness. The Owner Trustee and the Indenture Trustee make no representations
with respect to the Trust Estate or as to the validity or sufficiency of this
Indenture or of the Notes. Neither the Indenture Trustee nor the Owner Trustee
shall be accountable for the use or application by the Trust of the Notes or the
proceeds thereof or any money paid to the Trust or upon a Trust Order pursuant
to the provisions hereof.
Section 6.05. May Hold Notes. The Indenture Trustee, any
Agent, or any other agent of the Trust, in its individual or any other capacity,
may become the owner or pledgee of Notes and, subject to Sections 6.07 and 6.13
hereof, may otherwise deal with the Trust or any Affiliate of the Trust with the
same rights it would have if it were not Indenture Trustee, Agent or such other
agent.
Section 6.06. Money Held in Trust. Money held by the Indenture
Trustee in trust hereunder need not be segregated from other funds except to the
extent required by this Indenture or by law. The Indenture Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Trust and except to the extent of income or other gain
on investments that are obligations of the Indenture Trustee, in its commercial
capacity, and income or other gain actually received by the Indenture Trustee on
investments, which are obligations of others.
Section 6.07. Eligibility, Disqualification. Irrespective of
whether this Indenture is qualified under the TIA, this Indenture shall always
have an indenture trustee who satisfies the requirements of TIA Sections
310(a)(1) and 310(a)(5). The Indenture Trustee shall always have a combined
capital and surplus as stated in Section 6.08 hereof. The Indenture Trustee
shall be subject to TIA Section 310(b).
Section 6.08. Indenture Trustee's Capital and Surplus. The
Indenture Trustee shall at all times (a)(i) have a combined capital and surplus
of at least $50,000,000, or (ii) be a member of a bank holding company system,
the aggregate combined capital and surplus of which is at least $100,000,000 and
(b) be rated (or have long-term debt rated) "BBB" or better by S&P and "Baa2" by
Moody's; provided, however, that the Indenture Trustee's separate capital and
surplus shall at all times be at least the amount required by TIA Section
310(a)(2). If the Indenture Trustee publishes annual reports of condition of the
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type described in TIA Section 310(a)(1), its combined capital and surplus for
purposes of this Section 6.08 shall be as set forth in the latest such report.
If at any time the Indenture Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.08 and TIA Section 310(a)(2), it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article VI.
Section 6.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee pursuant to this Article VI shall
become effective until the acceptance of appointment by the successor Indenture
Trustee under Section 6.10 hereof.
(b) The Indenture Trustee may resign at any time by giving
written notice thereof to the Trust, the Note Insurer and each Rating Agency. If
an instrument of acceptance by a successor Indenture Trustee shall not have been
delivered to the Indenture Trustee within thirty (30) days after the giving of
such notice of resignation, the resigning Indenture Trustee may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee.
(c) The Indenture Trustee may be removed at any time by the
Note Insurer or, with the consent of the Note Insurer, by Act of the Holders
representing more than 50% of the Note Principal Balance of the Outstanding
Notes of both Classes, by written notice delivered to the Indenture Trustee and
to the Trust.
(d) If at any time:
(i) the Indenture Trustee shall have a conflicting interest
prohibited by Section 6.07 hereof and shall fail to resign or eliminate
such conflicting interest in accordance with Section 6.07 hereof after
written request therefor by the Trust or by any Noteholder; or
(ii) the Indenture Trustee shall cease to be eligible under
Section 6.08 hereof or shall become incapable of acting or shall be
adjudged bankrupt or insolvent, or a receiver of the Indenture Trustee
or of its property shall be appointed, or any public officer shall take
charge or control of the Indenture Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, (x) the Owner Trustee, on behalf of the Trust, by a
Trust Order, with the consent of the Note Insurer, may remove the Indenture
Trustee, and the Owner Trustee, on behalf of the Trust, by a Trust Order, shall
join with the Indenture Trustee in the execution, delivery and performance of
all instruments and agreements necessary or proper to appoint a successor
Indenture Trustee acceptable to the Note Insurer and to vest in such successor
Indenture Trustee any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Indenture; provided, however,
if the Owner Trustee, on behalf of the Trust, and the Note Insurer do not join
in such appointment within fifteen (15) days after the receipt by it of a
request to do so, or in case an Event of Default has occurred and is continuing,
the Indenture Trustee may petition a court of competent jurisdiction to make
such appointment, or (y) subject to Section 5.15 hereof, and, in the case of a
conflicting interest as described in clause (i) above, unless the Indenture
Trustee's duty to resign has been stayed as provided in TIA Section 310(b), the
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Note Insurer or any Noteholder who has been a bona fide Holder of a Note for at
least six (6) months may, on behalf of himself and all others similarly
situated, with the consent of the Note Insurer, petition any court of competent
jurisdiction for the removal of the Indenture Trustee and the appointment of a
successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office of the
Indenture Trustee for any cause, the Owner Trustee, on behalf of the Trust, by a
Trust Order, shall promptly appoint a successor Indenture Trustee acceptable to
the Note Insurer. If within one (1) year after such resignation, removal or
incapability or the occurrence of such vacancy a successor Indenture Trustee
shall be appointed by the Note Insurer or, with the consent of the Note Insurer,
by Act of the Holders of Notes representing more than 50% of the Note Principal
Balance of the Outstanding Notes of both Classes delivered to the Trust and the
retiring Indenture Trustee, the successor Indenture Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor
Indenture Trustee and supersede the predecessor Indenture Trustee appointed by
the Trust. If no successor Indenture Trustee shall have been so appointed by the
Trust, the Note Insurer or Noteholders and shall have accepted appointment in
the manner hereinafter provided, any Noteholder who has been a bona fide Holder
of a Note for at least six (6) months may, on behalf of himself and all others
similarly situated, with the consent of the Note Insurer, petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
(f) The Servicer, on behalf of the Trust, shall give notice of
each resignation and each removal of the Indenture Trustee and each appointment
of a successor Indenture Trustee to the Holders of Notes and the Note Insurer.
Each notice shall include the name of the successor Indenture Trustee and the
address of its Corporate Trust Office.
Section 6.10. Acceptance of Appointment by Successor Indenture
Trustee. Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Trust, the Note Insurer and the retiring
Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective
and such successor Indenture Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Indenture Trustee. Notwithstanding the foregoing, upon a Trust
Request of the Owner Trustee, on behalf of the Trust, or the successor Indenture
Trustee, such retiring Indenture Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Indenture
Trustee all the rights, powers and trusts of the retiring Indenture Trustee, and
shall duly assign, transfer and deliver to such successor Indenture Trustee all
property and money held by such retiring Indenture Trustee hereunder. Upon a
written request of any such successor Indenture Trustee, the Owner Trustee, on
behalf of the Trust, shall, with the written consent of the Note Insurer,
execute and deliver any and all instruments for more fully and certainly vesting
in and confirming to such successor Indenture Trustee all such rights, powers
and trusts.
No successor Indenture Trustee shall accept its appointment
unless at the time of such acceptance such successor Indenture Trustee shall be
qualified and eligible under this Article VI.
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Section 6.11. Merger, Conversion, Consolidation or Succession
to Business of Indenture Trustee. Any corporation or banking association into
which the Indenture Trustee may be merged or converted or with which it may be
consolidated, or any corporation or banking association resulting from any
merger, conversion or consolidation to which the Indenture Trustee shall be a
party, or any corporation or banking association succeeding to all or
substantially all of the corporate trust business of the Indenture Trustee,
shall be the successor of the Indenture Trustee hereunder; provided, that such
corporation or banking association shall be otherwise qualified and eligible
under this Article VI, without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case any Notes have
been authenticated, but not delivered, by the Indenture Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Indenture Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Indenture Trustee had
authenticated such Notes.
Section 6.12. Preferential Collection of Claims Against Trust.
The Indenture Trustee (and any co-trustee or separate trustee) shall be subject
to TIA Section 311(a), excluding any creditor relationship listed in TIA Section
31l(b), and an Indenture Trustee (and any co-trustee or separate trustee) who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
Section 6.13. Co-Indenture Trustees and Separate Indenture
Trustees. At any time or times, for the purpose of meeting the legal
requirements of the TIA or of any jurisdiction in which any of the Trust Estate
may at the time be located, the Indenture Trustee shall have power to appoint,
and, upon the written request of the Indenture Trustee, the Note Insurer or of
the Holders of Notes representing more than 50% of the Note Principal Balance of
the Outstanding Notes of both Classes with respect to which a co-trustee or
separate trustee is being appointed, with the written consent of the Note
Insurer, the Owner Trustee, on behalf of the Trust, shall for such purpose join
with the Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Indenture Trustee either to act as co-trustee, jointly with the
Indenture Trustee, of all or any part of the Trust Estate, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section 6.13. If the Owner
Trustee, on behalf of the Trust, does not join in such appointment within
fifteen (15) days after the receipt by it of a request to do so, or in case an
Event of Default has occurred and is continuing, the Indenture Trustee alone
shall have power to make such appointment. All fees and expenses of any
co-trustee or separate trustee shall be payable by the Trust.
Should any written instrument from the Trust be required by
any co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power, any
and all such instruments shall, on written request, be executed, acknowledged
and delivered by the Owner Trustee, on behalf of the Trust, with the written
consent of the Note Insurer.
Every co-trustee or separate trustee shall, to the extent
permitted by law, but to such extent only, be appointed subject to the following
terms:
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(a) The Notes shall be authenticated and delivered and all
rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Indenture Trustee
hereunder, shall be exercised, solely by the Indenture Trustee.
(b) The rights, powers, duties and obligations hereby
conferred or imposed upon the Indenture Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee or by the Indenture
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Indenture Trustee
shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(c) The Indenture Trustee at any time, by an instrument in
writing, executed by it, with the concurrence of the Owner Trustee, on
behalf of the Trust, evidenced by a Trust Order, may accept the
resignation of or remove any co-trustee or separate trustee appointed
under this Section 6.13, and, in case an Event of Default has occurred
and is continuing, the Indenture Trustee shall have power to accept the
resignation of, or remove, any such co-trustee or separate trustee
without the concurrence of the Trust, but upon the written request of
the Indenture Trustee, the Owner Trustee, on behalf of the Trust, shall
join with the Indenture Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee
or separate trustee so resigned or removed may be appointed in the
manner provided in this Section 6.13.
(d) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Indenture
Trustee, or any other such trustee hereunder.
(e) Any Act of Noteholders delivered to the Indenture Trustee
shall be deemed to have been delivered to each such co-trustee and
separate trustee.
Section 6.14. Authenticating Agents. The Owner Trustee, acting
at the direction of the Majority Certificateholders, shall appoint an
Authenticating Agent with power to act on the Trust's behalf, subject to the
direction of the Majority Certificateholders, in the authentication and delivery
of the Notes designated for such authentication and, containing provisions
therein for such authentication (unless the Owner Trustee, acting at the
direction of the Majority Certificateholders, has made other arrangements,
satisfactory to the Indenture Trustee and such Authenticating Agent, for
notation on the Notes of the authority of an Authenticating Agent appointed
after the initial authentication and delivery of such Notes) in connection with
transfers and exchanges under Section 2.06 hereof, as fully to all intents and
purposes as though the Authenticating Agent had been expressly authorized by
Section 2.06 hereof to authenticate and deliver Notes. For all purposes of this
Indenture (other than in connection with the authentication and delivery of
Notes pursuant to Sections 2.05 and 2.11 hereof in connection with their initial
issuance), the authentication and delivery of Notes by the Authenticating Agent
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pursuant to this Section 6.14 shall be deemed to be the authentication and
delivery of Notes "by the Indenture Trustee." Such Authenticating Agent shall at
all times be a Person that both meets the requirements of Section 6.07 hereof
for the Indenture Trustee hereunder and has an office for presentation of Notes
in the United States of America. The Indenture Trustee shall initially be the
Authenticating Agent and shall be the Note Registrar as provided in Section 2.06
hereof. The office from which the Indenture Trustee shall perform its duties as
Note Registrar and Authenticating Agent shall be its Corporate Trust Office. Any
Authenticating Agent appointed pursuant to the terms of this Section 6.14 or
pursuant to the terms of any supplemental indenture shall deliver to the
Indenture Trustee as a condition precedent to the effectiveness of such
appointment an instrument accepting the trusts, duties and responsibilities of
Authenticating Agent and of Note Registrar or co-Note Registrar and indemnifying
the Indenture Trustee for and holding the Indenture Trustee harmless against,
any loss, liability or expense (including reasonable attorneys' fees) incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance, administration of the trust or exercise of authority by
such Authenticating Agent, Note Registrar or co-Note Registrar.
Any corporation or banking association into which any
Authenticating Agent may be merged or converted or with which it may be
consolidated, or any corporation or banking association resulting from any
merger, consolidation or conversion to which any Authenticating Agent shall be a
party, or any corporation or banking association succeeding to the corporate
trust business of any Authenticating Agent, shall be the successor of the
Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section 6.14, without the execution or filing of any further
act on the part of the parties hereto or the Authenticating Agent or such
successor corporation or banking association.
Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trust. The Owner Trustee, acting at the
direction of the Majority Certificateholders, may at any time terminate the
agency of any Authenticating Agent by giving written notice of termination to
such Authenticating Agent and the Indenture Trustee. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section 6.14, the
Owner Trustee, acting at the direction of the Majority Certificateholders, shall
promptly appoint a successor Authenticating Agent, shall give written notice of
such appointment to the Indenture Trustee, and shall mail notice of such
appointment to all Holders of Notes.
The Indenture Trustee agrees, subject to Section 6.01(e)
hereof, to pay to any Authenticating Agent from time to time reasonable
compensation for its services and the Indenture Trustee shall be entitled to be
reimbursed for such payments pursuant to Section 6.16 hereof. The provisions of
Sections 2.09, 6.04 and 6.05 hereof shall be applicable to any Authenticating
Agent.
Section 6.15. Review of Mortgage Files. (a) The Indenture
Trustee shall, on or prior to the Closing Date, execute and deliver the
acknowledgement of receipt of the Note Insurance Policy required by Section
2.06(a) of the Sale and Servicing Agreement.
(b) The Indenture Trustee shall cause the Collateral Agent to
(i) on or prior to the Closing Date, execute and deliver the acknowledgement of
receipt of the Mortgage Loans required by Section 2.06(b)(i) of the Sale and
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Servicing Agreement, (ii) on or prior to thirty (30) days following the Closing
Date, execute and deliver the Initial Certificate required by Section
2.06(b)(ii) of the Sale and Servicing Agreement, and (iii) on or prior to ninety
(90) days following the Closing Date, execute and deliver the Final
Certification required by Section 2.06(b)(iii) of the Sale and Servicing
Agreement.
(c) In giving each of the acknowledgements, the Initial
Certification and the Final Certification referred to in clauses (a) and (b) of
this Section 6.15, neither the Indenture Trustee nor the Collateral Agent shall
be under any duty or obligation (i) to inspect, review or examine any such
documents, instruments, securities or other papers to determine that they or the
signatures thereto are genuine, enforceable, or appropriate for the represented
purpose or that they have actually been recorded or that they are other than
what they purport to be on their face or (ii) to determine whether any Mortgage
File should include a flood insurance policy, any rider, addenda, surety or
guaranty agreement, power of attorney, buy down agreement, assumption agreement,
modification agreement, written assurance or substitution agreement.
(d) In the event that the Mortgage Loans are required to be
recorded in accordance with the provisions of Article II of the Sale and
Servicing Agreement, no later than the fifth Business Day of each third month,
commencing in September 1999, the Indenture Trustee shall cause the Collateral
Agent to deliver to the Servicer and the Note Insurer a recordation report dated
as of the first day of such month, identifying those Mortgage Loans for which it
has not yet received (i) an original recorded Mortgage or a copy thereof
certified to be true and correct by the public recording office in possession of
such Mortgage or (ii) an original recorded Assignment of Mortgage to the
Indenture Trustee and any required intervening Assignments of Mortgage or a copy
thereof certified to be a true and correct copy by the public recording office
in possession of such Assignment of Mortgage.
Section 6.16. Indenture Trustee Fees and Expenses. The
Indenture Trustee shall be entitled to receive the Indenture Trustee Fee on each
Distribution Date as provided herein. The Indenture Trustee also shall be
entitled to (i) payment of or reimbursement for expenses, disbursements and
advances incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Indenture (including, but not limited to, the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ), and (ii) indemnification against losses,
liability and expenses, including reasonable attorney's fees, incurred, arising
out of or in connection with this Indenture, the Notes and the Sale and
Servicing Agreement. The Indenture Trustee and any director, officer, employee
or agent of the Indenture Trustee shall be indemnified by, first, the Trust and,
second, the Servicer and held harmless against any loss, liability or reasonable
expense incurred in connection with this Indenture or the Notes, other than any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance by the Indenture Trustee of its duties
hereunder. The obligations of the Servicer and the Trust under this Section 6.16
shall survive termination of the Trust and payment of the Notes, and shall
extend to any co-Indenture Trustee or separate-Indenture Trustee appointed
pursuant to this Article VI.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Note Registrar to Furnish Indenture Trustee
Names and Addresses of Noteholders. (a) The Note Registrar shall furnish or
cause to be furnished to the Indenture Trustee (i) semiannually, not less than
forty-five (45) days nor more than sixty (60) days after the Distribution Date
occurring closest to six (6) months after the Closing Date and each Distribution
Date occurring at six (6) month intervals thereafter, all information in the
possession or control of the Note Registrar, in such form as the Indenture
Trustee may reasonably require, as to names and addresses of the Holders of
Notes, and (ii) at such other times, as the Indenture Trustee may request in
writing, within thirty (30) days after receipt by the Note Registrar of any such
request, a list of similar form and content as of a date not more than ten (10)
days prior to the time such list is furnished; provided, however, that so long
as the Indenture Trustee is the Note Registrar, no such list shall be required
to be furnished.
(b) In addition to furnishing to the Indenture Trustee the
Noteholder lists, if any, required under clause (a) of this Section 7.01, the
Note Registrar shall also furnish all Noteholder lists, if any, required under
Section 3.03 hereof at the times required by such Section 3.03.
Section 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list, if any, furnished to the Indenture Trustee as
provided in Section 7.01 hereof and the names and addresses of the Holders of
Notes received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in Section
7.01 hereof 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 Trust, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
Section 7.03. Reports by Indenture Trustee. (a) Within sixty
(60) days after December 31 of each year (the "reporting date"), commencing
December 31, 1999, (i) the Indenture Trustee shall, if required by TIA Section
313(a), mail to all Holders a brief report dated as of such reporting date that
complies with TIA Section 313(a); (ii) the Indenture Trustee shall, to the
extent not set forth in the Indenture Trustee's Remittance Report pursuant to
Section 2.08(d) hereof, also mail to Holders of Notes and the Note Insurer with
respect to which it has made advances, any reports with respect to such advances
that are required by TIA Section 313(b)(2); and, the Indenture Trustee shall
also mail to Holders of Notes and the Note Insurer any reports required by TIA
Section 313(b)(1). For purposes of the information required to be included in
any such reports pursuant to TIA Sections 313(a)(2), 313(b)(1) (if applicable),
or 313(b)(2), the principal amount of indenture securities outstanding on the
date as of which such information is provided shall be the Note Principal
Balance of the then Outstanding Notes covered by the report.
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(b) A copy of each report required under this Section 7.03
shall, at the time of such transmission to Holders of Notes and the Note Insurer
be filed by the Indenture Trustee with the Commission and with each securities
exchange upon which the Notes are listed. The Servicer, on behalf of the Trust,
will notify the Indenture Trustee when the Notes are listed on any securities
exchange.
Section 7.04. Reports by Trust. The Servicer, on behalf of the
Trust, (a) shall deliver to the Indenture Trustee within fifteen (15) days after
the Trust is required to file the same with the Commission copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) that the Trust is required to file with the Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and (b)
shall also comply with the other provisions of TIA Section 314(a).
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Accounts; Investment; Collection of Moneys. (a)
The Trust hereby directs the Indenture Trustee to establish, on or before the
Closing Date, for each Class of Notes, at its Corporate Trust Office, one or
more Eligible Accounts that shall collectively be the "Distribution Account" for
such Class. The Indenture Trustee shall promptly deposit in the related
Distribution Account (i) the Servicer Remittance Amount for the related Pool
received by it from the Servicer on the Servicer Distribution Date pursuant to
the Sale and Servicing Agreement, (ii) any other funds from any deposits for
such Pool to be made by the Servicer pursuant to the Sale and Servicing
Agreement, (iii) any amount for such Pool required to be deposited in such
Distribution Account pursuant to this Section 8.01, (iv) all amounts for such
Pool received pursuant to Section 8.03 hereof, (v) any amount for such Pool
required to be deposited pursuant to Section 8.05 hereof, (vi) on each
Distribution Date, in accordance with the Servicer Remittance Report, the
Shortfall Amount for the related Class, until paid in full, first, from the
Distribution Account relating to the other Class of Notes, to the extent of the
Net Monthly Excess Cashflow from the other Pool of Mortgage Loans remaining
after payment of any Net Mortgage Loan Interest Shortfalls for such other Pool,
second, from the Cross-collateralization Reserve Account relating to this Class
of Notes, and third, from the Cross-collateralization Reserve Account relating
to the other Class of Notes, and (vii) all other amounts for such Pool received
for deposit in such Distribution Account, including the payment of any Loan
Repurchase Price for a Mortgage Loan in such Pool received by the Indenture
Trustee. All amounts that are deposited from time to time in a Distribution
Account are subject to withdrawal by the Indenture Trustee for the purposes set
forth in Sections 8.02 hereof. All funds withdrawn from a Distribution Account
pursuant to Section 8.02 hereof for the purpose of making payments to the
Holders of Notes shall be applied in accordance with Sections 3.03 and 8.02
hereof.
(b) The Trust hereby directs the Indenture Trustee to
establish for each Class of Notes, at its Corporate Trust Office, an Eligible
Account which shall be the "Pre-Funding Account" for such Class of Notes. On the
Closing Date, the Indenture Trustee shall deposit the Original Pre-Funded Amount
for each Class of Notes in the related Pre-Funding Account from the proceeds of
the sale of the related Class of Notes. The Indenture Trustee shall withdraw and
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distribute or cause to be distributed funds on deposit therein only at the times
specified below, based on written instructions provided by the Servicer or other
party as indicated:
(i) on any Subsequent Transfer Date, the Unaffiliated Seller
shall instruct in writing the Indenture Trustee to withdraw from the
related Pre-Funding Account an amount equal to 100% of the aggregate
Principal Balances as of the related Subsequent Cut-Off Date of the
Subsequent Mortgage Loans sold to the Trust in respect of the related
Pool and pledged to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer, on such Subsequent Transfer Date and
pay such amount to or upon the order of the Unaffiliated Seller upon
satisfaction of the conditions set forth in Section 2.14 hereof with
respect to such transfer; the Indenture Trustee may conclusively rely
on such written instructions from the Unaffiliated Seller;
(ii) if the Pre-Funding Amount for a Class of Notes (exclusive
of Pre-Funding Earnings for such Class) has been reduced to $100,000 or
less by the July 1999 or the August 1999 Distribution Date, then, on
such Distribution Date, after giving effect to any reductions in the
related Pre-Funding Account on such date, the Indenture Trustee shall
withdraw, from the related Pre-Funding Account on such date and deposit
in the Distribution Account relating to such Class, the amount on
deposit in such Pre-Funding Account, other than any Pre-Funding
Earnings, for payment to the related Noteholders as a prepayment of
principal on such Distribution Date;
(iii) if any amounts remain on deposit in either Pre-Funding
Account at the close of business on August 30, 1999, the Indenture
Trustee shall withdraw, from such Pre-Funding Account on the following
Distribution Date and deposit in the Distribution Account relating to
the related Class, the amount on deposit in such Pre-Funding Account,
other than any Pre-Funding Earnings, for payment to the related
Noteholders as a prepayment of principal on such Distribution Date; and
(iv) on the July 1999, August 1999 and September 1999
Distribution Dates, the Indenture Trustee shall transfer from each
Pre-Funding Account to the related Distribution Account, the
Pre-Funding Earnings, if any, applicable to such Distribution Date.
(c) The Trust hereby directs the Indenture Trustee to
establish for each Class of Notes, at its Corporate Trust Office, an Eligible
Account which shall be the "Capitalized Interest Account" for such Class of
Notes. On the Closing Date, the Indenture Trustee shall deposit the Original
Capitalized Interest Amount for each Class of Notes in the related Capitalized
Interest Account from the proceeds of the sale of the related Class of Notes.
The Indenture Trustee shall withdraw and distribute or cause to be distributed
funds on deposit therein only at the times specified below, based on written
instructions provided by the Servicer or other party as indicated:
(i) on the July 1999, August 1999 and September 1999
Distribution Dates, the Indenture Trustee shall transfer from each
Capitalized Interest Account to the related Distribution Account, the
applicable Capitalized Interest Requirement, if any, for such Class and
such Distribution Date; and
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(ii) on the Distribution Date immediately following, or on
which, the amount on deposit in the related Pre-Funding Account is
reduced to zero, any amounts remaining in either Capitalized Interest
Account, after taking into account the transfers in respect of the
Distribution Date described in clause (i) above, shall be paid to the
Unaffiliated Seller.
(d) The Trust hereby directs the Indenture Trustee to
establish, on or before the Closing Date, for each Class of Notes, at its
Corporate Trust Office, an Eligible Account that shall be the
"Cross-collateralization Reserve Account" for such Class. The Indenture Trustee
shall deposit and withdraw funds in each Cross-collateralization Reserve Account
in accordance with the provisions of Sections 8.01(a) and 8.02(a) hereof.
(e) So long as no Default or Event of Default shall have
occurred and be continuing, amounts held in the Accounts, other than the
Collection Account and the Note Insurance Payment Account, shall at the written
direction of the Servicer be invested in Permitted Investments, which Permitted
Investments shall mature no later than the Business Day preceding the
immediately following Distribution Date.
All income or other gains, if any, from investment of moneys
deposited in the Distribution and Collection Accounts shall be for the benefit
of the Servicer and on each Distribution Date, any such amounts may be released
from the Accounts and paid to the Servicer as part of its compensation for
acting as Servicer. Any loss resulting from such investment of moneys deposited
in an Account shall be reimbursed immediately as incurred to the related Account
by the Servicer. Subject to Section 6.01 hereof and the preceding sentence,
neither the Indenture Trustee nor the Servicer shall in any way be held liable
by reason of any insufficiency in the Accounts.
The Indenture Trustee shall not in any way be held liable by
reason of any insufficiency in any Account held by the Indenture Trustee
resulting from any investment loss on any Permitted Investment included therein
(except to the extent that the Indenture Trustee is the obligor and has
defaulted thereon).
(f) Except as otherwise expressly provided herein, the
Indenture Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall hold
all such money and property received by it as part of the Trust Estate and shall
apply it as provided in this Indenture.
If the Indenture Trustee shall not have received the Servicer
Remittance Amount by close of business on any related Servicer Distribution
Date, the Indenture Trustee shall, unless the Servicer shall have made
provisions satisfactory to the Indenture Trustee for delivery to the Indenture
Trustee of an amount equal to such Servicer Remittance Amount, deliver a notice,
with a copy to the Note Insurer, to the Servicer of its failure to remit such
Servicer Remittance Amount and that such failure, if not remedied by the close
of business on the Business Day after the date upon which such notice is
delivered to the Servicer, shall constitute a Servicer Event of Default under
the Sale and Servicing Agreement. If the Indenture Trustee shall subsequently
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receive any such Servicer Remittance Amount by the close of business on such
Business Day, such Servicer Event of Default shall not be deemed to have
occurred. Notwithstanding any other provision hereof, the Indenture Trustee
shall deliver to the Servicer, or its designee or assignee, any Servicer
Remittance Amount received with respect to a Mortgage Loan after the related
Servicer Distribution Date to the extent that the Servicer previously made
payment or provision for payment with respect to such Servicer Remittance Amount
in accordance with this Section 8.01, and any such Servicer Remittance Amount
shall not be deemed part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and
the Sale and Servicing Agreement, if, following delivery by the Indenture
Trustee of the notice described above, the Servicer shall fail to remit the
Servicer Remittance Amount on any Servicer Distribution Date, the Indenture
Trustee shall deliver a second notice to the Servicer, the Trust and the Note
Insurer by the close of business on the third Business Day prior to the related
Distribution Date indicating that a Servicer Event of Default occurred and is
continuing under the Sale and Servicing Agreement. Thereupon, the Indenture
Trustee shall take such actions as are required of the Indenture Trustee under
Article VII of the Sale and Servicing Agreement. In addition, if a default
occurs in any other performance required under the Sale and Servicing Agreement,
the Indenture Trustee may, and upon the request of the Note Insurer or, with the
consent of the Note Insurer, the Holders of Notes representing more than 50% of
the Note Principal Balance of the Outstanding Notes of both Classes shall, take
such action as may be appropriate to enforce such payment or performance
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and to proceed thereafter as provided in Article V
hereof.
Section 8.02. Distributions; Statements. On each Distribution
Date, unless the Notes have been declared due and payable pursuant to Section
5.02 hereof and moneys collected by the Indenture Trustee are being applied in
accordance with Section 5.07 hereof, Available Funds on deposit in each
Distribution Account on any Distribution Date or Redemption Date shall be
withdrawn from such Distribution Account, in the amounts required (based solely
on the Servicer's Remittance Report delivered to the Indenture Trustee on or
before such Distribution Date), for application on such Distribution Date in
respect of payments relating to the applicable Pool of Mortgage Loans and the
related Class of Notes as follows:
(i) to the Indenture Trustee, an amount equal to the Indenture
Trustee Fees then due to it with respect to the related Class of Notes;
(ii) from amounts then on deposit in the related Distribution
Account (excluding any Insured Payments), to the Note Insurer, the
lesser of (x) the excess of (i) the amount then on deposit in such
Distribution Account over (ii) the Insured Distribution Amount for such
Pool on such Distribution Date and (y) the sum of the amount of all
Reimbursement Amounts relating to such Class of Notes which have not
been previously paid as of such Distribution Date and any other amounts
relating to such Class then due to the Note Insurer pursuant to the
Insurance Agreement;
(iii) from amounts then on deposit in the related Distribution
Account, to the Holders of the related Class of Notes, the Distribution
Amount for such Class;
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(iv) from amounts then on deposit in the related Distribution
Account, to the Holders of the related Class of Notes, the amount of
any Net Mortgage Loan Interest Shortfalls for such Class;
(v) from amounts then on deposit in the related Distribution
Account, to the Cross-collateralization Reserve Account relating to the
other Class of Notes, the Reserve Payment Amount for such Class;
(vi) with respect to the Class A-2 Notes, from amounts then on
deposit in the Distribution Account relating to the Class A-2 Notes, to
the Holders of the Class A-2 Notes, the Class A-2 Available Funds Cap
Carry-Forward Amount;
(vii) with respect to the Class A-2 Notes, from amounts then
on deposit in the Distribution Account relating to the Class A-1 Notes,
to the Holders of the Class A-2 Notes, up to the Interest Coverage
Amount for such Distribution Date, any remaining Class A-2 Available
Funds Cap Carry-Forward Amount;
(viii) following the making by the Indenture Trustee of all
allocations, transfers and disbursements described above, from amounts
then on deposit in the related Distribution Account, the Indenture
Trustee shall distribute to the Holders of the related Trust
Certificates, the amount remaining on such Distribution Date, if any.
Section 8.03. Claims against the Note Insurance Policy. (a)
Within two (2) Business Days of receipt of each Servicer Remittance Report, the
Indenture Trustee shall determine with respect to the immediately following
Distribution Date, the amount to be on deposit in each Distribution Account on
such Distribution Date as a result of the (i) Servicer's remittance of the
Servicer Remittance Amount on the related Servicer Distribution Date, and (ii)
any transfers to each Distribution Account made from the related Capitalized
Interest Account and/or the related Pre-Funding Account relating to such
Distribution Date pursuant to Section 8.01 hereof, excluding the amount of any
Insured Payment and prior to the application of the amounts described in clauses
(i) through (viii) of Section 8.02 hereof for the related Distribution Date.
(b) If on any Distribution Date there is an Available Funds
Shortfall for either Pool, the Indenture Trustee shall complete a Notice in the
form of Exhibit A to the Note Insurance Policy and submit such notice to the
Note Insurer no later than 12:00 noon New York City time on the second Business
Day preceding such Distribution Date as a claim for an Insured Payment in an
amount equal to such Available Funds Shortfall for such Pool.
(c) The Indenture Trustee shall establish a separate Eligible
Account for the benefit of Holders of the Notes and the Note Insurer referred to
herein as the "Note Insurance Payment Account" over which the Indenture Trustee
shall have exclusive control and sole right of withdrawal. The Indenture Trustee
shall deposit upon receipt any amount paid under the Note Insurance Policy in
the Note Insurance Payment Account and distribute such amount only for purposes
of payment to the Noteholders of the related Pool of the Insured Distribution
Amount for such Pool 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 Trust. Amounts paid under the Note Insurance Policy, to
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the extent needed to pay the Insured Distribution Amount shall be transferred to
the related Distribution Account on the related Distribution Date and disbursed
by the Indenture Trustee to the Noteholders in accordance with Section 8.02. 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 Insured Distribution
Amount with other funds available to make such payment. However, the amount of
any payment of principal or of interest on the Notes to be paid from funds
transferred from the Note Insurance Payment Account shall be noted as provided
in subsection (d) of this Section 8.03 in the Note Register and in the Indenture
Trustee's Remittance Report. Funds held in the Note Insurance Payment Account
shall not be invested. Any funds remaining in the Note Insurance Payment Account
on the first Business Day following a Distribution Date shall be returned to the
Note Insurer pursuant to the written instructions of the Note Insurer by the end
of such Business Day.
(d) The Indenture Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any Note from
moneys received under the Note Insurance Policy. The Note Insurer shall have the
right to inspect such records at reasonable times during normal business hours
upon one (1) Business Day's prior notice to the Indenture Trustee.
(e) In the event that the Indenture Trustee has received a
certified copy of an order of the appropriate court that any Insured Payment has
been voided in whole or in part as a preference payment under applicable
bankruptcy law, the Indenture Trustee shall so notify the Note Insurer, shall
comply with the provisions of the Note Insurance Policy to obtain payment by the
Note Insurer of such voided Insured Payment, and shall, at the time it provides
notice to the Note Insurer, notify, by mail to the Noteholders of the affected
Notes that, in the event any Noteholder's Insured Payment is so recovered, such
Noteholder will be entitled to payment pursuant to the Note Insurance Policy, a
copy of which shall be made available through the Indenture Trustee, the Note
Insurer or the Note Insurer's fiscal agent, if any, and the Indenture Trustee
shall furnish to the Note Insurer or its fiscal agent, if any, its records
evidencing the payments which have been made by the Indenture Trustee and
subsequently recovered from the Noteholders, and dates on which such payments
were made.
(f) The Indenture Trustee shall promptly notify the Note
Insurer of any proceeding or the institution of any action, of which a
Responsible Officer of the Indenture Trustee has actual knowledge, 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 the Notes. Each Noteholder, by its purchase of Notes, the Servicer
and the Indenture Trustee agree that, the Note Insurer (so long as no Note
Insurer Default exists) 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, supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Note Insurer shall be subrogated to,
and each Noteholder, the Servicer and the Indenture Trustee hereby delegate and
assign to the Note Insurer, to the fullest extent permitted by law, the rights
of the Servicer, the Indenture Trustee and each Noteholder in the conduct of any
such Preference Claim, including, without limitation, all rights of any party to
any adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.
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(g) The Indenture Trustee shall, upon retirement of the Notes,
furnish to the Note Insurer a notice of such retirement, and, upon retirement of
the Notes and the expiration of the term of the Note Insurance Policy, surrender
the Note Insurance Policy to the Note Insurer for cancellation.
(h) Unless a Note Insurer Default exists and is continuing,
the Indenture Trustee and the Trust shall cooperate in all respects with any
reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests hereunder without limiting the rights or
affecting the interests of the Noteholders as otherwise set forth herein.
(i) Each Noteholder, by its purchase of Notes, and the
Indenture Trustee hereby agree that, unless a Note Insurer Default exists and is
continuing, the Note Insurer shall have the right to direct all matters relating
to the Notes in any proceeding in a bankruptcy of the Trust, including without
limitation any proceeding relating to a Preference Amount and the posting of any
surety or Note pending any such appeal.
(j) Anything herein to the contrary notwithstanding, any
payment with respect to principal of or interest on the Notes which is made with
moneys received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of the Notes from the Trust. The Trust and the Indenture
Trustee acknowledge, and each Holder by its acceptance of a Note agrees, that
without the need for any further action on the part of the Note Insurer, the
Trust, the Indenture Trustee or the Note Registrar (x) to the extent the Note
Insurer makes payments, directly or indirectly, on account of principal of or
interest on the Notes to the Holders of such Notes, the Note Insurer will be
fully subrogated to, and each Noteholder, the Trust and the Indenture Trustee
hereby delegate and assign to the Note Insurer, to the fullest extent permitted
by law, the rights of such Holders to receive such principal and interest from
the Trust, including, without limitation, any amounts due to the Noteholders in
respect of securities law violations arising from the offer and sale of the
Notes, and (y) the Note Insurer shall be paid such amounts from the sources and
in the manner provided herein for the payment of such amounts.
Section 8.04. General Provisions Regarding the Distribution
Accounts and Mortgage Loans. (a) Each Distribution Account shall relate solely
to the Notes of the related Class and to the Mortgage Loans in the related Pool,
Permitted Investments and other property securing the related Notes. Funds and
other property in each Distribution Account shall not be commingled with the
other Distribution Account or any other moneys or property of the Trust or any
Affiliate thereof. Notwithstanding the foregoing, the Indenture Trustee may hold
any funds or other property received or held by it as part of a Distribution
Account in collective accounts maintained by it in the normal course of its
business and containing funds or property held by it for other Persons (which
may include the Trust or an Affiliate); provided, that such accounts are under
the sole control of the Indenture Trustee and the Indenture Trustee maintains
adequate records indicating the ownership of all such funds or property and the
portions thereof held for credit to the related Distribution Account.
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(b) If any amounts are needed for payment from a Distribution
Account and sufficient uninvested funds are not available therein to make such
payment, the Indenture Trustee shall cause to be sold or otherwise converted to
cash a sufficient amount of the investments in such Distribution Account.
(c) The Indenture Trustee shall, at all times while any Notes
are Outstanding, maintain in its possession, or in the possession of an agent
whose actions with respect to such items are under the sole control of the
Indenture Trustee, all certificates or other instruments, if any, evidencing any
investment of funds in the Distribution Accounts. The Indenture Trustee shall
relinquish possession of such items, or direct its agent to do so, only for
purposes of collecting the final payment receivable on such investment or
certificate or, in connection with the sale of any investment held in the
Distribution Accounts, against delivery of the amount receivable in connection
with any sale.
(d) The Indenture Trustee shall not invest any part of the
Trust Estate in Permitted Investments that constitute uncertificated securities
(as defined in Section 8-102 of the Uniform Commercial Code, as enacted in the
relevant jurisdiction) or in any other book-entry securities unless it has
received an Opinion of Counsel reasonably satisfactory in form and substance to
the Indenture Trustee setting forth, with respect to each type of security for
which authority to invest is being sought, the procedures that must be followed
to maintain the lien and security interest created by this Indenture with
respect to the Trust Estate.
Section 8.05. Releases of Deleted Mortgage Loans. Upon notice
or discovery by a Responsible Officer of the Indenture Trustee that any of the
representations or warranties of the Unaffiliated Seller set forth in Section
3.03 of the Unaffiliated Seller's Agreement was materially incorrect or
otherwise misleading with respect to any Mortgage Loan as of the time made, the
Indenture Trustee shall direct the Unaffiliated Seller to either cure,
repurchase or substitute for such Mortgage Loan as provided in Section 3.05 of
the Unaffiliated Seller's Agreement. Upon any purchase of or substitution for a
Deleted Mortgage Loan by the Unaffiliated Seller in accordance with Section 3.05
of the Unaffiliated Seller's Agreement, the Indenture Trustee shall cause the
Collateral Agent to deliver the Indenture Trustee's Mortgage File relating to
such Deleted Mortgage Loan to the Unaffiliated Seller, and the Trust, the
Collateral Agent and the Indenture Trustee shall execute such instruments of
transfer as are necessary to convey title to such Deleted Mortgage Loan to the
Unaffiliated Seller from the lien of this Indenture. Nothing in this Section
8.05 should be construed to obligate the Indenture Trustee to actively monitor
the correctness or accuracy of the representations and warranties of the
Unaffiliated Seller.
Section 8.06. Reports by Indenture Trustee to Noteholders;
Access to Certain Information. On each Distribution Date, the Indenture Trustee
shall deliver the written reports required by Section 2.08(d) to Noteholders of
record as of the related Record Date (including the Clearing Agency, if any).
The Indenture Trustee shall make available at its Corporate
Trust Office, during normal business hours, for review by any Noteholder or any
person identified to the Indenture Trustee as a prospective Noteholder,
originals or copies of the following items: (a) the Indenture and any amendments
thereto, (b) all Indenture Trustee's Remittance Reports and other reports
delivered since the Closing Date pursuant to Section 2.08(d) hereof, (c) any
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Officers' Certificates delivered to the Indenture Trustee since the Closing Date
as described in the Indenture and (d) any Accountants' reports delivered to the
Indenture Trustee since the Closing Date as required under the Sale and
Servicing Agreement. Copies of any and all of the foregoing items will be
available from the Indenture Trustee upon request; however, the Indenture
Trustee will be permitted to require payment of a sum sufficient to cover the
reasonable costs and expenses of providing such copies and shall not be required
to provide such copies without reasonable assurances that such sum will be paid.
Section 8.07. Release of Trust Estate. The Indenture Trustee
shall, at such time as there are no Notes Outstanding, release all of the Trust
Estate to the Trust (other than any cash held for the payment of the Notes
pursuant to Section 3.03 or 4.02 hereof).
Section 8.08. Amendment to Sale and Servicing Agreement. The
Indenture Trustee may, without the consent of any Holder, enter into or consent
to any amendment or supplement to the Sale and Servicing Agreement for the
purpose of increasing the obligations or duties of any party other than the
Indenture Trustee or the Holders of the Notes. The Indenture Trustee may, in its
discretion, decline to enter into or consent to any such supplement or
amendment: (i) unless the Indenture Trustee receives an Opinion of Counsel that
the position of the Holders would not be materially adversely affected or
written confirmation of satisfaction of the Rating Agency Condition or (ii) if
its own rights, duties or immunities would be adversely affected.
Section 8.09. Delivery of the Mortgage Files Pursuant to Sale
and Servicing Agreement. As is appropriate for the servicing or foreclosure of
any Mortgage Loan, the Indenture Trustee shall cause the Collateral Agent to
deliver to the Servicer the Mortgage Files for such Mortgage Loan upon receipt
by the Indenture Trustee and the Collateral Agent on or prior to the date such
release is to be made of:
(a) such Officer's Certificates, if any, as are required by
the Sale and Servicing Agreement; and
(b) a Request for Release, executed by the Servicer, providing
that the Servicer will hold or retain the Indenture Trustee's Mortgage
Files in trust for the benefit of the Indenture Trustee, the Note
Insurer and the Holders of Notes.
Section 8.10. Servicer as Agent. In order to facilitate the
servicing of the Mortgage Loans by the Servicer of such Mortgage Loans, the
Servicer of the Mortgage Loans has been appointed by the Trust to retain, in
accordance with the provisions of the Sale and Servicing Agreement and this
Indenture, all Servicer Remittance Amounts on such Mortgage Loans prior to their
deposit into the related Distribution Account on or prior to the related
Servicer Distribution Date.
Section 8.11. Termination of Servicer. In the event of an
event of the occurrence of a Servicer Event of Default specified in Section 7.01
of the Sale and Servicing Agreement, the Indenture Trustee may, with the consent
of the Note Insurer or, with the prior written consent of the Note Insurer, the
Holder of Notes representing not less than 50% of the Note Principal Balance of
the Outstanding Notes of both Classes, and shall, upon the direction of the Note
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Insurer (or as otherwise provided in the Sale and Servicing Agreement),
terminate the Servicer as provided in Section 7.01 of the Sale and Servicing
Agreement. If the Indenture Trustee terminates the Servicer, the Indenture
Trustee shall, pursuant to Section 7.02 of the Sale and Servicing Agreement,
assume the duties of the Servicer or appoint a successor Servicer acceptable to
the Trust, the Note Insurer and the Rating Agencies and meeting the requirements
set forth in the Sale and Servicing Agreement.
Section 8.12. Opinion of Counsel. The Indenture Trustee shall
be entitled to receive at least five (5) Business Days' notice of any action to
be taken pursuant to Sections 8.08 and 8.09 hereof (other than in connection
with releases of Mortgage Loans that were subject to a prepayment in full),
accompanied by copies of any instruments involved, and the Indenture Trustee
shall be entitled to receive an Opinion of Counsel, in form and substance
reasonably satisfactory to the Indenture Trustee, stating the legal effect of
any such action, outlining the steps required to complete the same, and
concluding that all conditions precedent to the taking of such action have been
complied with. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
Section 8.13. Appointment of Collateral Agents. The Indenture
Trustee may, at no additional cost to the Trust or to the Indenture Trustee,
with the consent of the Note Insurer, appoint one or more Collateral Agents to
hold all or a portion of the Indenture Trustee Mortgage Files, as Agent for the
Indenture Trustee. Such Collateral Agent shall meet the requirements of Article
IX of the Sale and Servicing Agreement. Matters concerning the Collateral Agents
shall be governed by said Article IX. Chase Bank of Texas, N.A. is hereby
appointed as the initial Collateral Agent hereunder.
Section 8.14. Rights of the Note Insurer to Exercise Rights of
Noteholders. By accepting its Notes, each Noteholder agrees that unless a Note
Insurer Default exists, the Note Insurer shall have the right to exercise all
rights of the Noteholders under this Indenture, without any further consent of
the Noteholders, including, without limitation:
(a) the right to require the Servicer to effect foreclosures
upon Mortgage Loans upon failure of the Servicer to do so;
(b) the right to require the Unaffiliated Seller to repurchase
or substitute for Deleted Mortgage Loans pursuant to Section 8.05;
(c) the right to direct the actions of the Indenture Trustee
during the continuance of an Event of Default; and
(d) the right to vote on proposed amendments to this
Indenture.
In addition, each Noteholder agrees that, unless a Note
Insurer Default exists, the rights specifically set forth above may be exercised
by the Noteholders only with the prior written consent of the Note Insurer.
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Except as otherwise provided in Section 8.03 hereof and
notwithstanding any provision in this Indenture to the contrary, so long as a
Note Insurer Default has occurred and is continuing, the Note Insurer shall have
no rights to exercise any voting rights of the Noteholders hereunder, nor shall
the Indenture Trustee be required to obtain the consent of, or act at the
direction of, the Note Insurer.
All notices, statements, reports, certificates or opinions
required by this Indenture to be sent to any other party hereto or to the
Noteholders shall also be sent to the Note Insurer.
Section 8.15. Trust Estate and Accounts Held for Benefit of
the Note Insurer. The Collateral Agent, on behalf of the Indenture Trustee,
shall hold the Trust Estate and the Indenture Trustee's Mortgage Files, for the
benefit of the Noteholders and the Note 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 Note Insurer (provided there does not exist a Note Insurer
Default).
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of
Noteholders. With the consent of the Note Insurer and without the consent of the
Holders of any Notes, the Trust and the Indenture Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(a) 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;
(b) to add to the conditions, limitations and restrictions on
the authorized amount, terms and purposes of the issuance,
authentication and delivery of any Notes, as herein set forth,
additional conditions, limitations and restrictions thereafter to be
observed;
(c) to evidence the succession of another Person to the Trust
to the extent permitted herein, and the assumption by any such
successor of the covenants of the Trust herein and in the Notes
contained;
(d) to add to the covenants of the Trust, for the benefit of
the Holders of all Notes and the Note Insurer, or to surrender any
right or power herein conferred upon the Trust;
(e) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any other
provision herein, or to amend any other provisions with respect to
matters or questions arising under this Indenture, which shall not be
inconsistent with the provisions of this Indenture, provided that such
action shall not adversely affect in any material respect the interests
of the Holders of the Notes or the Holders of the Trust Certificates;
provided, that the amendment shall not be deemed to adversely affect in
any material respect the interests of the Holders of the Notes and the
Note Insurer if the Person requesting the amendment obtains written
confirmation of the satisfaction of the Rating Agency Condition; or
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(f) 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.
Section 9.02. Supplemental Indentures With Consent of
Noteholders. With the consent of the Note Insurer and with the consent of
Holders of Notes representing not less than a majority of the Note Principal
Balance of all Outstanding Notes of both Classes by Act of said Holders
delivered to the Trust and the Indenture Trustee, the Trust and the Indenture
Trustee may enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however, that
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(a) change any Distribution Date or the Final Stated Maturity
Date of the Notes or, with respect to the Notes, reduce the Note
Principal Balance thereof, the Note Rate thereon or the Redemption
Price with respect thereto, change the earliest date on which any Note
may be redeemed at the option of the Servicer, change any place of
payment where, or the coin or currency in which, any Note or any
interest thereon is payable, or impair the right to institute suit for
the enforcement of the payment of any installment of interest due on
any Note on or after the Final Stated Maturity Date thereof or for the
enforcement of the payment of the entire remaining unpaid principal
amount of any Note on or after the Final Stated Maturity Date (or, in
the case of redemption, on or after the applicable Redemption Date);
(b) reduce the percentage of the Note Principal Balance of the
Outstanding Notes, the consent of the Holders of which is required for
any such supplemental indenture, or the consent of the Holders of which
is required for any waiver of compliance with provisions of this
Indenture or Defaults hereunder and their consequences provided for in
this Indenture;
(c) modify any of the provisions of this Section 9.02 or
Sections 5.13 or 5.17(b) hereof, except to increase any percentage
specified therein or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Note affected thereby;
(d) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(e) permit the creation of any lien other than the lien of
this Indenture with respect to any part of the Trust Estate or
terminate the lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security
afforded by the lien of this Indenture;
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(f) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the Interest Distribution Amount
or Principal Distribution Amount for any Distribution Date and any
Class (including the calculation of any of the individual components of
such amounts) or to affect rights of the Holders of the Notes to the
benefits of any provisions for the mandatory redemption of Notes
contained herein; or
(g) incur any indebtedness, other than the Notes, that would
cause the Trust or the Trust Estate to be treated as a "taxable
mortgage pool" within the meaning of Code Section 7701(i).
The Indenture Trustee may in its discretion determine whether
or not any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Trust and the Indenture
Trustee of any supplemental indenture pursuant to this Section 9.02, the
Indenture Trustee shall mail to the Holders of the Notes to which such
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and (subject to Section 6.01 hereof) shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties
or immunities under this Indenture or otherwise. The Servicer, on behalf of the
Trust, shall cause executed copies of any supplemental indentures to be
delivered to the Note Insurer and the Rating Agencies.
Section 9.04. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article IX, this Indenture
shall be modified in accordance therewith, and such supplemental indenture shall
form a part of this Indenture for all purposes; and every Holder of Notes to
which such supplemental indenture relates that have theretofore been or
thereafter are authenticated and delivered hereunder shall be bound thereby.
Section 9.05. Conformity With Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article IX shall conform to the
requirements of the TIA as then in effect so long as this Indenture shall then
be qualified under the TIA.
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Section 9.06. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article 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 Owner Trustee,
acting at the direction of the Majority Certificateholders, shall so determine,
new Notes so modified as to conform, in the opinion of the Indenture Trustee and
the Owner Trustee, acting at the direction of the Majority Certificateholders,
to any such supplemental indenture may be prepared by the Servicer and executed
by the Owner Trustee, acting at the direction of the Majority
Certificateholders, on behalf of the Trust, and authenticated and delivered by
the Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Governing Documents. The Indenture
Trustee shall, upon a Trust Request, consent to any proposed amendment to the
Trust's governing documents, or an amendment to or waiver of any provision of
any other document relating to the Trust's governing documents, such consent to
be given without the necessity of obtaining the consent of the Holders of any
Notes upon receipt by the Indenture Trustee of:
(a) an Officer's Certificate, to which such proposed amendment
or waiver shall be attached, stating that such attached copy is a true
copy of the proposed amendment or waiver and that all conditions
precedent to such consent specified in this Section 9.07 have been
satisfied; and
(b) written confirmation of the satisfaction of the Rating
Agency Condition with respect to such proposed amendment.
Notwithstanding the foregoing, the Indenture Trustee may
decline to consent to a proposed waiver or amendment that adversely affects its
own rights, duties or immunities under this Indenture or otherwise.
Nothing in this Section 9.07 shall be construed to require
that any Person obtain the consent of the Indenture Trustee to any amendment or
waiver or any provision of any document where the making of such amendment or
the giving of such waiver without obtaining the consent of the Indenture Trustee
is not prohibited by this Indenture or by the terms of the document that is the
subject of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption. (a) At the option of the Servicer,
and at its sole cost and expense, (x) this Indenture may be terminated and all
the Notes may be redeemed in whole, but not in part, on any Redemption Date
after the Clean-Up Call Date by purchase of all of the outstanding Mortgage
Loans and REO Properties at a price equal the Termination Price or (y) the Class
A-1 Notes or the Class A-2 Notes may be redeemed in whole, but not in part, on
any Redemption Date after the related Note Clean-Up Call Date at the applicable
Note Termination Price.
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(b) Any such purchase or redemption shall be accomplished by
deposit into the related Distribution Account or Accounts of the applicable
Redemption Price on the Servicer Distribution Date preceding the Redemption
Date. The amounts on deposit therein shall be distributed by the Indenture
Trustee on such Redemption Date in accordance with the priority set forth in
Section 8.02 hereof. No termination or redemption is permitted without the prior
written consent of the Note Insurer if it would result in a draw on the Note
Insurance Policy.
(c) Notice of the election to redeem any Notes pursuant to
subsection (a) of this Section 10.01 shall be furnished to the Indenture Trustee
not later than thirty (30) days prior to the Distribution Date selected for such
redemption. Upon receiving such notice, the Indenture Trustee shall notify each
Holder of such Notes and Note Insurer of such election pursuant to Section 10.02
hereof. Any expenses associated with the compliance of the provisions hereof in
connection with a redemption of the Notes shall be paid by the Servicer.
(d) Upon the redemption of all of the Notes, the Mortgage
Loans in the Trust Estate shall be released and delivered to the Servicer. In
the case of a redemption of the Class A-2 Notes only, the Mortgage Loans in Pool
II will not be released from the lien of the Indenture until such time as the
Class A-1 Notes are either redeemed or terminated. In such case, the Pool II
Mortgage Loans will continue to be pledged to the Indenture Trustee, on behalf
of the Noteholders and the Note Insurer, to secure the obligations of the Trust
with respect to the Class A-1 Notes. In the case of a redemption of the Class
A-1 Notes only, the Mortgage Loans in Pool I will not be released from the lien
of the Indenture until such time as the Class A-2 Notes are either redeemed or
terminated. In such case, the Pool I Mortgage Loans will continue to be pledged
to the Indenture Trustee, on behalf of the Noteholders and the Note Insurer, to
secure the obligations of the Trust with respect to the Class A-2 Notes.
(e) Upon receipt of the notice from the Servicer of its
election to redeem any Notes pursuant to Section 10.01(a) hereof (which shall
state that the Servicer has determined that the conditions to redemption at the
option of the Servicer have been satisfied and setting forth the amount, if any,
to be withdrawn from each Distribution Account and paid to the Servicer as
reimbursement for Nonrecoverable Advances in respect of the related Mortgage
Loans and such other information as may be required to accomplish such
redemption), the Indenture Trustee shall prepare and deliver to the Trust, the
Servicer and the Note Insurer, no later than the related Redemption Date, an
Indenture Trustee's Remittance Report.
Section 10.02. Form of Redemption Notice. Notice of redemption
shall be given by the Indenture Trustee in the name of and at the expense of the
Trust by first class mail, postage prepaid, mailed not less than ten days prior
to the Redemption Date to each Holder of Notes to be redeemed, such Holders
being determined as of the Record Date for such Distribution Date, and to the
Note Insurer.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price at which the Notes of such Class will
be redeemed; and
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(c) the fact of payment in full on such Notes, the place where
such Notes are to be surrendered for payment of the Redemption Price
(which shall be the office or agency of the Trust to be maintained as
provided in Section 3.02 hereof), and that no interest shall accrue on
such Note for any period after the date fixed for redemption.
Failure to give notice of redemption, or any defect therein,
to any Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.
Section 10.03. Notes Payable on Optional Redemption. Notice of
redemption having been given as provided in Section 10.02 hereof, the Notes to
be redeemed shall, on the applicable Redemption Date, become due and payable at
the Redemption Price and (unless the Trust shall default in the payment of the
Redemption Price) no interest shall accrue on such Redemption Price for any
period after such Redemption Date; provided, however, that if such Redemption
Price is not paid on the Redemption Date, the Note Principal Balance shall,
until paid, bear interest from the Redemption Date at the applicable Note Rate.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions. (a) Upon
any application or request by any Person to the Indenture Trustee to take any
action under any provision of this Indenture, such Person shall furnish to the
Indenture Trustee an Officer's Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel, if requested by the
Indenture Trustee, stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
(b) Every certificate, opinion or letter with respect to
compliance with a condition or covenant provided for in this Indenture,
including one furnished pursuant to specific requirements of this Indenture
relating to a particular application or request (other than certificates
provided pursuant to TIA Section 314(a)(4)) shall include and shall be deemed to
include (regardless of whether specifically stated therein) the following:
(i) a statement that each individual signing such certificate,
opinion or letter has read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate, opinion or letter are based;
(iii) a statement that, in the opinion of each such
individual, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
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(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.02. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Trust may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any Opinion of Counsel may be based on the written opinion of other
counsel, in which event such Opinion of Counsel shall be accompanied by a copy
of such other counsel's opinion and shall include a statement to the effect that
such counsel believes that such counsel and the Indenture Trustee may reasonably
rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Wherever in this Indenture, in connection with any application
or certificate or report to the Indenture Trustee, it is provided that the Trust
shall deliver any document as a condition of the granting of such application,
or as evidence of the Trust'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 Trust to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Section 6.01(b)(ii) hereof.
Whenever in this Indenture it is provided that the absence of
the occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request or
direction of the Trust, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Trust's right to make such request or
direction, the Indenture Trustee shall be protected in acting in accordance with
such request or direction if it does not have knowledge of the occurrence and
continuation of such Default or Event of Default as provided in Section 6.01(d)
hereof.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by an agent duly appointed in writing; and, except
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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 Trust. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Indenture
Trustee and the Trust, if made in the manner provided in this Section 11.03.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered to
be done by the Indenture Trustee or the Trust in reliance thereon, whether or
not notation of such action is made upon such Notes.
Section 11.04. Notices, etc., to Indenture Trustee, the Note
Insurer and Trust. 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 Trust
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Indenture
Trustee at its Corporate Trust Office; or
(b) the Trust by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder (except as provided in
Section 5.01(c) and (d)) hereof if in writing and mailed, first-class
postage prepaid, to the Trust addressed to it at ABFS Mortgage Loan
Trust 1999-2, in care of First Union Trust Company, National
Association, One Rodney Square, 920 King Street, Suite 102, Wilmington,
Delaware, 19801, Attention: Corporate Trust Administration, or at any
other address previously furnished in writing to the Indenture Trustee
by the Trust.
(c) the Note Insurer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage prepaid, to Financial Security
Assurance Inc. addressed to it at 350 Park Avenue, New York, New York,
10022, Attention: Surveillance Department (in each case in which notice
or other communication to the Note Insurer refers to an Event of
Default, a claim on the Note Insurance Policy or with respect to which
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failure on the part of the Note 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 each of the
General Counsel and the Head--Financial Guaranty Group and shall be
marked to indicate "URGENT MATERIAL ENCLOSED"), or at any other address
previously furnished in writing to the Indenture Trustee by the Note
Insurer; or
(d) the Depositor by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage paid, to Prudential Securities
Secured Financing Corporation c/o Prudential Securities Incorporated,
One New York Plaza, New York, New York 10292; Attention: Managing
Director - Asset-Backed Finance Group, or at any other address
previously furnished in writing to the Indenture Trustee by the
Depositor; or
(e) the Unaffiliated Seller or the Servicer by the Indenture
Trustee or by any Noteholder shall be sufficient for every purpose
hereunder if in writing and mailed, first-class, postage paid, to such
party, in care of American Business Financial Services, Inc.,
BalaPointe Office Centre, 111 Presidential Boulevard, Suite 127, Bala
Cynwyd, Pennsylvania, 19004, Attention: General Counsel or at any other
address previously furnished in writing to the Indenture Trustee by the
Unaffiliated Seller or the Servicer; or
(f) the Underwriter by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to Prudential Securities Incorporated,
One New York Plaza, New York, New York 10292, Attention: Managing
Director - Asset-Backed Finance, or at any other address previously
furnished in writing to the Indenture Trustee by the Underwriter.
Notices required to be given to the Rating Agencies by the
Trust or the Indenture Trustee shall be in writing, personally delivered or
mailed first-class postage pre-paid, to (i) in the case of Moody's, at the
following address: Moody's Investors Service, Inc., Residential Mortgage
Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in
the case of S&P, at the following address: Standard & Poor's Ratings Services,
55 Water Street, New York, New York, 10041, Attention: Asset-Backed Surveillance
Department and (iii) in the case of the Indenture Trustee, at the following
address: c/o The Chase Manhattan Bank, 450 W. 33rd Street, New York, New York,
10001, Attention: Capital Markets Fiduciary Services, telephone (212) 946-3246,
telecopy (212) 946-8191; or as to each of the foregoing, at such other address
as shall be designed by written notice to the other parties.
Section 11.05. Notices and Reports to Noteholders; Waiver of
Notices. Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder as
it appears on the Note Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
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shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.
Section 11.06. Rules by Indenture Trustee. The Indenture
Trustee may make reasonable rules for any meeting of Noteholders.
Section 11.07. Conflict With Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this Indenture by any of the provisions of
the TIA, such required provision shall control.
Section 11.08. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and
agreements in this Indenture by the Trust shall bind its successors and assigns,
whether so expressed or not.
Section 11.10. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 11.11. Benefits of Indenture. Nothing in this
Indenture or in the Notes, expressed or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, any separate trustee or
co-trustee appointed under Section 6.14 hereof and the Noteholders, any benefit
or any legal or equitable right, remedy or claim under this Indenture.
Section 11.12. Legal Holidays. In any case where the date of
any Distribution Date, Redemption Date or any other date on which principal of
or interest on any Note is proposed to be paid shall not be a Business Day, then
(notwithstanding any other provision of the Notes or this Indenture) payment
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the nominal date of any such
Distribution Date, Redemption Date or other date for the payment of principal of
or interest on any Note and no interest shall accrue for the period from and
after any such nominal date, provided such payment is made in full on such next
succeeding Business Day.
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Section 11.13. Governing Law. IN VIEW OF THE FACT THAT
NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY STATES AND OUTSIDE THE UNITED STATES
AND THE DESIRE TO ESTABLISH WITH CERTAINTY THAT THIS INDENTURE WILL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF A STATE HAVING A
WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF
THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
Section 11.14. Counterparts. This instrument may be executed
in any number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.15. Recording of Indenture. This Indenture is
subject to recording in any appropriate public recording offices, such recording
to be effected by the Servicer, on behalf of the Trust, and at its expense in
compliance with any Opinion of Counsel delivered pursuant to Sections 2.11(c) or
3.06 hereof.
Section 11.16. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Trust, the Owner
Trustee or the Indenture Trustee on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Trust or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Indenture Trustee or the Owner Trustee in its individual capacity, any holder of
a beneficial interest in the Trust, the Owner Trustee or the Indenture Trustee
or of any successor or assign of the Indenture Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Trust
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of the Trust Agreement.
Section 11.17. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder and Beneficial Owner, by accepting a
Note, hereby covenant and agree that they will not at any time institute against
the Unaffiliated Seller or the Trust, or join in any institution against the
Unaffiliated Seller or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, this Indenture or any of the Basic
Documents. In addition, the Indenture Trustee will on behalf of the Holders of
the Notes, (a) file a written objection to any motion or other proceeding
seeking the substantive consolidation of any Originator with the Unaffiliated
Seller or the Trust, (b) file an appropriate memorandum of points and
authorities or other brief in support of such objection, or (c) endeavor to
establish at the hearing on such objection that the substantive consolidation of
such entity would be materially prejudicial to the Noteholders.
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This Section 11.17 will survive for one year and one day
following the termination of this Indenture.
Section 11.18. Inspection. The Trust agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee and the Note Insurer, during the Trust's normal business hours, to
examine all of books of account, records, reports and other papers of the Trust,
to make copies and extracts therefrom, to cause such books to be audited by
Independent Accountants selected by the Indenture Trustee or the Note Insurer,
as the case may be, and to discuss its affairs, finances and accounts with its
officers, employees and Independent Accountants (and by this provision the Trust
hereby authorizes its Accountants to discuss with such representatives such
affairs, finances and accounts), all at such reasonable times and as often as
may be reasonably requested. Any expense incident to the exercise by the
Indenture Trustee of any right under this Section 11.18 shall be borne by the
Trust.
Section 11.19. Usury. The amount of interest payable or paid
on any Note under the terms of this Indenture shall be limited to an amount that
shall not exceed the maximum nonusurious rate of interest allowed by the
applicable laws of the United States or the State of New York (whichever shall
permit the higher rate), that could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Note exceeds the Highest Lawful Rate, the Trust stipulates that such excess
amount will be deemed to have been paid as a result of an error on the part of
both the Indenture Trustee, acting on behalf of the Holder of such Note, and the
Trust, and the Holder receiving such excess payment shall promptly, upon
discovery of such error or upon notice thereof from the Trust or the Indenture
Trustee, refund the amount of such excess or, at the option of the Indenture
Trustee, apply the excess to the payment of principal of such Note, if any,
remaining unpaid. In addition, all sums paid or agreed to be paid to the
Indenture Trustee for the benefit of Holders of Notes for the use, forbearance
or detention of money shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
Notes.
Section 11.20. Note Insurer Default. Any right conferred to
the Note Insurer shall be suspended during any period in which a Note Insurer
Default exists. At such time as the Notes are no longer Outstanding under this
Indenture, and no amounts owed to the Note Insurer under the Basic Documents
remain unpaid, the Note Insurer's rights under this Indenture shall terminate.
Section 11.21. Third-Party Beneficiary. The Note Insurer is
intended as a third- party beneficiary of this Indenture which shall be binding
upon and inure to the benefit of the Note Insurer; provided, that,
notwithstanding the foregoing, for so long as a Note Insurer Default is
continuing with respect to its obligations under the Note Insurance Policy, the
Noteholders shall succeed to the Note Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Indenture that expressly confer rights upon the Note Insurer shall be for the
benefit of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Indenture.
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[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Trust and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
ABFS MORTGAGE LOAN TRUST 1999-2
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
under the Trust Agreement
By:
------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By:
------------------------------------------
Name:
Title:
[Signature Page to Indenture]
<PAGE>
APPENDIX I
DEFINED TERMS
"Accepted Servicing Practices": The Servicer's normal
servicing practices, which in general will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service, for their own
account, mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located.
"Account": Any of the Collection Account, the Distribution
Accounts, the Cross-collateralization Reserve Accounts, the Note Insurance
Payment Account, the Pre-Funding Accounts or the Capitalized Interest Accounts.
"Accountant": A Person engaged in the practice of accounting
who (except when the Indenture provides that an Accountant must be Independent)
may be employed by or affiliated with the Trust or an Affiliate of the Trust.
"Accrual Period": With respect to the Class A-1 Notes and any
Distribution Date, the prior calendar month; with respect to the Class A-2 Notes
and any Distribution Date, the period from and including the prior Distribution
Date (or, in the case of the first Distribution Date, from and including the
Closing Date) to and including the day immediately preceding such Distribution
Date.
"Act": With respect to any Noteholder, as defined in Section
11.03 of the Indenture.
"Addition Notice": A written notice from the Unaffiliated
Seller to the Depositor, the Trust, the Indenture Trustee, the Collateral Agent,
the Rating Agencies and the Note Insurer that the Unaffiliated Seller desires to
make a Subsequent Transfer.
"Adjusted Note Rate": With respect to any Distribution Date
for the Class A-1 Notes, the percentage equal to (i) the Class A-1 Note Rate
plus (ii) the Premium Percentage for such Class; with respect to any
Distribution Date for the Class A-2 Notes, the percentage equal to (i) the Class
A-2 Note Rate plus (ii) the Premium Percentage for such Class.
"Administrative Costs": With respect to each Class of Notes
and any Distribution Date, the sum of the Indenture Trustee Fee, the Premium
Amount and the Servicing Fee for such Distribution Date and such Class of Notes.
"Affiliate": With respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Agent": Any Note Registrar, Collateral Agent, or
Authenticating Agent.
"Aggregate Principal Balance": With respect to any Mortgage
Loans and any date of determination, the aggregate of the Principal Balances of
such Mortgage Loans as of such date of determination.
"Appraised Value": As to any Mortgaged Property, the appraised
value of the Mortgaged Property based upon the appraisal made by or on behalf of
the related Originator at the time referred to in the related Basic Documents
or, in the case of a Mortgage Loan that is a purchase money mortgage loan, the
sales price of the Mortgaged Property, if such sales price is less than such
appraised value.
"Assignment of Mortgage": With respect to each Mortgage Loan,
an assignment of the Mortgage, notice of transfer or equivalent instrument
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer.
"Authenticating Agent": The Person, if any, appointed as
Authenticating Agent by the Owner Trustee, acting at the direction of the
Majority Certificateholders, pursuant to Section 6.14 of the Indenture, until
any successor Authenticating Agent for the Notes is named, and thereafter
"Authenticating Agent" shall mean such successor. The initial Authenticating
Agent shall be the Indenture Trustee. Any Authenticating Agent other than the
Indenture Trustee shall sign an instrument under which it agrees to be bound by
all of the terms of this Indenture applicable to the Authenticating Agent.
"Authorized Denominations": Each Class of Notes is issuable
only in the minimum Percentage Interest corresponding to a minimum denomination
of $1,000 or integral multiples of $1,000 in excess thereof; provided, however,
that one Note of each Class is issuable in a denomination equal to any such
multiple plus an additional amount such that the aggregate denomination of all
Notes of such Class shall be equal to the Original Note Principal Balance of
such Class.
"Authorized Officer": With respect to (i) the Indenture
Trustee, any Responsible Officer, (ii) the Owner Trustee or the Collateral
Agent, the president, any vice president, any assistant vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer, any financial services officer or any other officer of the Owner
Trustee or the Collateral Agent customarily performing functions similar to
those performed by the above officers and (iii) any other Person, the chairman,
chief operating officer, president or any vice president of such Person.
"Available Funds": With respect to any Distribution Date and
any Distribution Account, the amount to be on deposit in such Distribution
Account on such Distribution Date (excluding the amount of any Insured Payment
and prior to the application of such amounts as described in Section 8.02 of the
Indenture for such Distribution Date) as a result of (a) the Servicer's
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remittance of the Servicer Remittance Amount on the related Servicer
Distribution Date, (b) any transfers to such Distribution Account made from the
related Capitalized Interest Account and/or the related Pre-Funding Account and
relating to such Distribution Date pursuant to Section 8.01 of the Indenture,
and (c) any transfers to such Distribution Account in respect of the Shortfall
Amount for such Class and such Distribution Date pursuant to Section 8.01 of the
Indenture, until such Shortfall Amount is paid in full, made first, to the
extent of the Net Monthly Excess Cashflow for the other Pool of Mortgage Loans
remaining after payment of any Net Mortgage Loan Interest Shortfalls for such
other Pool, from the Distribution Account relating to such other Pool, second,
from the Cross-collateralization Reserve Account relating to this Pool, and
third, from the Cross-collateralization Reserve Account relating to the other
Pool. For purposes of calculating the Available Funds, any Loan Repurchase Price
or Substitution Adjustment that is paid shall be deemed deposited in the
Distribution Account in the Due Period preceding such Servicer Distribution
Date.
"Available Funds Shortfall": With respect to any Distribution
Date and any Class, an amount equal to the excess of the Insured Distribution
Amount for such Distribution Date and for such Class over the Available Funds
for such Distribution Date and such Class available for distribution in respect
of such Insured Distribution Amount.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.
"Basic Documents": The Indenture, the Trust Agreement, the
Sale and Servicing Agreement, the Unaffiliated Seller's Agreement, the Insurance
Agreement and the Indemnification Agreement.
"Beneficial Owner": With respect to a Book-Entry Note, the
Person who is the beneficial owner of such Note as reflected on the books of the
Clearing Agency for the Notes or on the books of a Person maintaining an account
with such Clearing Agency (as either a Direct Participant or an Indirect
Participant, in accordance with the rules of such Clearing Agency).
"Best Efforts": Efforts determined to be in good faith and
reasonably diligent by the Person performing such efforts, specifically the
Trust or the Servicer or any other agent of the Trust, as the case may be, in
its reasonable discretion. Such efforts do not require the Trust or the Servicer
or any other agent of the Trust, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Trust or the Servicer or any other agent of the Trust, as the case
may be, to advance or expend fees or sums of money in addition to those
specifically set forth in this Indenture and the Sale and Servicing Agreement.
"Book-Entry Notes": Any Notes registered in the name of the
Clearing Agency or its nominee, ownership of which is reflected on the books of
the Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (as either a Direct Participant or an Indirect Participant in
accordance with the rules of such Clearing Agency).
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"Book-Entry Termination": The time at which the book-entry
registration of the Book-Entry Notes shall terminate, as specified in Section
2.13 of the Indenture.
"Business Day": Any day other than (i) a Saturday or Sunday or
(ii) a day that is either a legal holiday or a day on which the Note Insurer or
banking institutions in the State of New York, the State of Delaware, the State
of New Jersey, the State of North Carolina, or the state in which the Indenture
Trustee's office from which payments will be made to Certificateholders, are
authorized or obligated by law, regulation or executive order to be closed.
"Business Purpose Property": Any mixed-use property,
commercial property, or four or more unit multifamily property.
"Capitalized Interest Account": Each of the Capitalized
Interest Accounts established in accordance with Section 8.01(c) of the
Indenture and maintained by the Indenture Trustee.
"Capitalized Interest Requirement": With respect to each Class
of Notes and the Distribution Date occurring in July 1999, August 1999 and
September 1999, (A) the product of (i) one-twelfth of the related Adjusted Note
Rate as calculated as of such Distribution Date and (ii) the related Pre-Funded
Amount as of the first day of the related Due Period, minus (B) thirty (30)
days' interest, at the related Mortgage Interest Rate, on the Subsequent
Mortgage Loans for the related Pool transferred to the Trust during the related
Due Period which had a Due Date after the related Subsequent Cut-Off Date during
the related Due Period, minus (C) the amount of any Pre-Funding Earnings for the
related Pool earned from the last Distribution Date (or the Closing Date with
respect to the July 1999 Distribution Date). In no event will the Capitalized
Interest Requirement for either Pool be less than zero.
"CERCLA": The Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"Civil Relief Act": The Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
"Civil Relief Act Interest Shortfall": With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction
in the amount of interest collectible thereon for the most recently ended Due
Period as a result of the application of the Civil Relief Act, the amount, if
any, by which (a) interest collectible on such Mortgage Loan during the most
recently ended calendar month is less than (b) the sum of one month's interest
on the Principal Balance of such Mortgage Loan, calculated at a rate equal to
the related Mortgage Interest Rate.
"Class": Each class of Notes designated as the Class A-1 Notes
and the Class A-2 Notes.
"Class A-1 Carry-Forward Amount": As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-1 Interest
Distribution Amount as of the immediately preceding Distribution Date exceeded
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(ii) the amount of interest actually distributed to the Holders of the Class A-1
Notes on such immediately preceding Distribution Date and (b) thirty (30) days'
interest on the amount described in clause (a), calculated at an interest rate
equal to the Class A-1 Note Rate.
"Class A-1 Current Interest": With respect to the Class A-1
Notes for any Distribution Date, the interest accrued during the related Accrual
Period at the Class A-1 Note Rate applicable to such Distribution Date on the
Class A-1 Note Principal Balance as of such Distribution Date (and prior to
making any distributions on such Distribution Date).
"Class A-1 Distribution Amount": With respect to the Class A-1
Notes for any Distribution Date, the amount to be distributed to the Holders of
the Class A-1 Notes on such Distribution Date, applied first to interest and
then to principal, which amount shall be the sum of (i) any moneys released from
the Pre-Funding Account as a prepayment of principal on the Class A-1 Notes
pursuant to Section 8.01(b) of the Indenture, and (ii) the lesser of (x) the
Class A-1 Formula Distribution Amount for such Distribution Date and (y) the
amount (including any applicable portion of any Insured Payment) available for
distribution on account of the Class A-1 Notes for such Distribution Date.
"Class A-1 Formula Distribution Amount": With respect to the
Class A-1 Notes for any Distribution Date, the sum of the Class A-1 Interest
Distribution Amount and the Class A-1 Principal Distribution Amount.
"Class A-1 Interest Distribution Amount": With respect to the
Class A-1 Notes for any Distribution Date, an amount equal to (a) the related
Class A-1 Current Interest, less (b) the Class A-1 Mortgage Loan Interest
Shortfall Amount, plus (c) the Class A-1 Carry-Forward Amount, minus (d) any
amounts paid by the Note Insurer in respect of such Class A-1 Carry-Forward
Amount, in each case, as of such Distribution Date.
"Class A-1 Mortgage Loan Interest Shortfall Amount": With
respect to the Mortgage Loans in Pool I and any Distribution Date, the sum of
(x) the excess, if any, of the aggregate Prepayment Interest Shortfalls for the
related Due Period over the aggregate amount of Compensating Interest paid by
the Servicer in respect thereto and (y) the aggregate amount of Civil Relief Act
Interest Shortfalls in respect of which the Servicer did not make a Servicer
Advance.
"Class A-1 Note": Any Note designated as a "Class A-1 Note" on
the face thereof, in the form of Exhibit A to the Indenture. The Class A-1 Notes
shall be issued with an initial aggregate Note Principal Balance equal to the
Original Note Principal Balance therefor.
"Class A-1 Note Principal Balance": As of any date of
determination, the Original Note Principal Balance of the Class A-1 Notes less
any amounts actually distributed with respect to principal thereon on all prior
Distribution Dates.
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"Class A-1 Note Rate": With respect to any Distribution Date,
the per annum rate equal to 7.130%; provided, that, on any Distribution Date
after the Clean-Up Call Date or the Note Clean-Up Call Date for the Class A-1
Notes, the Class A-1 Note Rate will be 7.630%.
"Class A-1 Principal Distribution Amount": With respect to the
Class A-1 Notes for any Distribution Date, the lesser of (x) the Principal
Distribution Amount for Pool I for such Distribution Date, and (y) the Class A-1
Note Principal Balance as of such Distribution Date.
"Class A-2 Available Funds Cap Carry-Forward Amount": With
respect to the Class A-2 Notes and any Distribution Date, the sum of (a) the
excess of (x) the Class A-2 Current Interest calculated at the Class A-2 Formula
Note Rate over (y) the Class A-2 Current Interest calculated at the Class A-2
Available Funds Cap Rate, in each case as of such Distribution Date and (b) the
amount of any Class A-2 Available Funds Cap Carry-Forward remaining unpaid from
any previous Distribution Date, with 30 days' interest thereon on the Class A-2
Formula Note Rate.
"Class A-2 Available Funds Cap Rate": A per annum rate equal
to the Net Weighted Average Mortgage Interest Rate with respect to the Mortgage
Loans in Pool II, less the rate at which the Indenture Trustee Fee is then
calculated, less 0.75%.
"Class A-2 Carry-Forward Amount": As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Class A-2 Interest
Distribution Amount as of the immediately preceding Distribution Date exceeded
(ii) the amount of interest actually distributed to the Holders of the Class A-2
Notes on such immediately preceding Distribution Date and (b) thirty (30) days'
interest on the amount described in clause (a), calculated at an interest rate
equal to the Class A-2 Formula Note Rate.
"Class A-2 Current Interest": With respect to the Class A-2
Notes for any Distribution Date, the interest accrued during the related Accrual
Period at the Class A-2 Note Rate applicable to such Distribution Date on the
Class A-2 Note Principal Balance as of such Distribution Date (and prior to
making any distributions on such Distribution Date).
"Class A-2 Distribution Amount": With respect to the Class A-2
Notes for any Distribution Date, the amount to be distributed to the Holders of
the Class A-2 Notes on such Distribution Date, applied first to interest and
then to principal, which amount shall be the lesser of (x) the Class A-2 Formula
Distribution Amount for such Distribution Date and (y) the amount (including any
applicable portion of any Insured Payment) available for distribution on account
of the Class A-2 Notes for such Distribution Date.
"Class A-2 Formula Distribution Amount": With respect to the
Class A-2 Notes for any Distribution Date, the sum of the Class A-2 Interest
Distribution Amount and the Class A-2 Principal Distribution Amount.
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"Class A-2 Formula Note Rate": A per annum rate equal to LIBOR
plus 0.375%; provided, that, on any Distribution Date after the Clean-Up Call
Date or the Note Clean-Up Call Date for the Class A-2 Note, the Class A-2
Formula Note Rate will be equal to LIBOR plus 0.750% per annum.
"Class A-2 Interest Distribution Amount": With respect to the
Class A-2 Notes for any Distribution Date, an amount equal to (a) the related
Class A-2 Current Interest, less (b) the Class A-2 Mortgage Loan Interest
Shortfall Amount and Class A-2 Available Funds Cap Carry-Forward Amounts plus
(c) the Class A-2 Carry-Forward Amount, minus (d) any amounts paid by the Note
Insurer in respect of such Class A-2 Carry-Forward Amount, in each case, as of
such Distribution Date.
"Class A-2 Mortgage Loan Interest Shortfall Amount": With
respect to the Mortgage Loans in Pool II and any Distribution Date, the sum of
(x) the excess, if any, of the aggregate Prepayment Interest Shortfalls for the
related Due Period over the aggregate amount of Compensating Interest paid by
the Servicer in respect thereto and (y) the aggregate amount of Civil Relief Act
Interest Shortfalls in respect of which the Servicer did not make a Servicer
Advance.
"Class A-2 Note": Any Note designated as a "Class A-2 Note" on
the face thereof, in the form of Exhibit A to the Indenture. The Class A-2 Notes
shall be issued with an initial aggregate Note Principal Balance equal to the
Original Note Principal Balance therefor.
"Class A-2 Note Principal Balance": As of any date of
determination, the Original Note Principal Balance of the Class A-2 Notes less
any amounts actually distributed with respect to principal thereon on all prior
Distribution Dates.
"Class A-2 Note Rate": With respect to any Distribution Date,
the per annum rate equal to the lesser of (i) the Class A-2 Formula Note Rate
and (ii) the Class A-2 Available Funds Cap Rate for such Distribution Date.
"Class A-2 Principal Distribution Amount": With respect to the
Class A-2 Notes for any Distribution Date, the lesser of (x) the Principal
Distribution Amount for Pool II for such Distribution Date and (y) the Class A-2
Note Principal Balance as of such Distribution Date.
"Clean-Up Call Date": The first Distribution Date after the
sum of the Aggregate Principal Balances of the Mortgage Loans in Pool I and Pool
II is less than 10% of the sum of the Maximum Collateral Amount for Pool I and
Pool II.
"Clearing Agency": An organization registered as a "clearing
agency" pursuant to Section 17A of the Securities and Exchange Act of 1934, as
amended, and the regulations of the Commission thereunder and shall initially be
The Depository Trust Company of New York, the nominee for which is Cede & Co.
"Clearing Agency Participants": The entities for whom the
Clearing Agency will maintain book-entry records of ownership and transfer of
Book-Entry Notes, which may include securities brokers and dealers, banks and
trust companies and clearing corporations and certain other organizations.
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"Closing Date": June 29, 1999.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral Agent": Chase Bank of Texas, N.A., a national
banking association, or its successor-in-interest, or any successor Collateral
Agent appointed as provided in Section 9.08 of the Sale and Servicing Agreement.
"Collection Account": The Eligible Account established and
maintained by the Servicer pursuant to Section 5.02(b) of the Sale and Servicing
Agreement.
"Combined Loan-to-Value Ratio" or "CLTV": As to any Mortgage
Loan at any time, the fraction, expressed as a percentage, the numerator of
which is the sum of (i) the Principal Balance thereof at such time and (ii) if
such Mortgage Loan is subject to a second mortgage, the unpaid principal balance
of any related first mortgage loan or loans, if any, as of such time, and the
denominator of which is the Appraised Value of any related Mortgaged Property or
Properties as of the date of the appraisal used by or on behalf of the
Unaffiliated Seller to underwrite such Mortgage Loan.
"Commission": The United States Securities and Exchange
Commission.
"Compensating Interest": As defined in Section 6.05 of the
Sale and Servicing Agreement.
"Corporate Trust Office": With respect to (x) the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of the Basic Documents is located at
450 West 33rd Street, New York, New York, 10001, Attention: ABFS Mortgage Loan
Trust 1999-2; (y) the Owner Trustee, the principal office of the Owner Trustee
at which at any particular time its corporate trust business shall be
principally administered, which office at the date of the execution of the Basic
Documents is located at One Rodney Square, 920 King Street, Suite 102,
Wilmington, Delaware 19801, Attention: Corporate Trust Administration; and (z)
the Collateral Agent, the principal office of the Collateral Agent at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of the Basic Documents
is located at 801 West Greens Road, Houston, Texas 77067, Attention: Custody
Manager.
"Cross-collateralization Reserve Accounts": With respect to
each Class of Notes, the segregated trust account, which shall be an Eligible
Account, established and maintained pursuant to Section 8.01(d) of the Indenture
and entitled "The Chase Manhattan Bank, as Indenture Trustee for ABFS Mortgage
Loan Trust 1999-2 Mortgage Backed Notes, Series 1999-2, Class A-[1][2],
Cross-collateralization Reserve Account," as the case may be, on behalf of the
related Noteholders and the Note Insurer.
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"Cumulative Loan Loss": With respect to any period, the sum of
all Liquidated Loan Losses which occurred during such period.
"Cumulative Loss Percentage": As of any date of determination
thereof, the aggregate of all Liquidated Loan Losses since the Closing Date as a
percentage of the sum of (i) the aggregate Principal Balance of the Initial
Mortgage Loans as of the Initial Cut-Off Date and (ii) the aggregate Principal
Balance of any Subsequent Mortgage Loans transferred to the Trust as of the
related Subsequent Cut-Off Date.
"Cumulative Loss Test": The Cumulative Loss Test for each
period indicated below is satisfied if the Cumulative Loss Percentage for such
period does not exceed the percentage set out for such period below:
Period Cumulative Loss Percentage
31st - 36th Distribution Date 1.50%
37th - 48th Distribution Date 1.75%
49th Distribution Date and thereafter 2.00%
"Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
the amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
Delinquency.
"Cut-Off Date": With respect to the Initial Mortgage Loans,
the Initial Cut-Off Date, and with respect to the Subsequent Mortgage Loans, the
Subsequent Cut-Off Date.
"Cut-Off Date Aggregate Principal Balance": Means the
aggregate unpaid principal balance of the Initial Mortgage Loans as of the
Initial Cut-Off Date (or, with respect to Initial Mortgage Loans which were
originated after the Initial Cut-Off Date, as of the date of origination). The
Cut-Off Date Aggregate Principal Balance for the Trust is $164,913,971.51. The
Cut-Off Date Aggregate Principal Balance for Pool I and Pool II is
$150,459,287.31 and $14,454,684.20, respectively.
"Cut-Off Date Principal Balance": Means as to each Initial
Mortgage Loan, its unpaid principal balance as of the Initial Cut-Off Date (or,
with respect to Initial Mortgage Loans which were originated after the Initial
Cut-Off Date, as of the date of origination).
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Mortgage Loan in a proceeding under the Bankruptcy Code, except such a
reduction that constitutes a Deficient Valuation or a permanent forgiveness of
principal.
"Default": Any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
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"Deficient Valuation": With respect to any Mortgage Loan, a
valuation of the related Mortgaged Property by a court of competent jurisdiction
in an amount less than the then outstanding Principal Balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy
Code.
"Definitive Notes": Notes other than Book-Entry Notes.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.
"Delinquency Ratio": With respect to any Distribution Date,
the percentage equivalent of a fraction (a) the numerator of which equals the
aggregate Principal Balances of all Mortgage Loans that are sixty (60) or more
days Delinquent, in foreclosure or converted to REO Property as of the last day
of such Due Period and (b) the denominator of which is the aggregate Principal
Balance of the Mortgage Loans as of the last day of such Due Period.
"Delinquent": A Mortgage Loan is "delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
"Depositor": Prudential Securities Secured Financing
Corporation, a Delaware corporation.
"Direct Participant": Any broker-dealer, bank or other
financial institution for which the Clearing Agency holds Notes from time to
time as a securities depositary.
"Distribution Account": With respect to each Class of Notes,
the segregated trust account, which shall be an Eligible Account, established
and maintained pursuant to Section 8.01(a) of the Indenture and entitled "The
Chase Manhattan Bank, as Indenture Trustee for ABFS Mortgage Loan Trust 1999-2
Mortgage Backed Notes, Series 1999-2, Class A-[1][2], Distribution Account," as
the case may be, on behalf of the related Noteholders and the Note Insurer.
"Distribution Amount": The Class A-1 Distribution Amount or
the Class A-2 Distribution Amount, as applicable.
"Distribution Date": The 15th day of any month or if such 15th
day is not a Business Day, the first Business Day immediately following,
commencing on July 15, 1999.
"Due Date": With respect to each Mortgage Loan and any
Distribution Date, the day of the calendar month preceding the calendar month in
which such Distribution Date occurs on which the Monthly Payment for such
Mortgage Loan was due.
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"Due Period": With respect to each Distribution Date, the
calendar month preceding the related Distribution Date.
"Eligible Account": Either (A) an account or accounts
maintained with an institution (which may include the Indenture Trustee;
provided, that the Indenture Trustee otherwise meets these requirements) whose
deposits are insured by the FDIC, the unsecured and uncollateralized debt
obligations of which institution shall be rated "AA" or better by S&P and "Aa2"
or better by Moody's and in the highest short term rating category by S&P and
Moody's, and which is (i) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (ii) an
institution (including the Indenture Trustee) duly organized, validly existing
and in good standing under the applicable banking laws of any state, (iii) a
national banking association duly organized, validly existing and in good
standing under the federal banking laws, (iv) a principal subsidiary of a bank
holding company, or (v) approved in writing by the Note Insurer and the Rating
Agencies or (B) a trust account or accounts maintained with the trust department
of a federal or state chartered depository institution or trust company (which
may include the Indenture Trustee; provided, that the Indenture Trustee
otherwise meets these requirements), having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"Excess Over-collateralized Amount": With respect to a Pool of
Mortgage Loans and any Distribution Date, the excess, if any, of (x) the
Over-collateralized Amount for such Pool that would apply on such Distribution
Date after taking into account the payment of the Class A-1 Distribution Amount
or the Class A-2 Distribution Amount, as applicable, on such Distribution Date
(except for any distributions of Over-collateralization Reduction Amounts for
such Pool on such Distribution Date) over (y) the related Specified
Over-collateralized Amount for such Pool for such Distribution Date; provided,
however, that the Excess Over-collateralized Amount for the period beginning
with the Distribution Date as to which clause (b)(i)(y)(A) of "Specified
Over-collateralized Amount" applies (the "Trigger Date") and ending on the
Distribution Date occurring in the month six months subsequent to the Trigger
Date (inclusive) shall be limited to the amount obtained using the following
formula.
n
--- x E.S.A.
6
Where "n" is equal to the number of Distribution Dates that
have occurred since the Trigger Date and "E.S.A." is equal to the amount of
Excess Over-collateralized Amount that would otherwise be obtained for such
Distribution Date without regard to the provisions of this proviso.
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"Exchange Act": Means the Securities Exchange Act of 1934, as
amended.
"Event of Default": As defined in Section 5.01 of the
Indenture.
"Fannie Mae": The Federal National Mortgage Association, and
any successor thereto.
"FDIC": The Federal Deposit Insurance Corporation, and any
successor thereto.
"Final Certification": A certification as to the completeness
of each Indenture Trustee's Mortgage File prepared by the Collateral Agent, on
behalf of the Indenture Trustee, and provided by the Collateral Agent within
ninety (90) of the Closing Date pursuant to Section 2.06(a)(iii) of the Sale and
Servicing Agreement.
"Final Stated Maturity Date": With respect to both the Class
A-1 Notes and the Class A-2 Notes, the September 2030 Distribution Date.
"Foreclosure Profits": As to any Distribution Date, the
excess, if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan
that became a Liquidated Mortgage Loan during the related Due Period over (ii)
the sum of the unpaid Principal Balance of each such Liquidated Mortgage Loan
plus accrued and unpaid interest at the applicable Mortgage Interest Rate on the
unpaid Principal Balance thereof from the Due Date on which interest was last
paid by the Mortgagor (or, in the case of a Liquidated Mortgage Loan that had
been an REO Mortgage Loan, from the Due Date on which interest was last deemed
to have been paid pursuant to Section 5.06 of the Sale and Servicing Agreement)
to the next succeeding Due Date following the date such Loan became a Liquidated
Mortgage Loan.
"Freddie Mac": The Federal Home Loan Mortgage Corporation, and
any successor thereto.
"GAAP": Generally accepted accounting principles, consistently
applied.
"Grant": To assign, transfer, mortgage, pledge, create and
grant a security interest in, deposit, set-over and confirm. A Grant of a
Mortgage Loan and the related Mortgage Files, a Permitted Investment, the Sale
and Servicing Agreement, the Unaffiliated Seller's Agreement, or any other
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including without limitation the
immediate and continuing right to claim for, collect, receive and give receipts
for principal and interest payments thereunder, Insurance Proceeds, Loan
Purchase Prices and all other moneys payable thereunder and all proceeds
thereof, to give and receive notices and other communications, to make waivers
or other agreements, to exercise all rights and options, to bring Proceedings in
the name of the Granting party or otherwise, and generally to do and receive
anything that the Granting party is or may be entitled to do or receive
thereunder or with respect thereto.
"Highest Lawful Rate": As defined in Section 11.19 of the
Indenture.
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"I&I Payments": Payments due and owing under the Insurance
Agreement other than pursuant to Section 3.02(b) of such Insurance Agreement.
"Indemnification Agreement": As defined in the Insurance
Agreement.
"Indenture": The Indenture, dated as of June 1, 1999, between
the Trust and the Indenture Trustee, relating to the issuance of the Notes.
"Indenture Trustee": The Chase Manhattan Bank, a New York
banking corporation, or its successor-in-interest, or any successor Indenture
Trustee appointed as provided for in Section 6.09 of the Indenture.
"Indenture Trustee Fee": As to any Distribution Date, the fee
payable to the Indenture Trustee in respect of its services as Indenture Trustee
pursuant to Section 6.16 of the Indenture that accrues at a monthly rate equal
to one-twelfth of 0.025% on the Principal Balance of each Mortgage Loan, as of
the immediately preceding Due Date.
"Indenture Trustee's Mortgage File": The documents delivered
to the Collateral Agent, on behalf of the Indenture Trustee, pursuant to Section
2.05 of the Sale and Servicing Agreement.
"Indenture Trustee's Remittance Report": The statement
prepared pursuant to Section 2.08(d) of the Indenture, containing the following
information with respect to each Class:
(a) the amount of the distribution with respect to the each
Class of Notes and the Trust Certificates;
(b) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Prepayments or other
unscheduled recoveries of principal included therein and separately
identifying any Over-collateralization Increase Amounts for each Pool;
(c) the amount of such distributions allocable to interest and
the calculation thereof;
(d) the Note Principal Balance of each Class of Notes as of
such Distribution Date, together with the Note Principal Balance of
each Class of Notes (based on a Note in an original Note Principal
Balance of $1,000) then outstanding, in each case after giving effect
to any payment of principal on such Distribution Date;
(e) the amount of any Insured Payment included in the amounts
distributed to the Noteholders on such Distribution Date;
(f) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such distribution;
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<PAGE>
(g) the amounts, if any, of any Liquidated Loan Losses for
consumer purpose loans and for business purpose loans for the related
Due Period and cumulative Liquidated Loan Losses since the Closing Date
for consumer purpose loans and for business purpose loans;
(h) the Pre-Funding Amount for each Class on such Distribution
Date; and
(i) LIBOR for such Distribution Date.
Items (a), (b) and (c) above shall, with respect to each Class
of Notes, be presented on the basis of a Note having a $1,000 denomination. In
addition, by January 31 of each calendar year following any year during which
the Notes are outstanding, the Indenture Trustee shall furnish a report to each
Holder of record if so requested in writing at any time during each calendar
year as to the aggregate of amounts reported pursuant to (a), (b) and (c) with
respect to the Notes for such calendar year.
"Independent": When used with respect to any specified Person,
means such a Person who (i) is in fact independent of the Trust and any other
obligor upon the Notes, (ii) does not have any direct financial interest or any
material indirect financial interest in the Trust or in any such other obligor
or in an Affiliate of the Trust or such other obligor, and (iii) is not
connected with the Trust or any such other obligor as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing similar
functions. Whenever it is herein provided that any Independent Person's opinion
or certificate shall be furnished to the Indenture Trustee, such Person shall be
appointed by a Trust Order and such opinion or certificate shall state that the
signer has read this definition and that the signer is Independent within the
meaning hereof.
"Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in a Note.
"Individual Note": A Note of an Original Note Principal
Balance of $1,000; a Note of an Original Note Principal Balance in excess of
$1,000 shall be deemed to be a number of Individual Notes equal to the quotient
obtained by dividing such Original Note Principal Balance amount by $1,000.
"Initial Certification": A certification as to the
completeness of each Mortgage File prepared by the Collateral Agent, on behalf
of the Indenture Trustee, and provided by the Collateral Agent within thirty
(30) of the Closing Date pursuant to Section 2.06(a)(ii) of the Sale and
Servicing Agreement.
"Initial Cut-Off Date": The close of business on May 31, 1999
(or with respect to any Initial Mortgage Loan originated or otherwise acquired
by an Originator after May 31, 1999, the date of origination or acquisition of
such Initial Mortgage Loan).
"Initial Mortgage Loans": The Mortgage Loans delivered by the
Trust on the Closing Date.
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<PAGE>
"Initial Over-collateralized Amount": With respect to any
Pool, an amount equal to 0.50% of the Maximum Collateral Amount for such Pool.
"Insurance Agreement": The Insurance and Indemnity Agreement
dated as of June 1, 1999 among the Note Insurer, the Depositor, the Trust, the
Servicer, the Unaffiliated Seller, and the Originators as such agreement may be
amended or supplemented in accordance with the provisions thereof.
"Insurance Policies": All insurance policies insuring any
Mortgage Loan or Mortgaged Property, to the extent the Trust or the Indenture
Trustee has any interest therein.
"Insurance Proceeds": Proceeds paid by any insurer pursuant to
any insurance policy covering a Mortgage Loan to the extent such proceeds are
not applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices.
"Insurance Proceeds" do not include "Insured Payments."
"Insured Distribution Amount": With respect to any
Distribution Date and for any Pool, is the sum of (i) the Interest Distribution
Amount for such Pool, (ii) the amount of the Over-collateralization Deficit
applicable to such Pool, if any, with respect to such Distribution Date, and
(iii) with respect to the Distribution Date which is a Final Stated Maturity
Date, the outstanding Note Principal Balance for the related Class of Notes.
"Insured Payment": With respect to any Distribution Date and
any Class of Notes, the Available Funds Shortfall for such Class.
"Interest Coverage Amount": With respect to any Distribution
Date, is an amount equal to the product of (x) one-twelfth, (y) 1% and (z) the
Aggregate Principal Balance of the Mortgage Loans in Pool I as of the end of the
related Collection Period.
"Interest Determination Date": With respect to any Accrual
Period for the Class A-2 Notes, the second London Business Day preceding the
first day of such Accrual Period; provided, however, that with respect to the
July 1999 Distribution Date, the Interest Determination Date shall be the second
London Business Day preceding the Closing Date.
"Interest Distribution Amount": The Class A-1 Interest
Distribution Amount or the Class A-2 Interest Distribution Amount, as
applicable.
"Late Payment Rate": Has the meaning ascribed thereto in the
Insurance Agreement.
"Letter Agreement": The Letter of Representations to the
Clearing Agency from the Indenture Trustee and the Trust dated June 25, 1999.
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<PAGE>
"LIBOR": With respect to any Accrual Period for the Class A-2
Notes, the rate determined by the Indenture Trustee on the related Interest
Determination Date on the basis of the offered rates of the Reference Banks for
one-month U.S. dollar deposits, as such rates appear on Telerate Page 3750, as
of 11:00 a.m. (London time) on such Interest Determination Date. On each
Interest Determination Date, LIBOR for the related Accrual Period will be
established by the Indenture Trustee as follows:
(a) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period for the Class A-2 Notes shall be the arithmetic mean of
such offered quotations (rounded upwards if necessary to the nearest
whole multiple of 1/16%).
(b) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period Class A-2 Notes shall be the higher of (i) LIBOR as
determined on the previous Interest Determination Date and (ii) the
Reserve Interest Rate.
"Liquidated Loan Loss": With respect to any Distribution Date,
the aggregate of the amount of losses with respect to each Mortgage Loan which
became a Liquidated Mortgage Loan prior to the Due Date preceding such
Distribution Date, equal to the excess of (i) the unpaid Principal Balance of
each such Liquidated Mortgage Loan, plus accrued interest thereon in accordance
with the amortization schedule at the time applicable thereto at the applicable
Mortgage Interest Rate from the Due Date as to which interest was last paid with
respect thereto through the next succeeding Due Date following the date such
Loan became a Liquidated Mortgage Loan, over (ii) Net Liquidation Proceeds with
respect to such Liquidated Mortgage Loan.
"Liquidated Mortgage Loan": A Mortgage Loan with respect to
which the related Mortgaged Property has been acquired, liquidated or foreclosed
and with respect to which the Servicer determines that all Liquidation Proceeds
which it expects to recover have been recovered.
"Liquidation Expenses": Expenses incurred by the Servicer in
connection with the liquidation of any defaulted Mortgage Loan or property
acquired in respect thereof (including, without limitation, legal fees and
expenses, committee or referee fees, and, if applicable, brokerage commissions
and conveyance taxes), any unreimbursed amount expended by the Servicer pursuant
to Sections 5.04 and 5.06 of the Sale and Servicing Agreement respecting the
related Mortgage Loan and any unreimbursed expenditures for real property taxes
or for property restoration or preservation of the related Mortgaged Property.
Liquidation Expenses shall not include any previously incurred expenses in
respect of an REO Mortgage Loan which have been netted against related REO
Proceeds.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds) received by the Servicer in connection with (i) the taking of all or a
part of Mortgaged Property by exercise of the power of eminent domain or
condemnation, (ii) the liquidation of a defaulted Mortgage Loan through a
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Indenture Trustee's sale, foreclosure sale, REO Disposition or otherwise or
(iii) the liquidation of any other security for such Mortgage Loan, including,
without limitation, pledged equipment, inventory and working capital and
assignments of rights and interests made by the related Mortgagor.
"Loan Repurchase Price": With respect to any Mortgage Loan,
the Principal Balance of such Mortgage Loan as of the date of purchase, plus all
accrued and unpaid interest on such Principal Balance computed, as of the next
succeeding Due Date for such repurchased Mortgage Loan, at the Mortgage Interest
Rate, net of the Servicing Fee if the Unaffiliated Seller or any of its
Affiliates is the Servicer, plus the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to such Mortgage Loan, which purchase
price shall be deposited in the Collection Account on the next succeeding
Servicer Distribution Date, after deducting therefrom any amounts received in
respect of such repurchased Mortgage Loan or Loans and being held in the
Collection Account for future distribution to the extent such amounts have not
yet been applied to principal or interest on such Mortgage Loan.
"Loan-to-Value Ratio" or "LTV": With respect to any Mortgage
Loan as of its date of origination, the ratio on such date borne by the
outstanding Principal Balance of the Mortgage Loan to the Appraised Value of the
related Mortgaged Property.
"London Business Day": A day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
"Majority Certificateholders": The Holder or Holders of Trust
Certificates evidencing Percentage Interests in excess of 51% in the aggregate.
"Majority Noteholders": The Holder or Holders of Notes
evidencing Percentage Interests in excess of 51% in the aggregate.
"Maximum Collateral Amount": The sum of the Original Pool
Principal Balance and the Original Pre-Funded Amount for each Class of Notes.
"Monthly Payment": As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the payment of principal and interest due
thereon as specified for such Due Date in the related amortization schedule at
the time applicable thereto (after adjustment for any Curtailments and Deficient
Valuations occurring prior to such Due Date but before any adjustment to such
amortization schedule by reason of any bankruptcy, other than Deficient
Valuations, or similar proceeding or any moratorium or similar waiver or grace
period).
"Monthly Servicing Fee": As defined in Section 5.08 of the
Sale and Servicing Agreement.
"Moody's": Moody's Investors Service, Inc., a corporation
organized and existing under Delaware law, or any successor thereto and if such
corporation no longer for any reason performs the services of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized rating agency designated by the Note Insurer.
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"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on the Mortgaged Property.
"Mortgage File": As described in Exhibit A to the Sale and
Servicing Agreement.
"Mortgage Interest Rate": As to any Mortgage Loan, the per
annum fixed rate at which interest accrues on the unpaid Principal Balance
thereof.
"Mortgage Loan Interest Shortfall": With respect to any
Distribution Date, as to any Mortgage Loan, the sum of (a) the excess, if any,
of the Prepayment Interest Shortfall for such Mortgage Loan for the related Due
Period over the Compensating Interest for such Mortgage Loan paid by the
Servicer in respect thereto and (b) any Civil Relief Act Interest Shortfall in
respect of which the Servicer did not make a Servicer Advance.
"Mortgage Loan Schedule": The schedule of Initial Mortgage
Loans as of the Initial Cut-Off Date attached as Schedule I to the Indenture,
which will be deemed to be modified automatically to reflect any replacement,
sale, substitution, liquidation, transfer or addition of any Mortgage Loan,
including the addition of a Subsequent Mortgage Loan, pursuant to the terms
hereof. The initial Mortgage Loan Schedule sets forth as to each Initial
Mortgage Loan, and any subsequent Mortgage Loan Schedule provided in connection
with the Subsequent Mortgage Loans will set forth as to each Subsequent Mortgage
Loan: (i) its identifying number and the name of the related Mortgagor; (ii) the
billing address for the related Mortgaged Property including the state and zip
code; (iii) its date of origination; (iv) the original number of months to
stated maturity; (v) the original stated maturity; (vi) the original Principal
Balance; (vii) its Principal Balance as of the applicable Cut-Off Date; (viii)
the Mortgage Interest Rate; (ix) the scheduled monthly payment of principal and
interest and (x) a Pool designation.
"Mortgage Loans": The Initial Mortgage Loans and the
Subsequent Mortgage Loans, together with any Qualified Substitute Mortgage Loans
substituted therefor in accordance with the Basic Documents, as from time to
time are held as a part of the Trust, the Initial Mortgage Loans originally so
held being identified in the initial Mortgage Loan Schedule. When used in
respect of any Distribution Date, the term Mortgage Loans shall mean all
Mortgage Loans (including those in respect of which the Indenture Trustee has
acquired the related Mortgaged Property) which have not been repaid in full
prior to the related Due Period, did not become Liquidated Mortgage Loans prior
to such related Due Period or were not repurchased or replaced by the
Unaffiliated Seller prior to such related Due Period.
"Mortgage Note": The original, executed note or other evidence
of any indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Portfolio Performance Test": The Mortgage Portfolio
Performance Test is satisfied for any date of determination thereof if either
(a) (i) the Rolling Six Month Delinquency Rate is less than or equal to 11.00%,
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<PAGE>
(ii) the Over-collateralization Loss Test is satisfied and (iii) if the Twelve
Month Loss Amount is not greater than or equal to 1.25% of the Principal Balance
of the Mortgage Loans in each Pool as of the first day of the twelfth preceding
calendar month or (b) the Note Insurer, by notice to the Trust, the Servicer,
the Indenture Trustee and the Collateral Agent, expressly waives in writing
compliance with the foregoing tests for such Distribution Date.
"Mortgaged Property": The underlying property or properties
securing a Mortgage Loan, consisting of a fee simple interest in one or more
parcels of land.
"Mortgagor": The obligor on a Mortgage Note.
"Net Foreclosure Profits": As to any Distribution Date, the
excess, if any, of (i) the aggregate Foreclosure Profits with respect to such
Distribution Date over (ii) Liquidated Loan Losses with respect to such
Distribution Date.
"Net Liquidation Proceeds": As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses and net of any
unreimbursed Periodic Advances and Servicing Advances made by the Servicer. For
all purposes of the Basic Documents, Net Liquidation Proceeds shall be allocated
first to accrued and unpaid interest on the related Mortgage Loan and then to
the unpaid Principal Balance thereof.
"Net Monthly Excess Cashflow": With respect to any
Distribution Date and any Pool, the excess of (x) the Available Funds for such
Pool then on deposit in the related Distribution Account over (y) the sum of (i)
the Interest Distribution Amount for such Pool and such Distribution Date, (ii)
the Principal Distribution Amount for such Pool and such Distribution Date,
calculated for this purpose without regard to any Over-collateralization
Increase Amount (or portion thereof included therein) for such Pool and such
Distribution Date, (iii) the amounts due to the Note Insurer for such Pool on
such Distribution Date pursuant to Section 8.02(ii) of the Indenture, and (iv)
the Indenture Trustee Fees allocable to such Pool for such Distribution Date.
"Net Mortgage Loan Interest Shortfall Amount": The Class A-1
Mortgage Loan Interest Shortfall or the Class A-2 Mortgage Loan Interest
Shortfall Amount, as applicable.
"Net REO Proceeds": As to any REO Mortgage Loan, REO Proceeds
net of any related expenses of the Servicer.
"Net Weighted Average Mortgage Interest Rate": With respect to
any Due Period, the weighted average Mortgage Interest Rates (weighted by
Principal Balances) of the Mortgage Loans, calculated at the opening of business
on the first day of such Due Period, less the Servicing Fee Rate, and less the
Premium Percentage.
"Nonrecoverable Advances": With respect to any Mortgage Loan,
(a) any Periodic Advance previously made and not reimbursed from late
collections pursuant to Section 5.03 of the Sale and Servicing Agreement, or (b)
a Periodic Advance proposed to be made in respect of a Mortgage Loan or REO
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Property either of which, in the good faith business judgment of the Servicer,
as evidenced by an Officer's Certificate delivered to the Note Insurer and the
Indenture Trustee no later than the Business Day following such determination,
would not ultimately be recoverable pursuant to Section 5.03 of the Sale and
Servicing Agreement.
"Note": Any Class A-1 Note or Class A-2 Note executed by the
Owner Trustee on behalf of the Trust and authenticated by the Indenture Trustee.
"Noteholder" or "Holder": Each Person in whose name a Note is
registered in the Note Register, except that, solely for the purposes of giving
any consent, waiver, request or demand pursuant to the Indenture, any Note
registered in the name of the Servicer or any Subservicer or the Unaffiliated
Seller, or any Affiliate of any of them, shall be deemed not to be outstanding
and the undivided Percentage Interest evidenced thereby shall not be taken into
account in determining whether the requisite percentage of Notes necessary to
effect any such consent, waiver, request or demand has been obtained. For
purposes of any consent, waiver, request or demand of Noteholders pursuant to
the Indenture, upon the Indenture Trustee's request, the Servicer and the
Unaffiliated Seller shall provide to the Indenture Trustee a notice identifying
any of their respective Affiliates or the Affiliates of any Subservicer that is
a Noteholder as of the date(s) specified by the Indenture Trustee in such
request. Any Notes on which payments are made under the Note Insurance Policy
shall be deemed to be Outstanding and held by the Note Insurer to the extent of
such payment.
"Note Clean-Up Call Date": With respect to the Class A-1
Notes, the first Distribution Date after the Class A-1 Note Principal Balance is
less than or equal to 10% of the Original Note Principal Balance of the Class
A-1 Notes; with respect to the Class A-2 Notes, the first Distribution Date
after the Class A-2 Note Principal Balance is less than or equal to 10% of the
Original Note Principal Balance of the Class A-2 Notes.
"Note Insurance Payment Account": The Note Insurance Payment
Account established in accordance with Section 8.03(c) of the Indenture and
maintained by the Indenture Trustee.
"Note Insurance Policy": The Financial Guaranty Insurance
Policy No. 50824-N, all endorsements thereto dated the Closing Date, issued by
the Note Insurer for the benefit of the Noteholders.
"Note Insurer": Financial Security Assurance Inc., a monoline
stock insurance company organized and created under the laws of the State of New
York, and any successors thereto.
"Note Insurer Default": The existence and continuance of any
of the following:
(a) the Note Insurer shall have failed to make a required
payment when due under the Note Insurance Policy;
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(b) the Note Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the
Bankruptcy Code, the New York State Insurance Law or any other similar
federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the Bankruptcy Code, the New York State
Insurance Law or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation, or reorganization
that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i)
appointing a custodian, indenture trustee, agent, or receiver for the
Note Insurer or for all or any material portion of its property or (ii)
authorizing the taking of possession by a custodian, indenture trustee,
agent, or receiver of the Note Insurer or of all or any material
portion of its property.
"Note Principal Balance": As to any particular Note and date
of determination, the product of the Percentage Interest evidenced thereby and
the aggregate principal balance of all Notes of the same Class as of such date
of determination. The Trust Certificates do not have a "Note Principal Balance".
"Note Rate": The Class A-1 Note Rate or the Class A-2 Note
Rate, as applicable.
"Note Register": As defined in Section 2.06 of the Indenture.
"Note Registrar": As defined in Section 2.06 of the Indenture.
"Note Termination Price": With respect to either Class, an
amount equal to the sum of (i) 100% of the aggregate Note Principal Balance of
such Class, plus accrued and unpaid interest thereon, and (ii) any unreimbursed
amounts due to the Note Insurer under the Basic Documents and any I&I Payments.
"Notes": The Class A-1 Notes and the Class A-2 Notes.
"Officer's Certificate": A certificate signed by the chairman
of the board, the president or a vice president and the treasurer, the secretary
or one of the assistant treasurers or assistant secretaries of the Unaffiliated
Seller, the Servicer, or the Depositor, or, with respect to the Trust, a
certificate signed by a Responsible Officer of the Owner Trustee, at the
direction of the related Majority Certificateholders as required by any Basic
Document.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be counsel for the Unaffiliated Seller, the Servicer, the
Depositor, the Indenture Trustee, the Owner Trustee, a Noteholder or a
Noteholder's prospective transferee or the Note Insurer (including except as
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otherwise provided herein, in-house counsel) reasonably acceptable to each
addressee of such opinion and experienced in matters relating to the subject of
such opinion.
"Original Note Principal Balance": As of the Closing Date and
as to the Class A-1 Notes, $197,010,000 and as to the Class A-2 Notes, $
21,890,000. The Trust Certificates do not have an "Original Note Principal
Balance."
"Original Pool Principal Balance": The aggregate Principal
Balance of the Mortgage Loans, as of the Initial Cut-Off Date, which amount for
the Trust is equal to $164,913,971.51. The Original Pool Principal Balance for
Pool I and Pool II is $150,459,287.31 and $14,454,684.20, respectively.
"Original Capitalized Interest Amount": With respect to the
Class A-1 Notes, $571,677.07 and with respect to the Class A-2 Notes,
$58,098.93.
"Original Pre-Funded Amount": With respect to the Class A-1
Notes, $47,540,712.69 and with respect to the Class A-2 Notes, $7,545,315.80.
"Originators": American Business Credit, Inc., HomeAmerican
Credit, Inc., d/b/a Upland Mortgage and New Jersey Mortgage and Investment Corp.
"Outstanding": As of the date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:
(a) Definitive Notes theretofore canceled by the Note
Registrar or delivered to the Note Registrar for cancellation;
(b) Notes or portions thereof for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Indenture Trustee in trust for the Holders of such Notes; provided,
however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor, satisfactory to the Indenture Trustee, has been made;
(c) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser (as defined by the Uniform
Commercial Code of the applicable jurisdiction); and
(d) Notes alleged to have been destroyed, lost or stolen that
have been paid as provided for in Section 2.07 of the Indenture;
provided, however, that in determining whether the Holders of the requisite
percentage of the Note Principal Balance of the Outstanding Notes have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Notes owned by the Trust, any other obligor upon the Notes or any Affiliate of
the Trust, the Unaffiliated Seller, the Servicer or the Depositor or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
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determining whether the Indenture Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Notes that the Indenture Trustee knows to be so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Trust, any other obligor upon the Notes or any Affiliate of
the Trust, the Unaffiliated Seller, the Servicer or the Depositor or such other
obligor; provided, further, however, that Notes that have been paid with the
proceeds of the Note Insurance Policy shall be deemed to be Outstanding for the
purposes of this Indenture, such payment to be evidenced by written notice from
the Note Insurer to the Indenture Trustee, and the Note Insurer shall be deemed
to be the Holder thereof to the extent of any payments thereon made by the Note
Insurer which have not been reimbursed.
"Over-collateralization Deficit": As of any Distribution Date,
the amount, if any, by which (a) the aggregate Note Principal Balance of the
Notes, after taking into account the payment of the Principal Distribution
Amount for each Pool (except for any amount in respect of the
Over-collateralization Deficit) on such date exceeds (b) the sum of (i) the
Aggregate Principal Balances of the Mortgage Loans in such Pool determined as of
the end of the immediately preceding Due Period, (ii) the amount, if any, on
deposit in the Pre-Funding Accounts as of the close of business on the last day
of the immediately preceding Due Period, and (iii) the amount on deposit in the
Cross-collateralization Reserve Accounts on such Distribution Date, after
application of all amounts due on such Distribution Date.
"Over-collateralization Deficiency Amount": With respect to
any Distribution Date and any Pool, the difference, if greater than zero,
between (a) the Specified Over-collateralized Amount for such Pool applicable to
such Distribution Date and (b) the Over-collateralized Amount for such Pool
applicable to such Distribution Date prior to taking into account the payment of
any related Over-collateralization Increase Amount for such Pool on such
Distribution Date.
"Over-collateralization Increase Amount": With respect to any
Distribution Date and any Pool, the lesser of:
(a) the Over-collateralization Deficiency Amount for such Pool
as of such Distribution Date (after taking into account the payment of
the Principal Distribution Amount for such Pool on such Distribution
Date (except for any Over-collateralization Increase Amount for such
Pool)); and
(b) (i) with respect to the first Distribution Date, zero, and
(ii) with respect to any other Distribution Date, 100% of the
amount of Net Monthly Excess Cashflow on such Distribution Date.
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"Over-collateralization Loss Test": The Over-collateralization
Loss Test for any period set out below is satisfied if the Cumulative Loss
Percentage for such period does not exceed the percentage set out for such
period below:
Period Cumulative Loss Percentage
-------------------------------- --------------------------
1st - 12th Distribution Date 0.75%
13th - 24th Distribution Date 1.25%
25th - 36th Distribution Date 1.75%
37th - 48th Distribution Date 2.00%
49th - Distribution Date and thereafter 2.50%
"Over-collateralization Reduction Amount": With respect to any
Pool and Distribution Date, an amount equal to the lesser of (a) the Excess
Over-collateralized Amount for such pool and such Distribution Date and (b) the
Principal Distribution Amount for such Pool and such Distribution Date (without
regard to clause (b)(xi) of the definition of "Principal Distribution Amount").
"Over-collateralized Amount": As of any Distribution Date and
any Pool, the difference, if any, between (a) the sum of (i) the aggregate
Principal Balances of the Mortgage Loans in such Pool as of the close of
business on the last day of the related Due Period and (ii) the amount on
deposit in the related Pre-Funding Account as of the close of business on the
last day of the immediately preceding Due Period and (b) the aggregate Note
Principal Balance of the related Class as of such Distribution Date (after
taking into account the payment of the Principal Distribution Amount for such
Pool on such Distribution Date, except for any portion thereof related to an
Insured Payment); provided, however, that such amount shall not be less than
zero.
"Overfunded Interest Amount": With respect to each Pool and
each Subsequent Transfer Date occurring in June 1999, the excess of (i) the
amount on deposit in the related Capitalized Interest Account, over (ii)
three-months' interest calculated at the related Adjusted Note Rate on the
amount on deposit in the related Pre-Funding Account (net of any Pre-Funding
Earnings for such Pre-Funding Account) immediately following such Subsequent
Transfer Date (disregarding any amount applied from such Pre-Funding Account to
a Subsequent Mortgage Loan that does not have a Due Date in June 1999).
With respect to each Pool and each Subsequent Transfer Date
occurring in July 1999, the excess of (i) the amount on deposit in the related
Capitalized Interest Account, over (ii) two-months' interest calculated at the
related Adjusted Note Rate on the amount on deposit in the related Pre-Funding
Account (net of any Pre-Funding Earnings for such Pre-Funding Account)
immediately following such Subsequent Transfer Date (disregarding any amount
applied from the such Pre-Funding Account to a Subsequent Mortgage Loan that
does not have a Due Date in July 1999).
With respect to each Pool and each Subsequent Transfer Date
occurring in August 1999, the excess of (i) the amount on deposit in the related
Capitalized Interest Account, over (ii) one-month's interest calculated at the
related Adjusted Note Rate on the amount on deposit in the related Pre-Funding
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Account (net of any Pre-Funding Earnings for such Pre-Funding Account)
immediately following such Subsequent Transfer Date (disregarding any amount
applied from the such Pre-Funding Account to a Subsequent Mortgage Loan thast
does not have a Due Date in August 1999).
"Owner-Occupied Mortgaged Property": A Residential Dwelling as
to which (a) the related Mortgagor represented an intent to occupy as such
Mortgagor's primary residence at the origination of the Mortgage Loan, and (b)
the Unaffiliated Seller has no actual knowledge that such Residential Dwelling
is not so occupied.
"Ownership Interest": As to any Note, any ownership or
security interest in such Note, including any interest in such Note as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
"Owner Trustee": First Union Trust Company, National
Association, a national banking association, not in its individual capacity, but
solely as owner trustee under the Trust Agreement, and any successor owner
trustee thereunder.
"Owner Trustee Fee": As defined in Section 8.01 of the Trust
Agreement.
"Paying Agent": The Indenture Trustee or any other depository
institution or trust company that is authorized by the Trust pursuant to Section
3.03 of the Indenture to pay the principal of, or interest on, any Notes on
behalf of the Trust, which agent, if not the Indenture Trustee, shall have
signed an instrument agreeing to be bound by the terms of the Indenture
applicable to such Paying Agent.
"Percentage Interest": With respect to a Note of any Class,
the portion evidenced by such Note, expressed as a percentage rounded to four
decimal places, equal to a fraction the numerator of which is the denomination
represented by original principal balance of such Note and the denominator of
which is the Original Note Principal Balance of such Class. With respect to a
Trust Certificate, the portion evidenced thereby as stated on the face of such
Trust Certificate.
"Periodic Advance": The aggregate of the advances required to
be made by the Servicer on any Servicer Distribution Date pursuant to Section
5.18 of the Sale and Servicing Agreement, the amount of any such advances being
equal to the sum of:
(a) with respect to each Mortgage Loan that was Delinquent as
of the close of business on the last day of the Due Period preceding
the related Servicer Distribution Date, the product of (i) the
Principal Balance of such Mortgage Loan and (ii) one-twelfth of the
Mortgage Interest Rate for such Mortgage Loan net of the Servicing Fee,
and
(b) with respect to each REO Property which was acquired
during or prior to the related Due Period and as to which an REO
Disposition did not occur during the related Due Period, an amount
equal to the excess, if any, of (i) interest on the Principal Balance
of such REO Mortgage Loan at the Mortgage Interest Rate for such REO
Mortgage Loan net of the Servicing Fee, for the most recently ended Due
Period over (ii) the net proceeds from the REO Property transferred to
the Distribution Account for such Distribution Date;
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provided, however, that in each such case such advance has not been determined
by the Servicer to be a Nonrecoverable Advance.
"Permitted Investments": As used herein, Permitted Investments
shall include the following:
(a) obligations of, or guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof when
such obligations are backed by the full faith and credit of the United
States;
(b) repurchase agreements on obligations specified in clause
(a) maturing not more than three months from the date of acquisition
thereof, provided that the unsecured obligations of the party agreeing
to repurchase such obligations are at the time rated in one of the two
highest rating categories by the Rating Agencies;
(c) certificates of deposit, time deposits and bankers'
acceptances (which, in the case of bankers' acceptances, shall in no
event have an original maturity of more than 365 days) of any U.S.
depository institution or trust company, incorporated under the laws of
the United States or any state; provided, that the debt obligations of
such depository institution or trust company at the date of acquisition
thereof have been rated in one of the two highest rating categories by
the Rating Agencies;
(d) commercial paper (having original maturities of not more
than 270 days) of any corporation incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated in the highest short-term rating category by the Rating
Agencies;
(e) the VISTA U.S. Government Money Market Fund, the VISTA
Prime Money Market Fund and the VISTA Treasury Plus Fund, so long as
any such fund is rated in the highest rating category by Moody's or
S&P;
provided, that no instrument described hereunder shall evidence either the right
to receive (x) only interest with respect to the obligations underlying such
instrument or (y) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, national banking association,
unincorporated organization or government or any agency or political subdivision
thereof.
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"Plan": A pension or benefit plan or individual retirement
arrangement that is subject to ERISA or Section 4975 of the Code.
"Pool": Pool I or Pool II, as the case may be.
"Pool I": The pool of Mortgage Loans held by the Trust, as a
separate sub-trust, which secure the obligations of the Trust with respect to
the Class A-1 Notes, as reflected on the Mortgage Loan Schedule.
"Pool I Trust Certificate": A certificate evidencing the
beneficial interest of a Trust Certificateholder in the sub-trust of the Trust
consisting of the Mortgage Loans in Pool I, substantially in the form of Exhibit
A to the Trust Agreement.
"Pool II": The pool of Mortgage Loans held by the Trust, as a
separate sub-trust, which secure the obligations of the Trust with respect to
the Class A-2 Notes, as reflected on the Mortgage Loan Schedule.
"Pool II Trust Certificate": A certificate evidencing the
beneficial interest of a Trust Certificateholder in the sub-trust of the Trust
consisting of the Mortgage Loans in Pool II, substantially in the form of
Exhibit A to the Trust Agreement.
"Predecessor Notes": With respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.07 of the Indenture in lieu of
a lost, destroyed or stolen Note shall be deemed to evidence the same debt as
the lost, destroyed or stolen Note.
"Preference Amount": Any amounts distributed in respect of the
Notes which are recovered from any Holder of a Note as a voidable preference by
a trustee in bankruptcy pursuant to the Bankruptcy Code or other similar law in
accordance with a final, nonappealable order of a court having competent
jurisdiction and which have not theretofore been repaid to such Holder.
"Preference Claim": As defined in Section 8.03(f) of the
Indenture.
"Pre-Funding Account": Each of the Pre-Funding Accounts
established in accordance with Section 8.01(b) of the Indenture and maintained
by the Indenture Trustee.
"Pre-Funding Amount": With respect to either Pool and any date
of determination, the amount on deposit in the related Pre-Funding Account.
"Pre-Funding Earnings": With respect to either Pool and any
date of determination, the actual investment earnings realized on amounts
deposited in the related Pre-Funding Account.
"Pre-Funding Period": With respect to either Pre-Funding
Account, the period commencing on the Closing Date and ending on the earliest to
occur of (i) the date on which the amount on deposit in such Pre-Funding Account
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(exclusive of any investment earnings) is less than $100,000, (ii) the date on
which any Event of Default or Servicer Event Default occurs and (iii) the close
of business on August 31, 1999.
"Premium Amount": The product of the Premium Percentage and
the aggregate outstanding Note Principal Balance for the related Class on the
related Distribution Date, but prior to any distributions on such Distribution
Date.
"Premium Percentage": The rate at which the "Premium" is
determined, as described in the letter dated June 29, 1999 between the Servicer
and the Note Insurer.
"Premium Supplement Event": Means any Event of Default,
Servicer Event of Default or an "Event of Default" as defined in the Insurance
Agreement.
"Prepayment Assumption": A constant prepayment rate of 25%
HEP, used solely for determining the accrual of original issue discount and
market discount on the Notes for federal income tax purposes.
"Prepayment Interest Shortfall": With respect to any
Distribution Date, for each Mortgage Loan that was the subject during the
related Due Period of a Principal Prepayment, an amount equal to the excess, if
any, of (a) 30 days' interest on the Principal Balance of such Mortgage Loan at
a per annum rate equal to (i) the Mortgage Interest Rate (or at such lower rate
as may be in effect for such Mortgage Loan pursuant to application of the Civil
Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus
(ii) the Servicing Fee Rate over (b) the amount of interest actually remitted by
the Mortgagor in connection with such Principal Prepayment less the Servicing
Fee for such Mortgage Loan in such month.
"Principal Balance": As to any Mortgage Loan and any date of
determination, the outstanding principal balance of such Mortgage Loan as of
such date of determination after giving effect to prepayments received prior to
the end of the related Due Period and Deficient Valuations incurred prior to
such date of determination. The Principal Balance of a Mortgage Loan which
becomes a Liquidated Mortgage Loan on or prior to such date of determination
shall be zero.
"Principal Distribution Amount": For any Distribution Date and
any Pool of Mortgage Loans will be the lesser of:
(a) the excess of (i) the sum, as of such Distribution Date,
of (A) the Available Funds for such Pool and (B) any Insured Payment
with respect to the related Class of Notes plus, if the Note Insurer
shall so elect in its sole discretion, an amount of principal
(including Liquidated Loan Losses) that would have been payable
pursuant to clauses (b)(i) through (ix) below if sufficient funds were
made available to the Indenture Trustee, in accordance with the terms
of the Note Insurance Policy, over (ii) the sum of (w) the Interest
Distribution Amount for such Pool, (x) the Indenture Trustee Fee
allocable to such Pool and (y) the amount due the Note Insurer on such
Distribution Date pursuant to Section 8.02(ii) of the Indenture in
respect to the related Class of Notes; and
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(b) the sum, without duplication, of:
(i) all principal in respect of the Mortgage Loans in such
Pool actually collected during the related Due Period;
(ii) the principal balance of each Mortgage Loan that either
was repurchased by the Unaffiliated Seller or purchased by the Servicer
on the related Servicer Distribution Date from such Pool, to the extent
such principal balance is actually received by the Indenture Trustee;
(iii) any Substitution Adjustments delivered by the
Unaffiliated Seller on the related Servicer Distribution Date in
connection with a substitution of a Mortgage Loan in such Pool, to the
extent such Substitution Adjustments are actually received by the
Indenture Trustee;
(iv) the Net Liquidation Proceeds actually collected by the
Servicer with respect to Mortgage Loans in such Pool during the related
Due Period (to the extent such Net Liquidation Proceeds relate to
principal);
(v) with respect to the July 1999, August 1999 or September
1999 Distribution Dates, moneys released from the related Pre-Funding
Account, if any;
(vi) the proceeds received by the Indenture Trustee upon the
exercise by the Servicer of the optional redemption of the related
Class of Notes pursuant to Section 10.01 of the Indenture (to the
extent such proceeds relate to principal);
(vii) the amount of any Over-collateralization Deficit with
respect to such Pool for such Distribution Date;
(viii) the proceeds received by the Indenture Trustee on any
termination of the Trust pursuant to Section 10.01 of the Indenture (to
the extent such proceeds relate to principal) allocable to such Pool;
(ix) the amount of any Over-collateralization Increase Amount
with respect to such Pool for such Distribution Date, to the extent of
any Remaining Excess Cashflow for such Pool available for such purpose;
(x) if the Note Insurer shall so elect in its sole discretion,
an amount of principal (including Liquidated Loan Losses) that would
have been payable pursuant to clauses (i) through (ix) above if
sufficient funds were made available to the Indenture Trustee in
accordance with the terms of the Note Insurance Policy;
minus
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(xi) the amount of any Over-collateralization Reduction Amount
for such Pool for such Distribution Date.
In no event will the Principal Distribution Amount for a Pool
with respect to any Distribution Date be (x) less than zero or (y) greater than
the then aggregate outstanding Note Principal Balance of the related Class of
Notes.
"Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date.
"Proceeding": Any suit in equity, action at law or other
judicial or administrative proceeding.
"Prospectus Supplement": The Prospectus Supplement dated June
25, 1999 relating to the Notes filed with the Commission in connection with the
Registration Statement heretofore filed or to be filed with the Commission
pursuant to Rule 424(b)(2) or 424(b)(5).
"Qualified Appraiser": An appraiser, duly appointed by the
Unaffiliated Seller, who had no interest, direct or indirect, in the Mortgaged
Property or in any loan made on the security thereof, and whose compensation is
not affected by the approval or disapproval of the Mortgage Loan, and such
appraiser and the appraisal made by such appraiser both satisfy the requirements
of Title XI of the Federal Institutions Reform, Recovery and Enforcement Act of
1989 and the regulations promulgated thereunder, all as in effect on the date
the Mortgage Loan was originated.
"Qualified Substitute Mortgage Loan": A mortgage loan or
mortgage loans substituted for a Deleted Mortgage Loan pursuant to Section
2.06(b) or 4.02(b) of the Sale and Servicing Agreement, which (a) has or have an
interest rate at least equal to those applicable to the Deleted Mortgage Loan,
(b) relates or relate to a detached one-family residence or to the same type of
Residential Dwelling or Business Purpose Property, or any combination thereof,
as the Deleted Mortgage Loan and in each case has or have the same or a better
lien priority as the Deleted Mortgage Loan and has or have the same occupancy
status as the Deleted Mortgage Loan or is or are Owner-Occupied Mortgaged
Property(ies), (c) matures or mature no later than (and not more than one year
earlier than) the Deleted Mortgage Loan, (d) has or have a Loan-to-Value Ratio
or Loan-to-Value Ratios at the time of such substitution no higher than the
Loan-to-Value of the Deleted Mortgage Loan, (e) has or have a Combined
Loan-to-Value Ratio or Combined Loan-to-Value Ratios at the time of such
substitution no higher than the Combined Loan-to-Value Ratio of the Deleted
Mortgage Loan, (f) has or have a Principal Balance or Principal Balances (after
application of all payments received on or prior to the date of substitution)
not substantially less and not more than the Principal Balance of the Deleted
Mortgage Loan as of such date, and (g) complies or comply as of the date of
substitution with each representation and warranty set forth in Sections 3.01
and 3.02 of the Unaffiliated Seller's Agreement.
"Rating Agency": S&P or Moody's.
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"Rating Agency Condition": Means, with respect to any action
to which a Rating Agency Condition applies, that each Rating Agency shall have
been given ten (10) days (or such shorter period as is acceptable to each Rating
Agency) prior notice thereof and that each of the Rating Agencies shall have
notified the Indenture Trustee, the Servicer, the Depositor, the Note Insurer
and the Trust in writing that such action will not result in a reduction or
withdrawal of the then current "implied" rating of the Notes that it maintains
without taking into account the Note Insurance Policy.
"Record Date": With respect to the Class A-1 Notes, the last
Business Day of the month immediately preceding a month in which a Distribution
Date occurs; with respect to the Class A-2 Notes, the Business Day immediately
preceding the related Distribution Date.
"Redemption Price": The Termination Price or the Note
Termination Price, as applicable.
"Redemption Date": The Distribution Date, if any, on which (i)
the Indenture is terminated and all of the Notes are redeemed pursuant to
Article X of the Indenture, which date may occur on or after the Clean-Up Call
Date, or (ii) a Class of Notes is redeemed pursuant to Article X of the
Indenture, which date may occur on or after the related Note Clean-Up Call Date.
"Reference Banks": Citibank, Barclay's Bank PLC, The Bank of
Tokyo-Mitsubishi and National Westminster Bank PLC; provided, that if any of the
foregoing banks are not suitable to serve as a Reference Bank, then any leading
banks selected by the Unaffiliated Seller which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London, (ii) not controlling, under the control
of or under common control with the Unaffiliated Seller or any affiliate
thereof, (iii) whose quotations appear on the Telerate Page 3750 on the relevant
Interest Determination Date and (iv) which have been designated as such by the
Indenture Trustee.
"Reimbursement Amount": With respect to any Distribution Date
and any Pool of Mortgage Loans, equals the sum of (a)(i) all Insured Payments
previously received by the Indenture Trustee and all Preference Amounts
previously paid by the Note Insurer and in each case not previously repaid to
the Note Insurer pursuant to Section 8.02(ii) of the Indenture, plus (ii)
interest accrued on each such Insured Payment and Preference Amounts not
previously repaid calculated at the Late Payment Rate from the date the
Indenture Trustee received the related Insured Payment or Preference Amounts
paid by the Note Insurer, and (b)(i) any amounts then due and owing to the Note
Insurer under the Insurance Agreement (including the Premium Amount due on such
Distribution Date), as certified to the Indenture Trustee by the Note Insurer
plus (ii) interest on such amounts at the rate specified in the Insurance
Agreement. The Note Insurer shall notify the Indenture Trustee and the Servicer
of the amount of any Reimbursement Amount.
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"Remaining Excess Cashflow": For a Distribution Date and a
Pool of Mortgage Loans, the Net Monthly Excess Cashflow with respect to such
Pool remaining, if any, after payment of (i) any Net Mortgage Loan Interest
Shortfall Amounts for such Pool and such Distribution Date, and (ii) the
Shortfall Amount with respect to the other Pool of Mortgage Loans.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REO Disposition": The final sale by the Servicer of a
Mortgaged Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
"REO Mortgage Loan": Any Mortgage Loan which is not a
Liquidated Mortgage Loan and as to which the indebtedness evidenced by the
related Mortgage Note is discharged and the related Mortgaged Property is held
as part of the Trust.
"REO Proceeds": Proceeds received in respect of any REO
Mortgage Loan (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"REO Property": A Mortgaged Property acquired by the Servicer
in the name of the Indenture Trustee on behalf of the Noteholders through
foreclosure or deed-in-lieu of foreclosure.
"Request for Release": A request for release in substantially
the form attached as Exhibit F of the Sale and Servicing Agreement.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Indenture Trustee determines to
be either (i) the arithmetic mean (rounded upwards if necessary to the nearest
whole multiple of 1/16%) of the one-month U.S. dollar lending rates which three
New York City banks selected by the Indenture Trustee are quoting on the
relevant Interest Determination Date to the principal London offices of leading
banks in the London interbank market or (ii) in the event that the Indenture
Trustee can determine no such arithmetic mean, the lowest one-month U.S. dollar
lending rate which three New York City banks selected by the Indenture Trustee
are quoting on such Interest Determination Date to leading European banks.
"Reserve Payment Amount": With respect to any Distribution
Date and any Class of Notes, the amount necessary for the funds on deposit in
the related Cross-collateralization Reserve Account to equal the Specified
Reserve Amount.
"Residential Dwelling": A one- to four-family dwelling, a unit
in a planned unit development, a unit in a condominium development or a
townhouse.
"Responsible Officer": When used with respect to the Indenture
Trustee or the Owner Trustee, any officer assigned to the Corporate Trust
Division (or any successor thereto), including any Vice President, Second Vice
President, Senior Trust Officer, Trust Officer, Assistant Trust Officer, any
32
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Assistant Secretary, any trust officer or any other officer of the Indenture
Trustee or the Owner Trustee customarily performing functions similar to those
performed by any of the above designated officers and to whom, with respect to a
particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject. When used with respect to the
Unaffiliated Seller or the Servicer, the president or any vice president,
assistant vice president, or any secretary or assistant secretary.
"Rolling Six Month Delinquency Rate": For any Distribution
Date, the fraction, expressed as a percentage, equal to the average of the
Delinquency Ratio for each of the six (1, 2, 3, 4 or 5 in the case of the first
six (6) Distribution Dates, as the case may be) immediately preceding Due
Periods.
"Sale": The meaning specified in Section 5.17 of the
Indenture.
"Sale and Servicing Agreement": The Sale and Servicing
Agreement, dated as of June 1, 1999, among the Trust, the Servicer, the
Depositor, the Collateral Agent and the Indenture Trustee, providing for, among
other things, the sale of the Mortgage Loans from the Depositor to the Trust and
the servicing of the Mortgage Loans.
"Securities Act": Means the Securities Act of 1933, as
amended.
"Servicer": American Business Credit, Inc., a Pennsylvania
corporation, or any successor appointed as herein provided.
"Servicer Distribution Date": With respect to any Distribution
Date, the 10th day of the month in which such Distribution Date occurs, or if
such 10th day is not a Business Day, the Business Day preceding such 10th day.
"Servicer Event of Default": As defined in Section 7.01 of the
Sale and Servicing Agreement.
"Servicer Extension Notice": Has the meaning set forth in
Section 8.04 of the Sale and Servicing Agreement.
"Servicer Remittance Amount": With respect to any Servicer
Distribution Date, an amount equal to the sum of (i) all collections of
principal and interest on the Mortgage Loans (including Principal Prepayments,
Net REO Proceeds and Net Liquidation Proceeds, if any) collected by the Servicer
during the related Due Period, (ii) all Periodic Advances made by the Servicer
with respect to interest payments due to be received on the Mortgage Loans on
the related Due Date and (iii) any other amounts required to be placed in the
Collection Account by the Servicer pursuant to the Sale and Servicing Agreement
but excluding the following:
(a) amounts received on particular Mortgage Loans as late
payments of interest and respecting which the Servicer has previously
made an unreimbursed Periodic Advance;
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(b) amounts received on a particular Mortgage Loan with
respect to which the Servicer has previously made an unreimbursed
Servicing Advance, to the extent of such unreimbursed Servicing
Advance;
(c) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;
(d) that portion of Liquidation Proceeds and REO Proceeds to
the extent of any unpaid Servicing Fee;
(e) all income from Permitted Investments that is held in the
Collection Account for the account of the Servicer;
(f) all amounts in respect of late fees, assumption fees,
prepayment fees and similar fees;
(g) certain other amounts which are reimbursable to the
Servicer, as provided in this Sale and Servicing Agreement; and
(h) Net Foreclosure Profits.
"Servicer Remittance Report": The monthly report prepared by
the Servicer and delivered to the parties specified in Section 5.16(a) of the
Sale and Servicing Agreement.
"Servicing Advances": All reasonable and customary
"out-of-pocket" costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (d) compliance with the
obligations under Section 5.06 of the Sale and Servicing Agreement, all of which
reasonable and customary out-of-pocket costs and expenses are reimbursable to
the Servicer to the extent provided in Sections 5.03 and 5.06 of the Sale and
Servicing Agreement.
"Servicing Compensation": The Servicing Fee and other amounts
to which the Servicer is entitled pursuant to Section 5.08 of the Sale and
Servicing Agreement.
"Servicing Fee": As to each Mortgage Loan, the annual fee
payable to the Servicer, which is calculated as an amount equal to the product
of (a) Servicing Fee Rate, and (b) the Principal Balance thereof. Such fee shall
be calculated and payable monthly only from the amounts received in respect of
interest on such Mortgage Loan and shall be computed on the basis of the same
Principal Balance and for the period respecting which any related interest
payment on a Mortgage Loan is computed. The Servicing Fee includes any servicing
fees owed or payable to any Subservicer.
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"Servicing Fee Rate": 0.50% per annum
"Servicing Officer": Any officer of the Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Indenture Trustee, the Collateral Agent and the Note Insurer by the
Servicer, as such list may from time to time be amended.
"Shortfall Amount": With respect to any Distribution Date and
any Class of Notes, an amount, not less than zero, equal to the excess, if any,
of (A) the sum of (i) the Interest Distribution Amount for such Pool and such
Distribution Date, (ii) the Indenture Trustee Fee allocable to such Pool and
such Distribution Date, (iii) the sum of the amount of all Reimbursement Amounts
relating to such Class of Notes which have not been previously paid as of such
Distribution Date and any other amounts relating to such Class then due to the
Note Insurer pursuant to the Insurance Agreement, and (iv) the amount specified
in clause (b)(vii) of the definition of the Principal Distribution Amount for
such Class over (B) the Available Funds for such Class and such Distribution
Date, without taking into effect any Insured Payment or Shortfall Amount and
prior to the application of the amounts described in Section 8.02 of the
Indenture.
"Special Advance": As defined in Section 5.18(b) of the Sale
and Servicing Agreement.
"Specified Over-collateralized Amount": Means with respect to
any Distribution Date and any Pool:
(a) With respect to a Distribution Date occurring on or prior
to the Stepdown Date and after the Stepdown Date, if the Unaffiliated
Seller has given five days written notice of its election not to "step
down" as described in clause (b) below to the Indenture Trustee and the
Note Insurer, the amount which is equal to 5.00% of the Maximum
Collateral Amount for such Pool;
(b) With respect to a Distribution Date after the Stepdown
Date unless the Unaffiliated Seller has given five (5) days written
notice of its election not to "step down" as described in this clause
to the Indenture Trustee and the Note Insurer, (i) if the Stepdown
Requirement is satisfied, the lesser of (x) the amount equal to 5.00%
of the Maximum Collateral Amount for such Pool and (y) the greater of
(A) the amount equal to 10.00% of the then outstanding aggregate
Principal Balance of the Mortgage Loans in the related Pool of Mortgage
Loans or (B) 0.50% of the Maximum Collateral Amount for such Pool or
(ii) if the Stepdown Requirement is not satisfied, the amount which is
equal to 5.00% of the Maximum Collateral Amount for such Pool;
provided, however, that if on any Distribution Date, the Mortgage Portfolio
Performance Test is not satisfied, then the Specified Over-collateralized Amount
will be unlimited during the period that such Mortgage Portfolio Performance
Test is not satisfied.
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<PAGE>
"Specified Reserve Amount": Means, with respect to any Pool
and any Distribution Date, the excess, if any, of (x) the Specified
Over-collateralized Amount for such Pool and such Distribution Date, over (y)
the Over-collateralized Amount for such Pool and such Distribution Date.
"Standard & Poor's" or "S&P": Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto
and if such corporation no longer for any reason performs the services of a
securities rating agency, "S&P" shall be deemed to refer to any other nationally
recognized statistical rating organization designated by the Note Insurer.
"Startup Day": The day designated as such pursuant to Section
2.07(a) of the Trust Agreement.
"Step Down Date": The Distribution Date occurring in December
2001.
"Step Down Requirement": The Stepdown Requirement is satisfied
for any date of determination thereof if as of such date of determination either
(i) (x) the Rolling Six Month Delinquency Rate is less than 9.75%, (y) the
Cumulative Loss Test is satisfied and (z) the Twelve Month Loss Amount is not
greater than or equal to 0.75% of the Pool Principal Balance as of the first day
of the twelfth preceding calendar month or (ii) the Note Insurer, by notice to
each of the parties hereto in accordance with Section 10.06 of the Sale and
Servicing Agreement, expressly waives in writing compliance with the foregoing
tests for such Distribution Date.
"Subsequent Cut-Off Date": With respect to any Subsequent
Mortgage Loans, the close of business on the last day of the calendar month
preceding the month in which the Subsequent Transfer Date for such Subsequent
Mortgage Loans occurred.
"Subsequent Contribution Agreement": Any Subsequent
Contribution Agreement, between the Depositor and the Trust, in the form of
Exhibit G to the Sale and Servicing Agreement, relating to the contribution to
the Trust of Subsequent Mortgage Loans.
"Subsequent Mortgage Loans": The Mortgage Loans hereafter
purchased by the Trust and pledged to the Indenture Trustee with funds on
deposit in either Pre-Funding Account pursuant to Section 2.14 of the Indenture.
"Subsequent Pledge Agreement": Any Subsequent Pledge
Agreement, between the Trust and the Indenture Trustee, in the form of Exhibit B
to the Indenture, relating to the pledge to the Indenture Trustee, on behalf of
the Noteholders and the Note Insurer, of Subsequent Mortgage Loans.
"Subsequent Transfer": The purchase by the Trust and pledge to
the Indenture Trustee of the Subsequent Mortgage Loans.
"Subsequent Transfer Agreement": Any Subsequent Transfer
Agreement, among the Originators, the Unaffiliated Seller and the Depositor, in
the form of the Exhibit A to the Unaffiliated Seller's Agreement, relating to
the transfer to the Depositor of any Subsequent Mortgage Loans.
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"Subsequent Transfer Date": The date on which Subsequent
Mortgage Loans are purchased by the Trust with funds in either Pre-Funding
Account, such date occurring before the end of either Pre-Funding Period.
"Subservicers": HomeAmerican Credit, Inc., d/b/a Upland
Mortgage, a Pennsylvania corporation, or its successor in interest and New
Jersey Mortgage and Investment Corp., a New Jersey corporation, or its successor
in interest.
"Subservicing Agreement": The agreement between the Servicer
and the Subservicers relating to subservicing and/or administration of certain
Mortgage Loans as provided in Section 5.13 of the Sale and Servicing Agreement,
a copy of which shall be delivered, along with any modifications thereto, to the
Indenture Trustee and the Note Insurer.
"Substitution Adjustment": As to any date on which a
substitution occurs pursuant to Sections 2.06(b) or 4.02(b) of the Sale and
Servicing Agreement, the amount (if any) by which the aggregate principal
balances (after application of principal payments received on or before the date
of substitution) of any Qualified Substitute Mortgage Loans as of the date of
substitution, are less than the aggregate of the Principal Balances of the
related Deleted Mortgage Loans together with 30-days' interest thereon at the
Mortgage Interest Rate.
"Telerate Page 3750": The display designated as Telerate Page
3750 on the Telerate Service (or such other page as may replace the Telerate
page on that service for the purpose of displaying London interbank offered
rates of major banks).
"Termination Price": The sum of (i) 100% of the Aggregate
Principal Balance of each outstanding Mortgage Loan and (ii) the greater of (A)
the aggregate amount of accrued and unpaid interest on the Mortgage Loans
through the related Due Period and (B) thirty (30) days' interest thereon,
computed at a rate equal to the related Mortgage Interest Rate, in each case net
of the Servicing Fee, and (iii) any unpaid amount due the Note Insurer.
"Trust": ABFS Mortgage Loan Trust 1999-2, a Delaware statutory
business trust.
"Trust Agreement": The Trust Agreement, dated as of June 1,
1999, among the Unaffiliated Seller, the Depositor and the Owner Trustee,
relating to the establishment of the Trust.
"Trust Certificate": Any one of the Pool I Trust Certificates
or the Pool II Trust Certificates.
"Trust Certificateholder" or "Holder": A Person in whose name
a Trust Certificate is registered.
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"Trust Estate": All money, instruments and other property
subject or intended to be subject to the lien of the Indenture, for the benefit
of the Noteholders and the Note Insurer, as of any particular time, including,
without limitation, all property and interests, including all proceeds thereof,
Granted to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, pursuant to the Granting Clauses of the Indenture. The Trust
Estate shall consist of two separate sub-trusts comprised of Pool I and Pool II.
"Trust Indenture Act" or "TIA": The Trust Indenture Act of
1939, as it may be amended from time to time.
"Trust Order" and "Trust Request": A written order or request
of the Trust signed on behalf of the Trust by an Authorized Officer of the Owner
Trustee, at the direction of the related Majority Certificateholders and
delivered to the Indenture Trustee or the Authenticating Agent, as applicable.
"Twelve Month Loss Amount": With respect to any Distribution
Date, an amount equal to the aggregate of all Liquidated Loan Losses on the
Mortgage Loans which became Liquidated Mortgage Loans during the twelve (12)
preceding Due Periods.
"Unaffiliated Seller": ABFS 1999-2, Inc., a Delaware
corporation.
"Unaffiliated Seller's Agreement": The Unaffiliated Seller's
Agreement, dated as of June 1, 1999, among the Unaffiliated Seller, the
Originators and the Depositor relating to the sale of the Mortgage Loans from
the Originators to the Unaffiliated Seller and from the Unaffiliated Seller to
the Depositor.
"Underwriter": Prudential Securities Incorporated.
"Underwriting Guidelines": The underwriting guidelines of the
Originators as approved by the Note Insurer and the Depositor.
"United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States or a trust if a court within the United States can exercise
primary jurisdiction over its administration and at least one United States
fiduciary has the authority to control all substantial decisions of the trust.
38
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[See Schedule 1 to Unaffiliated Seller's Agreement.]
<PAGE>
EXHIBIT A
FORM OF NOTE
ABFS MORTGAGE LOAN TRUST 1999-2
CLASS A-[1][2] NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE NOTE IS A NON-RECOURSE OBLIGATION OF THE TRUST, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE NOTE INSURANCE POLICY
AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE TRUST IS NOT OTHERWISE
PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
-------------------------------------------
Note No.: CUSIP No.:
A-[1][2]-
Class A-1 Original Note Principal Balance: Percentage Interest:
$__________ 100%
Date of Indenture: First Distribution Date:
As of June 1, 1999 July 15, 1999
------------------------------------------
A-1
<PAGE>
ABFS MORTGAGE LOAN TRUST 1999-2
MORTGAGE BACKED NOTES, SERIES 1999-2, CLASS A-[1][2]
ABFS Mortgage Loan Trust 1999-2, a statutory business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Trust"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of $__________ (_________________________
Thousand Dollars) payable on each Distribution Date in an amount equal to the
result obtained by multiplying (x) the Percentage Interest of this Note set
forth on the cover page hereof, by (y) the aggregate amount, if any, payable
from the related Distribution Account in respect of principal on the Class
A-[1][2] Notes, pursuant to the Indenture, dated as of June 1, 1999, between the
Trust and The Chase Manhattan Bank, a New York banking corporation, as Indenture
Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid
Note Principal Balance of this Note shall be due and payable on the earlier of
(i) the Distribution Date occurring in September 2030 (this Note's "Final Stated
Maturity Date"), (ii) the Redemption Date, if any, applicable to this Notes
pursuant to Article X of the Indenture or (iii) the date on which an Event of
Default shall have occurred and be continuing, if the Notes have been declared
to be immediately due and payable in the manner provided in Section 5.02 of the
Indenture. Capitalized terms used but not defined herein are defined in Appendix
I to the Indenture.
Pursuant to the terms of the Indenture, payments will be made
on the 25th day of each month or, if such day is not a Business Day, on the
Business Day immediately following such 25th day (each a "Distribution Date"),
commencing on the first Distribution Date specified on the cover page hereof, to
the Person in whose name this Note is registered at the close of business on the
applicable Record Date, in an amount equal to the product of (a) the Percentage
Interest evidenced by this Note and (b) the sum of the amounts to be paid on the
Class A-[1][2] Notes with respect to such Distribution Date, all as more
specifically set forth in the Indenture.
Notwithstanding the foregoing, in the case of Definitive
Notes, upon written request at least five (5) days prior to the related Record
Date with appropriate instructions by the Holder of this Note (holding an
aggregate initial Note Principal Balance of at least $1,000,000), any payment of
principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States of
America designated by such Holder reasonably satisfactory to the Indenture
Trustee.
On each Distribution Date, Noteholders will be entitled to
receive interest payments in an aggregate amount equal to the Current Interest
for such Class for such Distribution Date, together with principal payments in
an aggregate amount equal to the Principal Distribution Amount for such Class
for such Distribution Date, plus, until the Over-collateralization Amount for
the related Pool and such Distribution Date is equal to the Specified
Over-collateralization Amount for such Pool and such Distribution Date, the Net
Monthly Excess Cashflow, if any, for such Pool and such Distribution Date. The
"Note Principal Balance" of a Note as of any date of determination is equal to
the initial Note Principal Balance thereof as of the Closing Date, reduced by
the aggregate of all amounts previously paid with respect to such Note on
account of principal.
A-2
<PAGE>
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. All payments made by the
Trust with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note.
This Note is one of a duly authorized issue of Notes of the
Trust, designated as the "ABFS Mortgage Loan Trust 1999-2, Mortgage Backed
Notes, Series 1999-2, Class A-[1][2]," issued under the Indenture, to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Trust, the
Indenture Trustee and the Holders of the Notes. Also issued under the Indenture
are the "ABFS Mortgage Loan Trust 1999-2, Mortgage Backed Notes, Series 1999-2,
Class A[1][2]." To the extent that any provision of this Note contradicts or is
inconsistent with the provisions of the Indenture, the provisions of the
Indenture shall control and supersede such contradictory or inconsistent
provision herein. The Notes are subject to all terms of the Indenture.
The Class A-[1][2] Notes are and will be equally and ratably
secured by the Mortgage Loans in the Pool [I][II], the other collateral related
thereto pledged as security therefor as provided in the Indenture, and, to the
extent provided in the Indenture, by the Mortgage Loans in Pool [I][II].
As described above, the entire unpaid Note Principal Balance
of this Note shall be due and payable on the earlier of the Final Stated
Maturity Date and any Redemption Date applicable to such Class, pursuant to
Article X of the Indenture. Notwithstanding the foregoing, the entire unpaid
Note Principal Balance of the Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing if the Indenture
Trustee, at the direction or upon the prior written consent of Financial
Security Assurance Inc. (the "Note Insurer") in the absence of a Note Insurer
Default, or the Holders of the Notes representing not less than 50% of the Note
Principal Balance of the Outstanding Notes (with the prior written consent of
the Note Insurer in the absence of a Note Insurer Default) of both Classes,
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.02 of the Indenture. All principal payments on the Notes
shall be made pro rata to the Noteholders entitled thereto.
The Note Insurer, in consideration of the payment of the
premium and subject to the terms of the Note Guaranty Insurance Policy (the
"Note Insurance Policy") thereby has unconditionally and irrevocably guaranteed
the payment of the Insured Payments.
Pursuant to the Indenture, unless a Note Insurer Default
exists (i) the Note Insurer shall be deemed to be the holder of the Notes for
certain purposes specified in the Indenture and will be entitled to exercise all
rights of the Noteholders thereunder, including the rights of Noteholders
relating to the occurrence of, and the remedies with respect to, an Event of
Default, without the consent of such Noteholders, and (ii) the Indenture Trustee
may take actions which would otherwise be at its option or within its
discretion, including actions relating to the occurrence of, and the remedies
with respect to, an Event of Default, only at the direction of the Note Insurer.
In addition, on each Distribution Date, after the Noteholders have been paid all
A-3
<PAGE>
amounts to which they are entitled, the Note Insurer will be entitled to be
reimbursed for any unreimbursed Insured Payments, unreimbursed Premium Amounts
(each with interest thereon at the "Late Payment Rate" specified in the
Insurance Agreement) and any other amounts owed under the Note Insurance Policy.
The Trust shall not be liable upon the indebtedness evidenced
by the Notes except to the extent of amounts available from the Trust Estate
which constitutes security for the payment of the Notes. The assets included in
the Trust Estate and payments under the Note Insurance Policy will be sole
source of payments on the Notes, and each Holder hereof, by its acceptance of
this Note, agrees that (i) such Note will be limited in right of payment to
amounts available from the Trust Estate and the Note Insurance Policy as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Trust, the Owner Trustee, the Indenture Trustee, the Depositor, the Seller, the
Servicer or any of their respective affiliates, or to the assets of any of the
foregoing entities, except the assets of the Trust pledged to secure the Notes
pursuant to the Indenture.
Payments of interest on this Note due and payable on each
Distribution Date, together with the installment of principal, if any, to the
extent not in full payment of this Note, shall be made by check mailed to the
Person whose name appears as the Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Notes registered on the Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Notwithstanding the foregoing, in the case of
Definitive Notes, upon written request at least five days prior to the related
Record Date with appropriate instructions by the Holder of this Note (holding an
aggregate initial Note Principal Balance of at least $1,000,000), any payment of
principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States of
America designated by such Holder reasonably satisfactory to the Indenture
Trustee. Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Distribution Date shall
be binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Trustee, in the name of and
on behalf of the Trust, will notify the Person who was the Holder hereof as of
the Record Date preceding such Distribution Date by notice mailed or transmitted
by facsimile prior to such Distribution Date, and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's principal Corporate Trust Office or at the office of the
Indenture Trustee's agent appointed for such purposes.
As provided in the Indenture, the Indenture may be terminated
and the Notes redeemed in whole, but not in part, at the option of the Servicer,
on any Distribution Date on and after the date on which the Aggregate Principal
Balance of all of the Mortgage Loans is less than 10% of the Maximum Collateral
Amount for Pool I and Pool II. As provided in the Indenture, either Class of
A-4
<PAGE>
Notes may be redeemed in whole, but not in part, at the option of the Servicer,
on any Distribution Date on and after the date on which the unpaid Note
Principal Balance of such Class of Notes is less than or equal to 10% of the
Original Note Principal Balance for such Class of Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be registered on
the Note Register upon surrender of this Note for registration of transfer at
the office or agency designated by the Trust pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, which requirements include membership or participation in
the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes
of authorized denominations and in the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.
In the case of a transfer of a Class A-[1][2] Note, the Note
Registrar shall not register the transfer of this Note unless the Note Registrar
has received a representation letter from the transferee to the effect that
either (i) the transferee is not, and is not acquiring the Note on behalf of or
with the assets of, an employee benefit plan or other retirement plan or
arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of this Note by the transferee qualifies for exemptive
relief under a Department of Labor Prohibited Transaction Class Exemption. Each
Beneficial Owner, by acceptance of a beneficial interest herein, shall be deemed
to make one of the foregoing representations.
Each Noteholder or Beneficial Owner, by acceptance of a Note
or, in the case of a Beneficial Owner, a beneficial interest in a Note,
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Trust, the Owner Trustee or the Indenture
Trustee on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Trust or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Trust, the Owner
Trustee or the Indenture Trustee or of any successor or assign of the Indenture
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
A-5
<PAGE>
Each Noteholder or Beneficial Owner, by acceptance of a Note
or, in the case of a Beneficial Owner, a beneficial interest in a Note,
covenants and agrees by accepting the benefits of the Indenture that such
Noteholder or Beneficial Owner will not at any time institute against American
Business Financial Services, Inc. or the Trust, or join in any institution
against American Business Financial Services, Inc. or the Trust of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under any United States federal or state bankruptcy or similar law in connection
with any obligations relating to the Notes, the Indenture, the Trust Agreement,
the Unaffiliated Seller's Agreement, the Sale and Servicing Agreement, the
Insurance Agreement and the Indemnification Agreement (the "Basic Documents").
The Trust has entered into the Indenture and this Note is
issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Notes will qualify as indebtedness of
the Trust secured by the Trust Estate. Each Noteholder, by acceptance of a Note
(and each Beneficial Owner by acceptance of a beneficial interest in a Note),
agrees to treat the Notes for federal, state and local income, single business
and franchise tax purposes as indebtedness of the Trust.
Prior to the due presentment for registration of transfer of
this Note, the Trust, the Indenture Trustee and any agent of the Trust or the
Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Trust, the Indenture Trustee or any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Trust and the rights of the Holders of the Notes under the
Indenture at any time by the Trust with the consent of the Note Insurer and the
Holders of Notes representing a majority of the Note Principal Balance of all
Outstanding Notes. The Indenture also contains provisions permitting the (i)
Note Insurer or (ii) if a Note Insurer Default exists, the Holders of Notes
representing specified percentages of the Note Principal Balance of Outstanding
Notes, on behalf of the Holders of all the Notes, to waive compliance by the
Trust with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Note
Insurer or by the Holder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Holder and upon all future Holders of
this Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Note. The Indenture also permits the amendment thereof,
in certain limited circumstances, or the waiver of certain terms and conditions
set forth in the Indenture, without the consent of Holders of the Notes issued
thereunder.
The term "Trust" as used in this Note includes any successor
to the Trust under the Indenture.
Initially, each Class of Notes will be represented by one Note
registered in the name of Cede & Co. as nominees of the Clearing Agency. The
Notes will be delivered in denominations as provided in the Indenture and
subject to certain limitations therein set forth. The Notes are exchangeable for
a like aggregate initial Note Principal Balance of Notes of different authorized
denominations, as requested by the Holder surrendering the same.
A-6
<PAGE>
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 Trust,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place and rate, and in the coin or currency herein
prescribed.
Unless the certificate of authentication hereon has been
executed by the Authenticating Agent whose name appears below by manual
signature, this Note shall not be entitled to any benefit under the Indenture
referred to herein, or be valid or obligatory for any purpose.
A-7
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Dated:
ABFS MORTGAGE LOAN TRUST 1999-2
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:
--------------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Class A-[1][2] Notes designated above and
referred to in the within-mentioned Indenture.
Dated:
THE CHASE MANHATTAN BANK,
as Authenticating Agent
By:
-------------------------------------
Authorized Signatory
A-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints
--------------------------------------------------------, attorney,
to transfer said Note on the books kept for registration thereof, with full
power of substitution in the premises.
Dated: */
-----------------------------------------------
Signature Guaranteed:
*/
- -----------------------------------------------------
*/ NOTICE: The signature to this assignment must correspond
with the name of the registered owner as it appears on the face of the within
Note in every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
A-9
<PAGE>
EXHIBIT B
FORM OF SUBSEQUENT PLEDGE AGREEMENT
This SUBSEQUENT PLEDGE AGREEMENT, dated as of _____________, 1999 (the
"Subsequent Transfer Date"), is entered into by and between ABFS MORTGAGE LOAN
TRUST 1999-2, as issuer (the "Trust"), and THE CHASE MANHATTAN BANK, as
indenture trustee (the "Indenture Trustee").
W I T N E S S E T H:
Reference is hereby made to that certain Indenture, dated as of June 1,
1999 (the "Indenture"), by and between the Trust and the Indenture Trustee.
Pursuant to the Indenture, the Trust agreed to pledge, and the Indenture Trustee
agreed to accept, from time to time, a security interest in Subsequent Mortgage
Loans (as defined below). The Indenture provides that each such pledge of
Subsequent Mortgage Loans be evidenced by the execution and delivery of a
Subsequent Pledge Agreement such as this Subsequent Pledge Agreement.
The assets pledged to the Indenture Trustee pursuant to this Subsequent
Pledge Agreement consist of (a) the Subsequent Mortgage Loans in Pool I and Pool
II listed in the Mortgage Loan Schedule attached hereto (including property that
secures a Subsequent Mortgage Loan that becomes an REO Property), including the
related Mortgage Files delivered or to be delivered to the Collateral Agent, on
behalf of the Indenture Trustee, including all payments of principal received,
collected or otherwise recovered after the Subsequent Cut-Off Date for each
Subsequent Mortgage Loan, all payments of interest accruing on each Subsequent
Mortgage Loan after the Subsequent Cut-Off Date therefor whenever received and
all other proceeds received in respect of such Subsequent Mortgage Loans, (b)
the Insurance Policies relating to the Subsequent Mortgage Loans, and (c) 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.
The "Subsequent Mortgage Loans" are those listed on the Schedule of
Mortgage Loans attached hereto. The Aggregate Principal Balance of such
subsequent Mortgage Loans as of the Subsequent Cut-Off Date is $__________ in
Pool I and $_________ in Pool II.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Subsequent
Pledge Agreement, capitalized terms used herein but not otherwise defined shall
have the respective meanings assigned to such terms in Appendix I to the
Indenture.
Section 2. Pledge. In consideration of the receipt of
$__________ (such amount being approximately 100% of the Aggregate Principal
Balance of the Subsequent Mortgage Loans) from the Indenture Trustee, the Trust
hereby pledges to the Indenture Trustee, for the benefit of the Noteholders and
the Note Insurer, without recourse, all of the Trust's right, title and interest
in, to, and under the Subsequent Mortgage Loans and related assets described
above, whether now existing or hereafter arising.
B-1
<PAGE>
In connection with such pledge, the Originators and the
Unaffiliated Seller shall satisfy the document delivery requirements set forth
in Section 2.05 of the Sale and Servicing Agreement with respect to each
Subsequent Mortgage Loan.
In connection with such pledge, the Servicer shall make a
Special Advance of $________ as set forth in Section 5.18(b) of the Sale and
Servicing Agreement.
Section 3. Representations and Warranties Concerning the
Subsequent Mortgage Loans. With respect to each Subsequent Mortgage Loan, the
Trust hereby assigns each of the representations and warranties made by the
Originators and the Unaffiliated Seller in Section 3 of the Subsequent Transfer
Agreement, for the benefit of the Indenture Trustee, the Note Insurer and the
Noteholders, on which the Indenture Trustee relies in accepting the pledge of
the Subsequent Mortgage Loans and the Note Insurer relies in connection with the
Note Insurance Policy. Such representations and warranties speak as of the
Subsequent Transfer Date unless otherwise indicated, and shall survive each
pledge, assignment, transfer and conveyance of the respective Subsequent
Mortgage Loans to the Indenture Trustee, for the benefit of the Noteholders and
the Note Insurer.
Section 4. Repurchase of Subsequent Mortgage Loans. Upon
discovery by any of the Depositor, the Unaffiliated Seller, an Originator, the
Indenture Trustee, the Servicer (on behalf of the Trust), the Note Insurer or
any Noteholder of a breach of any of the representations and warranties made by
the Originators and the Unaffiliated Seller pursuant to Section 3.03 of the
Unaffiliated Seller's Agreement or Section 3 of any Subsequent Transfer
Agreement, the party discovering such breach shall give prompt written notice to
such other Person; provided, that the Indenture Trustee shall have no duty to
inquire or to investigate the breach of any such representations and warranties.
The Originators and the Unaffiliated Seller will be obligated to repurchase a
Subsequent Mortgage Loan which breaches a representation or warranty in
accordance with the provisions of Section 4.02 of the Sale and Servicing
Agreement or to indemnify as described in Section 3.05(g) of the Unaffiliated
Seller's Agreement. Such repurchase and indemnification obligation of the
Originators and the Unaffiliated Seller shall constitute the sole remedy against
the Originators and the Unaffiliated Seller, and the Trust for such breach
available to the Servicer, the Trust, the Indenture Trustee, the Note Insurer
and the Noteholders.
Section 5. Amendment. This Subsequent Pledge Agreement may be
amended from time to time by the Trust and the Indenture Trustee only with the
prior written consent of the Note Insurer (or, in the event of a Note Insurer
Default, the Majority Holders).
Section 6. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS
SUBSEQUENT PLEDGE AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 5 SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSEQUENT PLEDGE
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM
THEREIN.
B-2
<PAGE>
Section 7. Counterparts. This Subsequent Pledge Agreement may
be executed in counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which shall constitute one and
the same instrument.
Section 8. Binding Effect; Third-Party Beneficiaries. This
Subsequent Pledge Agreement will inure to the benefit of and be binding upon the
parties hereto, the Note Insurer, the Noteholders, and their respective
successors and permitted assigns.
Section 9. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 10. Exhibits. The exhibits attached hereto and
referred to herein shall constitute a part of this Subsequent Pledge Agreement
and are incorporated into this Subsequent Pledge Agreement for all purposes.
[Remainder of Page Intentionally Left Blank]
B-3
<PAGE>
IN WITNESS WHEREOF, the Trust and the Indenture Trustee have caused
this Subsequent Pledge Agreement to be duly executed by their respective
officers as of the day and year first above written.
ABFS MORTGAGE LOAN TRUST
1999-2, as Issuer
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee
By:
------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By:
------------------------------------------
Name:
Title:
[Signature Page to Subsequent Pledge Agreement]
B-4
<PAGE>
EXHIBIT C
FORM OF NOTE INSURER CONSENT TO
SUBSEQUENT MORTGAGE LOANS
__________, 1999
The Chase Manhattan Bank,
as Indenture Trustee
450 W. 33rd Street
New York, New York 10001
Attention: Capital Markets Fiduciary Services
Re: ABFS Mortgage Loan Trust 1999-2;
Mortgage Backed Notes, Series 1999-2
------------------------------------
Ladies and Gentlemen:
Reference is made to the Indenture, dated as of June 1, 1999
(the "Indenture"), by and between ABFS Mortgage Loan Trust 1999-2, as issuer
(the "Trust"), and you, as indenture trustee (the "Indenture Trustee"). Pursuant
to Section 2.14(b)(viii) of the Indenture, the undersigned hereby approves and
consents to the acquisition of the Subsequent Mortgage Loans listed on Schedule
I attached hereto aggregating $____________ in Aggregate Principal Balance by
the Trust and the subsequent pledge of such Subsequent Mortgage Loans by the
Trust to the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer.
FINANCIAL SECURITY ASSURANCE INC.
By:
------------------------------------
Name:
Title:
C-1
<PAGE>
Exhibit 4.2
UNAFFILIATED SELLER'S AGREEMENT
dated as of June 1, 1999
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
ABFS 1999-2, INC.,
as Unaffiliated Seller
and
AMERICAN BUSINESS CREDIT, INC.,
HOMEAMERICAN CREDIT, INC., D/B/A UPLAND MORTGAGE, and
NEW JERSEY MORTGAGE AND INVESTMENT CORP.,
as Originators
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Article I DEFINITIONS 1
<S> <C>
Section 1.01 Definitions...........................................................................1
Article II PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS...............................................3
Section 2.01 Agreement to Purchase the Initial Mortgage Loans......................................3
Section 2.02 Agreement to Purchase the Subsequent Mortgage Loans...................................3
Section 2.03 Purchase Price........................................................................4
Section 2.04 Conveyance of Mortgage Loans; Possession of Mortgage Files............................4
Section 2.05 Delivery of Mortgage Loan Documents...................................................5
Section 2.06 Acceptance of Mortgage Loans..........................................................6
Section 2.07 Transfer of Mortgage Loans; Assignment of Agreement...................................7
Section 2.08 Examination of Mortgage Files.........................................................7
Section 2.09 Books and Records.....................................................................8
Section 2.10 Cost of Delivery and Recordation of Documents.........................................8
Article III REPRESENTATIONS AND WARRANTIES...............................................................8
Section 3.01 Representations and Warranties as to the Originators..................................8
Section 3.02 Representations and Warranties as to the Unaffiliated Seller.........................10
Section 3.03 Representations and Warranties Relating to the Mortgage Loans........................13
Section 3.04 Representations and Warranties of the Depositor......................................23
Section 3.05 Repurchase Obligation for Defective Documentation and for Breach of a
Representation or Warranty...........................................................24
Article IV THE UNAFFILIATED SELLER......................................................................27
Section 4.01 Covenants of the Originators and the Unaffiliated Seller.............................27
Section 4.02 Merger or Consolidation..............................................................27
Section 4.03 Costs................................................................................27
Section 4.04 Indemnification......................................................................28
Article V CONDITIONS OF CLOSING.........................................................................30
Section 5.01 Conditions of Depositor's Obligations................................................30
Section 5.02 Conditions of Unaffiliated Seller's Obligations......................................32
Section 5.03 Termination of Depositor's Obligations...............................................33
Article VI MISCELLANEOUS ...............................................................................34
Section 6.01 Notices..............................................................................34
Section 6.02 Severability of Provisions...........................................................34
Section 6.03 Agreement of Unaffiliated Seller.....................................................34
Section 6.04 Survival.............................................................................34
Section 6.05 Effect of Headings and Table of Contents.............................................34
Section 6.06 Successors and Assigns...............................................................34
Section 6.07 Confirmation of Intent; Grant of Security Interest...................................35
Section 6.08 Miscellaneous........................................................................35
Section 6.09 Amendments...........................................................................35
Section 6.10 Third-Party Beneficiaries............................................................36
Section 6.11 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.........................36
Section 6.12 Execution in Counterparts............................................................37
</TABLE>
SCHEDULES AND EXHIBITS
Schedule I - Mortgage Loan Schedule
Exhibit A - Form of Subsequent Transfer Agreement
<PAGE>
This UNAFFILIATED SELLER'S AGREEMENT, dated as of June 1, 1999
(this "Agreement"), by and among PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, a Delaware corporation, (the "Depositor"), ABFS 1999-2, INC., a
Delaware corporation (the "Unaffiliated Seller"), AMERICAN BUSINESS CREDIT,
INC., a Pennsylvania corporation ("ABC"), HOMEAMERICAN CREDIT, INC. D/B/A UPLAND
MORTGAGE, a Pennsylvania corporation ("Upland") and NEW JERSEY MORTGAGE AND
INVESTMENT CORP., a New Jersey corporation ("NJMIC", and together with ABC and
Upland, the "Originators").
W I T N E S S E T H:
WHEREAS, Schedule I attached hereto and made a part hereof
lists certain fixed rate business and consumer purpose first and second lien
mortgage loans (the "Mortgage Loans") owned by the Originators that the
Originators desire to sell to the Unaffiliated Seller, the Unaffiliated Seller
desires to sell to the Depositor and that the Depositor desires to purchase;
WHEREAS, it is the intention of the Originators, the
Unaffiliated Seller and the Depositor that simultaneously with the Originators'
conveyance of the Mortgage Loans to the Unaffiliated Seller and the Unaffiliated
Seller's conveyance of the Mortgage Loans to the Depositor on the Closing Date,
(a) the Depositor shall sell the Mortgage Loans to the ABFS Mortgage Loan Trust
1999-2, a Delaware statutory business trust (the "Trust") pursuant to a Sale and
Servicing Agreement to be dated as of June 1, 1999 (the "Sale and Servicing
Agreement"), to be entered into by and among the Depositor, as depositor, the
Trust, as issuer, ABC, as servicer (in such capacity, the "Servicer"), Chase
Bank of Texas, N.A., a national banking association, as collateral agent (the
"Collateral Agent"), and The Chase Manhattan Bank, a New York banking
corporation, as indenture trustee (the "Indenture Trustee"), and (b) the Trust
shall issue its Mortgage Backed Notes (the "Notes"), pursuant to an Indenture,
to be dated as of June 1, 1999 (the "Indenture"), by and between the Trust and
the Indenture Trustee, which Notes will be secured by a pledge of the assets of
the Trust.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
Article I
DEFINITIONS
Section 1.01 Definitions. (a) Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article I:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Prospectus" means the Prospectus dated June 23, 1999 relating
to the offering by the Depositor from time to time of its Mortgage Backed Notes
(Issuable in Series) in the form in which it was or will be filed with the
Commission pursuant to Rule 424(b) under the Securities Act with respect to the
offer and sale of the Notes.
<PAGE>
"Prospectus Supplement" means the Prospectus Supplement dated
June 25, 1999, relating to the offering of the Notes in the form in which it was
or will be filed with the Commission pursuant to Rule 424(b) under the
Securities Act with respect to the offer and sale of the Notes.
"Registration Statement" means that certain registration
statement on Form S-3, as amended (Registration No. 333-75489) relating to the
offering by the Depositor from time to time of its Mortgage Backed Notes
(Issuable in Series) as heretofore declared effective by the Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Event" means the existence of any one or more of
the following conditions:
(a) a stop order suspending the effectiveness of the
Registration Statement shall have been issued or a proceeding for that
purpose shall have been initiated or threatened by the Commission; or
(b) subsequent to the execution and delivery of this
Agreement, a downgrading, or public notification of a possible change,
without indication of direction, shall have occurred in the rating
afforded any of the debt securities or claims paying ability of any
person providing any form of credit enhancement for any of the Notes,
by any "nationally recognized statistical rating organization," as that
term is defined by the Commission for purposes of Rule 436(g)(2) under
the Securities Act; or
(c) subsequent to the execution and delivery of this
Agreement, there shall have occurred an adverse change in the
condition, financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Note Insurer or the Unaffiliated
Seller reasonably determined by the Depositor to be material; or
(d) subsequent to the date of this Agreement there shall have
occurred any of the following: (i) a suspension or material limitation
in trading in securities substantially similar to the Notes; (ii) a
general moratorium on commercial banking activities in the State of New
York declared by either Federal or New York State authorities; or (iii)
the engagement by the United States in hostilities, or the escalation
of such hostilities, or any calamity or crisis, if the effect of any
such event specified in this clause (iii) in the reasonable judgment of
the Depositor makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Notes on the terms and in the
manner contemplated in the Prospectus Supplement.
2
<PAGE>
(b) Capitalized terms used herein that are not otherwise defined shall
have the respective meanings ascribed thereto in Appendix I to the Indenture.
Article II
PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS
Section 2.01 Agreement to Purchase the Initial Mortgage Loans. (a)
Subject to the terms and conditions of this Agreement, the Originators agree to
sell, and the Unaffiliated Seller agrees to purchase on the Closing Date and
immediately subsequent thereto, the Unaffiliated Seller agrees to sell, and the
Depositor agrees to purchase, the Mortgage Loans having the Cut-Off Date
Aggregate Principal Balance or, in accordance with Section 2.08 hereof, such
other balance as is evidenced by the actual Cut-Off Date Aggregate Principal
Balance of the Mortgage Loans accepted by the Depositor on the Closing Date and
listed in the Mortgage Loan Schedule.
(b) Subject to Section 2.08 hereof, the Depositor and the Unaffiliated
Seller have agreed upon which of the Unaffiliated Seller's Mortgage Loans are to
be purchased by the Depositor on the Closing Date pursuant to this Agreement,
and the Unaffiliated Seller has prepared a schedule describing the Mortgage
Loans (the "Mortgage Loan Schedule") setting forth all of the Mortgage Loans to
be purchased under this Agreement, which Mortgage Loan Schedule is attached
hereto as Schedule I. The Mortgage Loan Schedule shall conform to the
requirements of the Depositor and to the definition of "Mortgage Loan Schedule"
in Appendix I to the Indenture.
(c) The closing for the purchase and sale of the Mortgage Loans shall
take place at the offices of Dewey Ballantine LLP, New York, New York, at 10:00
a.m., New York time, on the Closing Date, or such other place and time as the
parties shall agree.
Section 2.02 Agreement to Purchase the Subsequent Mortgage Loans.
Subject to the satisfaction of the conditions set forth in Section 2.14(b) of
the Indenture, (i) in consideration of the Unaffiliated Seller's delivery on the
related Subsequent Transfer Dates to or upon the order of the Originators of all
or a portion of the balance of funds on deposit in the Pre-Funding Accounts, the
Originators shall on any Subsequent Transfer Date sell, transfer, assign, set
over and convey to the Unaffiliated Seller, without recourse, but subject to the
terms and provisions of this Agreement, all of the right, title and interest of
the Originators in and to the Subsequent Mortgage Loans, including all principal
of, and all interest due on, such Subsequent Mortgage Loans, and all other
assets included or to be included in the Trust Estate and (ii) in consideration
of the Depositor's delivery on the related Subsequent Transfer Dates to or upon
the order of the Unaffiliated Seller of all or a portion of the balance of funds
on deposit in the Pre-Funding Accounts, the Unaffiliated Seller shall on any
Subsequent Transfer Date sell, transfer, assign, set over and convey to the
Depositor, without recourse, but subject to the terms and provisions of this
Agreement, all of the right, title and interest of the Unaffiliated Seller in
and to the Subsequent Mortgage Loans, including all principal of, and all
interest due on, such Subsequent Mortgage Loans, and all other assets included
or to be included in the Trust Estate.
The amount released from a Pre-Funding Account with respect to a
transfer of Subsequent Mortgage Loans to the related Pool shall be one-hundred
percent (100%) of the Aggregate Principal Balance of such Subsequent Mortgage
Loans so transferred, as of the related Subsequent Cut-Off Date.
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The obligation of the Depositor to purchase a Subsequent Mortgage Loan
on any Subsequent Transfer Date is subject to the satisfaction of the
requirements set forth in Section 2.14(b) of the Indenture.
Section 2.03 Purchase Price. (a) On the Closing Date, as consideration
for the Originators' sale of the Initial Mortgage Loans to the Unaffiliated
Seller, the Unaffiliated Seller will deliver to the Originators an amount in
cash equal to the sum of (A) 99.65%, and 99.65% of the Original Note Principal
Balance as of the Closing Date of the Class A-1 Notes and Class A-2 Notes,
respectively, plus (B) accrued interest on the Original Note Principal Balance
of the Class A-1 Notes at the rate of 7.130% per annum, from (and including)
June 1, 1999 to (but not including) June 29, 1999, minus (C) the Original
Pre-Funded Amount and the Original Capitalized Interest Amount for each Class of
Notes, payable by wire transfer of same day funds.
On the Closing Date, as full consideration for the Unaffiliated
Seller's sale of the Initial Mortgage Loans to the Depositor, the Depositor will
deliver to, or at the direction of, the Unaffiliated Seller (i) an amount in
cash equal to the sum of (A) 99.65 and 99.65% of the Original Note Principal
Balance as of the Closing Date of the Class A-1 Notes and Class A-2 Notes,
respectively, plus (B) accrued interest on the Original Note Principal Balance
of the Class A-1 Notes at the rate of 7.130% per annum, from (and including)
June 1, 1999 to (but not including) June 29, 1999, minus (C) the Original
Pre-Funded Amount and the Original Capitalized Interest Amount for each Class of
Notes, payable by wire transfer of same day funds, and (ii) the Trust
Certificates to be issued pursuant to the Trust Agreement.
(b) On each Subsequent Transfer Date, as full consideration for the
Originators' sale of the Subsequent Mortgage Loans to the Unaffiliated Seller
and the Unaffiliated Seller's sale of the Subsequent Mortgage Loans to the
Depositor, the Depositor will deliver to the Unaffiliated Seller and the
Unaffiliated Seller will deliver to the Originators an amount in cash equal to
the sum of 100% of the Aggregate Principal Balance of the Subsequent Mortgage
Loans of the related Pool as of the related Subsequent Cut-Off Date.
Section 2.04 Conveyance of Mortgage Loans; Possession of Mortgage
Files. (a) On the Closing Date and on each Subsequent Transfer Date, the
Originators shall sell, transfer, assign, set over and convey to the
Unaffiliated Seller, without recourse, but subject to the terms of this
Agreement, all right, title and interest in and to the applicable Mortgage
Loans, including all principal outstanding as of, and all interest due after,
the related Cut-Off Date, the Insurance Policies relating to each such Mortgage
Loan and all right, title and interest in and to the proceeds of such Insurance
Policies and all of its rights under this Agreement with respect to the Mortgage
Loans from and after the related Cut-Off Date or the Subsequent Cut-Off Date, as
applicable, and the Unaffiliated Seller shall sell, transfer, assign, set over
and convey to the Depositor, without recourse, but subject to the terms of this
Agreement, all right, title and interest in and to the applicable Mortgage
Loans, including all principal outstanding as of, and all interest due after,
the related Cut-Off Date, the Insurance Policies relating to each such Mortgage
Loan, all right, title and interest in and to the proceeds of such Insurance
Policies and all of its rights under this Agreement with respect to the Mortgage
Loans from and after the related Cut-Off Date or the Subsequent Cut-Off Date, as
applicable. Upon payment of the purchase price for such Mortgage Loans as
provided in Section 2.03 of this Agreement, the Originators and the Unaffiliated
Seller shall have hereby, and shall be deemed to have, sold, transferred,
assigned, set over and conveyed to the Depositor such Mortgage Loans, the
Insurance Policies relating to each such Mortgage Loan, all right, title and
interest in and to the proceeds of such Insurance Policies and all of its rights
under this Agreement with respect to the Mortgage Loans from and after the
related Cut-Off Date or the Subsequent Cut-Off Date, as applicable.
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(b) Upon the sale of such Mortgage Loans, the ownership of each related
Mortgage Note, each related Mortgage and the contents of the related Mortgage
File shall immediately vest in the Depositor and the ownership of all related
records and documents with respect to each Mortgage Loan prepared by or which
come into the possession of the Originators or the Unaffiliated Seller shall
immediately vest in the Depositor. The contents of any Indenture Trustee's
Mortgage File in the possession of the Originators or the Unaffiliated Seller at
any time after such sale, and any principal collected and interest due on the
Mortgage Loans after the related Cut-Off Date and received by the Originators or
the Unaffiliated Seller, shall be held in trust by the Originators or the
Unaffiliated Seller for the benefit of the Depositor as the owner thereof, and
shall be promptly delivered by the Originators or the Unaffiliated Seller to or
upon the order of the Depositor.
(c) Pursuant to the Sale and Servicing Agreement, the Depositor shall,
on the Closing Date, assign all of its right, title and interest in and to the
Initial Mortgage Loans to the Trust. Pursuant to the Indenture, the Trust shall,
on the Closing Date, pledge all of its right, title and interest in and to the
Initial Mortgage Loans to the Indenture Trustee, for the benefit of the
Noteholders and the Note Insurer.
Section 2.05 Delivery of Mortgage Loan Documents. (a) On or prior to
the Closing Date or Subsequent Transfer Date, as applicable, the related
Originator shall deliver to the Unaffiliated Seller, and the Unaffiliated Seller
shall deliver to the Collateral Agent, on behalf of the Indenture Trustee (as
pledgee of the Trust pursuant to the Indenture, the Trust being the assignee of
the Depositor pursuant to the Sale and Servicing Agreement), each of the
documents for each applicable Mortgage Loan in accordance with the provisions of
Section 2.05 of the Sale and Servicing Agreement.
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(b) As promptly as practicable, but in any event within thirty (30)
days from the Closing Date or the Subsequent Transfer Date, as applicable, the
Unaffiliated Seller shall promptly submit, or cause to be submitted by the
related Originator, for recording in the appropriate public office for real
property records, each assignment referred to in Section 2.05(a)(iv) of the Sale
and Servicing Agreement. The Collateral Agent, on behalf of the Indenture
Trustee, shall be required to retain a copy of each assignment submitted for
recording. In the event that any such assignment is lost or returned unrecorded
because of a defect therein, the Unaffiliated Seller or such Originator shall
promptly prepare a substitute assignment or cure such defect, as the case may
be, and thereafter the Unaffiliated Seller or such Originator shall submit each
such assignment for recording. (c) The Unaffiliated Seller or the related
Originator shall, within five (5) Business Days after the receipt thereof,
deliver or cause to be delivered to the Collateral Agent, on behalf of the
Indenture Trustee (as pledgee of the Trust pursuant to the Indenture, the Trust
being the assignee of the Depositor pursuant to the Sale and Servicing
Agreement): (i) the original recorded Mortgage and related power of attorney, if
any, in those instances where a copy thereof certified by the related Originator
was delivered to the Collateral Agent, on behalf of the Indenture Trustee,
pursuant to Section 2.05 of the Sale and Servicing Agreement; (ii) the original
recorded assignment of Mortgage from the related Originator to the Indenture
Trustee, which, together with any intervening assignments of Mortgage, evidences
a complete chain of assignment from the originator of the Mortgage Loan to the
Indenture Trustee in those instances where copies of such assignments certified
by the related Originator were delivered to the Collateral Agent, on behalf of
the Indenture Trustee, pursuant to Section 2.05 of the Sale and Servicing
Agreement; and (iii) the title insurance policy or title opinion required in
Section 2.05(a)(vi) of the Sale and Servicing Agreement.
Notwithstanding anything to the contrary contained in this Section
2.05, in those instances where the public recording office retains the original
Mortgage, power of attorney, if any, assignment or assignment of Mortgage after
it has been recorded or such original has been lost, the Unaffiliated Seller or
the related Originator shall be deemed to have satisfied its obligations
hereunder upon delivery to the Collateral Agent, on behalf of the Indenture
Trustee, of a copy of such Mortgage, power of attorney, if any, assignment or
assignment of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
From time to time the Unaffiliated Seller or the related Originator may
forward or cause to be forwarded to the Collateral Agent, on behalf of the
Indenture Trustee, additional original documents evidencing an assumption or
modification of a Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that are not
delivered to the Collateral Agent, on behalf of the Indenture Trustee, as
permitted by Section 2.05(a) hereof are and shall be held by the Servicer, the
Unaffiliated Seller or the related Originator in trust for the benefit of the
Indenture Trustee, on behalf of the Noteholders and the Note Insurer. In the
event that any such original document is required pursuant to the terms of this
Section 2.05 to be a part of an Indenture Trustee's Mortgage File, such document
shall be delivered promptly to the Collateral Agent, on behalf of the Indenture
Trustee. From and after the sale of the Mortgage Loans to the Depositor pursuant
hereto, to the extent that the Unaffiliated Seller or the related Originator
retains legal title of record to any Mortgage Loans prior to the vesting of
legal title in the Indenture Trustee, such title shall be retained in trust for
the Trust as the owner of the Mortgage Loans, as the Depositor's assignee, and
the Indenture Trustee, as the Trust's pledgee.
Section 2.06 Acceptance of Mortgage Loans. (a) To evidence the transfer
of the Mortgage Loans and related Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee, the Collateral Agent shall deliver the
acknowledgement of receipt, the Initial Certification and the Final
Certification required to be delivered pursuant to Section 2.06(b) of the Sale
and Servicing Agreement.
(b) The Sale and Servicing Agreement provides that, if the Collateral
Agent during the process of reviewing the Indenture Trustee's Mortgage Files,
finds any document constituting a part of a Indenture Trustee's Mortgage File
which is not executed, has not been received, is unrelated to the Mortgage Loan
identified in the Mortgage Loan Schedule, or does not conform to the
requirements of Section 2.05 of the Sale and Servicing Agreement or the
description thereof as set forth in the Mortgage Loan Schedule, the Collateral
Agent shall promptly so notify the Servicer, the Unaffiliated Seller, the
Indenture Trustee, the related Originator and the Note Insurer. The Unaffiliated
Seller and the Originators agrees that in performing any such review, the
Collateral Agent may conclusively rely on the Unaffiliated Seller and the
Originators as to the purported genuineness of any such document and any
signature thereon. Each of the Originators and the Unaffiliated Seller agrees to
use reasonable efforts to remedy a material defect in a document constituting
part of an Indenture Trustee's Mortgage File of which it is notified. If,
however, within sixty (60) days after such notice neither the Unaffiliated
Seller nor any Originator has remedied the defect and the defect materially and
adversely affects the interest of the Noteholders in the related Mortgage Loan
or the interests of the Note Insurer, then the Unaffiliated Seller and the
Originators shall be obligated to either substitute in lieu of such Mortgage
Loan a Qualified Substitute Mortgage Loan or purchase such Mortgage Loan in the
manner and subject to the conditions set forth in Section 3.05 hereof.
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(c) The failure of the Collateral Agent, the Indenture Trustee or the
Note Insurer to give any notice contemplated herein within the time periods
specified above shall not affect or relieve the Unaffiliated Seller's or the
Originators obligation to repurchase for any Mortgage Loan pursuant to this
Section 2.06 or Section 3.05 of this Agreement.
Section 2.07 Transfer of Mortgage Loans; Assignment of Agreement. The
Originators and the Unaffiliated Seller each hereby acknowledges and agrees that
the Depositor or the Trust may assign its interest under this Agreement to the
Indenture Trustee as may be required to effect the purposes of the Indenture and
the Sale and Servicing Agreement, without further notice to, or consent of, the
Unaffiliated Seller or the Originators, and the Indenture Trustee shall succeed
to such of the rights and obligations of the Depositor and the Trust hereunder
as shall be so assigned. The Depositor shall, pursuant to the Sale and Servicing
Agreement, assign all of its right, title and interest in and to the Mortgage
Loans and its right to exercise the remedies created by Sections 2.06 and 3.05
hereof for breaches of the representations, warranties, agreements and covenants
of the Unaffiliated Seller or the Originators contained in Sections 2.05, 2.06,
3.02 and 3.03 hereof to the Trust, and the Trust shall, pursuant to the
Indenture, pledge such right, title and interest to the Indenture Trustee, for
the benefit of the Noteholders and the Note Insurer. Each of the Originators and
the Unaffiliated Seller agrees that, upon such assignment to the Trust and
pledge to the Indenture Trustee, such representations, warranties, agreements
and covenants will run to and be for the benefit of the Indenture Trustee and
the Indenture Trustee may enforce, without joinder of the Depositor or the
Trust, the repurchase obligations of the Unaffiliated Seller and the Originators
set forth herein with respect to breaches of such representations, warranties,
agreements and covenants.
Section 2.08 Examination of Mortgage Files. Prior to the Closing Date
and each Subsequent Transfer Date, as applicable, the Unaffiliated Seller shall
make the Mortgage Files available to the Depositor or its designee for
examination at the Unaffiliated Seller's offices or at such other place as the
Unaffiliated Seller shall reasonably specify. Such examination may be made by
the Depositor or its designee at any time on or before the Closing Date or
Subsequent Transfer Date, as the case may be. If the Depositor or its designee
makes such examination prior to the Closing Date or Subsequent Transfer Date, as
the case may be, and identifies any Mortgage Loans that do not conform to the
requirements of the Depositor as described in this Agreement, such Mortgage
Loans shall be deleted from the Mortgage Loan Schedule and may be replaced,
prior to the Closing Date or Subsequent Transfer Date, as the case may be, by
substitute Mortgage Loans acceptable to the Depositor. The Depositor may, at its
option and without notice to the Unaffiliated Seller, purchase all or part of
the Mortgage Loans without conducting any partial or complete examination. The
fact that the Depositor, the Collateral Agent or the Indenture Trustee has
conducted or has failed to conduct any partial or complete examination of the
Mortgage Files shall not affect the rights of the Depositor or the Indenture
Trustee to demand repurchase or other relief as provided in this Agreement.
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Section 2.09 Books and Records. The transfer of each Mortgage Loan
shall be reflected on each of the Originators' and the Unaffiliated Seller's
accounting and other records, balance sheet and other financial statements as a
sale of assets by the Originators to the Unaffiliated Seller, by the
Unaffiliated Seller to the Depositor and by the Depositor to the Trust;
provided, that the Unaffiliated Seller's tax returns shall not reflect the
transfer from the Unaffiliated Seller to the Depositor and from the Depositor to
the Trust as a sale of the Mortgage Loans. Each of the Originators and the
Unaffiliated Seller shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Mortgage Loan which shall be clearly
marked to reflect the ownership of each Mortgage Loan by the Trust, and the
pledge of each Mortgage Loan by the Trust to the Indenture Trustee, for the
benefit of the Noteholders and the Note Insurer.
Section 2.10 Cost of Delivery and Recordation of Documents. The costs
relating to the delivery and recordation of the documents in connection with the
Mortgage Loans as specified in this Article II and in Article II of the Sale and
Servicing Agreement shall be borne by the Unaffiliated Seller or the
Originators.
Article III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties as to the Originators. Each
of the Originators hereby represents and warrants to the Unaffiliated Seller and
the Depositor, as of the Closing Date, that:
(a) The Originator is a corporation duly organized, validly
existing and in good standing under the laws of (i) with respect to ABC
and Upland, the State of Pennsylvania, or (ii) with respect to NJMIC,
the State of New Jersey, and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified and in good
standing in each state where a Mortgaged Property is located if the
laws of such state require licensing or qualification in order to
conduct business of the type conducted by the Originator and to perform
its obligations as the Originator hereunder, and in any event the
Originator is in compliance with the laws of any such state to the
extent necessary to ensure the enforceability of the related Mortgage
Loan; the Originator has the full power and authority, corporate and
otherwise, to execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance of this
Agreement (including all instruments of transfer to be delivered
pursuant to this Agreement) by the Originator and the consummation of
the transactions contemplated hereby have been duly and validly
authorized; this Agreement evidences the valid, binding and enforceable
obligation of the Originator; and all requisite corporate action has
been taken by the Originator to make this Agreement valid and binding
upon the Originator in accordance with its terms;
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(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Originator of, or compliance by the Originator
with, this Agreement or the sale of the Mortgage Loans pursuant to the
terms of this Agreement or the consummation of the transactions
contemplated by this Agreement, or if required, such approval has been
obtained prior to the Closing Date;
(c) Neither the execution and delivery of this Agreement, the
acquisition nor origination of the Mortgage Loans by the Originator or
the transactions contemplated hereby, nor the fulfillment of or
compliance with the terms and conditions of this Agreement, has or will
conflict with or result in a breach of any of the terms, conditions or
provisions of the Originator's charter or by-laws or any legal
restriction or any agreement or instrument to which the Originator is
now a party or by which it is bound or to which its property is
subject, or constitute a default or result in an acceleration under any
of the foregoing, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Originator or its
property is subject, or impair the ability of the Indenture Trustee (or
the Servicer as the agent of the Indenture Trustee) to realize on the
Mortgage Loans, or impair the value of the Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement (other than the information under the caption
"Underwriting") nor any statement, report or other document prepared by
the Originator and furnished or to be furnished pursuant to this
Agreement or in connection with the transactions contemplated hereby
contains any untrue statement or alleged untrue statement of any
material fact or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading;
(e) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Originator, threatened before a
court, administrative agency or government tribunal against the
Originator which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of the Originator, or in any
material impairment of the right or ability of the Originator to carry
on its business substantially as now conducted, or in any material
liability on the part of the Originator, or which would draw into
question the validity of this Agreement, the Mortgage Loans, or of any
action taken or to be taken in connection with the obligations of the
Originator contemplated herein, or which would impair materially the
ability of the Originator to perform under the terms of this Agreement
or that will prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
(f) The Originator is not in violation of or in default with
respect to, and the execution and delivery of this Agreement by the
Originator and its performance of and compliance with the terms hereof
will not constitute a violation or default with respect to, any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which violation or
default might have consequences that would materially and adversely
affect the condition (financial or other) or operations of the
Originator or its properties or might have consequences that would
materially and adversely affect its performance hereunder or under any
subservicing agreement;
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(g) Upon the receipt of each Mortgage File by the Depositor
(or its assignee) under this Agreement, the Depositor (or its assignee)
will have good title to each related Mortgage Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien
created by the Originator (other than liens which will be
simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Originator, and
the transfer, assignment and conveyance of the Mortgage Notes and the
Mortgages by the Originator pursuant to this Agreement are not subject
to the bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction;
(i) With respect to any Mortgage Loan purchased by the
Originator, the Originator acquired title to the Mortgage Loan in good
faith, without notice of any adverse claim;
(j) The Originator does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement. The Originator is solvent and the
sale of the Mortgage Loans by the Originator pursuant to the terms of
this Agreement will not cause the Originator to become insolvent. The
sale of the Mortgage Loans by the Originator pursuant to the terms of
this Agreement was not undertaken with the intent to hinder, delay or
defraud any of the Originator's creditors;
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of
any transferee of the Depositor (including the Trust and the Indenture
Trustee);
(l) The Originator has determined that it will treat the
disposition of the Mortgage Loans pursuant to this Agreement as a sale
for accounting and tax purposes;
(m) The Originator has not dealt with any broker or agent or
anyone else that may be entitled to any commission or compensation in
connection with the sale of the Mortgage Loans to the Depositor other
than to the Depositor or an affiliate thereof; and
(n) The consideration received by the Originator upon the sale
of the Mortgage Loans under this Agreement constitutes fair
consideration and reasonably equivalent value for the Mortgage Loans.
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Section 3.02 Representations and Warranties as to the Unaffiliated
Seller. The Unaffiliated Seller hereby represents and warrants to the Depositor,
as of the Closing Date, that:
(a) The Unaffiliated Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all licenses necessary to carry on its business as now
being conducted and is licensed, qualified and in good standing in each
state where a Mortgaged Property is located if the laws of such state
require licensing or qualification in order to conduct business of the
type conducted by the Unaffiliated Seller and to perform its
obligations as the Unaffiliated Seller hereunder, and in any event the
Unaffiliated Seller is in compliance with the laws of any such state to
the extent necessary to ensure the enforceability of the related
Mortgage Loan; the Unaffiliated Seller has the full power and
authority, corporate and otherwise, to execute and deliver this
Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments
of transfer to be delivered pursuant to this Agreement) by the
Unaffiliated Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, binding and enforceable obligation of
the Unaffiliated Seller; and all requisite corporate action has been
taken by the Unaffiliated Seller to make this Agreement valid and
binding upon the Unaffiliated Seller in accordance with its terms;
(b) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery
and performance by the Unaffiliated Seller of or compliance by the
Unaffiliated Seller with this Agreement or the sale of the Mortgage
Loans pursuant to the terms of this Agreement or the consummation of
the transactions contemplated by this Agreement, or if required, such
approval has been obtained prior to the Closing Date;
(c) Neither the execution and delivery of this Agreement, the
acquisition nor origination of the Mortgage Loans by the Unaffiliated
Seller nor the transactions contemplated hereby, nor the fulfillment of
or compliance with the terms and conditions of this Agreement, has or
will conflict with or result in a breach of any of the terms,
conditions or provisions of the Unaffiliated Seller's charter or
by-laws or any legal restriction or any agreement or instrument to
which the Unaffiliated Seller is now a party or by which it is bound or
to which its property is subject, or constitute a default or result in
an acceleration under any of the foregoing, or result in the violation
of any law, rule, regulation, order, judgment or decree to which the
Unaffiliated Seller or its property is subject, or impair the ability
of the Indenture Trustee (or the Servicer as the agent of the Indenture
Trustee) to realize on the Mortgage Loans, or impair the value of the
Mortgage Loans;
(d) Neither this Agreement nor the information contained in
the Prospectus Supplement (other than the information under the caption
"Underwriting") nor any statement, report or other document prepared by
the Unaffiliated Seller and furnished or to be furnished pursuant to
this Agreement or in connection with the transactions contemplated
hereby contains any untrue statement or alleged untrue statement of any
material fact or omits to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances
under which they were made, not misleading;
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(e) There is no action, suit, proceeding or investigation
pending nor, to the knowledge of the Unaffiliated Seller, threatened
before a court, administrative agency or government tribunal against
the Unaffiliated Seller which, either in any one instance or in the
aggregate, may result in any material adverse change in the business,
operations, financial condition, properties or assets of the
Unaffiliated Seller, or in any material impairment of the right or
ability of the Unaffiliated Seller to carry on its business
substantially as now conducted, or in any material liability on the
part of the Unaffiliated Seller, or which would draw into question the
validity of this Agreement, the Mortgage Loans, or of any action taken
or to be taken in connection with the obligations of the Unaffiliated
Seller contemplated herein, or which would impair materially the
ability of the Unaffiliated Seller to perform under the terms of this
Agreement or that will prohibit its entering into this Agreement or the
consummation of any of the transactions contemplated hereby;
(f) The Unaffiliated Seller is not in violation of or in
default with respect to, and the execution and delivery of this
Agreement by the Unaffiliated Seller and its performance of and
compliance with the terms hereof will not constitute a violation or
default with respect to, any order or decree of any court or any order,
regulation or demand of any federal, state, municipal or governmental
agency, which violation or default might have consequences that would
materially and adversely affect the condition (financial or other) or
operations of the Unaffiliated Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder or under any subservicing agreement;
(g) Upon the receipt of each Mortgage File by the Depositor
(or its assignee) under this Agreement, the Depositor (or its assignee)
will have good title to each related Mortgage Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien
created by the Unaffiliated Seller (other than liens which will be
simultaneously released);
(h) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Unaffiliated
Seller, and the transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Unaffiliated Seller pursuant to this
Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(i) With respect to any Mortgage Loan purchased by the
Unaffiliated Seller, the Unaffiliated Seller acquired title to the
Mortgage Loan in good faith, without notice of any adverse claim;
(j) The Unaffiliated Seller does not believe, nor does it have
any reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement. The Unaffiliated Seller is
solvent and the sale of the Mortgage Loans by the Unaffiliated Seller
pursuant to the terms of this Agreement will not cause the Unaffiliated
Seller to become insolvent. The sale of the Mortgage Loans by the
Unaffiliated Seller pursuant to the terms of this Agreement was not
undertaken with the intent to hinder, delay or defraud any of the
Unaffiliated Seller's creditors;
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<PAGE>
(k) The Mortgage Loans are not intentionally selected in a
manner so as to affect adversely the interests of the Depositor or of
any transferee of the Depositor (including the Trust and the Indenture
Trustee);
(l) The Unaffiliated Seller has determined that it will treat
the disposition of the Mortgage Loans pursuant to this Agreement as a
sale for accounting purposes;
(m) The Unaffiliated Seller has not dealt with any broker or
agent or anyone else that may be entitled to any commission or
compensation in connection with the sale of the Mortgage Loans to the
Depositor other than to the Depositor or an affiliate thereof; and
(n) The consideration received by the Unaffiliated Seller upon
the sale of the Mortgage Loans under this Agreement constitutes fair
consideration and reasonably equivalent value for the Mortgage Loans.
Section 3.03 Representations and Warranties Relating to the Mortgage
Loans. The Originators represent and warrant to the Unaffiliated Seller and the
Unaffiliated Seller represents to the Depositor that, as of the Closing Date, as
to each Initial Mortgage Loan, and as of the Subsequent Transfer Date, as to
each Subsequent Mortgage Loan, immediately prior to the sale and transfer of
such Mortgage Loan by the Unaffiliated Seller to the Depositor:
(a) The information set forth in each Mortgage Loan Schedule
is complete, true and correct;
(b) The information to be provided by the Unaffiliated Seller
or the Originators, directly or indirectly, to the Depositor in
connection with a Subsequent Mortgage Loan will be true and correct in
all material respects at the date or dates respecting which such
information is furnished;
(c) Each Mortgage is a valid first or second lien on a fee
simple (or its equivalent under applicable state law) estate in the
real property securing the amount owed by the Mortgagor under the
Mortgage Note subject only to (i) the lien of current real property
taxes and assessments which are not delinquent, (ii) with respect to
any Mortgage Loan identified on the Mortgage Loan Schedule as secured
by a second lien, the related first mortgage loan, (iii) covenants,
conditions and restrictions, rights of way, easements and other matters
of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending
institutions generally in the area wherein the property subject to the
Mortgage is located or specifically reflected in the appraisal obtained
in connection with the origination of the related Mortgage Loan
obtained by the Unaffiliated Seller and (iv) other matters to which
like properties are commonly subject which do not materially interfere
with the benefits of the security intended to be provided by such
Mortgage;
(d) Immediately prior to the transfer and assignment by the
related Originator to the Unaffiliated Seller and by the Unaffiliated
Seller to the Depositor, the Unaffiliated Seller or such Originator, as
applicable, had good title to, and was the sole owner of each Mortgage
Loan, free of any interest of any other Person, and the Unaffiliated
Seller or such Originator has transferred all right, title and interest
in each Mortgage Loan to the Depositor or the Unaffiliated Seller, as
applicable;
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<PAGE>
(e) As of the applicable Cut-Off Date, no payment of principal
or interest on or in respect of any Mortgage Loan remains unpaid for
thirty (30) or more days past the date the same was due in accordance
with the related Mortgage Note without regard to applicable grace
periods;
(f) As of the Initial Cut-Off Date, no Mortgage Loan has a
Mortgage Interest Rate less than 7.50% per annum in Pool I and 7.99%
per annum in Pool II and the weighted average Mortgage Interest Rate of
the Mortgage Loans is 11.004% in Pool I and 12.319% in Pool II;
(g) At origination, no Mortgage Loan in Pool I or Pool II had
an original term to maturity of greater than 360 months;
(h) As of the Initial Cut-Off Date, the weighted average
remaining term to maturity of the Mortgage Loans is 258 months for the
Mortgage Loans in Pool I and 229 months for the Mortgage Loans in Pool
II;
(i) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no mechanics' lien or claim for work,
labor or material (and no rights are outstanding that under law could
give rise to such lien) affecting the premises subject to any Mortgage
which is or may be a lien prior to, or equal or coordinate with, the
lien of such Mortgage, except those which are insured against by the
title insurance policy referred to in (ff) below;
(j) To the best knowledge of the Unaffiliated Seller and each
of the Originators, there is no delinquent tax or assessment lien
against any Mortgaged Property;
(k) Such Mortgage Loan, the Mortgage, and the Mortgage Note,
including, without limitation, the obligation of the Mortgagor to pay
the unpaid principal of and interest on the Mortgage Note, are each not
subject to any right of rescission (or any such rescission right has
expired in accordance with applicable law), set-off, counterclaim, or
defense, including the defense of usury, nor will the operation of any
of the terms of the Mortgage Note or the Mortgage, or the exercise of
any right thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim, or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim, or
defense has been asserted with respect thereto;
(l) To the best knowledge of the Unaffiliated Seller and each
of the Originators, the Mortgaged Property is free of material damage
and is in good repair, and there is no pending or threatened proceeding
for the total or partial condemnation of the Mortgaged Property;
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<PAGE>
(m) Neither the Originators nor the Unaffiliated Seller has
received a notice of default of any first mortgage loan secured by the
Mortgaged Property which has not been cured by a party other than the
Unaffiliated Seller;
(n) Each Mortgage Note and Mortgage are in substantially the
forms previously provided to the Depositor and the Indenture Trustee on
behalf of the Unaffiliated Seller;
(o) No Mortgage Loan had, at the date of origination, a CLTV
in excess of 125.27%, and the weighted average CLTV of all Mortgage
Loans as of the Initial Cut-Off Date is approximately 76.023% in Pool I
and 71.696% in Pool II;
(p) The Mortgage Loan was not originated in a program in which
the amount of documentation in the underwriting process was limited in
comparison to the originator's normal documentation requirements;
(q) No more than the following percentages of the Mortgage
Loans by Cut-Off Date Aggregate Principal Balance are secured by
Mortgaged Properties located in the following states:
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<PAGE>
Pool I
-------------------------------------------------------------
Percentage of Cut-Off
Date Aggregate
State Principal Balance
---------------------------- --------------------------
Colorado 0.15
Connecticut 0.75
Delaware 2.06
Florida 8.92
Georgia 7.39
Illinois 3.65
Indiana 0.58
Iowa 0.02
Kentucky 0.16
Maine 0.06
Maryland 2.33
Michigan 0.15
Mississippi 0.06
Missouri 0.06
Nebraska 0.02
New Hampshire 0.23
New Jersey 21.54
New York 22.66
North Carolina 3.10
Ohio 2.46
Pennsylvania 20.18
South Carolina 0.55
Tennessee 0.42
Texas 0.04
Virginia 2.20
West Virginia 0.211
=========================
100.00%
<PAGE>
================================================================================
Pool II
-------------------------------------------------------------
Percentage of Cut-Off
Date Aggregate
State Principal Balance
---------------------------- --------------------------
Connecticut 4.15
Florida 0.49
Georgia 11.46
Maine 0.69
Maryland 4.19
New Jersey 43.85
New York 26.85
Pennsylvania 9.22
=========================
100.00%
================================================================================
(r) The Mortgage Loans were not selected by the Unaffiliated
Seller or the Originators for sale hereunder or inclusion in the Trust
Estate on any basis adverse to the Trust Estate relative to the
portfolio of similar mortgage loans of the Unaffiliated Seller or the
Originators;
(s) None of the Mortgage Loans constitutes a lien on leasehold
interests;
(t) Each Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of
the benefits of the security including (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale and (B) otherwise by
judicial foreclosure. To the best of the Unaffiliated Seller's and the
Originators' knowledge, there is no homestead or other exemption
available to the related Mortgagor which would materially interfere
with the right to sell the related Mortgaged Property at a trustee's
sale or the right to foreclose the related Mortgage. The Mortgage
contains customary and enforceable provisions for the acceleration of
the payment of the Principal Balance of such Mortgage Loan in the event
all or any part of the related Mortgaged Property is sold or otherwise
transferred without the prior written consent of the holder thereof;
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<PAGE>
(u) The proceeds of such Mortgage Loan have been fully
disbursed, including reserves set aside by the Unaffiliated Seller or
the Originators, there is no requirement for, and neither the
Unaffiliated Seller nor the Originators shall make any, future advances
thereunder. Any future advances made prior to the applicable Cut-Off
Date have been consolidated with the principal balance secured by the
Mortgage, and such principal balance, as consolidated, bears a single
interest rate and single repayment term reflected on the applicable
Mortgage Loan Schedule. The Principal Balance as of the applicable
Cut-Off Date does not exceed the original principal amount of such
Mortgage Loan. Except with respect to no more than $150,000 of escrow
funds, any and all requirements as to completion of any on-site or
off-site improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees, and expenses
incurred in making, or recording such Mortgage Loan have been paid;
(v) All Mortgage Loans were originated in compliance with the
Originators' Underwriting Guidelines;
(w) The terms of the Mortgage and the Mortgage Note have not
been impaired, waived, altered, or modified in any respect, except by a
written instrument which has been recorded, if necessary, to protect
the interest of the Indenture Trustee and which has been delivered to
the Collateral Agent, on behalf of the Indenture Trustee. The substance
of any such alteration or modification is or as to Subsequent Mortgage
Loans will be reflected on the applicable Mortgage Loan Schedule and,
to the extent necessary, has been or will be approved by (i) the
insurer under the applicable mortgage title insurance policy, and (ii)
the insurer under any other insurance policy required hereunder for
such Mortgage Loan where such insurance policy requires approval and
the failure to procure approval would impair coverage under such
policy;
(x) No instrument of release, waiver, alteration, or
modification has been executed in connection with such Mortgage Loan,
and no Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement which has been approved by the
insurer under any insurance policy required hereunder for such Mortgage
Loan where such policy requires approval and the failure to procure
approval would impair coverage under such policy, and which is part of
the Mortgage File and has been delivered to the Collateral Agent, on
behalf of the Indenture Trustee, and the terms of which are reflected
in the applicable Mortgage Loan Schedule;
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<PAGE>
(y) Other than delinquencies described in clause (e) above,
there is no default, breach, violation, or event of acceleration
existing under the Mortgage or the Mortgage Note and no event which,
with the passage of time or with notice and the expiration of any grace
or cure period, would constitute such a default, breach, violation or
event of acceleration, and neither the Originators nor the Unaffiliated
Seller has waived any such default, breach, violation or event of
acceleration. All taxes, governmental assessments (including
assessments payable in future installments), insurance premiums, water,
sewer, and municipal charges, leaseholder payments, or ground rents
which previously became due and owing in respect of or affecting the
related Mortgaged Property have been paid. Neither the Originators nor
the Unaffiliated Seller has advanced funds, or induced, solicited, or
knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount
required by the Mortgage or the Mortgage Note;
(z) All of the improvements which were included for the
purposes of determining the Appraised Value of the Mortgaged Property
were completed at the time that such Mortgage Loan was originated and
lie wholly within the boundaries and building restriction lines of such
Mortgaged Property. Except for de minimis encroachments, no
improvements on adjoining properties encroach upon the Mortgaged
Property. To the best of the Unaffiliated Seller's and the Originators'
knowledge, no improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or regulation.
All inspections, licenses, and certificates required to be made or
issued with respect to all occupied portions of the Mortgaged Property
(including all such improvements which were included for the purpose of
determining such Appraised Value) and, with respect to the use and
occupancy of the same, including but not limited to certificates of
occupancy and fire underwriters certificates, have been made or
obtained from the appropriate authorities and the Mortgaged Property is
lawfully occupied under applicable law;
(aa) To the best of the Unaffiliated Seller's and the
Originators' knowledge, there do not exist any circumstances or
conditions with respect to the Mortgage, the Mortgaged Property, the
Mortgagor, or the Mortgagor's credit standing that can be reasonably
expected to cause such Mortgage Loan to become delinquent or adversely
affect the value or marketability of such Mortgage Loan, other than any
such circumstances or conditions permitted under the Originator's
Underwriting Guidelines;
(bb) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) (i)
in compliance with any and all applicable licensing requirements of the
laws of the state wherein the Mortgaged Property is located and (ii)
(A) organized under the laws of such state, (B) qualified to do
business in such state, (C) federal savings and loan associations or
national banks having principal offices in such state, (D) not doing
business in such state, or (E) not required to qualify to do business
in such state;
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<PAGE>
(cc) The Mortgage Note and the Mortgage are genuine, and each
is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting the enforcement of creditors' rights
generally and except that the equitable remedy of specific performance
and other equitable remedies are subject to the discretion of the
courts. All parties to the Mortgage Note and the Mortgage had legal
capacity to execute the Mortgage Note and the Mortgage and convey the
estate therein purported to be conveyed, and the Mortgage Note and the
Mortgage have been duly and properly executed by such parties or
pursuant to a valid power-of-attorney that has been recorded with the
Mortgage;
(dd) The transfer of the Mortgage Note and the Mortgage as and
in the manner contemplated by this Agreement is sufficient either (i)
fully to transfer to the Depositor all right, title, and interest of
the Unaffiliated Seller and the Originators thereto as note holder and
mortgagee or (ii) to grant to the Depositor the security interest
referred to in Section 6.07 hereof. The Mortgage has been duly assigned
and the Mortgage Note has been duly endorsed. The Assignment of
Mortgage delivered to the Collateral Agent, on behalf of the Indenture
Trustee, pursuant to Section 2.04(a)(iv) of the Sale and Servicing
Agreement is in recordable form and is acceptable for recording under
the laws of the applicable jurisdiction. The endorsement of the
Mortgage Note, the delivery to the Collateral Agent, on behalf of the
Indenture Trustee, of the endorsed Mortgage Note, and such Assignment
of Mortgage, and the delivery of such Assignment of Mortgage for
recording to, and the due recording of such Assignment of Mortgage in,
the appropriate public recording office in the jurisdiction in which
the Mortgaged Property is located are sufficient to permit the
Indenture Trustee to avail itself of all protection available under
applicable law against the claims of any present or future creditors of
the Unaffiliated Seller and the Originators, and are sufficient to
prevent any other sale, transfer, assignment, pledge, or hypothecation
of the Mortgage Note and Mortgage by the Unaffiliated Seller or the
Originators from being enforceable;
(ee) Any and all requirements of any federal, state, or local
law including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity, or disclosure laws applicable to such Mortgage Loan have
been complied with, and the Servicer shall maintain in its possession,
available for the Indenture Trustee's inspection, and shall deliver to
the Indenture Trustee or its designee upon demand, evidence of
compliance with all such requirements. The consummation of the
transactions contemplated by this Agreement will not cause the
violation of any such laws;
(ff) Such Mortgage Loan is covered by an ALTA mortgage title
insurance policy or such other generally used and acceptable form of
policy, issued by and the valid and binding obligation of a title
insurer qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the Unaffiliated Seller, and
its successors and assigns, as to the first or second priority lien, as
applicable, of the Mortgage in the original principal amount of such
Mortgage Loan. The assignment to the Indenture Trustee of the
Unaffiliated Seller's interest in such mortgage title insurance policy
does not require the consent of or notification to the insurer. Such
mortgage title insurance policy is in full force and effect and will be
in full force and effect and inure to the benefit of the Indenture
Trustee upon the consummation of the transactions contemplated by this
Agreement. No claims have been made under such mortgage title insurance
policy and none of the Unaffiliated Seller, the Originators nor any
prior holder of the Mortgage has done, by act or omission, anything
which would impair the coverage of such mortgage title insurance
policy;
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<PAGE>
(gg) All improvements upon the Mortgaged Property are insured
against loss by fire, hazards of extended coverage, and such other
hazards as are customary in the area where the Mortgaged Property is
located pursuant to insurance policies conforming to the requirements
of Section 3.05 hereof. If the Mortgaged Property at origination was
located in an area identified on a flood hazard boundary map or flood
insurance rate map issued by the Federal Emergency Management Agency as
having special flood hazards (and such flood insurance has been made
available), such Mortgaged Property was covered by flood insurance at
origination. Each individual insurance policy is the valid and binding
obligation of the insurer, is in full force and effect, and will be in
full force and effect and inure to the benefit of the Indenture Trustee
upon the consummation of the transactions contemplated by this
Agreement, and contain a standard mortgage clause naming the originator
of such Mortgage Loan, and its successors and assigns, as mortgagee and
loss payee. All premiums thereon have been paid. The Mortgage obligates
the Mortgagor to maintain all such insurance at the Mortgagor's cost
and expense, and upon the Mortgagor's failure to do so, authorizes the
holder of the Mortgage to obtain and maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from
the Mortgagor, and none of the Unaffiliated Seller, the related
Originator or any prior holder of the Mortgage has acted or failed to
act so as to impair the coverage of any such insurance policy or the
validity, binding effect, and enforceability thereof;
(hh) If the Mortgage constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, as no
fees or expenses are or will become payable by the trustee or the
Noteholders to the Indenture Trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor;
(ii) The Mortgaged Property consists of one or more parcels of
real property separately assessed for tax purposes. To the extent there
is erected thereon a detached or an attached one-family residence or a
detached two-to six-family dwelling, or an individual condominium unit
in a low-rise condominium, or an individual unit in a planned unit
development, or a commercial property, a manufactured dwelling, or a
mixed use or multiple purpose property, such residence, dwelling or
unit is not (i) a unit in a cooperative apartment, (ii) a property
constituting part of a syndication, (iii) a time share unit, (iv) a
property held in trust, (v) a mobile home, (vi) a log-constructed home,
or (vii) a recreational vehicle;
(jj) There exist no material deficiencies with respect to
escrow deposits and payments, if such are required, for which customary
arrangements for repayment thereof have not been made or which the
Unaffiliated Seller or the related Originator expects not to be cured,
and no escrow deposits or payments of other charges or payments due the
Unaffiliated Seller have been capitalized under the Mortgage or the
Mortgage Note;
20
<PAGE>
(kk) Such Mortgage Loan was not originated at a below market
interest rate. Such Mortgage Loan does not have a shared appreciation
feature, or other contingent interest feature;
(ll) The origination and collection practices used by the
Unaffiliated Seller, the Originators or the Servicer with respect to
such Mortgage Loan have been in all respects legal, proper, prudent,
and customary in the mortgage origination and servicing business;
(mm) The Mortgagor has, to the extent required by applicable
law, executed a statement to the effect that the Mortgagor has received
all disclosure materials, if any, required by applicable law with
respect to the making of fixed-rate mortgage loans. The Servicer shall
maintain or cause to be maintained such statement in the Mortgage File;
(nn) All amounts received by the Unaffiliated Seller or the
Originators with respect to such Mortgage Loan after the applicable
Cut-Off Date and required to be deposited in the related Distribution
Account have been so deposited in the related Distribution Account and
are, as of the Closing Date, or will be as of the Subsequent Transfer
Date, as applicable, in the related Distribution Account;
(oo) The appraisal report with respect to the Mortgaged
Property contained in the Mortgage File was signed prior to the
approval of the application for such Mortgage Loan by a qualified
appraiser, duly appointed by the originator of such Mortgage Loan, who
had no interest, direct or indirect, in the Mortgaged Property or in
any loan made on the security thereof and whose compensation is not
affected by the approval or disapproval of such application;
(pp) When measured by the Cut-Off Date Aggregate Principal
Balance, the Mortgagors with respect to at least 64.29% of the Mortgage
Loans in Pool I and 89.14% of the Mortgage Loans in Pool II,
represented at the time of origination that the Mortgagor would occupy
the Mortgaged Property as the Mortgagor's primary residence;
(qq) Each of the Originators and the Unaffiliated Seller has
no knowledge with respect to the Mortgaged Property of any governmental
or regulatory action or third party claim made, instituted or
threatened in writing relating to a violation of any applicable
federal, state or local environmental law, statute, ordinance,
regulation, order, decree or standard;
(rr) [Reserved];
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<PAGE>
(ss) With respect to second lien Mortgage Loans:
(i) the Unaffiliated Seller and the Originators have
no knowledge that the Mortgagor has received notice from the
holder of the prior mortgage that such prior mortgage is in
default,
(ii) no consent from the holder of the prior mortgage
is needed for the creation of the second lien Mortgage or, if
required, has been obtained and is in the related Mortgage
File,
(iii) if the prior mortgage has a negative
amortization, the CLTV was determined using the maximum loan
amount of such prior mortgage,
(iv) the related first mortgage loan encumbering the
related Mortgaged Property does not have a mandatory future
advance provision, and
(v) the Mortgage Loans conform in all material
respects to the description thereof in the Prospectus
Supplement.
(tt) Each of the Originators and the Unaffiliated Seller
further represents and warrants to the Indenture Trustee, the Note
Insurer and the Noteholders that as of the Subsequent Cut-Off Date all
representations and warranties set forth in clauses (a) through (ss)
above will be correct in all material respects as to each Subsequent
Mortgage Loan, and the representations so made in this subsection (tt)
as to the following matters will be deemed to be correct if: (i) each
Subsequent Mortgage Loan may not be thirty (30) or more days
contractually delinquent as of the related Subsequent Cut-Off Date;
(ii) the original term to maturity of such Subsequent Mortgage Loan may
not exceed 360 months for Pool I and 360 months for Pool II; (iii) such
Subsequent Mortgage Loan must have a mortgage interest rate of at least
7.50% for Pool I and 7.99% for Pool II; (iv) the purchase of the
Subsequent Mortgage Loans is consented to by the Note Insurer and the
Rating Agencies, notwithstanding the fact that the Subsequent Mortgage
Loans meet the parameters stated herein; (v) the principal balance of
any such Subsequent Mortgage Loan may not exceed $240,000 for Pool I
and $655,000 for Pool II; (vi) no more than 12.00% for Pool I and
26.00% for Pool II of the aggregate principal balance of such
Subsequent Mortgage Loans may be Second Liens; (vii) no such Subsequent
Mortgage Loan shall have a CLTV of more than (a) for consumer purpose
loans, 125.00% for Pool I and 100.00% for Pool II, and (b) for business
purpose loans, 76.00% for Pool I and 76.00% for Pool II; (viii) no more
than 42.00% for Pool I and 50.00% for Pool II of such Subsequent
Mortgage Loans may be Balloon Loans; (ix) no more than 6.00% for Pool I
and 35.00% for Pool II of such Subsequent Mortgage Loans may be secured
by mixed-use properties, commercial properties, or five or more unit
multifamily properties; and (x) following the purchase of such
Subsequent Mortgage Loans by the Trust, the Mortgage Loans (including
the Subsequent Mortgage Loans), (a) will have a weighted average
mortgage interest rate, (I) for consumer purpose loans, of at least
10.60% for Pool I and 10.00% for Pool II and (II) for business purpose
loans, of at least 15.90% for Pool I and 15.95% for Pool II; and (b)
will have a weighted average CLTV of not more than (I) for consumer
purpose loans, 77.50% for Pool I and 88.00% for Pool II, and (II) for
business purpose loans, 62.00% for Pool I and 62.00% for Pool II.
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(uu) To the best of the Unaffiliated Seller's and the
Originators' knowledge, no error, omission, misrepresentation,
negligence, fraud or similar occurrence with respect to a Mortgage Loan
has taken place on the part of any person, including without limitation
the Mortgagor, any appraiser, any builder or developer, or any other
party involved in the origination of the Mortgage Loan or in the
application of any insurance in relation to such Mortgage Loan;
(vv) Each Mortgaged Property is in compliance with all
environmental laws, ordinances, rules, regulations and orders of
federal, state or governmental authorities relating thereto. No
hazardous material has been or is incorporated in, stored on or under,
released from, treated on, transported to or from, or disposed of on or
from, any Mortgaged Property such that, under applicable law (A) any
such hazardous material would be required to be eliminated before the
Mortgaged Property could be altered, renovated, demolished or
transferred, or (B) the owner of the Mortgaged Property, or the holder
of a security interest therein, could be subjected to liability for the
removal of such hazardous material or the elimination of the hazard
created thereby. Neither the Unaffiliated Seller nor any Mortgagor has
received notification from any federal, state or other governmental
authority relating to any hazardous materials on or affecting the
Mortgaged Property or to any potential or known liability under any
environmental law arising from the ownership or operation of the
Mortgaged Property. For the purposes of this subsection, the term
"hazardous materials" shall include, without limitation, gasoline,
petroleum products, explosives, radioactive materials, polychlorinated
biphenyls or related or similar materials, asbestos or any material
containing asbestos, lead, lead-based paint and any other substance or
material as may be defined as a hazardous or toxic substance by any
federal, state or local environmental law, ordinance, rule, regulation
or order, including, without limitation, CERCLA, the Clean Air Act, the
Clean Water Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act and any regulations promulgated pursuant
thereto; and
(ww) With respect to any business purpose loan, the related
Mortgage Note contains an acceleration clause, accelerating the
maturity date under the Mortgage Note to the date the individual
guarantying such loan becomes subject to any bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally.
Section 3.04 Representations and Warranties of the Depositor. The
Depositor hereby represents, warrants and covenants to the Unaffiliated Seller,
as of the date of execution of this Agreement and the Closing Date, that:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to
purchase each Mortgage Loan and to execute, deliver and perform, and to
enter into and consummate all the transactions contemplated by this
Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, and, assuming the due
authorization, execution and delivery hereof by the Unaffiliated Seller
and the Originators, constitutes the legal, valid and binding agreement
of the Depositor, enforceable against the Depositor in accordance with
its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating
to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law);
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<PAGE>
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority
or court is required for the execution, delivery and performance of or
compliance by the Depositor with this Agreement or the consummation by
the Depositor of any of the transactions contemplated hereby, except
such as have been made on or prior to the Closing Date;
(e) The Depositor has filed or will file the Prospectus and
Prospectus Supplement with the Commission in accordance with Rule
424(b) under the Securities Act; and
(f) None of the execution and delivery of this Agreement, the
purchase of the Mortgage Loans from the Unaffiliated Seller, the
consummation of the other transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with the charter or bylaws of
the Depositor or conflicts or will conflict with or results or will
result in a breach of, or constitutes or will constitute a default or
results or will result in an acceleration under, any term, condition or
provision of any indenture, deed of trust, contract or other agreement
or other instrument to which the Depositor is a party or by which it is
bound and which is material to the Depositor, or (ii) results or will
result in a violation of any law, rule, regulation, order, judgment or
decree of any court or governmental authority having jurisdiction over
the Depositor.
Section 3.05 Repurchase Obligation for Defective Documentation and for
Breach of a Representation or Warranty. (a) Each of the representations and
warranties contained in Sections 3.01, 3.02 and 3.03 shall survive the purchase
by the Depositor of the Mortgage Loans, the subsequent transfer thereof by the
Depositor to the Trust and the subsequent pledge thereof by the Trust to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer, and
shall continue in full force and effect, notwithstanding any restrictive or
qualified endorsement on the Mortgage Notes and notwithstanding subsequent
termination of this Agreement, the Sale and Servicing Agreement or the
Indenture.
(b) With respect to any representation or warranty contained in
Sections 3.01 or 3.03 hereof that is made to the best of the Originators'
knowledge or contained in Sections 3.02 or 3.03 hereof that is made to the best
of the Unaffiliated Seller's knowledge, if it is discovered by the Servicer, any
Subservicer, the Indenture Trustee, the Collateral Agent, the Depositor, the
Note Insurer or any Noteholder that the substance of such representation and
warranty was inaccurate as of the Closing Date or the Subsequent Transfer Date,
as applicable, and such inaccuracy materially and adversely affects the value of
the related Mortgage Loan, then notwithstanding the Originators' or the
Unaffiliated Seller's lack of knowledge with respect to the inaccuracy at the
time the representation or warranty was made, such inaccuracy shall be deemed a
breach of the applicable representation or warranty. Upon discovery by the
Originators, the Unaffiliated Seller, the Servicer, any Subservicer, the
Indenture Trustee, the Collateral Agent, the Note Insurer, the Depositor or any
Noteholder of a breach of any of such representations and warranties which
materially and adversely affects the value of Mortgage Loans or the interest of
the Noteholders, or which materially and adversely affects the interests of the
Note Insurer or the Noteholders in the related Mortgage Loan in the case of a
representation and warranty relating to a particular Mortgage Loan
(notwithstanding that such representation and warranty was made to the
Originators' or the Unaffiliated Seller's best knowledge), the party discovering
such breach shall give, pursuant to this Section 3.05(b) and pursuant to Section
4.02 of the Sale and Servicing Agreement, prompt written notice to the others.
Subject to the next to last paragraph of this Section 3.05(b), within sixty (60)
days of the earlier of its discovery or its receipt of notice of any breach of a
representation or warranty, the Unaffiliated Seller and the Originators shall
(a) promptly cure such breach in all material respects, or (b) purchase such
Mortgage Loan at a purchase price equal to the Loan Repurchase Price, or (c)
remove such Mortgage Loan from the Trust Estate (in which case it shall become a
Deleted Mortgage Loan) and substitute one or more Qualified Substitute Mortgage
Loans. Any such substitution shall be accompanied by payment by the Unaffiliated
Seller of the Substitution Adjustment, if any, to be deposited in the related
Distribution Account pursuant to the Sale and Servicing Agreement.
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The Originators shall cooperate with the Unaffiliated Seller to cure
any breach and shall reimburse the Unaffiliated Seller for the costs and
expenses related to any cure, substitution (including any Substitution
Adjustment) or repurchase incurred by the Unaffiliated Seller pursuant to this
Section 3.05.
(c) As to any Deleted Mortgage Loan for which the Unaffiliated Seller
or an Originator substitutes a Qualified Substitute Mortgage Loan or Loans, the
Unaffiliated Seller or such Originator shall effect such substitution by
delivering to the Indenture Trustee and the Collateral Agent, a certification in
the form attached to the Sale and Servicing Agreement as Exhibit H, executed by
a Servicing Officer and the documents described in Section 2.05(a) of the Sale
and Servicing Agreement for such Qualified Substitute Mortgage Loan or Loans.
Pursuant to the Sale and Servicing Agreement, upon receipt by the Indenture
Trustee and the Collateral Agent of a certification of a Servicing Officer of
such substitution or purchase and, in the case of a substitution, upon receipt
by the Collateral Agent, on behalf of the Indenture Trustee of the related
Mortgage File, and the deposit of certain amounts in the related Distribution
Account pursuant to Section 2.07(b) of the Sale and Servicing Agreement (which
certification shall be in the form of Exhibit H to the Sale and Servicing
Agreement), the Collateral Agent, on behalf of the Indenture Trustee, shall be
required to release to the Servicer for release to the Unaffiliated Seller the
related Indenture Trustee's Mortgage File and shall be required to execute,
without recourse, and deliver such instruments of transfer furnished by the
Unaffiliated Seller as may be necessary to transfer such Mortgage Loan to the
Unaffiliated Seller or such Originator.
(d) Pursuant to the Sale and Servicing Agreement, the Servicer shall
deposit in the related Distribution Account all payments received in connection
with such Qualified Substitute Mortgage Loan or Loans after the date of such
substitution. Monthly Payments received with respect to Qualified Substitute
Mortgage Loans on or before the date of substitution will be retained by the
Unaffiliated Seller. The Trust will own all payments received on the Deleted
Mortgage Loan on or before the date of substitution, and the Unaffiliated Seller
shall thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Mortgage Loan. Pursuant to the Sale and Servicing
Agreement, the Servicer shall be required to give written notice to the
Indenture Trustee, the Collateral Agent and the Note Insurer that such
substitution has taken place and shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms of the Sale and
Servicing Agreement and the substitution of the Qualified Substitute Mortgage
Loan. The parties hereto agree to amend the Mortgage Loan Schedule accordingly.
Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall
be subject to the terms of the Indenture, the Sale and Servicing Agreement and
this Agreement in all respects, and the Unaffiliated Seller shall be deemed to
have made with respect to such Qualified Substitute Mortgage Loan or Loans, as
of the date of substitution, the representations and warranties set forth in
Sections 3.02 and 3.03 herein. On the date of such substitution, the
Unaffiliated Seller will remit to the Servicer and, pursuant to the Sale and
Servicing Agreement, the Servicer will deposit into the related Distribution
Account, an amount equal to the Substitution Adjustment, if any.
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(e) [Reserved];
(f) It is understood and agreed that the obligations of the
Unaffiliated Seller and the Originator set forth in Section 2.06 and this
Section 3.05 to cure, purchase or substitute for a defective Mortgage Loan as
provided in Section 2.06 and this Section 3.05 constitute the sole remedies of
the Depositor, the Indenture Trustee, the Note Insurer and the Noteholders
respecting a breach of the foregoing representations and warranties.
(g) The Unaffiliated Seller and the Originator shall be obligated to
indemnify the Indenture Trustee, the Trust, the Depositor, the Owner Trustee,
the Collateral Agent, the Noteholders and the Note Insurer (in their individual
and trust capacities) and their successors, assigns, agents and servants
(collectively, the "Indemnified Parties") from and against, any and all
liabilities, obligations, losses, damages, taxes, claims, actions and suits, and
any and all reasonable costs, expenses and disbursements (including reasonable
legal fees and expenses) of any kind and nature whatsoever (collectively,
"Expenses") which may at any time be imposed on, incurred by, or asserted
against any Indemnified Party in any way relating to or arising out of a breach
of the Unaffiliated Seller or the related Originator of the representations or
warranties herein. The indemnities contained in this Section 3.05 shall survive
the resignation or termination of the Owner Trustee or the termination of this
Agreement.
(h) Each of the Originators and the Unaffiliated Seller shall be
jointly and severally responsible for any repurchase, cure or substitution
obligation of any of the Originators or the Unaffiliated Seller under this
Agreement, the Indenture and the Sale and Servicing Agreement.
(i) Any cause of action against the Unaffiliated Seller or an
Originator relating to or arising out of the breach of any representations and
warranties or covenants made in Sections 2.06, 3.02 or 3.03 shall accrue as to
any Mortgage Loan upon (i) discovery of such breach by any party and notice
thereof to the Unaffiliated Seller or such Originator, (ii) failure by the
Unaffiliated Seller or such Originator to cure such breach or purchase or
substitute such Mortgage Loan as specified above, and (iii) demand upon the
Unaffiliated Seller or such Originator by the Indenture Trustee for all amounts
payable in respect of such Mortgage Loan.
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Article IV
THE UNAFFILIATED SELLER
Section 4.01 Covenants of the Originators and the Unaffiliated Seller.
Each of the Originators and the Unaffiliated Seller covenants to the Depositor
as follows:
(a) The Originators and the Unaffiliated Seller shall
cooperate with the Depositor and the firm of independent certified
public accountants retained with respect to the issuance of the Notes
in making available all information and taking all steps reasonably
necessary to permit the accountants' letters required hereunder to be
delivered within the times set for delivery herein.
(b) The Unaffiliated Seller agrees to satisfy or cause to be
satisfied on or prior to the Closing Date, all of the conditions to the
Depositor's obligations set forth in Section 5.01 hereof that are
within the Unaffiliated Seller's (or its agents') control.
(c) The Originators and the Unaffiliated Seller hereby agree
to do all acts, transactions, and things and to execute and deliver all
agreements, documents, instruments, and papers by and on behalf of the
Originators or the Unaffiliated Seller as the Depositor or its counsel
may reasonably request in order to consummate the transfer of the
Mortgage Loans to the Depositor and the subsequent transfer thereof to
the Indenture Trustee, and the rating, issuance and sale of the Notes.
Section 4.02 Merger or Consolidation. Each of the Originators and the
Unaffiliated Seller will keep in full effect its existence, rights and
franchises as a corporation and will obtain and preserve its qualification to do
business as a foreign corporation, in each jurisdiction necessary to protect the
validity and enforceability of this Agreement or any of the Mortgage Loans and
to perform its duties under this Agreement. Any Person into which any of the
Originators or the Unaffiliated Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Originators or the Unaffiliated Seller shall be a party, or any Person
succeeding to the business of the Originators or the Unaffiliated Seller, shall
be approved by the Note Insurer which approval shall not be unreasonably
withheld. If the approval of the Note Insurer is not required, the successor
shall be an established mortgage loan servicing institution that is a Permitted
Transferee and in all events shall be the successor of the Originators or the
Unaffiliated Seller 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. The Originators and the Unaffiliated Seller shall send notice
of any such merger or consolidation to the Indenture Trustee and the Note
Insurer.
Section 4.03 Costs. In connection with the transactions contemplated
under this Agreement, the Trust Agreement, the Indenture and the Sale and
Servicing Agreement, the Unaffiliated Seller shall promptly pay (or shall
promptly reimburse the Depositor to the extent that the Depositor shall have
paid or otherwise incurred): (a) the fees and disbursements of the Depositor's,
the Unaffiliated Seller's and the Originators' counsel; (b) the fees of S&P and
Moody's; (c) any of the fees of the Indenture Trustee and the fees and
disbursements of the Indenture Trustee's counsel; (d) any of the fees of the
Owner Trustee and the fees and disbursements of the Owner Trustee's counsel; (e)
expenses incurred in connection with printing the Prospectus, the Prospectus
Supplement, any amendment or supplement thereto, any preliminary prospectus and
the Notes; (f) fees and expenses relating to the filing of documents with the
Commission (including without limitation periodic reports under the Exchange
Act); (g) the shelf registration amortization fee of 0.04% of the Note Principal
Balance of the Notes on the Closing Date, paid in connection with the issuance
of Notes; (h) the fees and disbursements for Deloitte & Touche LLP, accountants
for the Originators; and (i) all of the initial expenses (not to exceed $75,000)
of the Note Insurer including, without limitation, legal fees and expenses,
accountant fees and expenses and expenses in connection with due diligence
conducted on the Mortgage Files but not including the initial premium paid to
the Note Insurer. For the avoidance of doubt, the parties hereto acknowledge
that it is the intention of the parties that the Depositor shall not pay any of
the Indenture Trustee's or Owner Trustee's fees and expenses in connection with
the transactions contemplated by this Agreement, the Trust Agreement, the
Indenture and the Sale and Servicing Agreement. All other costs and expenses in
connection with the transactions contemplated hereunder shall be borne by the
party incurring such expenses.
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Section 4.04 Indemnification. (a) The Originators and the Unaffiliated
Seller, jointly and severally, agree
(i) to indemnify and hold harmless the Depositor, each of its
directors, each of its officers who have signed the Registration
Statement, and each of its directors and each person or entity who
controls the Depositor or any such person, within the meaning of
Section 15 of the Securities Act, against any and all losses, claims,
damages or liabilities, joint and several, to which the Depositor or
any such person or entity may become subject, under the Securities Act
or otherwise, and will reimburse the Depositor and each such
controlling person for any legal or other expenses incurred by the
Depositor or such controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Prospectus
Supplement or any amendment or supplement to the Prospectus Supplement
or the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
in the Prospectus Supplement or any amendment or supplement to the
Prospectus Supplement approved in writing by the Originators or the
Unaffiliated Seller, in light of the circumstances under which they
were made, not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission
relates to the information contained in the Prospectus Supplement
referred to in Section 3.01(d). This indemnity agreement will be in
addition to any liability which the Originators and the Unaffiliated
Seller may otherwise have; and
(ii) to indemnify and to hold the Depositor harmless against
any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses
that the Depositor may sustain in any way related to the failure of any
of the Originators or the Unaffiliated Seller to perform its duties in
compliance with the terms of this Agreement. The Originators or the
Unaffiliated Seller shall immediately notify the Depositor if a claim
is made by a third party with respect to this Agreement, and the
Originators or the Unaffiliated Seller shall assume the defense of any
such claim and pay all expenses in connection therewith, including
reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Depositor in
respect of such claim. Pursuant to the Indenture, the Indenture Trustee
shall reimburse the Unaffiliated Seller in accordance with the
Indenture for all amounts advanced by the Unaffiliated Seller pursuant
to the preceding sentence except when the claim relates directly to the
failure of the Unaffiliated Seller to perform its duties in compliance
with the terms of this Agreement.
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(b) The Depositor agrees to indemnify and hold harmless each
of the Originators and the Unaffiliated Seller, each of their respective
directors and each person or entity who controls the Originators or the
Unaffiliated Seller or any such person, within the meaning of Section 15 of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint and several, to which the Originators or the Unaffiliated Seller or any
such person or entity may become subject, under the Securities Act or otherwise,
and will reimburse the Originators and the Unaffiliated Seller and any such
director or controlling person for any legal or other expenses incurred by such
party or any such director or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, the Prospectus Supplement, any amendment or supplement to the
Prospectus or the Prospectus Supplement or the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission is other than a
statement or omission relating to the information set forth in subsection (a)(i)
of this Section 4.04; provided, however, that in no event shall the Depositor be
liable to the Unaffiliated Seller under this paragraph (b) in an amount in
excess of the Depositor's resale profit or the underwriting fee on the sale of
the Notes. This indemnity agreement will be in addition to any liability which
the Depositor may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 4.04 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 4.04, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to any indemnified party hereunder except to the extent such
indemnifying party has been prejudiced thereby. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 4.04 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be liable for the
expenses of more than one separate counsel.
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(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 4.04 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
subsection (b) of this Section 4.04 in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) subject to the limits set forth in subsection (a)
and subsection (b) of this Section 4.04; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, there shall be
considered the relative benefits received by the Originators and the
Unaffiliated Seller on the one hand, and the Depositor on the other, the
Originators', the Unaffiliated Seller's and the Depositor's relative knowledge
and access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and prevent any statement or omission,
and any other equitable considerations appropriate in the circumstances. The
Originators, the Unaffiliated Seller and the Depositor agree that it would not
be equitable if the amount of such contribution were determined by pro rata or
per capita allocation. For purposes of this Section 4.04, each director of the
Depositor, each officer of the Depositor who signed the Registration Statement,
and each person, if any who controls the Depositor within the meaning of Section
15 of the Securities Act, shall have the same rights to contribution as the
Depositor, and each director of the Originators or the Unaffiliated Seller, and
each person, if any who controls the Originators or the Unaffiliated Seller
within the meaning of Section 15 of the Securities Act, shall have the same
rights to contribution as the Originators and the Unaffiliated Seller.
Article V
CONDITIONS OF CLOSING
Section 5.01 Conditions of Depositor's Obligations. The obligations of
the Depositor to purchase the Mortgage Loans will be subject to the satisfaction
on the Closing Date of the following conditions. Upon payment of the purchase
price for the Mortgage Loans, such conditions shall be deemed satisfied or
waived.
(a) Each of the obligations of the Unaffiliated Seller
required to be performed by it on or prior to the Closing Date pursuant
to the terms of this Agreement shall have been duly performed and
complied with and all of the representations and warranties of the
Unaffiliated Seller and the Originators under this Agreement shall be
true and correct as of the Closing Date and no event shall have
occurred which, with notice or the passage of time, would constitute a
default under this Agreement, and the Depositor shall have received a
certificate to the effect of the foregoing signed by an authorized
officer of the Unaffiliated Seller and the Originators.
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(b) The Depositor shall have received a letter dated the date
of this Agreement, in form and substance acceptable to the Depositor
and its counsel, prepared by Deloitte & Touche LLP, independent
certified public accountants, regarding the numerical information
contained in the Prospectus Supplement including, but not limited to
the information under the captions "Prepayment and Yield
Considerations" and "The Mortgage Loan Pools" regarding any numerical
information in any marketing materials relating to the Notes and
regarding any other information as reasonably requested by the
Depositor.
(c) The Mortgage Loans will be acceptable to the Depositor, in
its sole reasonable discretion.
(d) The Depositor shall have received the following additional
closing documents, in form and substance reasonably satisfactory to the
Depositor and its counsel:
(i) the Mortgage Loan Schedule;
(ii) this Agreement, the Sale and Servicing
Agreement, the Indenture, the Trust Agreement, and the
Underwriting Agreement dated as of June 11, 1999 between the
Depositor and Prudential Securities Incorporated and all
documents required thereunder, duly executed and delivered by
each of the parties thereto other than the Depositor;
(iii) officer's certificates of an officer of each of
the Originators and the Unaffiliated Seller, dated as of the
Closing Date, and attached thereto resolutions of the board of
directors and a copy of the charter and by-laws;
(iv) copy of each of the Originators and the
Unaffiliated Seller's charter and all amendments, revisions,
and supplements thereof, certified by a secretary of each
entity;
(v) an opinion of the counsel for the Originators and
the Unaffiliated Seller as to various corporate matters in a
form acceptable to the Depositor, its counsel, the Note
Insurer, S&P and Moody's (it being agreed that the opinion
shall expressly provide that the Indenture Trustee shall be
entitled to rely on the opinion);
(vi) opinions of counsel for the Unaffiliated Seller,
in forms acceptable to the Depositor, its counsel, the Note
Insurer, S&P and Moody's as to such matters as shall be
required for the assignment of a rating to the Notes of "AAA"
by S&P, and "Aaa" by Moody's (it being agreed that such
opinions shall expressly provide that the Indenture Trustee
shall be entitled to rely on such opinions);
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(vii) a letter from Moody's that it has assigned a
rating of "Aaa" to the Notes;
(viii) a letter from S&P that it has assigned a
rating of "AAA" to the Notes;
(ix) an opinion of counsel for the Indenture Trustee
in form and substance acceptable to the Depositor, its
counsel, the Note Insurer, Moody's and S&P (it being agreed
that the opinion shall expressly provide that the Unaffiliated
Seller shall be entitled to rely on the opinion);
(x) an opinion of counsel for the Owner Trustee in
form and substance acceptable to the Depositor, its counsel,
the Note Insurer, Moody's and S&P (it being agreed that the
opinion shall expressly provide that the Unaffiliated Seller
shall be entitled to rely on the opinion);
(xi) an opinion or opinions of counsel for the
Servicer, in form and substance acceptable to the Depositor,
its counsel, the Note Insurer, Moody's and S&P (it being
agreed that the opinion shall expressly provide that the
Unaffiliated Seller shall be entitled to rely on the opinion);
and
(xii) an opinion or opinions of counsel for the Note
Insurer, in each case in form and substance acceptable to the
Depositor, its counsel, Moody's and S&P (it being agreed that
the opinion shall expressly provide that the Unaffiliated
Seller shall be entitled to rely on the opinion).
(e) The Note Insurance Policy shall have been duly executed,
delivered and issued with respect to the Notes.
(f) All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto shall
be satisfactory in form and substance to the Depositor and its counsel.
(g) The Unaffiliated Seller shall have furnished the Depositor
with such other certificates of its officers or others and such other
documents or opinions as the Depositor or its counsel may reasonably
request.
Section 5.02 Conditions of Unaffiliated Seller's Obligations. The
obligations of the Unaffiliated Seller under this Agreement shall be subject to
the satisfaction, on the Closing Date, of the following conditions:
(a) Each of the obligations of the Depositor required to be
performed by it at or prior to the Closing Date pursuant to the terms
of this Agreement shall have been duly performed and complied with and
all of the representations and warranties of the Depositor contained in
this Agreement shall be true and correct as of the Closing Date and the
Unaffiliated Seller shall have received a certificate to that effect
signed by an authorized officer of the Depositor.
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(b) The Unaffiliated Seller shall have received the following
additional documents:
(i) this Agreement and the Sale and Servicing
Agreement, and all documents required thereunder, in each case
executed by the Depositor as applicable; and
(ii) a copy of a letter from Moody's to the Depositor
to the effect that it has assigned a rating of "Aaa" to the
Notes and a copy of a letter from S&P to the Depositor to the
effect that it has assigned a rating of "AAA" to the Notes.
(iii) an opinion of counsel for the Indenture Trustee
in form and substance acceptable to the Unaffiliated Seller
and its counsel;
(iv) an opinion of counsel for the Owner Trustee in
form and substance acceptable to the Unaffiliated Seller and
its counsel;
(v) an opinion of counsel for the Note Insurer in
form and substance acceptable to the Unaffiliated Seller and
its counsel;
(vi) an opinion of the counsel for the Depositor as
to securities and tax matters; and
(vii) an opinion of the counsel for the Depositor as
to true sale matters.
(c) The Depositor shall have furnished the Unaffiliated Seller
with such other certificates of its officers or others and such other
documents to evidence fulfillment of the conditions set forth in this
Agreement as the Unaffiliated Seller may reasonably request.
Section 5.03 Termination of Depositor's Obligations. The Depositor may
terminate its obligations hereunder by notice to the Unaffiliated Seller at any
time before delivery of and payment of the purchase price for the Mortgage Loans
if: (a) any of the conditions set forth in Section 5.01 are not satisfied when
and as provided therein; (b) there shall have been the entry of a decree or
order by a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Unaffiliated Seller, or for the
winding up or liquidation of the affairs of the Unaffiliated Seller; (c) there
shall have been the consent by the Unaffiliated Seller to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating to
the Unaffiliated Seller or of or relating to substantially all of the property
of the Unaffiliated Seller; (d) any purchase and assumption agreement with
respect to the Unaffiliated Seller or the assets and properties of the
Unaffiliated Seller shall have been entered into; or (e) a Termination Event
shall have occurred. The termination of the Depositor's obligations hereunder
shall not terminate the Depositor's rights hereunder or its right to exercise
any remedy available to it at law or in equity.
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Article VI
MISCELLANEOUS
Section 6.01 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
telex or telegraph and confirmed by a similar mailed writing, if to the
Depositor, addressed to the Depositor at Prudential Securities Secured Financing
Corporation, One New York Plaza, 14th Floor, New York, New York 10292,
Attention: Managing Director - Asset Backed Finance Group, or to such other
address as the Depositor may designate in writing to the Unaffiliated Seller and
the Originators and if to the Unaffiliated Seller or an Originator, addressed to
the Unaffiliated Seller or such Originator at Balapointe Office Centre, 111
Presidential Boulevard, Suite 127, Bala Cynwyd, Pennsylvania 19004, Attention:
Mr. Anthony Santilli, Jr., or to such other address as the Unaffiliated Seller
or such Originator may designate in writing to the Depositor.
Section 6.02 Severability of Provisions. Any part, provision,
representation, warranty or covenant of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any part, provision, representation, warranty or covenant of
this Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
Section 6.03 Agreement of Unaffiliated Seller. The Unaffiliated Seller
agrees to execute and deliver such instruments and take such actions as the
Depositor may, from time to time, reasonably request in order to effectuate the
purpose and to carry out the terms of this Agreement.
Section 6.04 Survival. The parties to this Agreement agree that the
representations, warranties and agreements made by each of them herein and in
any Note or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the other party hereto, notwithstanding any investigation
heretofore or hereafter made by such other party or on such other party's
behalf, and that the representations, warranties and agreements made by the
parties hereto in this Agreement or in any such certificate or other instrument
shall survive the delivery of and payment for the Mortgage Loans.
Section 6.05 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 6.06 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as expressly permitted by the terms
hereof, this Agreement may not be assigned, pledged or hypothecated by any party
hereto to a third party without the written consent of the other party to this
Agreement and the Note Insurer; provided, however, that the Depositor may assign
its rights hereunder without the consent of the Unaffiliated Seller.
34
<PAGE>
Section 6.07 Confirmation of Intent; Grant of Security Interest. It is
the express intent of the parties hereto that the conveyance of the Mortgage
Loans by the Originators to the Unaffiliated Seller as contemplated by this
Unaffiliated Seller's Agreement be, and be treated for all purposes as, a sale
of the Mortgage Loans and that the conveyance of the Mortgage Loans by the
Unaffiliated Seller to the Depositor as contemplated by this Unaffiliated
Seller's Agreement be, and be treated for accounting purposes as, a sale of the
Mortgage Loans. It is, further, not the intention of the parties that any such
conveyance be deemed a pledge of the Mortgage Loans by the Originators to the
Unaffiliated Seller or by the Unaffiliated Seller to the Depositor to secure a
debt or other obligation of the Originators or the Unaffiliated Seller, as the
case may be. However, in the event that, notwithstanding the intent of the
parties, the Mortgage Loans are held to continue to be property of the
Originators or the Unaffiliated Seller then (a) this Unaffiliated Seller's
Agreement shall also be deemed to be a security agreement within the meaning of
Articles 8 and 9 of the Uniform Commercial Code; (b) the transfer of the
Mortgage Loans provided for herein shall be deemed to be a grant by the
Originators to the Unaffiliated Seller and by the Unaffiliated Seller to the
Depositor of a security interest in all of such parties' right, title and
interest in and to the Mortgage Loans 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 Depositor (or its assignee) of
Mortgage Notes 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 Depositor (or its assignee) for the
purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Depositor pursuant to any provision hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Originators, the Unaffiliated Seller and the Depositor shall, to the
extent consistent with this Unaffiliated Seller's Agreement, take such actions
as may be necessary to ensure that, if this Unaffiliated Seller's Agreement were
deemed to create a security interest in the Mortgage Loans, such security
interest would be deemed to be a perfected security interest of first priority
under applicable law and will be maintained as such throughout the term of this
Agreement.
Section 6.08 Miscellaneous. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof.
35
<PAGE>
Section 6.09 Amendments. (a) This Agreement may be amended from time to
time by the Originators, the Unaffiliated Seller and the Depositor by written
agreement, upon the prior written consent of the Note Insurer, without notice to
or consent of the Noteholders, and with prior written notice to the Owner
Trustee to cure any ambiguity, to correct or supplement any provisions herein,
to comply with any changes in the Code, or 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, however, that such
action shall not, as evidenced by an Opinion of Counsel, at the expense of the
party requesting the change, delivered to the Indenture Trustee, adversely
affect in any material respect the interests of any Noteholder; and provided,
further, that no such amendment shall reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Note without the consent of the Holder of such Note, or
change the rights or obligations of any other party hereto without the consent
of such party.
(b) This Agreement may be amended from time to time by the
Originators, the Unaffiliated Seller and the Depositor with the consent of the
Note Insurer, the Majority Noteholders and the Holders of the majority of the
Percentage Interest in the Trust Certificates and with prior written notice to
the Owner Trustee 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; provided, however, that no such amendment
shall reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any Note
without the consent of the Holder of such Note or reduce the percentage for each
Class the Holders of which are required to consent to any such amendment without
the consent of the Holders of 100% of each Class of Notes affected thereby.
(c) It shall not be necessary for the consent of Holders under
this Section 6.09 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.
Section 6.10 Third-Party Beneficiaries. The parties agree that each of
the Trust, the Owner Trustee, the Note Insurer and the Indenture Trustee is an
intended third-party beneficiary of this Agreement to the extent necessary to
enforce the rights and to obtain the benefit of the remedies of the Depositor
under this Agreement which are assigned to the Trust and then to the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer, pursuant to
the Sale and Servicing Agreement and the Indenture, respectively, and to the
extent necessary to obtain the benefit of the enforcement of the obligations and
covenants of the Unaffiliated Seller under Section 4.01 and 4.04(a)(ii) of this
Agreement. The parties further agree that Prudential Securities Incorporated and
each of its directors and each person or entity who controls Prudential
Securities Incorporated or any such person, within the meaning of Section 15 of
the Securities Act (each, an "Underwriter Entity") is an intended third-party
beneficiary of this Agreement to the extent necessary to obtain the benefit of
the enforcement of the obligations and covenants of the Unaffiliated Seller with
respect to each Underwriter Entity under Section 4.04(a)(i) of this Agreement.
Section 6.11 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
36
<PAGE>
(b) THE ORIGINATORS, THE DEPOSITOR AND THE UNAFFILIATED SELLER
EACH HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK CITY, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH IN SECTION 6.01 OF THIS
AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER
THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAIL, POSTAGE PREPAID. THE
ORIGINATORS, THE DEPOSITOR AND THE UNAFFILIATED SELLER EACH HEREBY WAIVES ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE ORIGINATORS, THE DEPOSITOR AND THE UNAFFILIATED
SELLER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
EITHERS' RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER
JURISDICTION.
(c) THE ORIGINATORS, THE DEPOSITOR AND THE UNAFFILIATED SELLER
EACH HEREBY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 6.12 Execution in Counterparts. This Agreement 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.
[Remainder of Page Intentionally Left Blank]
37
<PAGE>
IN WITNESS WHEREOF, the parties to this Unaffiliated Seller's
Agreement have caused their names to be signed by their respective officers
thereunto duly authorized as of the date first above written.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
By:
---------------------------------------
Name:
Title:
ABFS 1999-2, INC.
By:
---------------------------------------
Name:
Title:
AMERICAN BUSINESS CREDIT, INC.
By:
---------------------------------------
Name:
Title:
HOMEAMERICAN CREDIT, INC., D/B/A UPLAND MORTGAGE
By:
---------------------------------------
Name:
Title:
NEW JERSEY MORTGAGE AND INVESTMENT CORP.
By:
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT A
FORM OF SUBSEQUENT
TRANSFER AGREEMENT
This SUBSEQUENT TRANSFER AGREEMENT, dated as of ________, 1999 (the
"Subsequent Transfer Date"), is entered into by and among ABFS 1999-2, INC., as
unaffiliated seller (the "Unaffiliated Seller"), AMERICAN BUSINESS CREDIT, INC.,
as an originator ("ABC"), HOMEAMERICAN CREDIT, INC. D/B/A UPLAND MORTGAGE, as an
originator ("Upland"), NEW JERSEY MORTGAGE AND INVESTMENT CORP., as an
originator ("NJMIC") (ABC, Upland and NJMIC are collectively referred to herein
as the "Originators"), and PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as depositor (the "Depositor").
W I T N E S S E T H:
Reference is hereby made to (x) that certain Unaffiliated Seller's
Agreement, dated as of June 1, 1999 (the "Unaffiliated Seller's Agreement"), by
and among the Unaffiliated Seller, the Originators and the Depositor, and (y)
that certain Indenture, dated as of June 1, 1999 (the "Indenture"), by and
between the ABFS Mortgage Loan Trust 1999-2 (the "Trust") and The Chase
Manhattan Bank, as indenture trustee (the "Indenture Trustee"). Pursuant to the
Unaffiliated Seller's Agreement, the Originators have agreed to sell, assign and
transfer, and the Unaffiliated Seller has agreed to accept, from time to time,
Subsequent Mortgage Loans (as defined below), and the Unaffiliated Seller has
agreed to sell, assign and transfer, and the Depositor has agreed to accept,
from time to time, such Subsequent Mortgage Loans. The Unaffiliated Seller's
Agreement provides that each such sale of Subsequent Mortgage Loans be evidenced
by the execution and delivery of a Subsequent Transfer Agreement such as this
Subsequent Transfer Agreement.
The assets sold to the Unaffiliated Seller, and then sold to the
Depositor pursuant to this Subsequent Transfer Agreement consist of (a) the
Subsequent Mortgage Loans in Pool I and Pool II listed in the Mortgage Loan
Schedule attached hereto (including property that secures a Subsequent Mortgage
Loan that becomes an REO Property), including the related Mortgage Files
delivered or to be delivered to the Collateral Agent, on behalf of the Indenture
Trustee, including all payments of principal received, collected or otherwise
recovered after the Subsequent Cut-Off Date for each Subsequent Mortgage Loan,
all payments of interest due on each Subsequent Mortgage Loan after the
Subsequent Cut-Off Date therefor whenever received and all other proceeds
received in respect of such Subsequent Mortgage Loans, (b) the Insurance
Policies relating to the Subsequent Mortgage Loans, and (c) 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.
The "Subsequent Mortgage Loans" are those listed on the Schedule of
Mortgage Loans attached hereto. The Aggregate Principal Balance of such
Subsequent Mortgage Loans as of the Subsequent Cut-Off Date is $__________ in
Pool I and $__________ in Pool II.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Subsequent Transfer
Agreement, capitalized terms used herein but not otherwise defined shall have
the respective meanings assigned to such terms in Appendix I to the Indenture.
Section 2. Sale, Assignment and Transfer. In consideration of the
receipt of $__________ (such amount being approximately 100% of the Aggregate
Principal Balance of the Subsequent Mortgage Loans) from the Unaffiliated
Seller, each of the Originators hereby sells, assigns and transfers to the
Unaffiliated Seller, without recourse, all of their respective right, title and
interest in, to, and under the Subsequent Mortgage Loans and related assets
described above, whether now existing or hereafter arising.
In consideration of receipt of $__________ (such amount being
approximately 100% of the Aggregate Principal Balance of the Subsequent Mortgage
Loans) from the Depositor, the Unaffiliated Seller hereby sells, assigns and
transfers to the Depositor, without recourse, all of its right, title and
interest in, to, and under the Subsequent Mortgage Loans and related assets
described above, whether now existing or hereafter arising.
In connection with each such sale, assignment and transfer, the
Originators and the Unaffiliated Seller shall satisfy the document delivery
requirements set forth in Section 2.05 of the Sale and Servicing Agreement with
respect to each Subsequent Mortgage Loan.
Section 3. Representations and Warranties of the Originators and the
Unaffiliated Seller. With respect to each Subsequent Mortgage Loan, each of the
Originators and the Unaffiliated Seller hereby remake each of the
representations, warranties and covenants made by the Originators and the
Unaffiliated Seller in Section 3.03 of the Unaffiliated Seller's Agreement, on
which the Depositor relies in accepting the Subsequent Mortgage Loans. Such
representations and warranties speak as of the Subsequent Transfer Date unless
otherwise indicated, and shall survive each sale, assignment, transfer and
conveyance of the Subsequent Mortgage Loans to the Depositor.
Each of the Originators and the Unaffiliated Seller hereby acknowledge
that the Depositor is transferring the Subsequent Mortgage Loans to the Trust,
and that the Trust is pledging the Subsequent Mortgage Loans to the Indenture
Trustee, for the benefit of the Noteholders and the Note Insurer, on the date
hereof. Each of the Originators and the Unaffiliated Seller hereby acknowledge
and agree that the Depositor may assign to the Trust, and the Trust may assign
to the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer, its interest in the representations and warranties set forth in this
Section 3. Each of the Originators and the Unaffiliated Seller agrees that, upon
such assignment to the Trust and pledge to the Indenture Trustee, such
representations, warranties, agreements and covenants will run to and be for the
benefit of the Indenture Trustee and the Indenture Trustee may enforce, without
joinder of the Depositor or the Trust, the repurchase and indemnification
obligations of the Unaffiliated Seller and the Originators set forth herein with
respect to breaches of such representations, warranties, agreements and
covenants.
2
<PAGE>
Section 4. Repurchase of Subsequent Mortgage Loans. Upon discovery by
any of the Depositor, the Unaffiliated Seller, an Originator, the Indenture
Trustee, the Servicer on behalf of the Trust, the Note Insurer or any Noteholder
of a breach of any of the representations and warranties made by the Originators
and the Unaffiliated Seller pursuant to Section 3.03 of the Unaffiliated
Seller's Agreement or this Section 3, the party discovering such breach shall
give prompt written notice to each other Person; provided, that the Indenture
Trustee shall have no duty to inquire or to investigate the breach of any such
representations and warranties. The Originators and the Unaffiliated Seller will
be obligated to repurchase a Subsequent Mortgage Loan which breaches a
representation or warranty in accordance with the provisions of Section 4.02 of
the Sale and Servicing Agreement or to indemnify as described in Section 3.05(g)
of the Unaffiliated Seller's Agreement. Such repurchase and indemnification
obligation of the Originators and the Unaffiliated Seller shall constitute the
sole remedy against the Originators and the Unaffiliated Seller, and the Trust
for such breach available to the Servicer, the Trust, the Depositor, the
Indenture Trustee, the Note Insurer and the Noteholders.
Section 5. Amendment. This Subsequent Transfer Agreement may be amended
from time to time by the Originators, the Unaffiliated Seller and the Depositor
only with the prior written consent of the Note Insurer (or, in the event of a
Note Insurer Default, the Majority Holders).
Section 6. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS SUBSEQUENT
TRANSFER AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 5 SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSEQUENT TRANSFER
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM
THEREIN.
Section 7. Counterparts. This Subsequent Transfer Agreement may be
executed in counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which shall constitute one and
the same instrument.
Section 8. Binding Effect; Third-Party Beneficiaries. This Subsequent
Transfer Agreement will inure to the benefit of and be binding upon the parties
hereto, the Note Insurer, the Trust, the Owner Trustee, the Noteholders, and
their respective successors and permitted assigns.
3
<PAGE>
Section 9. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 10. Exhibits. The exhibits attached hereto and referred to
herein shall constitute a part of this Subsequent Transfer Agreement and are
incorporated into this Subsequent Transfer Agreement for all purposes.
Section 11. Intent of the Parties; Security Agreement. The Originators,
the Unaffiliated Seller and the Depositor intend that the conveyance of all
right, title and interest in and to the Subsequent Mortgage Loans and related
assets described above by the Originators to the Unaffiliated Seller and by the
Unaffiliated Seller to the Depositor pursuant to this Subsequent Transfer
Agreement shall be, and be construed as, a sale of the Subsequent Mortgage Loans
from the Originators to the Unaffiliated Seller and from the Unaffiliated Seller
to the Depositor.
It is, further, not intended that such conveyances be deemed to be
pledges of the Subsequent Mortgage Loans by the Originators to the Unaffiliated
Seller and by the Unaffiliated Seller to the Depositor to secure a debt or other
obligation of the Originators or of the Unaffiliated Seller, as the case may be.
However, in the event that the Subsequent Mortgage Loans are held to be property
of the Originators or the Unaffiliated Seller, or if for any reason this
Subsequent Transfer Agreement is held or deemed to create a security interest in
the Subsequent Mortgage Loans, then it is intended that: (a) this Subsequent
Transfer Agreement shall also be deemed to be a security agreement within the
meaning of Articles 8 and 9 of the Uniform Commercial Code of any other
applicable jurisdiction; (b) the conveyance provided for in this Subsequent
Transfer Agreement shall be deemed to be a grant by the Originators to the
Unaffiliated Seller and by the Unaffiliated Seller to the Depositor of a
security interest in all of the Originators' and the Unaffiliated Seller's
respective right, title and interest, whether now owned or hereafter acquired,
in and to the Subsequent Mortgage Loans and related assets described above. The
Originators and the Unaffiliated Seller, as applicable, shall, to the extent
consistent with this Subsequent Transfer Agreement, take such reasonable actions
as may be necessary to ensure that, if this Subsequent Transfer Agreement were
deemed to create a security interest in the Subsequent Mortgage Loans and the
other property described above, such interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Subsequent Transfer Agreement.
[Remainder of Page Intentionally Left Blank]
4
<PAGE>
IN WITNESS WHEREOF, the Originators, the Unaffiliated Seller and the Depositor
have caused this Subsequent Transfer Agreement to be duly executed by their
respective officers as of the day and year first above written.
AMERICAN BUSINESS CREDIT, INC.
By:
---------------------------------------
Name:
Title:
HOMEAMERICAN CREDIT, INC. D/B/A
UPLAND MORTGAGE
By:
---------------------------------------
Name:
Title:
NEW JERSEY MORTGAGE AND
INVESTMENT, INC.
By:
---------------------------------------
Name:
Title:
ABFS 1999-2, INC.
By:
---------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:
---------------------------------------
Name:
Title:
[Signature Page to Subsequent Transfer Agreement]
<PAGE>
EXHIBIT 4.3
SALE AND SERVICING AGREEMENT
dated as of June 1, 1999
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
ABFS MORTGAGE LOAN TRUST 1999-2,
as Issuer,
AMERICAN BUSINESS CREDIT, INC.,
as Servicer,
CHASE BANK OF TEXAS, N.A.,
as Collateral Agent,
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee
<PAGE>
SALE AND SERVICING AGREEMENT, dated as of June 1, 1999 (this
"Agreement"), by and among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
a Delaware corporation, as depositor (the "Depositor"), ABFS MORTGAGE LOAN TRUST
1999-2, a Delaware statutory business trust, as issuer (the "Trust"), AMERICAN
BUSINESS CREDIT, INC., a Pennsylvania corporation, as servicer (the "Servicer"),
CHASE BANK OF TEXAS, N.A., a national banking association, as collateral agent
(the "Collateral Agent"), and THE CHASE MANHATTAN BANK, a New York banking
corporation, as indenture trustee (the "Indenture Trustee").
W I T N E S S E T H
WHEREAS, the Depositor desires to sell to the Trust, and the
Trust desires to purchase from the Depositor, the mortgage loans (the "Mortgage
Loans") listed on Schedule I to this Agreement;
WHEREAS, immediately after such purchase, the Trust will
pledge such Mortgage Loans to the Indenture Trustee pursuant to the terms of an
Indenture, dated as of June 1, 1999 (the "Indenture"), between the Trust and the
Indenture Trustee, and issue the ABFS Mortgage Loan Trust 1999-2, Mortgage
Backed Notes (the "Notes");
WHEREAS, the Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the Trust;
WHEREAS, the Collateral Agent will hold, on behalf of the
Indenture Trustee, the Mortgage Loans and certain other assets pledged to the
Indenture Trustee pursuant to the Indenture; and
WHEREAS, Financial Security Assurance Inc. (the "Note
Insurer") is intended to be a third-party beneficiary of this Agreement, and is
hereby recognized by the parties hereto to as a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Trust, the Depositor, the Servicer, the
Collateral Agent and the Indenture Trustee hereby agree as follows:
Article I.
DEFINITIONS
Section 1.01 Certain Defined Terms. Capitalized terms used
herein but not defined herein shall have the meanings ascribed to such terms in
Appendix I attached hereto.
Section 1.02 Provisions of General Application. (a) All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
(b) The terms defined herein and in Appendix I to the
Indenture include the plural as well as the singular.
<PAGE>
(c) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Any reference to statutes are to be construed as including
all statutory provisions consolidating, amending or replacing the statute to
which reference is made and all regulations promulgated pursuant to such
statutes.
(e) All calculations of interest with respect to the Class A-1
Notes provided for herein shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All calculations of interest with respect to
the Class A-2 Notes provided for herein shall be on the basis of a 360-day year
and the actual number of days elapsed in the related Accrual Period. All
calculations of interest with respect to any Mortgage Loan provided for herein
shall be made in accordance with the terms of the related Mortgage Note and
Mortgage or, if such documents do not specify the basis upon which interest
accrues thereon, on the basis of a 360-day year consisting of twelve 30-day
months, to the extent permitted by applicable law.
(f) Any Mortgage Loan payment is deemed to be received on the
date such payment is actually received by the Servicer; provided, however, that,
for purposes of calculating distributions on the Notes, prepayments with respect
to any Mortgage Loan are deemed to be received on the date they are applied in
accordance with Accepted Servicing Practices consistent with the terms of the
related Mortgage Note and Mortgage to reduce the outstanding Principal Balance
of such Mortgage Loan on which interest accrues.
Section 1.03 Business Day Certificate. On the Closing Date
(with respect to the calendar years 1999 and 2000) and thereafter, within
fifteen (15) days prior to the end of each calendar year while this Agreement
remains in effect (with respect to the succeeding calendar years), the Servicer
shall provide to the Indenture Trustee and the Collateral Agent a certificate of
a Servicing Officer specifying the days on which banking institutions in the
Commonwealth of Pennsylvania are authorized or obligated by law, executive order
or governmental decree to be closed.
Article II.
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01 Purchase and Sale of Initial Mortgage Loans. The
Depositor does hereby sell, transfer, assign, set over and convey to the Trust,
without recourse, but subject to the terms and provisions of this Agreement, all
of the right, title and interest of the Depositor in and to the Initial Mortgage
Loans, including the outstanding principal of, and interest due on, such Initial
Mortgage Loans listed on Schedule I attached hereto, and all other assets
included or to be included in the Trust Estate. In connection with such transfer
and assignment, and pursuant to Section 2.07 of the Unaffiliated Seller's
Agreement, the Depositor does hereby also irrevocably transfer, assign, set over
and otherwise convey to the Trust all of its rights under the Unaffiliated
Seller's Agreement, including, without limitation, its right to exercise the
remedies created by Sections 2.06 and 3.05 of the Unaffiliated Seller's
Agreement for defective documentation and for breaches of representations and
warranties, agreements and covenants of the Unaffiliated Seller and the
Originators contained in Sections 3.01, 3.02 and 3.03 of the Unaffiliated
Seller's Agreement.
2
<PAGE>
Section 2.02 Purchase and Sale of Subsequent Mortgage Loans.
(a) Subject to the satisfaction of the conditions set forth in Section 2.14(b)
of the Indenture, in consideration of the Trust's delivery on the related
Subsequent Transfer Dates to or upon the order of the Depositor of all or a
portion of the balance of funds in the related Pre-Funding Account, the
Depositor shall on any Subsequent Transfer Date sell, transfer, assign, set over
and convey to the Trust without recourse, but subject to terms and provisions of
this Agreement, all of the right, title and interest of the Depositor in and to
the Subsequent Mortgage Loans in the related Pool, including the outstanding
principal of, and interest due on, such Subsequent Mortgage Loans, and all other
assets included or to be included in the Trust Estate. In connection with such
transfer and assignment, and pursuant to Section 2.07 of the Unaffiliated
Seller's Agreement, the Depositor will also irrevocably transfer, assign, set
over and otherwise convey to the Trust all of its rights under the Unaffiliated
Seller's Agreement and the related Subsequent Transfer Agreement, including,
without limitation, its right to exercise the remedies created by Sections 2.06
and 3.05 of the Unaffiliated Seller's Agreement for defective documentation and
for breaches of representations and warranties, agreements and covenants of the
Unaffiliated Seller and the Originators contained in Sections 3.01, 3.02 and
3.03 of the Unaffiliated Seller's Agreement.
The amount released from a Pre-Funding Account with respect to
a transfer of Subsequent Mortgage Loans to the related Pool shall be one-hundred
percent (100%) of the Aggregate Principal Balances of the Subsequent Mortgage
Loans so transferred, as of the related Subsequent Cut-Off Date.
(b) In connection with the transfer and assignment of the
Subsequent Mortgage Loans to the Trust, the Depositor shall cause the
Unaffiliated Seller to satisfy the document delivery requirements set forth in
Section 2.05 hereof.
(c) For any Subsequent Mortgage Loan that has a first Due Date
that occurs later than the last day of the Due Period following the Due Period
in which the Subsequent Mortgage Loan was sold to the Trust, on each applicable
Servicer Distribution Date, the Servicer will deposit into the Distribution
Account 30 days' interest at the related Mortgage Interest Rate, net of the
Servicing Fee, for each month after the month in which the Subsequent Transfer
occurs until, but not including, the month in which such first Due Date occurs.
Section 2.03 Purchase Price. On the Closing Date, as full
consideration for the Depositor's sale of the Initial Mortgage Loans to the
Trust, the Underwriter, on behalf of the Trust, will deliver to, or at the
direction of, the Depositor (i) an amount in cash equal to the sum of (A) 99.65%
and 99.65% of the Original Note Principal Balance as of the Closing Date of the
Class A-1 Notes and the Class A-2 Notes, respectively, plus (B) accrued interest
on the Original Note Principal Balance of the Class A-1 Notes at the rate of
7.130% per annum from (and including) June 1, 1999 to (but not including) the
Closing Date, minus (C) the Original Pre-Funded Amount and the Original
Capitalized Interest Amount each Class of Notes, payable by wire transfer of
same day funds, and (ii) the Trust Certificates to be issued pursuant to the
Trust Agreement.
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Section 2.04 Possession of Mortgage Files; Access to Mortgage
Files. (a) Upon the receipt by the Depositor, or its designee, of the purchase
price for the Initial Mortgage Loans set forth in Section 2.03 hereof and the
issuance of the Notes pursuant to the Indenture, the ownership of each Mortgage
Note, each Mortgage and the contents of the Mortgage File related to each
Initial Mortgage Loan will be vested in the Trust, and will be pledged to the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer.
(b) Pursuant to Section 2.05 hereof and Section 2.05 of the
Unaffiliated Seller's Agreement, the Unaffiliated Seller has delivered or caused
to be delivered the Indenture Trustee's Mortgage File related to each Initial
Mortgage Loan to the Collateral Agent, on behalf of the Indenture Trustee.
(c) The Collateral Agent will be the custodian, on behalf of
the Indenture Trustee, to hold the Indenture Trustee's Mortgage Files in trust
for the benefit of all present and future Noteholders and the Note Insurer. In
the event the Collateral Agent resigns or is removed, the Indenture Trustee
shall either (x) hold the Indenture Trustee's Mortgage Files, or (y) appoint a
successor Collateral Agent to hold the Indenture Trustee's Mortgage Files as set
forth in Section 9.08 hereof.
(d) The Collateral Agent shall afford the Depositor, the
Trust, the Note Insurer and the Servicer reasonable access to all records and
documentation regarding the Mortgage Loans relating to this Agreement, such
access being afforded at customary charges, upon reasonable prior written
request and during normal business hours at the offices of the Collateral Agent.
Section 2.05 Delivery of Mortgage Loan Documents. (a) In
connection with the transfer and assignment of the Mortgage Loans, the Depositor
shall on or before the Closing Date, with respect to the Initial Mortgage Loans,
and shall on or before the Subsequent Transfer Date with respect to Subsequent
Mortgage Loans, deliver, or cause the Unaffiliated Seller to deliver, to the
Collateral Agent, on behalf of the Indenture Trustee (as pledgee of the Trust
pursuant to the Indenture), the following documents or instruments with respect
to each Mortgage Loan so transferred or assigned:
(i) the original Mortgage Note, endorsed without recourse in
blank by the related Originator, including all intervening endorsements
showing a complete chain of endorsement;
(ii) the related original Mortgage with evidence of recording
indicated thereon or a copy thereof certified by the applicable recording
office;
(iii) the recorded mortgage assignment, or copy thereof
certified by the applicable recording office, if any, showing a complete
chain of assignment from the originator of the related Mortgage Loan to the
related Originator (which assignment may, at such Originator's option, be
combined with the assignment referred to in subpart (iv) hereof, in which
case it must be in recordable form, but need not have been previously
recorded);
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(iv) a mortgage assignment in recordable form (which, if
acceptable for recording in the relevant jurisdiction, may be included in a
blanket assignment or assignments) of each Mortgage from the related
Originator to the Indenture Trustee;
(v) originals of all assumption, modification and substitution
agreements in those instances where the terms or provisions of a Mortgage
or Mortgage Note have been modified or such Mortgage or Mortgage Note has
been assumed; and
(vi) an original title insurance policy (or (A) a copy of the
title insurance policy, or (B) a binder thereof or copy of such binder
together with a certificate from the related Originator that the original
Mortgage has been delivered to the title insurance company that issued such
binder for recordation).
In instances where the original recorded Mortgage and a
completed assignment thereof in recordable form cannot be delivered by the
related Originator to the Unaffiliated Seller, and by the Unaffiliated Seller to
the Collateral Agent, on behalf of the Indenture Trustee prior to or
concurrently with the execution and delivery of this Agreement (or, with respect
to Subsequent Mortgage Loans, prior to or on the related Subsequent Transfer
Date), due to a delay in connection with recording, the related Originator may:
(x) in lieu of delivering such original recorded Mortgage,
deliver to the Collateral Agent, on behalf of the Indenture Trustee, a
copy thereof; provided, that the related Originator certifies that the
original Mortgage has been delivered to a title insurance company for
recordation after receipt of its policy of title insurance or binder
therefor; and
(y) in lieu of delivering the completed assignment in
recordable form, deliver to the Collateral Agent, on behalf of the
Indenture Trustee, the assignment in recordable form, otherwise
complete except for recording information.
The Collateral Agent, on behalf of the Indenture Trustee,
shall promptly upon receipt thereof, with respect to each Mortgage Note
described in Section 2.05(a)(i) hereof and each assignment described in Section
2.05(a)(iv) hereof, endorse such Mortgage Note and assignment as follows: "The
Chase Manhattan Bank, as Indenture Trustee under the Indenture dated as of June
1, 1999, ABFS Mortgage Loan Trust 1999-2."
(b) As promptly as practicable, but in any event within thirty
(30) days from the Closing Date or the Subsequent Transfer Date, as applicable,
the Unaffiliated Seller shall promptly submit, or cause to be submitted by the
related Originator, for recording in the appropriate public office for real
property records, each assignment referred to in Section 2.05(a)(iv). The
Collateral Agent, on behalf of the Indenture Trustee, shall retain a copy of
each assignment submitted for recording. In the event that any such assignment
is lost or returned unrecorded because of a defect therein, the Unaffiliated
Seller or such Originator shall promptly prepare a substitute assignment or cure
such defect, as the case may be, and thereafter the Unaffiliated Seller or such
Originator shall submit each such assignment for recording. The costs relating
to the delivery and recordation of the documents in connection with the Mortgage
Loans as specified in this Article II shall be borne by the Unaffiliated Seller.
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(c) The Unaffiliated Seller or the related Originator shall,
within five (5) Business Days after the receipt thereof, deliver, or cause to be
delivered, to the Collateral Agent, on behalf of the Indenture Trustee: (i) the
original recorded Mortgage and related power of attorney, if any, in those
instances where a copy thereof certified by the related Originator was delivered
to the Collateral Agent, on behalf of the Indenture Trustee; (ii) the original
recorded assignment of Mortgage from the related Originator to the Indenture
Trustee, which, together with any intervening assignments of Mortgage, evidences
a complete chain of assignment from the originator of the Mortgage Loan to the
Indenture Trustee, in those instances where copies of such assignments certified
by the related Originator were delivered to the Collateral Agent, on behalf of
the Indenture Trustee, and (iii) the title insurance policy or title opinion
required in Section 2.05(a)(vi). The Collateral Agent shall review the recorded
assignment to confirm the information contained therein. The Collateral Agent
shall notify Indenture Trustee, the Note Insurer and the Servicer, of any defect
in such assignment based on such review. The Servicer shall have a period of
sixty (60) days following such notice to correct or cure such defect. In the
event that the Servicer fails to record an assignment of a Mortgage as provided
herein, the Collateral Agent shall, at the Servicer's expense, use reasonable
efforts to prepare and, if required hereunder, file such assignments for
recordation in the appropriate real property or other records and the Servicer
hereby appoints the Collateral Agent as its attorney-in-fact with full power and
authority acting in its stead for the purpose of such preparation, execution and
filing.
Notwithstanding anything to the contrary contained in this
Section 2.05, in those instances where the public recording office retains the
original Mortgage, power of attorney, if any, assignment or assignment of
Mortgage after it has been recorded or such original has been lost, the
Unaffiliated Seller or the related Originator shall be deemed to have satisfied
its obligations hereunder upon delivery to the Collateral Agent, on behalf of
the Indenture Trustee, of a copy of such Mortgage, power of attorney, if any,
assignment or assignment of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof.
From time to time the Unaffiliated Seller or the related
Originator may forward, or cause to be forwarded, to the Collateral Agent, on
behalf of the Indenture Trustee, additional original documents evidencing any
assumption or modification of a Mortgage Loan.
(d) All original documents relating to the Mortgage Loans that
are not delivered to the Collateral Agent, on behalf of the Indenture Trustee,
as permitted by Section 2.05(a) hereof are, and shall be, held by the Servicer,
the Unaffiliated Seller or the related Originator, as the case may be, in trust
for the benefit of the Indenture Trustee, on behalf of the Noteholders and the
Note Insurer. In the event that any such original document is required pursuant
to the terms of this Section 2.05 to be a part of an Indenture Trustee's
Mortgage File, such document shall be delivered promptly to the Collateral
Agent, on behalf of the Indenture Trustee. From and after the sale of the
Mortgage Loans to the Trust pursuant hereto, to the extent that the Unaffiliated
Seller or the related Originator retains legal title of record to any Mortgage
Loans prior to the vesting of legal title in the Trust, such title shall be
retained in trust for the Trust as the owner of the Mortgage Loans, and the
Indenture Trustee, as the pledgee of the Trust under the Indenture. In acting as
custodian of any original document which is part of the Indenture Trustee's
Mortgage Files, the Servicer agrees further that it does not and will not have
or assert any beneficial ownership interest in the related Mortgage Loans or the
Mortgage Files. Promptly upon the Servicer's receipt of any such original
document, the Servicer, on behalf of the Trust, shall mark conspicuously each
such original document, and its master data processing records with a legend
evidencing that the Trust has purchased the related Mortgage Loan and all right
and title thereto and interest therein, and pledged such Mortgage Loan and all
right and title thereto and interest therein to the Indenture Trustee, on behalf
of the Noteholders and the Note Insurer.
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Section 2.06 Acceptance of the Trust Estate; Certain Substitutions;
Certification by the Collateral Agent. (a) The Indenture Trustee agrees to
execute and deliver to the Depositor, the Note Insurer, the Collateral Agent and
the Servicer on or prior to the Closing Date an acknowledgement of receipt of
the Note Insurance Policy in the form attached as Exhibit B hereto.
(b) The Collateral Agent, on behalf of the Indenture Trustee,
agrees to:
(i) execute and deliver to the Depositor, the Note Insurer,
the Indenture Trustee, the Servicer and the Unaffiliated Seller, on or
prior to the Closing Date or any Subsequent Transfer Date, as applicable,
with respect to each Mortgage Loan transferred on such date, an
acknowledgement of receipt of the Mortgage File containing the original
Mortgage Note (with any exceptions noted), in the form attached as Exhibit
C hereto, and declares that it will hold such documents and any amendments,
replacements or supplements thereto, as well as any other assets included
in the definition of Trust Estate and delivered to the Collateral Agent, on
behalf of the Indenture Trustee, in trust upon and subject to the
conditions set forth herein, for the benefit of the Noteholders and the
Note Insurer.
(ii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within thirty (30) days after the Closing Date or
any Subsequent Transfer Date, as applicable (or, with respect to any
Qualified Substitute Mortgage Loans, within thirty (30) days after the
receipt by the Collateral Agent, on behalf of the Indenture Trustee,
thereof), and to deliver to the Unaffiliated Seller, the Servicer, the
Depositor, the Indenture Trustee and the Note Insurer a certification, in
the form attached hereto as Exhibit D, to the effect that, except as
otherwise noted, as to each Mortgage Loan listed in the related Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage
Loan specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it pursuant
to Section 2.05 are in its possession, (ii) each such document has been
reviewed by it and has not been mutilated, damaged, torn or otherwise
physically altered (handwritten additions, changes or corrections shall not
constitute physical alteration if they reasonably appear to have been
initialed by the Mortgagor), appears regular on its face and relates to
such Mortgage Loan, and (iii) based on its examination and only as to the
foregoing documents, the information set forth on the Mortgage Loan
Schedule as to the information set forth in (i), (ii), (v) and (vi) of the
definition of "Mortgage Loan Schedule" accurately reflects the information
set forth in the Indenture Trustee's Mortgage File delivered on such date.
(iii) to review (or cause to be reviewed) each Indenture
Trustee's Mortgage File within ninety (90) days after the Closing Date or
any Subsequent Transfer Date, as applicable (or, with respect to any
Qualified Substitute Mortgage Loans, within ninety (90) days after the
receipt by the Collateral Agent, on behalf of the Indenture Trustee,
thereof), and to deliver to the Unaffiliated Seller, the Servicer, the
Depositor, the Indenture Trustee, the Rating Agencies and the Note Insurer
a certification in the form attached hereto as Exhibit E to the effect
that, except as otherwise noted, as to each Mortgage Loan listed in the
related Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or any Mortgage Loan specifically identified in such certification as not
covered by such certification), (i) all documents required to be delivered
to it pursuant to Section 2.05 are in its possession, (ii) each such
document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or
corrections shall not constitute physical alteration if they reasonably
appear to be initialed by the Mortgagor), appears regular on its face and
relates to such Mortgage Loan, and (iii) based on its examination and only
as to the foregoing documents, the information set forth in the definition
of "Mortgage Loan Schedule" accurately reflects the information set forth
in the Indenture Trustee's Mortgage File delivered on such date.
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In performing any such review, the Collateral Agent may
conclusively rely on the Unaffiliated Seller as to the purported genuineness of
any such document and any signature thereon. It is understood that the scope of
the Collateral Agent's review of the Indenture Trustee's Mortgage Files is
limited solely to confirming that the documents listed in Section 2.05 have been
executed and received and relate to the Indenture Trustee's Mortgage Files
identified in the related Mortgage Loan Schedule. The Collateral Agent shall be
under no duty or obligation 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 are other
than what they purport to be on their face.
(c) If the Collateral Agent during the process of reviewing
the Indenture Trustee's Mortgage Files finds any document constituting a part of
a Indenture Trustee's Mortgage File which is not executed, has not been
received, is unrelated to the Mortgage Loan identified in the related Mortgage
Loan Schedule, or does not conform to the requirements of Section 2.05 or the
description thereof as set forth in the related Mortgage Loan Schedule, the
Collateral Agent shall promptly so notify the Servicer, the Unaffiliated Seller,
the Originators, the Note Insurer and the Indenture Trustee. Pursuant to Section
2.06(b) of the Unaffiliated Seller's Agreement, the Unaffiliated Seller and the
Originators have agreed to use reasonable efforts to cause to be remedied a
material defect in a document constituting part of an Indenture Trustee's
Mortgage File of which it is so notified by the Collateral Agent. If, however,
within sixty (60) days after the Collateral Agent's notice to it respecting such
defect the Unaffiliated Seller or the Originators have not caused to be remedied
the defect and the defect materially and adversely affects the interest of the
Noteholders and the Note Insurer in the related Mortgage Loan, the Unaffiliated
Seller and the Originators will be obligated, pursuant to Section 3.05 of the
Unaffiliated Seller's Agreement, to either (i) substitute in lieu of such
Mortgage Loan a Qualified Substitute Mortgage Loan in the manner and subject to
the conditions set forth in Section 3.05 of the Unaffiliated Seller's Agreement
or (ii) purchase such Mortgage Loan at a purchase price equal to the Loan
Repurchase Price. Upon receipt by the Collateral Agent and the Indenture Trustee
of a certification, in the form attached hereto as Exhibit F, of a Servicing
Officer of such substitution or purchase and, in the case of a substitution,
upon receipt by the Collateral Agent, on behalf of the Indenture Trustee, of the
related Indenture Trustee's Mortgage File, and the deposit of the amounts
described above in the Collection Account, the Collateral Agent shall release to
the Servicer for release to the Unaffiliated Seller the related Indenture
Trustee's Mortgage File and the Indenture Trustee shall execute, without
recourse, and deliver such instruments of transfer furnished by the Unaffiliated
Seller as may be necessary to transfer such Mortgage Loan to the Unaffiliated
Seller. The Collateral Agent shall notify the Indenture Trustee, who shall
notify the Note Insurer if the Unaffiliated Seller fails to repurchase or
substitute for a Mortgage Loan in accordance with the foregoing.
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Section 2.07 Grant of Security Interest. (a) It is intended
that the conveyance of the Mortgage Loans and other property by the Depositor to
the Trust as provided in this Article II be, and be construed as, a sale of the
Mortgage Loans and such other property by the Depositor to the Trust. It is,
further, not intended that such conveyance be deemed a pledge of the Mortgage
Loans or such other property by the Depositor to the Trust to secure a debt or
other obligation of the Depositor. However, in the event that the Mortgage Loans
or any of such other property are held to be property of the Depositor, or if
for any reason this Agreement is held or deemed to create a security interest in
the Mortgage Loans or any of such other property, then it is intended that: (i)
this Agreement shall also be deemed to be a security agreement within the
meaning of the Uniform Commercial Code; (ii) the conveyance provided for in this
Article II 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 such other property and all amounts payable to the
holders of the Mortgage Loans in accordance with the terms thereof and all
proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including, without limitation,
all amounts from time to time held or invested in the Distribution Account,
whether in the form of cash, instruments, securities or other property; (iii)
the possession by the Collateral Agent, on behalf of the Indenture Trustee, of
the Mortgage Notes 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 the Uniform Commercial Code; and (iv) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts or
confirmations from financial intermediaries, bailees or agents, as applicable,
of the Indenture Trustee for the purpose of perfecting such security interest
under applicable law. The Depositor, the Servicer, on behalf of the Trust, the
Collateral Agent and the Indenture Trustee, shall, to the extent consistent with
this Agreement, take such actions as may be reasonably necessary to ensure that,
if this Agreement were deemed to create a security interest in the Mortgage
Loans or any of such other property, such security interest would be deemed to
be a perfected security interest of first priority under applicable law and will
be maintained as such throughout the term of this Agreement.
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(b) The Unaffiliated Seller, the Depositor and the Servicer
shall take no action inconsistent with the Trust's ownership of the Trust Estate
and each shall indicate or shall cause to be indicated in its records and
records held on its behalf that ownership of each Mortgage Loan and the other
assets in the Trust Estate are held by the Collateral Agent, on behalf of the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer. In
addition, the Unaffiliated Seller, the Depositor and the Servicer shall respond
to any inquiries from third parties with respect to ownership of a Mortgage Loan
or any other asset in the Trust Estate by stating that it is not the owner of
such asset and that the Trust is the owner of such Mortgage Loan or other asset
in the Trust Estate, which is held by the Collateral Agent, on behalf of the
Indenture Trustee, for the benefit of the Noteholders and the Note Insurer.
Section 2.08 Further Action Evidencing Assignments. (a) The
Servicer agrees that, from time to time, at its expense, it shall cause the
Unaffiliated Seller to (and the Depositor on behalf of itself also agrees that
it shall), promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or appropriate, or that the
Servicer, the Indenture Trustee or the Collateral Agent may reasonably request,
in order to perfect, protect or more fully evidence the transfer of ownership of
the Mortgage Loans and other assets in the Trust Estate or to enable the
Collateral Agent, on behalf of the Indenture Trustee, to exercise or enforce any
of its rights hereunder. Without limiting the generality of the foregoing, the
Servicer and the Depositor will, upon the request of the Servicer, the Indenture
Trustee or the Collateral Agent execute and file (or cause to be executed and
filed) such real estate filings, financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate.
(b) The Depositor hereby grants to the Servicer, the Indenture
Trustee and the Collateral Agent powers of attorney to execute all documents on
its behalf under this Agreement and the Unaffiliated Seller's Agreement as may
be necessary or desirable to effectuate the foregoing.
Section 2.09 Assignment of Agreement. The Depositor hereby
acknowledges and agrees that the Trust may assign its interest under this
Agreement to the Indenture Trustee, for the benefit of the Noteholders and the
Note Insurer, as may be required to effect the purposes of the Indenture,
without further notice to, or consent of, the Depositor, and the Indenture
Trustee shall succeed to such of the rights and obligations of the Trust
hereunder as shall be so assigned. The Trust shall, pursuant to the Indenture,
assign all of its right, title and interest in and to the Mortgage Loans and its
right to exercise the remedies created by Section 2.06 and 3.05 of the
Unaffiliated Seller's Agreement for breaches of the representations, warranties,
agreements and covenants of the Unaffiliated Seller or the Originators contained
in Sections 2.05, 2.06, 3.02 and 3.03 of the Unaffiliated Seller's Agreement,
assign such right, title and interest to the Indenture Trustee, for the benefit
of the Noteholders and the Note Insurer. The Depositor agrees that, upon such
assignment to the Indenture Trustee, such representations, warranties,
agreements and covenants will run to and be for the benefit of the Indenture
Trustee and the Indenture Trustee may enforce, without joinder of the Depositor
or the Trust, the repurchase obligations of the Unaffiliated Seller and the
Originators set forth herein with respect to breaches of such representations,
warranties, agreements and covenants.
Article III.
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations of the Servicer. The Servicer hereby represents and
warrants to the Indenture Trustee, the Depositor, the Collateral Agent, the
Trust, the Note Insurer and the Noteholders as of the Closing Date and during
the term of this Agreement that:
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(a) Each of the Servicer and the Subservicers is duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation and has the power to own its assets and
to transact the business in which it is currently engaged. Each of the
Servicer and the Subservicers is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or leased by
it or the performance of its obligations hereunder requires such
qualification and in which the failure so to qualify could reasonably be
expected to have a material adverse effect on the business, properties,
assets, or condition (financial or other) of the Servicer or the
Subservicers or the performance of their respective obligations hereunder;
(b) The Servicer has the power and authority to make, execute,
deliver and perform this Agreement and all of the transactions contemplated
under this Agreement, and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement, and
assuming the due authorization, execution and delivery hereof by the other
parties hereto constitutes, or will constitute, the legal, valid and
binding obligation of the Servicer, enforceable in accordance with its
terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity
principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(c) The Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or
agency which consent already has not been obtained in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except such as have been obtained prior to the Closing Date;
(d) The execution, delivery and performance of this Agreement
by the Servicer will not violate any provision of any existing law or
regulation or any order or decree of any court or the charter or bylaws of
the Servicer, or constitute a breach of any mortgage, indenture, contract
or other Agreement to which the Servicer is a party or by which it may be
bound;
(e) There is no action, suit, proceeding or investigation
pending or threatened against the Servicer or the Subservicers which,
either in any one instance or in the aggregate, is, in the Servicer's
judgment, likely to result in any material adverse change in the business,
operations, financial condition, properties, or assets of the Servicer or
the Subservicers, or in any material impairment of the right or ability of
any of them to carry on its business substantially as now conducted, or in
any material liability on the part of any of them, or which would draw into
question the validity of this Agreement, the Notes, or the Mortgage Loans
or of any action taken or to be taken in connection with the obligations of
the Servicer or the Subservicers contemplated herein or therein, or which
would be likely to impair materially the ability of the Servicer or the
Subservicers to perform their respective obligations hereunder;
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(f) Neither this Agreement nor any statement, report, or other
document furnished by the Servicer or the Subservicers pursuant to this
Agreement or in connection with the transactions contemplated hereby,
including, without limitation, the sale or placement of the Notes, contains
any untrue statement of fact provided by or on behalf of the Servicer or
omits to state a fact necessary to make the statements provided by or on
behalf of the Servicer contained herein or therein not misleading:
(g) The Servicer does not believe, nor does it have any reason
or cause to believe, that it cannot perform each and every covenant
contained in this Agreement; and
(h) None of the Servicer or the Subservicers is an "investment
company" or a company "controlled by an investment company," within the
meaning of the Investment Company Act of 1940, as amended.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.01 shall survive the
delivery of the respective Indenture Trustee's Mortgage Files to the Collateral
Agent, on behalf of the Indenture Trustee or to another custodian, as the case
may be, and inure to the benefit of the Indenture Trustee.
Section 3.02 Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Indenture Trustee, the Trust, the Collateral Agent and the Servicer that as of
the date of this Agreement or as of such date specifically provided herein:
(a) The Depositor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) The Depositor has the corporate power and authority to
convey the Mortgage Loans and to execute, deliver and perform, and to enter
into and consummate transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Depositor, all requisite corporate action
having been taken, and, assuming the due authorization, execution and
delivery hereof by the other parties hereto, constitutes or will constitute
the legal, valid and binding agreement of the Depositor, enforceable
against the Depositor in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at
law);
(d) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority or
court is required for the execution, delivery and performance of or
compliance by the Depositor with this Agreement or the consummation by the
Depositor of any of the transactions contemplated hereby, except as have
been made on or prior to the Closing Date;
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(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this
Agreement, (i) conflicts or will conflict with or results or will result in
a breach of, or constitutes or will constitute a default or results or will
result in an acceleration under (A) the charter or bylaws of the Depositor,
or (B) of any term, condition or provision of any material indenture, deed
of trust, contract or other agreement or instrument to which the Depositor
or any of its subsidiaries is a party or by which it or any of its
subsidiaries is bound; (ii) results or will result in a violation of any
law, rule, regulation, order, judgment or decree applicable to the
Depositor of any court or governmental authority having jurisdiction over
the Depositor or its subsidiaries; or (iii) results in the creation or
imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or
against or investigations of, the Depositor pending, or to the knowledge of
the Depositor, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Depositor's
reasonable judgment, might materially and adversely affect the performance
by the Depositor of its obligations under this Agreement, or the validity
or enforceability of this Agreement; and
(g) The Depositor is not in default with respect to any order
or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency that may materially and adversely
affect its performance hereunder.
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.02 shall survive delivery
of the respective Indenture Trustee's Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee or to another custodian, as the case may be, and
shall inure to the benefit of the Indenture Trustee.
Section 3.03 Representations, Warranties and Covenants of the
Collateral Agent. The Collateral Agent hereby represents, warrants and covenants
to the Indenture Trustee, the Trust, the Servicer and the Depositor that as of
the date of this Agreement or as of such date specifically provided herein:
(a) The Collateral Agent is a national banking association
duly organized, validly existing and in good standing under the laws of the
United States of America;
(b) The Collateral Agent has the corporate power and authority
to execute, deliver and perform, and to enter into and consummate
transactions contemplated by this Agreement; and
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Collateral Agent, all requisite corporate
action having been taken, and, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes or will
constitute the legal, valid and binding agreement of the Collateral Agent,
enforceable against the Collateral Agent in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law).
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It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.03 shall survive delivery
of the respective Indenture Trustee's Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee or to another custodian, as the case may be, and
shall inure to the benefit of the Indenture Trustee.
Section 3.04 Representations, Warranties and Covenants of the
Indenture Trustee. The Indenture Trustee hereby represents, warrants and
covenants to the Collateral Agent, the Trust, the Servicer and the Depositor
that as of the date of this Agreement or as of such date specifically provided
herein:
(a) The Indenture Trustee is a banking corporation duly
organized, validly existing and in good standing under the laws of the
State of New York;
(b) The Indenture Trustee has the corporate power and
authority to execute, deliver and perform, and to enter into and consummate
transactions contemplated by this Agreement;
(c) This Agreement has been duly and validly authorized,
executed and delivered by the Indenture Trustee, all requisite corporate
action having been taken, and, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes or will
constitute the legal, valid and binding agreement of the Indenture Trustee,
enforceable against the Indenture Trustee in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law);
It is understood and agreed that the representations,
warranties and covenants set forth in this Section 3.04 shall survive delivery
of the respective Indenture Trustee's Mortgage Files to the Collateral Agent, on
behalf of the Indenture Trustee or to another custodian, as the case may be.
Article IV.
THE MORTGAGE LOANS
Section 4.01 Representations and Warranties Concerning the
Mortgage Loans. With respect to each Mortgage Loan, the Depositor hereby assigns
to the Trust, pursuant to Section 2.07 of the Unaffiliated Seller's Agreement,
the representations, warranties and covenants of the Unaffiliated Seller and the
Originators set forth in Sections 3.01, 3.02 and 3.03 of the Unaffiliated
Seller's Agreement. Such representations, warranties and covenants are made or
deemed to be made (x) with respect to the Initial Mortgage Loans, as of the
Initial Cut-Off Date and (y) with respect to the Subsequent Mortgage Loans, as
of the related Subsequent Cut-Off Date.
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Section 4.02 Purchase and Substitution. (a) It is understood
and agreed that the representations and warranties set forth in Sections 3.01,
3.02 and 3.03 of the Unaffiliated Seller's Agreement shall survive the purchase
by the Depositor of the Mortgage Loans, the subsequent transfer thereof by the
Depositor to the Trust, the subsequent pledge thereof by the Trust to the
Indenture Trustee, for the benefit of the Noteholders and the Notes Insurer, and
the delivery of the Notes to the Noteholders, and shall continue in full force
and effect, notwithstanding any restrictive or qualified endorsement on the
Mortgage Notes and notwithstanding subsequent termination of this Agreement or
the Unaffiliated Seller's Agreement.
(b) Upon discovery by the Unaffiliated Seller, the Depositor,
the Servicer, any Subservicer, the Indenture Trustee, the Collateral Agent, the
Note Insurer or a Noteholder of a breach of any of the representations and
warranties in Sections 3.01, 3.02 or 3.03 of the Unaffiliated Seller's Agreement
which materially and adversely affects the value of the Mortgage Loans or the
interest of the Noteholders or the Note Insurer, or which materially and
adversely affects the interests of the Note Insurer or the Noteholders in the
related Mortgage Loan in the case of a representation and warranty relating to a
particular Mortgage Loan (notwithstanding that such representation and warranty
was made to the Unaffiliated Seller's or the Originator's best knowledge), the
party discovering such breach or failure shall promptly (and in any event within
five (5) days of the discovery) give written notice thereof to the others.
Within sixty (60) days of the earlier of its discovery or its receipt of notice
of any breach of a representation or warranty, the Servicer shall, or shall
cause the Unaffiliated Seller or an Originator to, (a) promptly cure such breach
in all material respects, (b) purchase such Mortgage Loan on the next succeeding
Servicer Distribution Date, in the manner and at the price specified in Section
2.06(b) and this Section 4.02, or (c) remove such Mortgage Loan from the Trust
Estate (in which case it shall become a Deleted Mortgage Loan) and substitute
one or more Qualified Substitute Mortgage Loans in the manner specified in
Section 2.06(b) and this Section 4.02. The Collateral Agent shall give prompt
written notice to the Indenture Trustee, who shall deliver such notice to the
Note Insurer and the Rating Agencies of any repurchase or substitution made
pursuant to this Section 4.02 or Section 2.06(b).
(c) As to any Deleted Mortgage Loan for which the Unaffiliated
Seller substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer
shall cause the Unaffiliated Seller or an Originator, as applicable, to effect
such substitution by delivering to the Indenture Trustee a certification, in the
form attached hereto as Exhibit F, executed by a Servicing Officer, and the
documents described in Sections 2.05(a)(i)-(vi) for such Qualified Substitute
Mortgage Loan or Loans.
(d) The Servicer shall deposit in the Distribution Account all
payments received in connection with such Qualified Substitute Mortgage Loan or
Loans after the date of such substitution. Monthly Payments received with
respect to Qualified Substitute Mortgage Loan or Loans on or before the date of
substitution will be retained by the Unaffiliated Seller. The Trust will own all
payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Unaffiliated Seller shall thereafter be entitled to retain
all amounts subsequently received in respect of such Deleted Mortgage Loan. The
Servicer shall give written notice to the Indenture Trustee, the Collateral
Agent and the Note Insurer that such substitution has taken place and 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. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects.
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(e) [Reserved];
(f) It is understood and agreed that the obligations of the
Unaffiliated Seller and the Originators set forth in Sections 2.06 and 3.05 of
the Unaffiliated Seller's Agreement to, and the Servicer's obligation set forth
in this Section 4.02 to cause the Unaffiliated Seller and the Originators to,
cure, purchase or substitute for a defective Mortgage Loan, or to indemnify as
described in Section 3.05(g) of the Unaffiliated Seller's Agreement, constitute
the sole remedies of the Indenture Trustee, the Collateral Agent, the Note
Insurer and the Noteholders respecting a breach of the representations and
warranties of the Unaffiliated Seller and the Originators set forth in Sections
3.01, 3.02 and 3.03 of the Unaffiliated Seller's Agreement.
(g) Pursuant to Section 3.05(g) of the Unaffiliated Seller's
Agreement, the Unaffiliated Seller and the Originators shall be obligated to
indemnify the Indenture Trustee, the Trust, the Owner Trustee, the Collateral
Agent, the Noteholders and the Note Insurer for any third party claims arising
out of a breach by the Unaffiliated Seller or the related Originator of
representations or warranties regarding the Mortgage Loans.
(h) Pursuant to Section 3.05(h) of the Unaffiliated Seller's
Agreement, the Unaffiliated Seller and each of the Originators shall be jointly
and severally responsible for any repurchase, cure or substitution obligation of
the Unaffiliated Seller or any of the Originators under this Agreement, the
Unaffiliated Seller's Agreement or the Indenture.
Article V.
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01 The Servicer. The Servicer shall service and
administer the Mortgage Loans in accordance with the Accepted Servicing
Practices and shall have full power and authority to do any and all things not
inconsistent therewith in connection with such servicing and administration
which it may deem necessary or desirable subject to the limitations set forth in
this Agreement. The Indenture Trustee shall furnish the Servicer with any powers
of attorney and other documents necessary or appropriate to enable the Servicer
to carry out its servicing and administrative duties hereunder. Without limiting
the generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered by the Indenture Trustee, to execute and deliver, on
behalf of itself, the Noteholders and the Indenture Trustee or any of them, any
and all instruments of satisfaction or cancellation, or of partial or full
release or discharge and all other comparable instruments, and to effect such
modifications, waivers, indulgences and other like matters as are in its
judgment necessary or desirable, with respect to the Mortgage Loans and the
Mortgaged Properties and the servicing and administration thereof. The Servicer
shall notify the Indenture Trustee of any such waiver, release, discharge,
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modification, indulgence or other such matter by delivering to the Indenture
Trustee an Officer's Certificate certifying that such agreement is in compliance
with this Section 5.01 together with the original copy of any written agreement
or other document executed in connection therewith, all of which written
agreements or documents shall, for all purposes, be considered a part of the
related Indenture Trustee's Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. Notwithstanding anything
in this Agreement to the contrary, the Servicer shall not permit any
modification with respect to any Mortgage Loan unless (i) the modifications do
not decrease the Mortgage Interest Rate, reduce or increase the principal
balance, decrease the lien priority, increase the current LTV above the lessor
of the current LTV or the original LTV, or change the final maturity date on or
of such Mortgage Loan and (ii) the Note Insurer consents to such modifications
in writing; provided, however, that the Servicer shall be permitted to extend
the final maturity date on a Mortgage Loan by 180 days or less without the
consent of the Note Insurer.
The relationship of the Servicer (and of any successor to the
Servicer as servicer under this Agreement) to the Indenture Trustee under this
Agreement is intended by the parties to be that of an independent contractor and
not that of a joint venturer, partner or agent.
Section 5.02 Collection of Certain Mortgage Loan Payments;
Collection Account. (a) The Servicer shall make its 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 Accepted Servicing Practices. Consistent with the foregoing,
the Servicer may in its discretion waive any assumption fees or other fees which
may be collected in the ordinary course of servicing such Mortgage Loans.
(b) The Servicer shall establish and maintain, in the name of
the Indenture Trustee, the Collection Account, in trust for the benefit of the
Noteholders and the Note Insurer. The Collection Account shall be established
and maintained as an Eligible Account.
(c) The Servicer shall deposit in the Collection Account any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after the Cut-Off Date, and thereafter, on each Business Day
(except as otherwise permitted herein), the following payments and collections
received or made by it (other than in respect of principal collected and
interest due on the Mortgage Loans on or before the Cut-Off Date):
(i) payments of interest on the Mortgage Loans;
(ii) payments of principal of the Mortgage Loans;
(iii) the Loan Repurchase Price of Mortgage Loans repurchased
pursuant to Sections 2.06, 4.02 or 5.05;
(iv) the Substitution Adjustment received in connection with
Mortgage Loans for which Qualified Substitute Mortgage Loans are received
pursuant to Sections 2.06, 4.02 and 3.03;
(v) all Liquidation Proceeds; and
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(vi) all Insurance Proceeds (including, for this purpose, any
amounts required to be deposited by the Servicer pursuant to Section 5.04
hereof).
It is understood that the Servicer need not deposit amounts
representing fees, prepayment premiums, late payment charges or extension or
other administrative charges payable by Mortgagors, or amounts received by the
Servicer for the account of Mortgagors for application towards the payment of
taxes, insurance premiums, assessments and similar items.
(d) The Servicer shall invest any funds in the Collection
Account in Permitted Investments, which shall mature not later than the Business
Day next preceding the Servicer Distribution Date next following the date of
such investment (except that any investment held by the Indenture Trustee may
mature on such Servicer Distribution Date) and shall not be sold or disposed of
prior to its maturity. All net income and gain realized from any such investment
shall be for the benefit of the Servicer and shall be subject to its withdrawal
or order on a Servicer Distribution Date. The Servicer shall deposit from its
own funds the amount of any loss, to the extent not offset by investment income
or earnings, in the Collection Account upon the realization of such loss.
Section 5.03 Permitted Withdrawals from the Collection
Account. The Servicer may make withdrawals from the Collection Account, on or
prior to any Servicer Distribution Date, for the following purposes:
(a) to reimburse the Servicer for Liquidation Expenses
theretofore incurred in respect of any Mortgage Loan in an amount not to
exceed the amount of the sum of the related Insurance Proceeds and
Liquidation Proceeds deposited in the Collection Account pursuant to
Section 5.02(c)(v)-(vi);
(b) to reimburse the Servicer for amounts expended by it
pursuant to Section 5.04 in good faith in connection with the restoration
of damaged property, in an amount not to exceed the amount of the related
Insurance Proceeds and Liquidation Proceeds (net of withdrawals pursuant to
Section 5.03(a)) and amounts representing proceeds of other insurance
policies covering the property subject to the related Mortgage deposited in
the Collection Account pursuant to Section 5.02(c)(v)-(vi);
(c) to pay to the Unaffiliated Seller amounts received in
respect of any Defective Mortgage Loan purchased or substituted for by the
Unaffiliated Seller to the extent that the distribution of any such amounts
on the Servicer Distribution Date upon which the proceeds of such purchase
are distributed would make the total amount distributed in respect of any
such Mortgage Loan on such Servicer Distribution Date greater than the Loan
Repurchase Price or the Substitution Adjustment therefor;
(d) to reimburse the Servicer for unreimbursed Servicing
Advances, without interest, with respect to the Mortgage Loans for which it
has made a Servicing Advance, from subsequent collections with respect to
interest on such Mortgage Loans and from Liquidation Proceeds, Insurance
Proceeds and/or the Loan Repurchase Price or Substitution Adjustment of or
relating to such Mortgage Loans;
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(e) to reimburse the Servicer for any Periodic Advances
determined in good faith to have become Nonrecoverable Advances, such
reimbursement to be made from any funds in the Collection Account;
(f) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with a
final, nonappealable order of a court having competent jurisdiction;
(g) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein; and
(h) to pay the Servicer the Servicing Compensation pursuant to
Section 5.08 hereof to the extent not retained or paid.
The Servicer shall keep and maintain a separate accounting for
each Mortgage Loan for the purpose of accounting for withdrawals from the
Collection Account pursuant to this Section 5.03.
Section 5.04 Hazard Insurance Policies; Property Protection
Expenses. (a) The Servicer shall cause to be maintained for each Mortgage Loan a
hazard insurance policy with extended coverage which contains a standard
mortgagee's clause with an appropriate endorsement in an amount equal to the
lesser of (x) the maximum insurable value of the related Mortgaged Property or
(y) the sum of the Principal Balance of such Mortgage Loan plus the outstanding
balance of any mortgage loan senior to such Mortgage Loan, but in no event shall
such amount be less than is necessary to prevent the Mortgagor from becoming a
coinsurer thereunder. The Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the sum of the Principal Balance of such Mortgage Loan and the
principal balance of any mortgage loan senior to such Mortgage Loan at the time
of such foreclosure plus accrued interest and the good-faith estimate of the
Servicer of related Liquidation Expenses to be incurred in connection therewith.
Amounts collected by the Servicer under any such policies shall be deposited in
the Collection Account to the extent that they constitute Liquidation Proceeds
or Insurance Proceeds. Each hazard insurance policy shall contain a standard
mortgage clause naming the Originator, its successors and assigns, as mortgagee.
The Servicer shall be under no obligation to require that any Mortgagor maintain
earthquake or flood or other additional insurance and shall be under no
obligation itself to maintain any such additional insurance on property acquired
in respect of a Mortgage Loan, other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance.
(b) If the Servicer shall obtain and maintain a blanket policy
issued by an insurer acceptable to the Rating Agencies and the Note Insurer
insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in Section
5.04(a), 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 a policy
complying with Section 5.04(a), and there shall have been a loss which would
have been covered by such policy, deposit in the Collection Account the amount
not otherwise payable under the blanket policy because of such deductible
clause.
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(c) If the Mortgaged Property or REO Property is located at
the time of origination of the Mortgage Loan in a federally designated special
flood hazard area (and if the flood insurance policy referenced herein has been
made available), the Servicer will cause to be maintained flood insurance in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the sum of the Principal Balance of the related Mortgage Loan and the
principal balance of the related first lien, if any, (ii) the maximum insurable
value of the related Mortgaged Property, and (iii) 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).
Section 5.05 Assumption and Modification Agreements. In any
case in which a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall exercise its right to accelerate the maturity of
the related Mortgage Loan and require that the Principal Balance thereof be paid
in full on or prior to such conveyance by the Mortgagor under any "due-on-sale"
clause applicable thereto. If such "due-on-sale" clause, by its terms, is not
operable or the Servicer is prevented, as provided in the last paragraph of this
Section 5.05, from enforcing any such clause, the Servicer is authorized,
subject to the consent of the Note Insurer, to take or enter into an assumption
and modification agreement from or with the Person to whom such property has
been or is about to be conveyed, pursuant to which such Person becomes liable
under the Mortgage Note and the Mortgagor remains liable thereon or, if the
Servicer in its reasonable judgment finds it appropriate, is released from
liability thereon. The Servicer shall notify the Indenture Trustee and the
Collateral Agent that any assumption and modification agreement has been
completed by delivering to the Indenture Trustee, the Collateral Agent and the
Note Insurer an Officer's Certificate certifying that such agreement is in
compliance with this Section 5.05 together with the original copy of such
assumption and modification agreement. Any such assumption and modification
agreement shall, for all purposes, be considered a part of the related Mortgage
File to the same extent as all other documents and instruments constituting a
part thereof. In connection with any such agreement, the then current Mortgage
Interest Rate thereon shall not be increased or decreased. Any fee collected by
the Servicer for entering into any such agreement will be retained by the
Servicer as additional servicing compensation. At its sole election, the
Servicer may purchase from the Trust any Mortgage Loan that has been assumed in
accordance with this Section 5.05 within one month after the date of such
assumption at a price equal to the greater of (i) the fair market value of such
Mortgage Loan (as determined by the Servicer in its good faith judgment) and
(ii) the Loan Repurchase Price. Such amount, if any, shall be deposited into the
Collection Account in the Due Period in which such repurchase is made.
Notwithstanding the foregoing paragraph of this Section 5.05
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, or transfer of any Mortgaged Property
without the assumption thereof, by operation of law or any assumption or
transfer which the Servicer reasonably believes it may be restricted by law from
preventing for any reason whatsoever.
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Section 5.06 Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably convert to ownership
Mortgaged 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 5.02(a). Prior to
conducting any sale in a foreclosure proceeding or accepting a deed-in-lieu of
foreclosure with respect to any Mortgaged Property, the Servicer shall cause an
environmental review to be performed, in accordance with Accepted Servicing
Practices on the Mortgaged Property by a company such as Equifax, Inc. or
Toxicheck. If such review reveals that the Mortgaged Property has on it, under
it or is near hazardous or toxic material or waste or reveals any other
environmental problem, the Servicer shall not foreclose or accept a deed-in-lieu
of foreclosure, without the prior written consent of the Note Insurer. In
connection with such foreclosure or other conversion, the Servicer shall follow
such practices (including, in the case of any default on a related senior
mortgage loan, the advancing of funds to correct such default) and procedures
which are consistent with Accepted Servicing Practices as it shall deem
necessary or advisable and as shall be normal and usual in its general first and
second mortgage loan servicing activities. The foregoing is subject to the
proviso that the Servicer shall not be required to expend its own funds in
connection with any foreclosure or towards the correction of any default on a
related senior mortgage loan or restoration of any property unless, in the
reasonable judgment of the Servicer, such expenses will be recoverable from
Liquidation Proceeds.
(b) In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Indenture Trustee, or to its nominee,
on behalf of Noteholders and the Note Insurer.
(c) Any Insurance Proceeds or Liquidation Proceeds received
with respect to a Mortgage Loan or REO Property (other than received in
connection with a purchase by the Trust Certificateholders of all the Mortgage
Loans and REO Properties in the Trust Estate pursuant to Section 10.01 of the
Indenture) will be applied in the following order of priority, in each case to
the extent of Available Funds: first, to pay the Servicer any accrued and unpaid
Servicing Fees relating to such Mortgage Loan; second, to reimburse the Servicer
or any Subservicer for any related unreimbursed Servicing Advances, and any
related unreimbursed Periodic Advances theretofore funded by the Servicer or any
Subservicer from its own funds, in each case, with respect to the related
Mortgage Loan; third, to accrued and unpaid interest on the Mortgage Loan, at
the Mortgage Interest Rate (or at such lesser rate as may be in effect for such
Mortgage Loan pursuant to application of the Civil Relief Act) on the Principal
Balance of such Mortgage Loan, to the date such Mortgage Loan is determined to
be a Liquidated Mortgage Loan if it is a Liquidated Mortgage Loan, or to the Due
Date in the Due Period prior to the Distribution Date on which such amounts are
to be distributed if such determination has not yet been made, minus any unpaid
Servicing Fees with respect to such Mortgage Loan; fourth, to the extent of the
Principal Balance of the Mortgage Loan outstanding immediately prior to the
receipt of such proceeds, as a recovery of principal of the related Mortgage
Loan; and fifth, to any prepayment or late payment charges or penalty interest
payable in connection with the receipt of such proceeds and to all other fees
and charges due and payable with respect to such Mortgage Loan. The amount of
any gross Insurance Proceeds and Liquidation Proceeds received with respect to
any Mortgage Loan or REO Property minus the amount of any unreimbursed Servicing
Advances, unreimbursed Periodic Advances or unpaid Servicing Fees, in each case,
with respect to the related Mortgage Loan, are the "Net Recovery Proceeds" with
respect to such Mortgage Loan or REO Property.
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Section 5.07 Indenture Trustee to Cooperate. Upon the payment
in full of the Principal Balance of any Mortgage Loan, the Servicer will notify
the Indenture Trustee and the Collateral Agent by a certification (which
certification shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 5.02 have been so deposited) of a
Servicing Officer. Upon any such payment in full, the Servicer is authorized to
execute, pursuant to the authorization contained in Section 5.01, an instrument
of satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Servicer if required by applicable law and be delivered
to the Person entitled thereto, it being understood and agreed that no expenses
incurred in connection with such instrument of satisfaction shall be reimbursed
from the Collection Account. From time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, the Collateral Agent shall, upon
request of the Servicer and delivery to the Collateral Agent of a Request for
Release signed by a Servicing Officer, release the related Mortgage File to the
Servicer and shall execute such documents as shall be necessary for the
prosecution of any such proceedings. Such Request for Release shall obligate the
Servicer to return the Indenture Trustee's Mortgage File to the Collateral Agent
when the need therefor by the Servicer no longer exists unless the Mortgage Loan
shall be liquidated, in which case, upon receipt of a certificate of a Servicing
Officer similar to that hereinabove specified, the Request for Release shall be
released by the Collateral Agent to the Servicer.
Section 5.08 Servicing Compensation; Payment of Certain
Expenses by Servicer. On each Distribution Date, the Servicer shall be entitled
to receive, and the Indenture Trustee shall pay, out of collections on the
Mortgage Loans for the Due Period, as servicing compensation for such Due
Period, an amount (the "Monthly Servicing Fee") equal to the product of
one-twelfth of the Servicing Fee Rate and the aggregate outstanding Principal
Balance of each Pool of Mortgage Loans as of the beginning of such Due Period.
Additional servicing compensation in the form of assumption fees, late payment
charges or extension and other administrative charges shall be retained by the
Servicer. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder (including payment of all fees and
expenses of the Subservicer, payment of the Indenture Trustee Fee and payment of
the Collateral Agent Fee to the extent that monies in the Collection Account are
insufficient therefor, as provided in Section 6.16 of the Indenture and Section
9.05 hereof, and all other fees and expenses not expressly stated hereunder to
be payable by or from another source) and shall not be entitled to reimbursement
therefor except as specifically provided herein.
Section 5.09 Annual Statement as to Compliance. The Servicer
will deliver to the Indenture Trustee, the Collateral Agent, the Rating
Agencies, the Note Insurer and each Noteholder, on or before April 30 of each
year, beginning April 30, 2000, an Officer's Certificate of the Servicer stating
that (a) a review of the activities of the Servicer during the preceding
calendar year and of its performance under this Agreement has been made under
such officer's supervision and (b) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all its material obligations
under this 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.
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Section 5.10 Annual Independent Public Accountants' Servicing
Report. On or before April 30 of each year, beginning April 30, 2000, the
Servicer at its expense shall cause a firm of independent public accountants
that is a member of the American Institute of Certified Public Accountants (who
may also render other services to the Servicer) to furnish a report to the
Indenture Trustee, the Collateral Agent, the Rating Agencies and each Noteholder
to the effect that such firm has examined certain documents and records relating
to the servicing of mortgage loans under servicing agreements (including this
Agreement) substantially similar to this Agreement, and that such examination,
which has been conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers (to the extent that the procedures in
such audit guide are applicable to the servicing obligations set forth in such
agreements), has disclosed no items of noncompliance with the provisions of this
Agreement which, in the opinion of such firm, are material, except for such
items of noncompliance as shall be set forth in such report.
Section 5.11 Access to Certain Documentation. The Servicer
shall permit the designated agents or representatives of each Noteholder, the
Note Insurer, the Collateral Agent and the Indenture Trustee (i) to examine and
make copies of and abstracts from all books, records and documents (including
computer tapes and disks) in the possession or under the control of the Servicer
relating to the Mortgage Loans and (ii) to visit the offices and properties of
the Servicer for the purpose of examining such materials and to discuss matters
relating to the Mortgage Loans and the Servicer's performance under this
Agreement with any of the officers or employees of the Servicer having knowledge
thereof and with the independent public accountants of the Servicer (and by this
provision the Servicer authorizes its accountants to discuss their respective
finances and affairs), all at such reasonable times, as often as may be
reasonably requested and without charge to such Noteholder, the Note Insurer,
the Collateral Agent or the Indenture Trustee.
Section 5.12 Maintenance of Fidelity Bond. The Servicer shall
during the term of its service as Servicer maintain in force a fidelity bond and
errors and omissions insurance in respect of its officers, employees or agents.
Such bond and insurance shall comply with the requirements from time to time of
the FNMA for Persons performing servicing for mortgage loans purchased by such
association.
Section 5.13 The Subservicers. The parties acknowledge that
the Servicer intends to appoint the Subservicers as the Servicer's agents for
the purpose of servicing on the Servicer's behalf such of the Mortgage Loans as
were originated in the States of New Jersey, Pennsylvania and New York. The
Servicer agrees to cause the Subservicers to service such Mortgage Loans in a
manner consistent with the Accepted Servicing Practices set forth in this
Agreement, and agrees that receipt by the Subservicers of any and all amounts
which by the terms hereof are required to be deposited in the Collection Account
shall constitute receipt thereof by the Servicer for all purposes hereof as of
the date so received by the Subservicers. Notwithstanding such designation of
the Subservicers, the Servicer agrees that it is, and it shall remain, fully
obligated under the terms hereof as Servicer with respect to all such Mortgage
Loans, and nothing herein shall relieve or release the Servicer from its
obligations to the other parties hereto to service such Mortgage Loans in the
manner provided in this Agreement.
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Section 5.14 Reports to the Indenture Trustee; Collection
Account Statements. Not later than fifteen (15) days after each Distribution
Date, the Servicer shall provide to the Indenture Trustee, the Collateral Agent
and the Note Insurer a statement, certified by a Servicing Officer, setting
forth the status of the Collection Account as of the close of business on the
related Distribution Date, stating that all distributions required by this
Agreement to be made by the Servicer on behalf of the Indenture Trustee have
been made (or if any required distribution has not been made by the Servicer,
specifying the nature and status thereof) and showing, for the period covered by
such statement, the aggregate of deposits into and withdrawals from the
Collection Account for each category of deposit specified in Section 5.02 and
each category of withdrawal specified in Section 5.03 and the aggregate of
deposits into the Collection Account as specified in Section 6.01. Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Indenture Trustee to any Noteholder upon
request.
Section 5.15 Optional Purchase of Defaulted Mortgage Loans.
(a) Subject to Section 5.15(b), the Unaffiliated Seller or any Affiliate of the
Unaffiliated Seller, in its sole discretion, shall have the right to elect (by
written notice sent to the Servicer, the Indenture Trustee and the Note
Insurer), but shall not be obligated, to purchase for its own account from the
Trust any Mortgage Loan which is ninety (90) days or more Delinquent in the
manner and at the Loan Purchase Price (except that the amount described in
clause (ii) of the definition of Loan Purchase Price shall in no case be net of
the Servicing Fee). The purchase price for any Mortgage Loan purchased hereunder
shall be deposited in the Collection Account and the Collateral Agent, upon the
Indenture Trustee's receipt of such deposit, shall release or cause to be
released to the purchaser of such Mortgage Loan the related Indenture Trustee's
Mortgage File and shall execute and deliver such instruments of transfer or
assignment prepared by the purchaser of such Mortgage Loan, in each case without
recourse, as shall be necessary to vest in the purchaser of such Mortgage Loan
any Mortgage Loan released pursuant hereto and the purchaser of such Mortgage
Loan shall succeed to all the Indenture Trustee's right, title and interest in
and to such Mortgage Loan and all security and documents related thereto. Such
assignment shall be an assignment outright and not for security. The purchaser
of such Mortgage Loan shall thereupon own such Mortgage Loan, and all security
and documents, free of any further obligation to the Indenture Trustee, the
Collateral Agent, the Note Insurer or the Noteholders with respect thereto. The
purchaser of such Mortgage Loan shall give written notice to the Note Insurer of
the means by which any Mortgage Loan purchased pursuant to this Section 5.15 is
ultimately disposed of.
(b) After the Unaffiliated Seller or an Affiliate of the
Unaffiliated Seller has repurchased defaulted Mortgage Loans in a Aggregate
Principal Balance equal to 1% of the Maximum Collateral Amount, then
notwithstanding the foregoing, unless the Note Insurer consents, any such
Unaffiliated Seller or Affiliate of the Unaffiliated Seller may only exercise
its option pursuant to this Section 5.15 with respect to the Mortgage Loan or
Mortgage Loans that have been Delinquent for the longest period at the time of
such repurchase. Any request by the Unaffiliated Seller or Affiliate to the Note
Insurer for consent to repurchase Mortgage Loans that are not the most
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Delinquent shall be accompanied by a description of the Mortgage Loans that have
been Delinquent longer than the Mortgage Loan or Mortgage Loans the Unaffiliated
Seller or such Affiliate proposes to repurchase. If the Note Insurer fails to
respond to such request within ten (10) Business Days after receipt thereof, the
Unaffiliated Seller or such Affiliate may repurchase the Mortgage Loan or
Mortgage Loans proposed to be repurchased without the consent of, or any further
action by, the Note Insurer. Notice to the Note Insurer shall be delivered in
accordance with the terms of the Insurance and Indemnity Agreement.
Section 5.16 Reports to be Provided by the Servicer. (a) Two
(2) Business Days prior to each Servicer Distribution Date, the Servicer shall
deliver to the Indenture Trustee a Servicer Remittance Report for such
Distribution Date, setting forth the information required in the definition of
"Indenture Trustee's Remittance Report."
(b) On each Servicer Distribution Date, the Servicer shall
deliver to the Indenture Trustee and the Note Insurer (via E-mail at
[email protected]) the following information with respect to all Mortgage Loans
as well as a break out as to (x) consumer purpose and business purpose Mortgage
Loans and (y) each Mortgage Loan Group, in each case, as of the close of
business on the last Business Day of the prior calendar month (except as
otherwise provided in clause (v) below):
(i) the total number of Mortgage Loans and the Aggregate
Principal Balances thereof, together with the number, Aggregate principal
balances of such Mortgage Loans and the percentage (based on the Aggregate
Principal Balances of the Mortgage Loans) of the Aggregate Principal
Balances of such Mortgage Loans to the Aggregate Principal Balance of all
Mortgage Loans (A) 31-59 days Delinquent, (B) 60-89 days Delinquent and (C)
90 or more days Delinquent;
(ii) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage Loans in foreclosure
proceedings and the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of any such Mortgage Loans also included in any of the
statistics described in the foregoing clause (i);
(iii) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage Loans
to the Aggregate Principal Balance of all Mortgage Loans relating to
Mortgagors in bankruptcy proceedings and the number, Aggregate Principal
Balances of all Mortgage Loans and percentage (based on the Aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans also
included in any of the statistics described in the foregoing clause (i);
(iv) the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of the Aggregate Principal Balances of such Mortgage Loans
to the Aggregate Principal Balance of all Mortgage Loans relating to REO
Properties and the number, Aggregate Principal Balances of all Mortgage
Loans and percentage (based on the Aggregate Principal Balances of the
Mortgage Loans) of any such Mortgage Loans also included in any of the
statistics described in the foregoing clause (i);
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(v) the weighted average Mortgage Interest Rate as of the Due
Date occurring in the Due Period related to such Distribution Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Cumulative Loan Losses and the aggregate Cumulative
Loan Losses since the Closing Date; and
(ix) the total number of Mortgage Loans and the Pool Principal
Balance.
(c) In connection with the transfer of the Notes, the
Indenture Trustee on behalf of any Noteholder may request that the Servicer make
available to any prospective Noteholder annual audited financial statements of
the Servicer for one or more of the most recently completed five (5) fiscal
years for which such statements are publicly available, which request shall not
be unreasonably denied or unreasonably delayed. Such annual audited financial
statements also shall be made available to the Note Insurer upon request.
(d) The Servicer also agrees to make available on a reasonable
basis to the Note Insurer or any prospective Noteholder a knowledgeable
financial or accounting officer for the purpose of answering reasonable
questions respecting recent developments affecting the Servicer or the financial
statements of the Servicer and to permit the Note Insurer or any prospective
Noteholder to inspect the Servicer's servicing facilities during normal business
hours for the purpose of satisfying the Note Insurer or such prospective
Noteholder that the Servicer has the ability to service the Mortgage Loans in
accordance with this Agreement.
Section 5.17 Adjustment of Servicing Compensation in Respect
of Prepaid Mortgage Loans. The Monthly Servicing Fee that the Servicer shall be
entitled to receive with respect to each Mortgage Loan and each Distribution
Date shall be offset on such Distribution Date by an amount equal to the
Prepayment Interest Shortfall with respect to such Mortgage Loan to the extent
that it is the subject of Principal Prepayments during the month preceding the
month of such Distribution Date. The amount of any offset against the Monthly
Servicing Fee with respect to any Distribution Date under this Section 5.17
shall be limited to the Monthly Servicing Fee otherwise payable to the Servicer
(without adjustment on account of Prepayment Interest Shortfalls) with respect
to such Mortgage Loan, and the rights of the Noteholders to the offset of the
aggregate Prepayment Interest Shortfalls against the Monthly Servicing Fee shall
not be cumulative.
Section 5.18 Periodic Advances; Special Advance. (a) If, on
any Servicer Distribution Date, the Servicer determines that any Monthly
Payments due on the Due Date immediately preceding such Servicer Distribution
Date have not been received as of the end of the related Due Period, the
Servicer shall determine the amount of any Periodic Advance required to be made
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with respect to the related Distribution Date. The Servicer shall, one (1)
Business Day after such Servicer Distribution Date, deliver a magnetic tape or
diskette to the Indenture Trustee indicating the payment status of each Mortgage
Loan as of such Servicer Distribution Date. The Servicer shall include in the
amount to be deposited in the Collection Account on such Servicer Distribution
Date an amount equal to the Periodic Advance, if any, which deposit may be made
in whole or in part from funds in the Collection Account being held for future
distribution or withdrawal on or in connection with Distribution Dates in
subsequent months. Any funds being held for future distribution to Noteholders
and so used shall be replaced by the Servicer from its own funds by deposit in
the Collection Account on or before the Business Day preceding any such future
Servicer Distribution Date to the extent that funds in the Collection Account on
such Servicer Distribution Date shall be less than payments to Noteholders
required to be made on such date.
The Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such
Periodic Advance shall be deemed to have been made, such determination being
conclusive for purposes of withdrawals from the Collection Account pursuant to
Section 5.03 hereof.
(b) In addition to the Periodic Advances, the Servicer shall
make special advances ("Special Advances") on the Servicer Distribution Date
occurring in July 1999, of $314,364.25, with respect to interest on Mortgage
Loans in Pool I not having their first payment due until after June 1999 and
$19,079.89 with respect to interest on Mortgage Loans in Pool II not having
their first payment due until after June 1999. The Special Advances shall be
made without regard to recoverability, and shall not be reimbursable. In no
event shall the Indenture Trustee, as successor Servicer, be liable for the
payment of the Special Advances.
On each Subsequent Transfer Date, the Servicer will make the
Special Advance set forth in the related subsequent Pledge Agreement.
Section 5.19 Indemnification; Third Party Claims. (a) The
Servicer agrees to indemnify and to hold each of the Trust, the Owner Trustee,
the Depositor, the Indenture Trustee, the Collateral Agent, the Unaffiliated
Seller, the Note Insurer and each Noteholder harmless against any and all
claims, losses, penalties, fines, forfeitures, legal fees and related costs,
judgments, and any other costs, fees and expenses that the Trust, the Owner
Trustee, the Depositor, the Indenture Trustee, the Collateral Agent, the
Unaffiliated Seller, the Note Insurer and any Noteholder may sustain in any way
related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement and the other
Basic Document. Each indemnified party and the Servicer shall immediately notify
the other indemnified parties if a claim is made by a third party with respect
to this Agreement and the other Basic Documents, and the Servicer shall assume
the defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Trust, the Owner Trustee,
the Depositor, the Servicer, the Indenture Trustee, the Collateral Agent, the
Unaffiliated Seller, the Note Insurer and/or a Noteholder in respect of such
claim. The Indenture Trustee shall reimburse the Servicer in accordance with
Section 5.08 hereof, out of collections on the Mortgage Loans for the Due
Period, for all amounts advanced by it pursuant to the preceding sentence except
to the extent that the claim relates directly to the failure of the Servicer to
service and administer the Mortgages in compliance with the terms of this
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Agreement; provided, that the Servicer's indemnity hereunder shall not be in any
manner conditioned on the availability of funds for such reimbursement. The
obligations of the Servicer under this Section 5.19 arising prior to any
resignation or termination of the Servicer hereunder shall survive the
resignation or termination of the Servicer
(b) The Indenture Trustee may, if necessary, reimburse the
Servicer from amounts otherwise distributable on the related Trust Certificates
for all amounts advanced by it pursuant to Section 4.04(a)(ii) of the
Unaffiliated Seller's Agreement, except to the extent that the claim relates
directly to the failure of the Servicer, if it is the Unaffiliated Seller, or is
an Affiliate of the Unaffiliated Seller, to perform its obligations to service
and administer the Mortgages in compliance with the terms of the Unaffiliated
Seller's Agreement and this Agreement, or the failure of the Unaffiliated Seller
to perform its duties in compliance with the terms of this Agreement.
(c) The Indenture Trustee shall reimburse the Unaffiliated
Seller from amounts otherwise distributable on the related Trust Certificates
for all amounts advanced by the Unaffiliated Seller pursuant to the second
sentence of Section 4.04(a)(ii) of the Unaffiliated Seller's Agreement except
when the relevant claim relates directly to the failure of the Unaffiliated
Seller to perform its duties in compliance with the terms of the Unaffiliated
Seller's Agreement.
Section 5.20 Maintenance of Corporate Existence and Licenses;
Merger or Consolidation of the Servicer. (a) The Servicer will keep in full
effect its existence, rights and franchises as a corporation, will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 to be true and correct at all
times under this Agreement.
(b) Any Person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person succeeding
to the business of the Servicer, shall be an established mortgage loan servicing
institution that has a net worth of at least $15,000,000 and is a Permitted
Transferee, and in all events shall be the successor of the Servicer 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. The Servicer
shall send notice of any such merger or consolidation to the Owner Trustee, the
Indenture Trustee, the Collateral Agent and the Note Insurer.
Section 5.21 Assignment of Agreement by Servicer; Servicer Not
to Resign. The Servicer shall not assign this Agreement nor resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Owner Trustee, on behalf of the Trust, at the direction of the Trust
Certificateholders, the Depositor, the Servicer, the Unaffiliated Seller, the
Note Insurer, the Collateral Agent and the Indenture Trustee or upon the
determination that the Servicer's duties hereunder are no longer permissible
under applicable law and that such incapacity cannot be cured by the Servicer
without incurring, in the reasonable judgment of the Note Insurer, unreasonable
expense. Any such determination that the Servicer's duties hereunder are no
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longer permissible under applicable law permitting the resignation of the
Servicer shall be evidenced by a written Opinion of Counsel (who may be counsel
for the Servicer) to such effect delivered to the Indenture Trustee, the
Collateral Agent, the Unaffiliated Seller, the Trust, the Depositor and the Note
Insurer. No such resignation shall become effective until the Indenture Trustee
or a successor appointed in accordance with the terms of this Agreement has
assumed the Servicer's responsibilities and obligations hereunder in accordance
with Section 7.02. The Servicer shall provide the Indenture Trustee, the
Collateral Agent, the Rating Agencies and the Note Insurer with 30 days' prior
written notice of its intention to resign pursuant to this Section 5.21.
Section 5.22 Periodic Filings with the Securities and Exchange
Commission; Additional Information. The Indenture Trustee shall prepare or cause
to be prepared for filing with the Commission (other than the initial Current
Report on Form 8-K to be filed by the Depositor in connection with the issuance
of the Notes) any and all reports, statements and information respecting the
Trust and/or the Notes required to be filed, and shall solicit any and all
proxies of the Noteholders whenever such proxies are required to be solicited,
pursuant to the Securities Exchange Act of 1934, as amended. The Depositor shall
promptly file, and exercise its reasonable best efforts to obtain a favorable
response to, no-action requests with, or other appropriate exemptive relief
from, the Commission seeking the usual and customary exemption from such
reporting requirements granted to issuers of securities similar to the Notes.
Fees and expenses incurred by the Indenture Trustee in connection with the
foregoing shall be reimbursed pursuant to Section 6.16 of the Indenture and
shall not be paid by the Trust.
The Servicer and the Depositor each agree to promptly furnish
to the Indenture Trustee, from time to time upon request, such further
information, reports and financial statements as the Indenture Trustee deems
appropriate to prepare and file all necessary reports with the Commission.
Article VI.
APPLICATION OF FUNDS
Section 6.01 Deposits to the Distribution Account. On each
Servicer Distribution Date, the Servicer shall cause to be deposited in the
Distribution Account, from funds on deposit in the Collection Account, (a) an
amount equal to the Servicer Remittance Amount and (b) Net Foreclosure Profits,
if any with respect to the related Distribution Date, minus any portion thereof
payable to the Servicer pursuant to Section 5.03. On each Servicer Distribution
Date, the Servicer shall also deposit into the Distribution Account any Periodic
Advances with respect to the related Distribution Date calculated in accordance
with Section 5.18 and any amounts required to be deposited in connection with a
Subsequent Mortgage Loan pursuant to Section 2.14(b) of the Indenture; on the
Servicer Distribution Date occurring in July 1999 and August 1999, the Servicer
also will deposit the related Special Advance pursuant to Section 5.18(b).
Section 6.02 Collection of Money. Except as otherwise
expressly provided herein, the Indenture Trustee may demand payment or delivery
of all money and other property payable to or receivable by the Indenture
Trustee pursuant to this Agreement, including (a) all payments due on the
Mortgage Loans in accordance with the respective terms and conditions of such
Mortgage Loans and required to be paid over to the Indenture Trustee by the
Servicer or by any Subservicer and (b) Insured Payments. The Indenture Trustee
shall hold all such money and property received by it, as part of the Trust
Estate and shall apply it as provided in the Indenture.
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Section 6.03 Application of Principal and Interest. In the
event that Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than
the Principal Balance of the related Mortgage Loan plus accrued interest
thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on
a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be
applied to payment of the related Mortgage Note as provided therein, and if not
so provided, first to interest accrued at the Mortgage Interest Rate and then to
principal.
Section 6.04 Information Concerning the Mortgage Loans. No
later than 12:00 noon Pennsylvania time on the fourth Business Day preceding
each Distribution Date, the Servicer shall deliver to the Indenture Trustee a
report in computer-readable form containing such information as to each Mortgage
Loan and as to each Mortgage Loan Pool as of such Distribution Date and such
other information as the Indenture Trustee shall reasonably require.
Section 6.05 Compensating Interest. Not later than the close
of business on the third Business Day prior to the Distribution Date, the
Servicer shall remit to the Indenture Trustee (without right to reimbursement
therefor) for deposit into the related Distribution Account, an amount equal to,
for each Mortgage Loan, the lesser of (a) the Prepayment Interest Shortfall for
such Mortgage Loan for the related Distribution Date resulting from Principal
Prepayments during the related Due Period and (b) its Monthly Servicing Fees
with respect to such Mortgage Loan received in the related Due Period and shall
not have the right to reimbursement therefor (the "Compensating Interest").
Section 6.06 Effect of Payments by the Note Insurer;
Subrogation. Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Notes which is made with moneys
received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of the Notes from the Trust Estate. The Depositor, the
Servicer, the Trust, the Collateral Agent and the Indenture Trustee acknowledge
and agree, that without the need for any further action on the part of the Note
Insurer, the Depositor, the Servicer, the Trust, the Collateral Agent, the
Indenture Trustee or the Note Registrar (a) to the extent the Note Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Notes to the Holders of such Notes, the Note Insurer will be fully subrogated
to, and each Noteholder, the Servicer, the Depositor, the Trust, the Collateral
Agent and the Indenture Trustee hereby delegate and assign to the Note Insurer,
to the fullest extent permitted by law, the rights of such Holders to receive
such principal and interest from the Trust Estate, including, without
limitation, any amounts due to the Noteholders in respect of securities law
violations arising from the offer and sale of the Notes, and (b) the Note
Insurer shall be paid such amounts from the sources and in the manner provided
herein for the payment of such amounts and as provided in the Insurance
Agreement. The Indenture Trustee, the Collateral Agent and the Servicer shall
cooperate in all respects with any reasonable request by the Note Insurer for
action to preserve or enforce the Note Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Holders
as otherwise set forth herein.
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Article VII.
SERVICER DEFAULT
Section 7.01 Servicer Events of Default. (a) The following
events shall each constitute a "Servicer Event of Default" hereunder:
(i) any failure by the Servicer to remit to the Indenture
Trustee any payment required to be made by the Servicer under the terms of
this Agreement (other than Servicing Advances covered by clause (ii)
below), which continues unremedied for one (1) 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 and the Note Insurer by the
Indenture Trustee or to the Servicer and the Indenture Trustee by the Note
Insurer or Noteholders of Notes evidencing Percentage Interests of at least
25%;
(ii) the failure by the Servicer to make any required
Servicing Advance, which failure continues unremedied for a period of
thirty (30) days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer by
the Indenture Trustee or to the Servicer and the Indenture Trustee by any
Noteholder or the Note Insurer;
(iii) any failure 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 this Agreement, or the failure of
any representation and warranty made pursuant to Section 3.01(a) hereof to
be true and correct which continues unremedied for a period of thirty (30)
days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer by the Indenture
Trustee or to the Servicer and the Indenture Trustee by any Noteholder or
the Note Insurer;
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present or
future federal or state bankruptcy, insolvency or similar law or for the
appointment of a conservator or receiver or liquidation in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall have
remained in force, undischarged or unstayed for a period of sixty (60)
days;
(v) the Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all of
the Servicer's property;
(vi) the Servicer shall admit in writing its inability
generally to pay its debts 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;
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(vii) the Note Insurer shall notify the Indenture Trustee of
any "event of default" under the Insurance Agreement;
(viii) if on any Distribution Date the Rolling Six Month
Delinquency Rate exceeds 12.75% of the aggregate outstanding Principal
Balance for the Mortgage Loans;
(ix) if on any Distribution Date, commencing in June 2000, the
Twelve Month Loss Amount exceeds 1.75% of the aggregate outstanding
Principal Balance for the Mortgage Loans, as of the close of business on
the first day of the twelfth preceding calendar month;
(x) if (a) on any Distribution Date occurring before June 1,
2000, the aggregate Cumulative Loan Losses since the Initial Cut-Off Date
exceed 1.00% of the Original Pool Principal Balance, (b) on any
Distribution Date on or after June 1, 2000 and before June 1, 2001, the
aggregate Cumulative Loan Losses since the Initial Cut-Off Date exceed
1.50% of the Original Pool Principal Balance, (c) on any Distribution Date
on or after June 1, 2001 and before June 1, 2002, the aggregate Cumulative
Loan Losses since the Initial Cut-Off Date exceed 2.25% of the Original
Pool Principal Balance, (d) on any Distribution Date on or after June 1,
2002 and before June 1, 2003, the aggregate Cumulative Loan Losses since
the Initial Cut-Off Date exceed 3.00% of the Original Pool Principal
Balance, or (e) on any Distribution Date on or after June 1, 2003, the
aggregate Cumulative Loan Losses since the Initial Cut-Off Date exceed
3.75% of the Original Pool Principal Balance;
(xi) the occurrence of an Event of Default under the
Indenture; or
(xii) a Servicer Extension Notice shall not have been
delivered as set forth in Section 8.04 hereof.
(b) So long as a Servicer Event of Default shall have occurred
and not have been remedied: (x) with respect solely to Section 7.01(a)(i), if
such payment is in respect of Periodic Advances or Compensating Interest owing
by the Servicer and such payment is not made by 12:00 noon New York time on the
second Business Day prior to the applicable Distribution Date, the Indenture
Trustee, upon receipt of written notice or discovery by a Responsible Officer of
such failure, shall give immediate telephonic and facsimile notice of such
failure to a Servicing Officer of the Servicer and to the Note Insurer and the
Indenture Trustee shall, with the consent of the Note Insurer, terminate all of
the rights and obligations of the Servicer under this Agreement and the
Indenture Trustee, or a successor Servicer appointed in accordance with Section
7.02, shall immediately make such Periodic Advance or payment of Compensating
Interest and assume, pursuant to Section 7.02 hereof, the duties of a successor
Servicer; (y) with respect to that portion of Section 7.01(a)(i) not referred to
in the preceding clause (x) and with respect to clauses (ii), (iii), (iv), (v),
(vi) and (vii) of Section 7.01, the Indenture Trustee shall, but only at the
direction of the Note Insurer or the Majority Noteholders, by notice in writing
to the Servicer and a Responsible Officer of the Indenture Trustee and subject
to the prior written consent of the Note Insurer, in the case of any removal at
the direction of the Majority Noteholders, and in addition to whatever rights
such Noteholders may have at law or equity to damages, including injunctive
relief and specific performance, terminate all the rights and obligations of the
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Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof, as servicer; and (z) with respect to clauses (viii)-(x) of Section
7.01(a), the Indenture Trustee shall, but only at the direction of the Note
Insurer, after notice in writing to the Servicer and a Responsible Officer of
the Indenture Trustee, terminate all the rights and obligations of the Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
as Servicer. Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall, subject to Section 7.02, pass to and be
vested in the Indenture Trustee, or its designee approved by the Note Insurer,
and the Indenture Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, at the
expense of the Servicer, any and all documents and other instruments and do or
cause to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the Mortgage Loans and related
documents. The Servicer agrees to cooperate (and pay any related costs and
expenses) with the Indenture Trustee in effecting the termination of the
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to the Indenture Trustee, or its designee, for administration by it
of all amounts which shall at the time be credited by the Servicer to the
Collection Account or thereafter received with respect to the Mortgage Loans.
The Indenture Trustee shall promptly notify the Note Insurer and the Rating
Agencies of the occurrence of a Servicer Event of Default.
Section 7.02 Indenture Trustee to Act; Appointment of
Successor. (a) On and after the time the Servicer receives a notice of
termination pursuant to Section 7.01 or fails to receive a Servicer Extension
Notice pursuant to Section 8.04, or the Indenture Trustee receives the
resignation of the Servicer evidenced by an Opinion of Counsel pursuant to
Section 5.21, or the Servicer is removed as Servicer pursuant to this Article
VII, in which event the Indenture Trustee shall promptly notify the Rating
Agencies, except as otherwise provided in Section 7.01, the Indenture Trustee
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 placed on the Servicer by the terms and provisions hereof
arising on or after the date of succession; provided, however, that the
Indenture Trustee shall not be liable for any actions or the representations and
warranties of any Servicer prior to it and including, without limitation, the
obligations of the Servicer set forth in Sections 2.06 and 4.02 hereof. The
Indenture Trustee, as successor Servicer, shall be obligated to pay Compensating
Interest pursuant to Section 6.05 in any event and to make advances pursuant to
Section 5.18 unless, and only to the extent the Indenture Trustee determines
reasonably and in good faith that such advances would not be recoverable
pursuant to Section 5.04, such determination to be evidenced by a certification
of a Responsible Officer of the Indenture Trustee delivered to the Note Insurer.
(b) Notwithstanding the above, the Indenture Trustee may, if
it shall be unwilling to so act, or shall, if it is unable to so act or if the
Majority Noteholders with the consent of the Note Insurer or the Note Insurer so
requests in writing to the Indenture Trustee, appoint, pursuant to such
direction of the Majority Noteholders and Note Insurer or the Note Insurer, or
if no such direction is provided to the Indenture Trustee, pursuant to the
provisions set forth in Section 7.02(c), or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution
acceptable to the Note Insurer that has a net worth of not less than $15,000,000
as the successor to the Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Servicer hereunder.
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(c) In the event the Indenture Trustee is the successor
Servicer, it shall be entitled to the same Servicing Compensation (including the
Servicing Fee as adjusted pursuant to the definition thereof) and other funds
pursuant to Section 5.08 hereof as the Servicer if the Servicer had continued to
act as servicer hereunder. In the event the Indenture Trustee is unable or
unwilling to act as successor Servicer, the Indenture Trustee shall solicit, by
public announcement, bids from housing and home finance institutions, banks and
mortgage servicing institutions meeting the qualifications set forth above. Such
public announcement shall specify that the successor servicer shall be entitled
to the full amount of the aggregate Servicing Fees hereunder as servicing
compensation, together with the other Servicing Compensation. Within thirty (30)
days after any such public announcement, the Indenture Trustee shall negotiate
and effect the sale, transfer and assignment of the servicing rights and
responsibilities hereunder to the qualified party submitting the highest
qualifying bid. The Indenture Trustee shall deduct from any sum received by the
Indenture Trustee from the successor to the Servicer in respect of such sale,
transfer and assignment all costs and expenses of any public announcement and of
any sale, transfer and assignment of the servicing rights and responsibilities
hereunder and the amount of any unreimbursed Servicing Advances and Periodic
Advances owed to the Indenture Trustee. After such deductions, the remainder of
such sum shall be paid by the Indenture Trustee to the Servicer at the time of
such sale, transfer and assignment to the Servicer's successor.
(d) The Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. The Servicer agrees to cooperate with the Indenture Trustee and
any successor Servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Indenture
Trustee or such successor Servicer, as applicable, at the Servicer's cost and
expense, 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 Indenture Trustee or such successor servicer, as applicable, all amounts
that then have been or should have been deposited in the Collection Account by
the Servicer or that are thereafter received with respect to the Mortgage Loans.
Any collections received by the Servicer after such removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor Servicer. Neither the Indenture Trustee nor any other successor
Servicer shall 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 hereunder. Notwithstanding anything to the
contrary herein, no appointment of a successor Servicer under this Agreement
shall be effective until the Indenture Trustee and the Note Insurer shall have
consented thereto, and written notice of such proposed appointment shall have
been provided by the Indenture Trustee to the Note Insurer and to each
Noteholder. The Indenture Trustee shall not resign as Servicer until a successor
Servicer reasonably acceptable to the Note Insurer has been appointed. The Note
Insurer shall have the right to remove the Indenture Trustee as successor
Servicer under this Section 7.02 without cause, and the Indenture Trustee shall
appoint such other successor Servicer as directed by the Note Insurer.
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(e) Pending appointment of a successor Servicer hereunder, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor Servicer out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Servicer pursuant to Section 5.08, together with other Servicing Compensation.
The 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.
Section 7.03 Waiver of Defaults. The Majority Noteholders may,
on behalf of all Noteholders, and subject to the consent of the Note Insurer,
waive any events permitting removal of the Servicer as servicer pursuant to this
Article VII; provided, however, that the Majority Noteholders may not waive a
default in making a required distribution on a Note without the consent of the
Holder of such Note. Upon any waiver of a past default, such default shall cease
to exist, and any Servicer Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereto
except to the extent expressly so waived. Notice of any such waiver shall be
given by the Indenture Trustee to the Rating Agencies and the Note Insurer.
Section 7.04 Rights of the Note Insurer to Exercise Rights of
the Noteholders. By accepting its Note, each Noteholder agrees that unless a
Note Insurer Default exists, the Note Insurer shall be deemed to be the
Noteholders for all purposes (other than with respect to the receipt of payment
on the Notes) and shall have the right to exercise all rights of the Noteholders
under this Agreement and under the Notes without any further consent of the
Noteholders, including, without limitation:
(a) the right to require the Unaffiliated Seller to repurchase
Mortgage Loans pursuant to Sections 2.06 and 4.02 hereof to the extent set
forth therein;
(b) the right to give notices of breach or to terminate the
rights and obligations of the Servicer as servicer pursuant to Section 7.01
hereof and to consent to or direct waivers of Servicer defaults pursuant to
Section 7.03 hereof;
(c) 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 hereof;
(d) the right to institute proceedings against the Servicer
pursuant to Section 7.01 hereof;
(e) the right to remove the Indenture Trustee pursuant to
Section 6.09 of the Indenture;
(f) the right to direct foreclosures upon the failure of the
Servicer to do so in accordance with the provisions of Section 5.06 of this
Agreement; and
(g) any rights or remedies expressly given the Majority
Noteholders.
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In addition, each Noteholder agrees that, subject to Section
10.02, unless a Note Insurer Default exists, the rights specifically enumerated
above may only be exercised by the Noteholders with the prior written consent of
the Note Insurer.
Section 7.05 Indenture Trustee To Act Solely with Consent of the Note Insurer.
Unless a Note Insurer Default exists, the Indenture Trustee shall not, without
the Note Insurer's consent or unless directed by the Note Insurer:
(a) terminate the rights and obligations of the Servicer as
Servicer pursuant to Section 7.01 hereof;
(b) agree to any amendment pursuant to Section 10.03 hereof; or
(c) undertake any litigation.
The Note Insurer may, in writing and in its sole discretion
renounce all or any of its rights under Sections 7.04, 7.05 or 7.06 or any
requirement for the Note Insurer's consent for any period of time.
Section 7.06 Mortgage Loans, Trust Estate and Accounts Held
for Benefit of the Note Insurer. (a) The Indenture Trustee shall hold the Trust
Estate and the Indenture Trustee's Mortgage Files, for the benefit of the
Noteholders and the Note Insurer, and all references in this Agreement and in
the Notes to the benefit of Noteholders shall be deemed to include the Note
Insurer. The Indenture Trustee shall cooperate in all reasonable respects with
any reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests under this Agreement and the Notes unless, as
stated in an Opinion of Counsel addressed to the Indenture Trustee and the Note
Insurer, such action is adverse to the interests of the Noteholders or
diminishes the rights of the Noteholders or imposes additional burdens or
restrictions on the Noteholders.
(b) The Servicer hereby acknowledges and agrees that it shall
service the Mortgage Loans for the benefit of the Noteholders and for the
benefit of the Note Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Noteholders shall be deemed to include the Note
Insurer.
Section 7.07 Note Insurer Default. Notwithstanding anything
elsewhere in this Agreement or in the Notes to the contrary, if a Note Insurer
Default exists, or if and to the extent the Note Insurer has delivered its
written renunciation of all of its rights under this Agreement, the provisions
of this Article VII and all other provisions of this Agreement which (a) permit
the Note Insurer to exercise rights of the Noteholders, (b) restrict the ability
of the Noteholders, the Servicer, the Collateral Agent or the Indenture Trustee
to act without the consent or approval of the Note Insurer, (c) provide that a
particular act or thing must be acceptable to the Note Insurer, (d) permit the
Note Insurer to direct (or otherwise to require) the actions of the Indenture
Trustee, the Collateral Agent, the Servicer or the Noteholders, (e) provide that
any action or omission taken with the consent, approval or authorization of the
Note Insurer shall be authorized hereunder or shall not subject the party taking
or omitting to take such action to any liability hereunder or (f) which have a
similar effect, shall be of no further force and effect and the Indenture
Trustee shall administer the Trust Estate and perform its obligations hereunder
solely for the benefit of the Holders of the Notes. Nothing in the foregoing
sentence, nor any action taken pursuant thereto or in compliance therewith,
shall be deemed to have released the Note Insurer from any obligation or
liability it may have to any party or to the Noteholders hereunder, under any
other agreement, instrument or document (including, without limitation, the Note
Insurance Policy) or under applicable law.
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Article VIII.
TERMINATION
Section 8.01 Termination. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Indenture Trustee of either: (i)
the disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to the Note Insurer and the Indenture Trustee or (ii) mutual consent of
the Owner Trustee, on behalf of the Trust, at the direction of the Trust
Certificateholders, the Indenture Trustee, the Collateral Agent, the Servicer,
the Note Insurer and all Noteholders in writing.
(b) In addition, subject to Section 8.02, the Servicer may, at
its option and at its sole cost and expense, call the Class A-1 Notes or the
Class A-2 Notes or terminate the Trust in accordance with the terms of Section
10.01 of the Indenture.
(c) If on any Distribution Date, the Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the
Trust Estate other than funds in the Distribution Account, the Servicer shall
send a final distribution notice promptly to each Noteholder in accordance with
Section 8.01(d).
(d) Notice of any termination, specifying the Distribution
Date upon which the Trust will terminate and the Noteholders shall surrender
their Notes to the Indenture Trustee for payment of the final distribution and
cancellation, shall be given promptly by the Servicer by letter to Noteholders
mailed during the month of such final distribution before the Servicer
Distribution Date in such month, specifying (i) the Distribution Date upon which
final payment of the Notes will be made upon presentation and surrender of Notes
at the office of the Indenture Trustee therein designated, (ii) the amount of
any such final payment and (iii) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the Notes at the office of the Indenture Trustee
therein specified. The Servicer shall give such notice to the Indenture Trustee
therein specified at the time such notice is given to Noteholders. The
obligations of the Note Insurer hereunder shall terminate upon the deposit by
the Servicer with the Indenture Trustee of a sum sufficient to purchase all of
the Mortgage Loans and REO Properties as set forth in Section 10.01 of the
Indenture or when the Note Principal Balance of the Notes has been reduced to
zero.
(e) In the event that all of the Noteholders do not surrender
their Notes for cancellation within six (6) months after the time specified in
the above-mentioned written notice, the Servicer shall give a second written
notice to the remaining Noteholders to surrender their Notes for cancellation
and receive the final distribution with respect thereto. If within six (6)
months after the second notice, all of the Notes shall not have been surrendered
for cancellation, the Indenture Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining Noteholders
concerning surrender of their Notes and the cost thereof shall be paid out of
the funds and other assets which remain subject hereto. If within nine (9)
months after the second notice all the Notes shall not have been surrendered for
cancellation, the related Trust Certificateholders shall be entitled to all
unclaimed funds and other assets which remain subject hereto and the Indenture
Trustee upon transfer of such funds shall be discharged of any responsibility
for such funds and the Noteholders shall look only to the related Trust
Certificateholders for payment and not to the Note Insurer. Such funds shall
remain uninvested.
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Section 8.02 Additional Termination Requirements. By their
acceptance of the Notes, the Holders thereof hereby agree to appoint the
Servicer as their attorney in fact to: (i) adopt such a plan of complete
liquidation (and the Noteholders hereby appoint the Indenture Trustee as their
attorney in fact to sign such plan) as appropriate or upon the written request
of the Note Insurer and (ii) to take such other action in connection therewith
as may be reasonably required to carry out such plan of complete liquidation all
in accordance with the terms hereof.
Section 8.03 Accounting Upon Termination of Servicer. Upon
termination of the Servicer, the Servicer shall, at its expense:
(a) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee, the funds in any Account;
(b) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee all Indenture Trustee's
Mortgage Files and related documents and statements held by it hereunder
and a Mortgage Loan portfolio computer tape;
(c) deliver to the successor Servicer or, if none shall yet
have been appointed, to the Indenture Trustee and, upon request, to the
Noteholders a full accounting of all funds, including a statement showing
the Monthly Payments collected by it and a statement of monies held in
trust by it for the payments or charges with respect to the Mortgage Loans;
and
(d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer
of servicing of the Mortgage Loans to the successor Servicer and to more
fully and definitively vest in such successor all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer under this
Agreement.
Section 8.04 Retention and Termination of the Servicer. The
Servicer hereby covenants and agrees to act as Servicer under this Agreement for
an initial term commencing on the Closing Date and expiring on September 30,
1999 (the "Initial Term"). Thereafter, the Initial Term shall be extendible in
the sole discretion of the Note Insurer by written notice (each, a "Servicer
Extension Notice") of the Note Insurer (or the Indenture Trustee if revocable
written standing instructions of the Note Insurer have been previously delivered
to the Indenture Trustee), for any specified number of three (3) month terms to
the Servicer. Each such Servicer Extension Notice, if any, shall be delivered by
the Note Insurer (or the Indenture Trustee, as applicable,) to the other parties
to this Agreement. The Servicer hereby agrees that, as of the date hereof and
upon its receipt of any Servicer Extension Notice, the Servicer shall be bound
for the duration of the Initial Term and the term covered by any such Servicer
Extension Notice to act as the Servicer, subject to and in accordance with the
other provisions of this Agreement. The Servicer agrees that if, as of the
fifteenth day prior to the last day of any such servicing term, the Servicer
shall not have received a Servicer Extension Notice from the Note Insurer or
Indenture Trustee, as applicable, the Servicer shall, within five (5) days
thereafter, give written notice of such non-receipt to the Note Insurer and the
Indenture Trustee. The failure of the Note Insurer or the Indenture Trustee, as
applicable, to deliver a Servicer Extension Notice by the end of any such
three-month term shall result in the automatic termination of the Servicer.
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Article IX.
THE COLLATERAL AGENT
Section 9.01 Duties of the Collateral Agent. (a) The
Collateral Agent, prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default has occurred and has not been cured or waived,
the Collateral Agent shall exercise such of the rights and powers vested in it
by this Agreement, 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.
(b) The Collateral Agent, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Collateral Agent which are specifically required to
be furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that the Collateral Agent shall not be responsible
for the accuracy or content of any resolution, certificate, statement, opinion,
report, document, order or other instrument furnished by any Person hereunder.
If any such instrument is found not to conform on its face to the requirements
of this Agreement, the Collateral Agent shall note it as such on the Initial
Certification or Final Certification delivered pursuant to Section 2.06(b).
(c) No provision of this Agreement shall be construed to
relieve the Collateral Agent from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided, however,
that:
(i) prior to the occurrence of an Event of Default, and after
the curing of all such Events of Default which may have occurred, the
duties and obligations of the Collateral Agent shall be determined solely
by the express provisions of this Agreement, the Collateral Agent shall not
be liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Collateral Agent
and, in the absence of bad faith on the part of the Collateral Agent, the
Collateral Agent may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Collateral Agent and conforming
to the requirements of this Agreement;
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(ii) the Collateral Agent shall not be personally liable for
an error of judgment made in good faith by a Responsible Officer or other
officers of the Collateral Agent, unless it shall be proved that the
Collateral Agent was negligent in ascertaining the pertinent facts;
(iii) the Collateral Agent shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of the Note Insurer or the Indenture
Trustee or with the consent of the Note Insurer or the Indenture Trustee;
(iv) the Collateral Agent shall not be required to expend or
risk its own funds or otherwise incur financial liability for the
performance of any of its duties hereunder or the exercise of any of its
rights or powers if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it and none of the provisions
contained in this Agreement shall in any event require the Collateral Agent
to perform, or be responsible for the manner of performance of, any of the
obligations of the Servicer or the Indenture Trustee under this Agreement;
and
(v) subject to the other provisions of this Agreement and
without limiting the generality of this Section 9.01, the Collateral Agent
shall have no duty (A) to see to any recording, filing, or depositing of
this Agreement or any agreement referred to herein or any financing
statement or continuation statement evidencing a security interest, or to
see to the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance, (C) to see to the payment or discharge of any tax, assessment,
or other governmental charge or any lien or encumbrance of any kind owing
with respect to, assessed or levied against, any part of the Trust, the
Trust Estate, the Noteholders or the Mortgage Loans, (D) to confirm or
verify the contents of any reports or certificates of any Person delivered
to the Collateral Agent pursuant to this Agreement believed by the
Collateral Agent to be genuine and to have been signed or presented by the
proper party or parties.
Section 9.02 Certain Matters Affecting the Collateral Agent. Except as
otherwise provided in Section 9.01
hereof:
(a) the Collateral Agent may rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, Opinion of Counsel, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) the Collateral Agent may consult with counsel and any
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
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(c) the Collateral Agent shall be under no obligation to
exercise any of the trusts or powers vested in it by this Agreement or to
institute, conduct or defend by litigation hereunder or in relation hereto
at the request, order or direction of the Note Insurer or any of the
Noteholders, pursuant to the provisions of this Agreement, unless such
Noteholders or the Note Insurer, as applicable, shall have offered to the
Indenture Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein by the Collateral
Agent or thereby; nothing contained herein shall, however, relieve the
Collateral Agent of the obligation, upon the occurrence of an Event of
Default (which has not been cured), to exercise such of the rights and
powers vested in it by this Agreement, and to 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;
(d) the Collateral Agent shall not be personally liable for
any action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers conferred
upon it by this Agreement;
(e) prior to the occurrence of an Event of Default and after
the curing of all Events of Default which may have occurred, the Collateral
Agent 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 Note Insurer
or Holders of Class A Notes evidencing Percentage Interests aggregating not
less than 25%; provided, however, that if the payment within a reasonable
time to the Collateral Agent of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the opinion
of the Collateral Agent, not reasonably assured to the Collateral Agent by
the security afforded to it by the terms of this Agreement, the Collateral
Agent may require reasonable indemnity against such expense or liability as
a condition to taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Collateral
Agent, shall be repaid by the Servicer upon demand from the Servicer's own
funds;
(f) the right of the Collateral Agent to perform any
discretionary act enumerated in this Agreement shall not be construed as a
duty, and the Collateral Agent shall not be answerable for anything other
than its negligence or willful misconduct in the performance of such act;
(g) the Collateral Agent may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys.
Section 9.03 Collateral Agent Not Liable for Notes or Mortgage
Loans. (a) The recitals contained herein shall be taken as the statements of the
Trust and the Servicer, as the case may be, and the Collateral Agent assumes no
responsibility for their correctness. The Collateral Agent makes no
representations as to the validity or sufficiency of this Agreement or of any
Mortgage Loan or related document. The Collateral Agent shall not be accountable
for the use or application of any funds paid to the Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Collection Account by the
Servicer. The Collateral Agent shall not be responsible for the legality or
validity of the Agreement or the validity, priority, perfection or sufficiency
of the security for the Notes issued or intended to be issued under the
Indenture.
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Section 9.04 Collateral Agent May Own Notes. (a) The
Collateral Agent in its individual or any other capacity may become the owner or
pledgor of Notes with the same rights it would have if it were not Collateral
Agent, and may otherwise deal with the parties hereto.
Section 9.05 Collateral Agent's Fees and Expenses; Indemnity.
(a) The Collateral Agent acknowledges that in consideration of the performance
of its duties hereunder it is entitled to receive its fees and expenses from the
Servicer, as separately agreed between the Servicer and the Collateral Agent.
The Trust, the Depositor, the Indenture Trustee and the Note Insurer shall not
pay any of the Collateral Agent fees and expenses in connection with this
transaction. The Collateral Agent shall not be entitled to compensation for any
expense, disbursement or advance as may arise from its negligence or bad faith,
and the Collateral Agent shall have no lien on the Trust Estate for the payment
of its fees and expenses.
(b) The Collateral Agent and any director, officer, employee
or agent of the Collateral Agent shall be indemnified by the Servicer and held
harmless against any loss, liability, claim, damage or expense arising out of,
or imposed upon the Trust Estate or the Collateral Agent through the Servicer's
acts or omissions in violation of this Agreement, other than any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or negligence of
the Collateral Agent in the performance of its duties hereunder or by reason of
the Collateral Agent 's reckless disregard of obligations and duties hereunder.
The obligations of the Servicer under this Section 9.05 arising prior to any
resignation or termination of the Servicer hereunder shall survive termination
of the Servicer and payment of the Notes.
Section 9.06 Eligibility Requirements for Collateral Agent.
(a) The Collateral Agent hereunder shall at all times be a banking entity (a)
organized and doing business under the laws of any state or the United States of
America subject to supervision or examination by federal or state authority, (b)
authorized under such laws to exercise corporate trust powers, including taking
title to the Trust Estate on behalf of the Indenture Trustee, for the benefit of
the Noteholders and the Note Insurer, (c) having a combined capital and surplus
of at least $50,000,000, (d) whose long-term deposits, if any, shall be rated at
least BBB- by S&P and Baa3 by Moody's (except as provided herein) or such lower
long-term deposit rating as may be approved in writing by the Note Insurer, and
(e) reasonably acceptable to the Note Insurer as evidenced in writing. If such
banking entity publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purposes of determining an entity's combined capital and surplus for
clause (c) of this Section 9.06, the amount set forth in its most recent report
of condition so published shall be deemed to be its combined capital and
surplus. In case at any time the Collateral Agent shall cease to be eligible in
accordance with the provisions of this Section 9.06, the Collateral Agent shall
resign immediately in the manner and with the effect specified in Section 9.07.
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Section 9.07 Resignation and Removal of the Collateral Agent.
(a) The Collateral Agent may at any time resign and be discharged from the
trusts hereby created by giving thirty (30) days' written notice thereof to the
Indenture Trustee, the Servicer, and the Note Insurer.
(b) If at any time the Collateral Agent shall cease to be
eligible in accordance with the provisions of Section 9.06 and shall fail to
resign after written request therefor by the Indenture Trustee, the Servicer or
the Note Insurer, or if at any time the Collateral Agent shall become incapable
of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Collateral Agent or of its property shall be appointed, or any public officer
shall take charge or control of the Collateral Agent or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Indenture Trustee or the Servicer, with the consent of the Note Insurer, or the
Note Insurer may remove the Collateral Agent.
(c) If the Collateral Agent fails to perform in accordance
with the terms of this Agreement, the Indenture Trustee, the Servicer or the
Majority Noteholders, with the consent of the Note Insurer, or the Note Insurer
may remove the Collateral Agent.
(d) Upon removal or receipt of notice of resignation of the
Collateral Agent,
the Indenture Trustee shall either (i) take possession of the Indenture
Trustee's Mortgage Files and assume the duties of the Collateral Agent hereunder
or (ii) appoint a successor Collateral Agent pursuant to Section 9.08. If the
Indenture Trustee shall assume the duties of the Collateral Agent hereunder, it
shall notify the Trust, the Depositor, the Servicer and Note Insurer in writing.
Section 9.08 Successor Collateral Agent. Upon the resignation
or removal of the Collateral Agent, the Indenture Trustee may appoint a
successor Collateral Agent, with the written approval of the Note Insurer;
provided, however, that the successor Collateral Agent so appointed shall in no
event be the Unaffiliated Seller, the Depositor or the Servicer or any Person
known to a Responsible Officer of the Indenture Trustee to be an Affiliate of
the Unaffiliated Seller, the Depositor or the Servicer and shall be approved by
the Note Insurer. The Indenture Trustee or such custodian, as the case may be,
shall assume the duties of the Collateral Agent hereunder. Any successor
Collateral Agent appointed as provided in this Section 9.08 shall execute,
acknowledge and deliver to the Trust, the Depositor, the Note Insurer, the
Servicer, the Indenture Trustee and to its predecessor Collateral Agent an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Collateral Agent shall become effective and such
successor Collateral Agent, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as Collateral
Agent herein. The predecessor Collateral Agent shall deliver to the successor
Collateral Agent all Indenture Trustee's Mortgage Files and related documents
and statements held by it hereunder, and the Servicer and the predecessor
Collateral Agent shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in the successor Collateral Agent all such rights, powers, duties and
obligations. The cost of any such transfer to the successor Collateral Agent
shall be for the account of the Collateral Agent in the event of the resignation
of the Collateral Agent, and shall be for the account of the Servicer in the
event of the removal of the Collateral Agent. No successor Collateral Agent
shall accept appointment as provided in this Section 9.08 unless at the time of
43
<PAGE>
such acceptance such successor Collateral Agent shall be eligible under the
provisions of Section 9.06. Upon acceptance of appointment by a successor
Collateral Agent as provided in this Section 9.08, the Servicer shall mail
notice of the succession of such Collateral Agent hereunder to all Noteholders
at their addresses as shown in the Note Register and to the Rating Agencies. If
the Servicer fails to mail such notice within ten (10) days after acceptance of
appointment by the successor Collateral Agent, the successor Collateral Agent
shall cause such notice to be mailed at the expense of the Servicer.
Section 9.09 Merger or Consolidation of Collateral Agent. Any
Person into which the Collateral Agent may be merged or converted or with which
it may be consolidated or any corporation or national banking association
resulting from any merger, conversion or consolidation to which the Collateral
Agent shall be a party, or any corporation or national banking association
succeeding to the business of the Collateral Agent, shall be the successor of
the Collateral Agent hereunder; provided, that such corporation or national
banking association shall be eligible under the provisions of Section 9.06,
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.
Article X.
MISCELLANEOUS PROVISIONS
Section 10.01 Limitation on Liability. None of the Trust, the
Owner Trustee, the Depositor, the Servicer, the Collateral Agent, the Indenture
Trustee or any of the directors, officers, employees or agents of such Persons
shall be under any liability to the Trust, the Noteholders or the Note Insurer
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 Trust, the Owner Trustee, the
Depositor, the Servicer, the Collateral Agent, the Indenture Trustee or any such
Person against any breach of warranties or representations made herein by such
party, or against any specific liability imposed on each such party pursuant to
this Agreement or against any liability which would otherwise be imposed upon
such party by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations or
duties hereunder. The Trust, the Owner Trustee, the Depositor, the Servicer, the
Collateral Agent, the Indenture Trustee and any director, officer, employee or
agent of such Person may rely in good faith on any document of any kind which,
prima facie, is properly executed and submitted by any appropriate Person
respecting any matters arising hereunder.
Section 10.02 Acts of Noteholders. (a) Except as otherwise
specifically provided herein, whenever Noteholder action, consent or approval is
required under this Agreement, such action, consent or approval shall be deemed
to have been taken or given on behalf of, and shall be binding upon, all
Noteholders if the Majority Noteholders or the Note Insurer agrees to take such
action or give such consent or approval.
(b) The death or incapacity of any Noteholder shall not
operate to terminate this Agreement or the Trust, 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 Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
44
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(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 Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms 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 Agreement pursuant
to any provision hereof.
Section 10.03 Amendment. (a) This Agreement may be amended
from time to time by the Owner Trustee, on behalf of the Trust, the Servicer,
the Depositor, the Collateral Agent and the Indenture Trustee by written
agreement, upon the prior written consent of the Note Insurer, without notice to
or consent of the Noteholders to cure any ambiguity, to correct or supplement
any provisions herein, to comply with any changes in the Code, or 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, however, that such action shall not, as evidenced by an Opinion of
Counsel, at the expense of the party requesting the change, delivered to the
Indenture Trustee, adversely affect in any material respect the interests of any
Noteholder; and provided further, that no such amendment shall reduce in any
manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Note without the consent of
such Noteholder, or change the rights or obligations of any other party hereto
without the consent of such party. The Indenture Trustee shall give prompt
written notice to the Rating Agencies of any amendment made pursuant to this
Section 10.03.
(b) This Agreement may be amended from time to time by the
Owner Trustee, on behalf of the Trust, the Servicer, the Depositor, the
Collateral Agent and the Indenture Trustee, with the consent of the Note
Insurer, the Majority Noteholders and the Holders of the majority of the
Percentage Interest in the Trust Certificates, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that no such amendment shall reduce in any manner the amount
of, or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Class of Notes without the consent of the
Holders of such Class of Notes or reduce the percentage for the Holders of which
are required to consent to any such amendment without the consent of the Holders
of 100% of such Class of Notes affected thereby.
(c) It shall not be necessary for the consent of Holders under
this Section 10.03 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof.
Section 10.04 Recordation of Agreement. To the extent
permitted by applicable law, this Agreement, or a memorandum thereof if
permitted under applicable law, is subject to recordation in all appropriate
public offices for real property records in all of 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 Noteholders'
expense on direction and at the expense of Majority Noteholders requesting such
recordation, but only when accompanied by an Opinion of Counsel to the effect
that such recordation materially and beneficially affects the interests of the
Noteholders or is necessary for the administration or servicing of the Mortgage
Loans.
45
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Section 10.05 Duration of Agreement. This Agreement shall
continue in existence and effect until terminated as herein provided.
Section 10.06 Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, the Subservicers, the Originators
or the Unaffiliated Seller, addressed to such Person, c/o American Business
Financial Services, Inc., Balapointe Office Centre, 111 Presidential Boulevard,
Suite 127, Bala Cynwyd, Pennsylvania 19004, Attention: General Counsel; (ii) in
the case of the Trust, ABFS Mortgage Loan Trust 1999-2, c/o the Owner Trustee at
its Corporate Trust Office, Attention: Corporate Trust Administration; (iii) in
the case of the Collateral Agent, Chase Bank of Texas, N.A., at its Corporate
Trust Office, Attention: Document Custody Manager; (iv) in the case of the
Indenture Trustee, c/o The Chase Manhattan Bank, 450 W. 33rd Street, New York,
New York, 10001, Attention: Capital Markets Fiduciary Services, telephone (212)
946-3246, telecopy (212) 946-8191; (v) in the case of the Depositor or the
Underwriter, Prudential Securities Secured Financing Corporation or Prudential
Securities Incorporated, One New York Plaza, New York, New York 10292,
Attention: Managing Director- Asset Backed Finance Group; (vi) in the case of
the Note Insurer, Financial Security Assurance Inc., 350 Park Avenue, New York,
New York 10022 Attention: Surveillance Department (in each case in which notice
or other communication to the Note Insurer refers to an Event of Default, a
Servicer Event of Default or a claim on the Note Insurance Policy or with
respect to which failure on the part of the Note 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 each of the General
Counsel and the Head- Financial Guaranty Group, and shall be marked to indicate
"URGENT MATERIAL ENCLOSED"); (vii) in the case of Standard & Poor's Rating
Services, 55 Water Street, New York, New York 10041 Attention: Residential
Mortgage Surveillance Group; (viii) in the case of Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007 Attention: Home Equity
Monitoring Group; and (ix) in the case of the Noteholders, as set forth in the
Note Register. Any such notices shall be deemed to be effective with respect to
any party hereto upon the receipt of such notice by such party, except that
notices to the Noteholders shall be effective upon mailing or personal delivery.
Section 10.07 Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be
held invalid for any reason whatsoever, 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 covenants, agreements, provisions or
terms of this Agreement.
Section 10.08 No Partnership. Nothing herein contained shall
be deemed or construed to create a co-partnership or joint venture between the
parties hereto and the services of the Servicer shall be rendered as an
independent contractor and not as agent for the Noteholders.
46
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Section 10.09 Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an
original; such counterparts, together, shall constitute one and the same
agreement.
Section 10.10 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the Trust, the Servicer, the
Depositor, the Indenture Trustee, the Collateral Agent and the Noteholders and
their respective successors and permitted assigns.
Section 10.11 Headings. The headings of the various sections
of this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
Section 10.12 The Note Insurer Default. Any right conferred to
the Note Insurer shall be suspended during any period in which a Note Insurer
Default exists. At such time as the Notes are no longer outstanding hereunder,
and no amounts owed to the Note Insurer hereunder remain unpaid, the Note
Insurer's rights hereunder shall terminate.
Section 10.13 Third Party Beneficiary. The parties agree that
each of the Owner Trustee, the Unaffiliated Seller and the Note Insurer is
intended and shall have all rights of a third-party beneficiary of this
Agreement.
Section 10.14 Intent of the Parties. It is the intent of the
parties hereto and Noteholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Notes be treated as debt. The parties to this Agreement and the Holder of each
Note, by acceptance of its Note, and each Beneficial Owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the related
Notes in accordance with the preceding sentence for purposes of federal income
taxes, state and local income and franchise taxes and other taxes imposed on or
measured by income.
Section 10.15 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
(b) THE TRUST, THE SERVICER, THE DEPOSITOR, THE COLLATERAL
AGENT AND THE INDENTURE TRUSTEE HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT
LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH IN SECTION
10.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS
AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE
TRUST, THE DEPOSITOR, THE SERVICER, THE COLLATERAL AGENT AND THE INDENTURE
TRUSTEE EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
47
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OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE
COURT. NOTHING IN THIS SECTION 10.15 SHALL AFFECT THE RIGHT OF THE TRUST, THE
DEPOSITOR, THE SERVICER, THE COLLATERAL AGENT OR THE INDENTURE TRUSTEE TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS
TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE TRUST, THE DEPOSITOR, THE SERVICER, THE COLLATERAL
AGENT AND THE INDENTURE TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A
JURY.
[Remainder of Page Intentionally Left Blank]
48
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trust, the Indenture
Trustee, the Collateral Agent and the Depositor have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION, as Depositor
By:________________________________
Name:
Title:
ABFS MORTGAGE LOAN TRUST 1999-2
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not
in its individual capacity,
but solely as Owner
Trustee under the Trust
Agreement
By:________________________________
Name:
Title:
AMERICAN BUSINESS CREDIT, INC., as
Servicer
By:_________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Indenture Trustee
By:_________________________________
Name:
Title:
CHASE BANK OF TEXAS, N.A., as
Collateral Agent
By:_________________________________
Name:
Title
[Signature Page to Sale and Servicing Agreement]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Page
Article I. DEFINITIONS............................................................................................1
Section 1.01 Certain Defined Terms........................................................................1
Section 1.02 Provisions of General Application............................................................1
Section 1.03 Business Day Certificate.....................................................................2
Article II. SALE AND CONVEYANCE OF THE MORTGAGE LOANS.............................................................2
Section 2.01 Purchase and Sale of Initial Mortgage Loans..................................................2
Section 2.02 Purchase and Sale of Subsequent Mortgage Loans...............................................3
Section 2.03 Purchase Price...............................................................................3
Section 2.04 Possession of Mortgage Files; Access to Mortgage Files.......................................4
Section 2.05 Delivery of Mortgage Loan Documents..........................................................4
Section 2.06 Acceptance of the Trust Estate; Certain Substitutions; Certification by the
Collateral Agent.............................................................................7
Section 2.07 Grant of Security Interest...................................................................9
Section 2.08 Further Action Evidencing Assignments.......................................................10
Section 2.09 Assignment of Agreement.....................................................................10
Article III. REPRESENTATIONS AND WARRANTIES......................................................................10
Section 3.01 Representations of the Servicer.............................................................10
Section 3.02 Representations, Warranties and Covenants of the Depositor..................................12
Section 3.03 Representations, Warranties and Covenants of the Collateral Agent...........................13
Section 3.04 Representations, Warranties and Covenants of the Indenture Trustee..........................14
Article IV. THE MORTGAGE LOANS...................................................................................14
Section 4.01 Representations and Warranties Concerning the Mortgage Loans................................14
Section 4.02 Purchase and Substitution...................................................................15
Article V. ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS....................................................16
Section 5.01 The Servicer................................................................................16
Section 5.02 Collection of Certain Mortgage Loan Payments; Collection Account............................17
Section 5.03 Permitted Withdrawals from the Collection Account...........................................18
Section 5.04 Hazard Insurance Policies; Property Protection Expenses.....................................19
Section 5.05 Assumption and Modification Agreements......................................................20
Section 5.06 Realization Upon Defaulted Mortgage Loans...................................................21
Section 5.07 Indenture Trustee to Cooperate..............................................................22
Section 5.08 Servicing Compensation; Payment of Certain Expenses by Servicer.............................22
Section 5.09 Annual Statement as to Compliance...........................................................22
Section 5.10 Annual Independent Public Accountants' Servicing Report.....................................23
Section 5.11 Access to Certain Documentation.............................................................23
Section 5.12 Maintenance of Fidelity Bond................................................................23
Section 5.13 The Subservicers............................................................................23
Section 5.14 Reports to the Indenture Trustee; Collection Account Statements.............................24
i
<PAGE>
Section 5.15 Optional Purchase of Defaulted Mortgage Loans...............................................24
Section 5.16 Reports to be Provided by the Servicer......................................................25
Section 5.17 Adjustment of Servicing Compensation in Respect of Prepaid Mortgage Loans...................26
Section 5.18 Periodic Advances; Special Advance..........................................................26
Section 5.19 Indemnification; Third Party Claims.........................................................27
Section 5.20 Maintenance of Corporate Existence and Licenses; Merger or Consolidation of the
Servicer....................................................................................28
Section 5.21 Assignment of Agreement by Servicer; Servicer Not to Resign.................................28
Section 5.22 Periodic Filings with the Securities and Exchange Commission; Additional Information........29
Article VI. APPLICATION OF FUNDS.................................................................................29
Section 6.01 Deposits to the Distribution Account........................................................29
Section 6.02 Collection of Money.........................................................................29
Section 6.03 Application of Principal and Interest.......................................................30
Section 6.04 Information Concerning the Mortgage Loans...................................................30
Section 6.05 Compensating Interest.......................................................................30
Section 6.06 Effect of Payments by the Note Insurer; Subrogation.........................................30
Article VII. SERVICER DEFAULT....................................................................................31
Section 7.01 Servicer Events of Default..................................................................31
Section 7.02 Indenture Trustee to Act; Appointment of Successor..........................................33
Section 7.03 Waiver of Defaults..........................................................................35
Section 7.04 Rights of the Note Insurer to Exercise Rights of the Noteholders............................35
Section 7.05 Indenture Trustee To Act Solely with Consent of the Note Insurer............................36
Section 7.06 Mortgage Loans, Trust Estate and Accounts Held for Benefit of the Note Insurer..............36
Section 7.07 Note Insurer Default........................................................................36
Article VIII. TERMINATION........................................................................................37
Section 8.01 Termination.................................................................................37
Section 8.02 Additional Termination Requirements.........................................................38
Section 8.03 Accounting Upon Termination of Servicer.....................................................38
Section 8.04 Retention and Termination of the Servicer...................................................38
Article IX. THE COLLATERAL AGENT.................................................................................39
Section 9.01 Duties of the Collateral Agent..............................................................39
Section 9.02 Certain Matters Affecting the Collateral Agent..............................................40
Section 9.03 Collateral Agent Not Liable for Notes or Mortgage Loans.....................................41
Section 9.04 Collateral Agent May Own Notes..............................................................42
Section 9.05 Collateral Agent's Fees and Expenses; Indemnity.............................................42
Section 9.06 Eligibility Requirements for Collateral Agent...............................................42
Section 9.07 Resignation and Removal of the Collateral Agent.............................................43
Section 9.08 Successor Collateral Agent..................................................................43
<PAGE>
Section 9.09 Merger or Consolidation of Collateral Agent.................................................44
Article X. MISCELLANEOUS PROVISIONS..............................................................................44
Section 10.01 Limitation on Liability.....................................................................44
Section 10.02 Acts of Noteholders.........................................................................44
Section 10.03 Amendment...................................................................................45
Section 10.04 Recordation of Agreement....................................................................45
Section 10.05 Duration of Agreement.......................................................................46
Section 10.06 Notices.....................................................................................46
Section 10.07 Severability of Provisions..................................................................46
Section 10.08 No Partnership..............................................................................46
Section 10.09 Counterparts................................................................................47
Section 10.10 Successors and Assigns......................................................................47
Section 10.11 Headings....................................................................................47
Section 10.12 The Note Insurer Default....................................................................47
Section 10.13 Third Party Beneficiary.....................................................................47
Section 10.14 Intent of the Parties.......................................................................47
Section 10.15 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL................................47
EXHIBITS
EXHIBIT A Contents of the Mortgage File
EXHIBIT B Indenture Trustee's Acknowledgement of Receipt
EXHIBIT C Collateral Agent's Acknowledgement of Receipt
EXHIBIT D Initial Certification of Collateral Agent
EXHIBIT E Final Certification of Collateral Agent
EXHIBIT F Request for Release of Documents
EXHIBIT G Form of Subsequent Contribution Agreement
SCHEDULES
SCHEDULE I Mortgage Loan Schedule
</TABLE>
<PAGE>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[See Schedule I to Unaffiliated Seller's Agreement]
iv
<PAGE>
APPENDIX I
DEFINED TERMS
[See Appendix I to Indenture]
v
<PAGE>
EXHIBITS TO SALE AND SERVICING AGREEMENT
<PAGE>
EXHIBIT A
CONTENTS OF THE MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall
include each of the following items (copies to the extent the originals have
been delivered to the Collateral Agent, on behalf of the Indenture Trustee, for
the benefit of the Noteholders and the Note Insurer, pursuant to Section 2.05 of
the Sale and Servicing Agreement), all of which shall be available for
inspection by the Noteholders, to the extent required by applicable laws:
The original Mortgage Note, with all prior and intervening endorsements showing
a complete chain of endorsements from the originator of the Mortgage Loan to the
Person so endorsing the Mortgage Loan to the Trustee, endorsed by such Person
"Pay to the order of ________________ without recourse" and signed, by facsimile
or manual signature, in the name of the Unaffiliated Seller by a Responsible
Officer. Either: (i) the original Mortgage, and related power of attorney, if
any, with evidence of recording thereon, or (ii) a copy of the Mortgage and
related power of attorney, if any, certified as a true copy of the original
Mortgage or power of attorney by a Responsible Officer of the Unaffiliated
Seller on the face of such copy substantially as follows: "certified true and
correct copy of original which has been transmitted for recordation." Either:
(i) The original Assignment of Mortgage in recordable form in blank or (ii) a
copy of the Assignment of Mortgage certified as a true copy of the original
Assignment of Mortgage by a Responsible Officer of the Unaffiliated Seller on
the face of such copy substantially as follows: "certified true and correct copy
of original which has been transmitted for recordation." Any such Assignments of
Mortgage may be made by blanket assignments for Mortgage Loans secured by the
Mortgaged Properties located in the same county, if permitted by applicable law.
The original lender's policy of title insurance or a true copy thereof, or if
such original lender's title insurance policy has been lost, a copy thereof
certified by the appropriate title insurer to be true and complete, or if such
lender's title insurance policy has not been issued as of the Closing Date, a
marked up commitment (binder) to issue such policy. All original intervening
assignments, if any, showing a complete chain of assignments from the originator
to the related Originator, including any recorded warehousing assignments, with
evidence of recording thereon, certified by a Responsible Officer of the related
Originator by facsimile or manual signature as a true copy of the original of
such intervening assignments. Originals of all assumption, written assurance,
substitution and modification agreements, if any.
A-1
<PAGE>
EXHIBIT B
INDENTURE TRUSTEE'S ACKNOWLEDGMENT OF RECEIPT
June __, 1999
Prudential Securities Secured American Business Credit, Inc.
Financing Corporation BalaPointe Office Centre
One New York Plaza 111 Presidential Boulevard, Suite 127
New York, New York 10292 Bala Cynwyd, Pennsylvania 19004
Chase Bank of Texas, N.A., Financial Security Assurance Inc.
as Collateral Agent 350 Park Avenue
801 West Green Road, Suite 200 New York, New York 10022
Houston, TX 77067
Re: Sale and Servicing Agreement, dated as of June 1,
1999 among Prudential Securities Secured Financing
Corporation, as Depositor, ABFS Mortgage Loan
Trust 1999-2, American Business Credit, Inc., as
Servicer, The Chase Manhattan Bank, as Indenture
Trustee, and Chase Bank of Texas, N.A., as
Collateral Agent
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Sale
and Servicing Agreement, the undersigned, as Indenture Trustee, hereby
acknowledges receipt by it in good faith without notice of adverse claims, of
(x) the Original Pre-Funded Amount and the Original Capitalized Interest Amount
for both Pool I and Pool II and (y) the Note Insurance Policy, and declares that
it holds and will hold such Accounts and the Note Insurance Policy in trust for
the exclusive use and benefit of all present and future Noteholders.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in Appendix I to the Indenture, dated as of
June 1, 1999, by and between ABFS Mortgage Loan Trust 1999-2 and the Indenture
Trustee.
THE CHASE MANHATTAN BANK,
as Trustee
By:________________________
Name:
Title:
B-1
<PAGE>
C-2
EXHIBIT C
COLLATERAL AGENT'S ACKNOWLEDGEMENT OF RECEIPT
June __, 1999
Prudential Securities Secured American Business Credit, Inc.
Financing Corporation BalaPointe Office Centre
One New York Plaza 111 Presidential Boulevard, Suite 127
New York, New York 10292 Bala Cynwyd, Pennsylvania 19004
The Chase Manhattan Bank, Financial Security Assurance Inc.
as Indenture Trustee 350 Park Avenue
450 W. 33rd Street New York, New York 10022
New York, New York 10001
Re: Sale and Servicing Agreement, dated as of June 1,
1999 among Prudential Securities Secured Financing
Corporation, as Depositor, ABFS Mortgage Loan
Trust 1999-2, American Business Credit, Inc., as
Servicer, The Chase Manhattan Bank, as Indenture
Trustee, and Chase Bank of Texas, N.A., as
Collateral Agent
Ladies and Gentlemen:
In accordance with Section 2.06 of the above-captioned Sale
and Servicing Agreement, the undersigned, as Collateral Agent, hereby
acknowledges receipt by it in good faith without notice of adverse claims,
subject to the provisions of Sections 2.04 and 2.05 of the Sale and Servicing
Agreement (as such provisions relate to the Initial Mortgage Loans), of, with
respect to each of the Initial Mortgage Loans, the Mortgage File containing the
original Mortgage Note, except with respect to the list of exceptions attached
hereto, and based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule accurately reflects
information set forth in the Mortgage Note, and declares that it holds and will
hold such documents and the other documents delivered to it constituting the
Indenture Trustee's Mortgage Files, and that it holds or will hold all such
assets and such other assets included in the definition of "Trust Estate" that
are delivered to it, on behalf of the Indenture Trustee, in trust for the
exclusive use and benefit of all present and future Noteholders and the Note
Insurer.
The Collateral Agent has made no independent examination of
any such documents beyond the review specifically required in the
above-referenced Sale and Servicing Agreement. The Collateral Agent makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any such documents or any of the Mortgage Loans identified on
the Mortgage Loan Schedule, or (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
The Schedule of Mortgage Loans is attached to this Receipt.
C-1
<PAGE>
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in Appendix I to the Indenture, dated as of
June 1, 1999, by and between ABFS Mortgage Loan Trust 1999-2 and the Indenture
Trustee.
CHASE BANK OF TEXAS, N.A.,
as Collateral Agent
By:_______________________
Name:
Title:
C-2
<PAGE>
INITIAL CERTIFICATION OF COLLATERAL AGENT
______________, 1999
Prudential Securities Secured American Business Credit, Inc.
Financing Corporation BalaPointe Office Centre
One New York Plaza 111 Presidential Boulevard, Suite 127
New York, New York 10292 Bala Cynwyd, Pennsylvania 19004
The Chase Manhattan Bank, Financial Security Assurance Inc.
as Indenture Trustee 350 Park Avenue
450 W. 33rd Street New York, New York 10022
New York, New York 10001
Re: Sale and Servicing Agreement, dated as of June 1,
1999 among Prudential Securities Secured Financing
Corporation, as Depositor, ABFS Mortgage Loan
Trust 1999-2, American Business Credit, Inc., as
Servicer, The Chase Manhattan Bank, as Indenture
Trustee, and Chase Bank of Texas, N.A., as
Collateral Agent
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06 of the
above-referenced Sale and Servicing Agreement, the undersigned, as Collateral
Agent, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05 of the Sale and Servicing Agreement and has determined
that (i) all documents required to be delivered to it pursuant to Section 2.05
of the above-referenced Sale and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered
(handwritten additions, changes or corrections do not constitute physical
alteration if they reasonably appear to have been initialed by the Mortgagor)
appears regular on its face and relates to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing documents, the information set
forth in the Mortgage Loan Schedule as to the information in clauses (i), (ii),
(v) and (vi) of the definition of "Mortgage Loan Schedule" respecting such
Mortgage Loan accurately reflects the information set forth in Indenture
Trustee's Mortgage File. The Collateral Agent has made no independent
examination of such documents beyond the review specifically required in the
above-referenced Sale and Servicing Agreement. The Collateral Agent makes no
representations as to: (x) the validity, legality, enforceability or genuineness
of any such documents contained in each or any of the Mortgage Loans identified
on the Mortgage Loan Schedule, or (y) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
D-1
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Sale and Servicing
Agreement.
CHASE BANK OF TEXAS, N.A.,
as Collateral Agent
By:_______________________
Name:
Title:
D-2
<PAGE>
FINAL CERTIFICATION OF COLLATERAL AGENT
________________, 1999
Prudential Securities Secured American Business Credit, Inc.
Financing Corporation BalaPointe Office Centre
One New York Plaza 111 Presidential Boulevard, Suite 127
New York, New York 10292 Bala Cynwyd, Pennsylvania 19004
The Chase Manhattan Bank, Financial Security Assurance Inc.
as Indenture Trustee 350 Park Avenue
450 W. 33rd Street New York, New York 10022
New York, New York 10001
Re: Sale and Servicing Agreement, dated as of June 1,
1999 among Prudential Securities Secured Financing
Corporation, as Depositor, ABFS Mortgage Loan
Trust 1999-2, American Business Credit, Inc., as
Servicer, The Chase Manhattan Bank, as Indenture
Trustee, and Chase Bank of Texas, N.A., as
Collateral Agent
Ladies and Gentlemen:
In accordance with the provisions of Section 2.06 of the
above-referenced Sale and Servicing Agreement, the undersigned, as Collateral
Agent, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
listed on the attachment hereto), it has reviewed the documents delivered to it
pursuant to Section 2.05 of the Sale and Servicing Agreement and has determined
that (i) all documents required to be delivered to it pursuant to Section 2.05
of the above-referenced Sale and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered
(handwritten additions, changes or corrections do not constitute physical
alteration if they reasonably appear to have been initialed by the Mortgagor)
appears regular on its face and relates to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing documents, the information set
forth in the Mortgage Loan Schedule respecting such Mortgage Loan accurately
reflects the information set forth in the Indenture Trustee's Mortgage File. The
Collateral Agent has made no independent examination of such documents beyond
the review specifically required in the above-referenced Sale and Servicing
Agreement. The Collateral Agent makes no representations as to: (x) the
validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (y) 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 Sale and Servicing
E-1
Agreement.
CHASE BANK OF TEXAS, N.A.,
as Collateral Agent
By:________________________
Name:
Title:
E-2
<PAGE>
EXHIBIT F
REQUEST FOR RELEASE OF DOCUMENTS
----------------,
Chase Bank of Texas, N.A.,
as Collateral Agent
801 West Greens Road, Suite 200
Houston, Texas 77067
The Chase Manhattan Bank,
as Indenture Trustee
450 W. 33rd Street
New York, NY 10001
Re: Sale and Servicing Agreement, dated as of June 1,
1999 among Prudential Securities Secured Financing
Corporation, as Depositor, ABFS Mortgage Loan
Trust 1999-2, American Business Credit, Inc., as
Servicer, The Chase Manhattan Bank, as Indenture
Trustee, and Chase Bank of Texas, N.A., as
Collateral Agent
In connection with the administration of the pool of Mortgage
Loans held by Chase Bank of Texas, N.A., as Collateral Agent, on behalf of The
Chase Manhattan Bank, as Indenture Trustee, for the benefit of the Noteholders
and the Note Insurer, we request the release, and acknowledge receipt, of the
(Indenture Trustee's Mortgage File/[specify document]) for the Mortgage Loan
described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
- -------------------------------------
Mortgage Loan Number:
- ---------------------
Reason for Requesting Documents (check one)
- -------------------------------------------
____ 1. Mortgage Loan Paid in Full
(Servicer hereby certifies that all amounts received
in connection therewith have been credited to the
Collection Account.)
____ 2. Mortgage Loan Liquidated
(Servicer hereby certifies that all proceeds of
foreclosure, insurance or other liquidation have been
finally received and credited to the Collection
Account.)
F-1
<PAGE>
____ 3. Mortgage Loan in Foreclosure
____ 4. Mortgage Loan Repurchased Pursuant to Section 5.18 of the Sale and
Servicing Agreement.
____ 5. Mortgage Loan Repurchased or Substituted pursuant to Article II or
III of the Sale and Servicing Agreement (Servicer hereby certifies
that the repurchase price or Substitution Adjustment has been
credited to the related Distribution Account and that the
substituted mortgage loan is a Qualified Substitute Mortgage Loan.)
____ 6. Other (explain)____________________________________________________
If box 1 or 2 above is checked, and if all or part of the
Indenture Trustee's Mortgage File was previously released to us, please release
to us our previous receipt on file with you, as well as any additional documents
in your possession relating to the above specified Mortgage Loan.
If box 3, 4, 5 or 6 above is checked, upon our return of all
of the above documents to the Collateral Agent, please acknowledge your receipt
by signing in the space indicated below, and returning this form.
AMERICAN BUSINESS CREDIT, INC.,
as Servicer
By:____________________________
Name:
Title:
Documents returned to Collateral Agent:
CHASE BANK OF TEXAS, N.A.,
as Collateral Agent
By:______________________
Name:
Title:
Date:
F-2
<PAGE>
EXHIBIT G
FORM OF SUBSEQUENT CONTRIBUTION AGREEMENT
This SUBSEQUENT CONTRIBUTION AGREEMENT, dated as of ________, 1999 (the
"Subsequent Transfer Date"), is entered into by and between PRUDENTIAL
SECURITIES SECURED FINANCING CORPORATION, as depositor (the "Depositor"), and
the ABFS MORTGAGE LOAN TRUST 1999-2 (the "Trust").
W I T N E S S E T H:
Reference is hereby made to (x) that certain Sale and Servicing
Agreement, dated as of June 1, 1999 (the "Sale and Servicing Agreement"), by and
among the Depositor and the Trust, and (y) that certain Indenture, dated as of
June 1, 1999 (the "Indenture"), by and between the Trust and The Chase Manhattan
Bank, as indenture trustee (the "Indenture Trustee"). Pursuant to the Sale and
Servicing Agreement, the Depositor has agreed to sell, assign and transfer, and
the Trust has agreed to accept, from time to time, Subsequent Mortgage Loans (as
defined below). The Sale and Servicing Agreement provides that each such sale of
Subsequent Mortgage Loans be evidenced by the execution and delivery of a
Subsequent Contribution Agreement such as this Subsequent Contribution
Agreement.
The assets sold to the Trust pursuant to this Subsequent Contribution
Agreement consist of (a) the Subsequent Mortgage Loans in Pool I and Pool II
listed in the Mortgage Loan Schedule attached hereto (including property that
secures a Subsequent Mortgage Loan that becomes an REO Property), including the
related Mortgage Files delivered or to be delivered to the Collateral Agent, on
behalf of the Indenture Trustee, including all payments of principal received,
collected or otherwise recovered after the Subsequent Cut-Off Date for each
Subsequent Mortgage Loan, all payments of interest accruing on each Subsequent
Mortgage Loan after the Subsequent Cut-Off Date therefor whenever received and
all other proceeds received in respect of such Subsequent Mortgage Loans, (b)
the Insurance Policies relating to the Subsequent Mortgage Loans, and (c) 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.
The "Subsequent Mortgage Loans" are those listed on the Schedule of
Mortgage Loans attached hereto. The Aggregate Principal Balance of such
Subsequent Mortgage Loans as of the Subsequent Cut-Off Date is $__________ in
Pool I and $__________ in Pool II.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Subsequent
Contribution Agreement, capitalized terms used herein but not otherwise defined
shall have the respective meanings assigned to such terms in Appendix I to the
Indenture.
G-1
<PAGE>
Section 2. Sale, Assignment and Transfer. In consideration of the
receipt of $_________ (such amount being approximately 100% of the Aggregate
Principal Balance of the Subsequent Mortgage Loans) from the Trust, the
Depositor hereby sells, assigns and transfers to the Trust, without recourse,
all of its right, title and interest in, to, and under the Subsequent Mortgage
Loans and related assets described above, whether now existing or hereafter
arising.
In connection with such sale, assignment and transfer, the Originators
and the Unaffiliated Seller shall satisfy the document delivery requirements set
forth in Section 2.05 of the Sale and Servicing Agreement with respect to each
Subsequent Mortgage Loan.
Section 3. Representations and Warranties of Concerning the Subsequent
Mortgage Loans. With respect to each Subsequent Mortgage Loan, the Depositor
hereby assigns each of the representations and warranties made by the
Originators and the Unaffiliated Seller in Section 3 of the Subsequent Transfer
Agreement, on which the Trust relies in accepting the pledge of the Subsequent
Mortgage Loans. Such representations and warranties speak as of the Subsequent
Transfer Date unless otherwise indicated, and shall survive each sale,
assignment, transfer and conveyance of the respective Subsequent Mortgage Loans
to the Trust.
Section 4. Repurchase of Subsequent Mortgage Loans. Upon discovery by
any of the Depositor, the Unaffiliated Seller, an Originator, the Indenture
Trustee, the Servicer (on behalf of the Trust), the Note Insurer or any
Noteholder of a breach of any of the representations and warranties made by the
Originators and the Unaffiliated Seller pursuant to Section 3.03 of the
Unaffiliated Seller's Agreement or this Section 3, the party discovering such
breach shall give prompt written notice to such other Person; provided, that the
Indenture Trustee shall have no duty to inquire or to investigate the breach of
any such representations and warranties. The Originators and the Unaffiliated
Seller will be obligated to repurchase a Subsequent Mortgage Loan which breaches
a representation or warranty in accordance with the provisions of Section 4.02
of the Sale and Servicing Agreement or to indemnify as described in Section
3.05(g) of the Unaffiliated Seller's Agreement. Such repurchase and
indemnification obligation of the Originators and the Unaffiliated Seller shall
constitute the sole remedy against the Originators and the Unaffiliated Seller,
and the Trust for such breach available to the Servicer, the Trust, the
Indenture Trustee, the Note Insurer and the Noteholders.
Section 5. Amendment. This Subsequent Contribution Agreement may be
amended from time to time by the Depositor and the Trust only with the prior
written consent of the Note Insurer (or, in the event of a Note Insurer Default,
the Majority Holders).
Section 6. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS SUBSEQUENT
CONTRIBUTION AGREEMENT AND ANY AMENDMENT HEREOF PURSUANT TO SECTION 5 SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSEQUENT CONTRIBUTION
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY AND FOR ANY COUNTERCLAIM
THEREIN.
G-2
<PAGE>
Section 7. Counterparts. This Subsequent Contribution Agreement may be
executed in counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which shall constitute one and
the same instrument.
Section 8. Binding Effect; Third-Party Beneficiaries. This Subsequent
Contribution Agreement will inure to the benefit of and be binding upon the
parties hereto, the Note Insurer, the Noteholders, and their respective
successors and permitted assigns.
Section 9. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 10. Exhibits. The exhibits attached hereto and referred to
herein shall constitute a part of this Subsequent Contribution Agreement and are
incorporated into this Subsequent Contribution Agreement for all purposes.
Section 11. Intent of the Parties; Security Agreement. The Depositor
and the Trust intend that the conveyance of all right, title and interest in and
to the Subsequent Mortgage Loans and related assets described above by the
Depositor to the Trust pursuant to this Subsequent Contribution Agreement shall
be, and be construed as, a sale of the Subsequent Mortgage Loans from the
Depositor to the Trust. It is, further, not intended that such conveyances be
deemed to be pledges of the Subsequent Mortgage Loans by the Depositor to the
Trust to secure a debt or other obligation of the Depositor. However, in the
event that the Subsequent Mortgage Loans are held to be property of the
Depositor, or if for any reason this Subsequent Contribution Agreement is held
or deemed to create a security interest in the Subsequent Mortgage Loans, then
it is intended that: (a) this Subsequent Contribution Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of the
Uniform Commercial Code of any other applicable jurisdiction; (b) the conveyance
provided for in this Subsequent Contribution Agreement 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, whether now owned or hereafter acquired,
in and to the Subsequent Mortgage Loans and related assets described above. The
Depositor shall, to the extent consistent with this Subsequent Contribution
Agreement, take such reasonable actions as may be necessary to ensure that, if
this Subsequent Contribution Agreement were deemed to create a security interest
in the Subsequent Mortgage Loans and the other property described above, such
interest would be deemed to be a perfected security interest of first priority
under applicable law and will be maintained as such throughout the term of this
Subsequent Contribution Agreement.
[Remainder of Page Intentionally Left Blank]
G-3
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Trust have caused this
Subsequent Contribution Agreement to be duly executed by their respective
officers as of the day and year first above written.
ABFS MORTGAGE LOAN TRUST 1999-2
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, not in
its individual capacity,
but solely as Owner Trustee
By:________________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:________________________________
Title:
G-4
<PAGE>
Exhibit 8.1
June 29, 1999
The Addressees Listed
on Schedule I Hereto
Re: ABFS Mortgage Loan Trust 1999-2,
Mortgage Backed Notes, Series 1999-2
Ladies and Gentlemen:
We have acted as special tax counsel in connection with the
issuance and delivery of (x) certain mortgage backed notes denominated as ABFS
Mortgage Loan Trust 1999-2, Mortgage Backed Notes, Series 1999-2, Class A-1 (the
"Class A-1 Notes") and Class A-2 (the "Class A-2 Notes" and, together with the
Class A-1 Notes, the "Notes"), pursuant to an Indenture, dated as of June 1,
1999 (the "Indenture"), by and between the ABFS Mortgage Loan Trust 1999-2 (the
"Trust") and The Chase Manhattan Bank, as indenture trustee (the "Indenture
Trustee"), and (y) two classes of trust certificates (the "Trust Certificates"),
pursuant to a Trust Agreement, dated as of June 1, 1999 (the "Trust Agreement"),
by and among First Union Trust Company, National Association, as owner trustee
(the "Owner Trustee"), Prudential Securities Secured Financing Corporation, and
ABFS 1999-2, Inc., as unaffiliated seller (the "Unaffiliated Seller").
Each class of Notes will be secured by a pledge of a separate
portion of the assets of the Trust. The assets of the Trust (the "Trust Estate")
will consist primarily of two pools of fixed-rate, closed-end, monthly-pay,
business and consumer purpose home equity loans secured by first- or second-lien
mortgages or deeds of trust on residential or commercial real properties (the
"Mortgage Loans"). The Class A-1 Notes will be secured by the Mortgage Loans in
the first pool ("Pool I") and the Class A-2 Notes will be secured by the
Mortgage Loans in the second pool ("Pool II"). Each pool will constitute a
separate sub-trust of the Trust. Each class of Trust Certificates evidences the
entire beneficial ownership interest in the sub-trust of the Trust consisting of
the related pool of Mortgage Loans.
As special tax counsel, we have examined such documents as we
deemed appropriate for the purposes of rendering the opinions set forth below,
including the following: (a) a Prospectus, dated June 23, 1999, and a Prospectus
Supplement, dated June 25, 1999 (together the "Prospectus"), with respect to the
Notes, (b) an executed copy of the Indenture and the exhibits attached thereto,
and (c) an executed copy of the Trust Agreement and the exhibits attached
thereto. Terms capitalized herein and not otherwise defined herein shall have
their respective meanings as set forth in Appendix I to the Indenture.
We have examined the question of whether the Notes issued
under the Indenture will be treated as indebtedness for federal income tax
<PAGE>
The Addressees Listed
on Schedule I Hereto
June 29, 1999;
Page 2
purposes. Our analysis is based on the provisions of the Internal Revenue Code
of 1986, as amended, and the Treasury Regulations promulgated thereunder as in
effect on the date hereof and on existing judicial and administrative
interpretations thereof. These authorities are subject to change and to
differing interpretations, which could apply retroactively. The opinion of
special tax counsel is not binding on the courts or the Internal Revenue Service
(the "IRS").
In general, whether a transaction constitutes the issuance of
indebtedness for federal income tax purposes is a question of fact, the
resolution of which is based primarily upon the economic substance of the
instruments and the transaction pursuant to which they are issued rather than
the form of the transaction or the manner in which the instruments are labeled.
The IRS and the courts have set forth various factors to be taken into account
in determining whether or not a transaction constitutes the issuance of
indebtedness for federal income tax purposes, which we have reviewed as they
apply to this transaction.
Based upon the foregoing and upon the assumptions set forth
below, we are of the opinion that for federal income tax purposes:
1. The Notes will be treated as indebtedness because (a) the
characteristics of the Notes strongly indicate that in economic
substance the Notes are a form of indebtedness and (b) the parties have
stated unambiguously their intention to treat the Notes as indebtedness
for tax purposes.
2. The statements under the caption "Material Federal Income
Tax Consequences" in the Prospectus are accurate and complete in all
material respects.
3. Neither the sub-trust of the Trust consisting of the Pool I
Mortgage Loans nor the sub-trust of the Trust consisting of the Pool II
Mortgage Loans will be characterized as an association (or a publicly
traded partnership) taxable as a corporation or a taxable mortgage
pool.
This opinion is furnished by us as counsel in connection with
the conveyance of the Mortgage Loans to the Trust as of the date hereof. We
express no opinion on any matter not discussed in this letter and we undertake
no obligation to update this letter or the opinions contained herein after the
date hereof. This opinion letter is rendered as of the Closing Date, at the
request of the addressees hereof, for the sole benefit of each addressee, and no
other person or entity is entitled to rely hereon without our prior written
consent. Copies of this opinion letter may not be furnished to any other person
or entity, nor may any portion of this opinion letter be quoted, circulated or
referred to in any other document, without our prior written consent.
Very truly yours,
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
<S> <C>
Financial Security Assurance Inc. Prudential Securities Incorporated
350 Park Avenue One New York Plaza
New York, New York 10022 New York, New York 10292
Chase Bank of Texas, N.A., Prudential Securities Secured Financing Corporation
as Collateral Agent One New York Plaza
801 West Greens Road New York, New York 10292
Suite 200
Houston, Texas 77067
Standard & Poor's Ratings Services Moody's Investors Service, Inc.
55 Water Street 99 Church Street
New York, New York 10041 New York, New York 10007
American Business Credit, Inc. The Chase Manhattan Bank,
BalaPointe Office Centre as Indenture Trustee
111 Presidential Boulevard, Suite 127 450 W. 33rd Street
Bala Cynwyd, PA 19004 New York, New York 10001
ABFS Mortgage Loan Trust 1999-2 First Union Trust Company, National
c/o First Union Trust Company, National Association, as Owner Trustee
Association, as Owner Trustee One Rodney Square
One Rodney Square 920 King Street, Suite 102
920 King Street, Suite 102 Wilmington, Delaware 19801
Wilmington, Delaware 19801
</TABLE>
<PAGE>
Exhibit 10.1
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE(R)
Obligor: As described in Endorsement No. 1 Policy No.: 50824-N
Obligations: $218,900,000 ABFS Mortgage Date of Issuance: 6/29/99
Loan Trust 1999-2 Mortgage Backed Notes,
Series 1999-2, Class A-1 and Class A-2
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of,
or interest on, the Obligations made during the Term of this Policy to
such Holder that is subsequently avoided in whole or in part as a
preference payment under applicable law (such payment to be made by
Financial Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this
Policy by Financial Security following Financial Security's receipt of
notice as described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each
Holder to receive payments under the Obligations to the extent of any payment by
Financial Security hereunder.
Except to the extent expressly modified by an endorsement
hereto, the following terms shall have the meanings specified for all purposes
of this Policy. "Holder" means the registered owner of any Obligation as
indicated on the registration books maintained by or on behalf of the Obligor
for such purpose or, if the Obligation is in bearer form, the holder of the
Obligation. Scheduled Payments" means payments which are scheduled to be made
during the Term of this Policy in accordance with the original terms of the
Obligations when issued and without regard to any amendment or modification of
such Obligations thereafter; payments which become due on an accelerated basis
as a result of (a) a default by the Obligor, (b) an election by the Obligor to
pay principal on an accelerated basis or (c) any other cause, shall not
constitute "Scheduled Payments" unless Financial Security shall elect, in its
sole discretion, to pay such principal due upon such acceleration together with
any accrued interest to the date of
<PAGE>
acceleration. "Term of this Policy" shall have the meaning set forth in
Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial
Security, and shall not be modified, altered or affected by any other agreement
or instrument, including any modification or amendment thereto, or by the
merger, consolidation or dissolution of the Obligor. Except to the extent
expressly modified by an endorsement hereto, the premiums paid in respect of
this Policy are nonrefundable for any reason whatsoever, including payment, or
provision being made for payment, of the Obligations prior to maturity. This
Policy may not be canceled or revoked during the Term of this Policy. THIS
POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED
IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has
caused this Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:______________________________
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance
Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 100NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
OBLIGOR: ABFS MORTGAGE LOAN TRUST 1999-2
OBLIGATIONS: $218,900,000 ABFS Mortgage Loan Trust 1999-2
Mortgage Backed Notes, Series 1999-2, Class A-1
and Class A-2
POLICY NO. 50824-N
DATE OF ISSUANCE: June 29, 1999
1. Definitions. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Indenture unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in New York are authorized or obligated
by law or executive order to be closed.
"Holder" shall not include the Obligor or any affiliates or
successors thereof in the event the Obligor, or any such affiliate or successor,
is a registered or beneficial owner of the Obligation.
"Indenture" means the Indenture, dated as of June 1, 1999, between
ABFS Mortgage Loan Trust 1999-2 as Issuer and the Indenture Trustee, as amended
from time to time with the consent of Financial Security.
"Indenture Trustee" means The Bank of New York, in its capacity as
Indenture Trustee under the Indenture and the Sale and Servicing Agreement and
any successor in such capacity.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security
and to the Fiscal Agency (as defined below), if any, at or prior to 12:00 noon,
New York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on the next succeeding Business Day. If any notice or
<PAGE>
Policy No.: 50824-N Date of Issuance: June 29, 1999
certificate given hereunder by the Indenture Trustee is not in proper form or is
not properly completed, executed or delivered, it shall be deemed not to have
been Received, and Financial Security or its Fiscal Agent shall promptly so
advise the Indenture Trustee and the Indenture Trustee may submit an amended
notice.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement, dated as of June 1, 1999, among ABFS Mortgage Loan Trust 1999-2 as
Issuer, American Business Credit, Inc. as Servicer, Chase Bank of Texas, N.A. as
Collateral Agent, Prudential Securities Secured Financing Corporation as
Depositor and the Indenture Trustee, as amended from time to time with the
consent of Financial Security.
"Scheduled Payments" means, with respect to any Payment Date and the
Obligations, the Insured Payments, without regard to any amendment or
modification of the Notes, the Indenture or the Sale and Servicing Agreement,
except such amendments or modifications to which Financial Security has given
its prior written consent. Scheduled Payments shall not include any amounts due
in respect of the Obligations attributable to any increase in interest rate,
penalty or other sum payable by the Obligor by reason of any default or event of
default in respect of the Obligations, or by reason of any deterioration of the
creditworthiness of the Obligor, nor shall Scheduled Payments include, nor shall
coverage be provided under this Policy in respect of, any taxes, withholding or
other charge imposed by any governmental authority due in connection with the
payment of any Scheduled Payment to a Holder.
"Term of This Policy" means the period from and including the Date
of Issuance to and including the date on which (i) all Scheduled Payments have
been paid that have been required to be paid by the Obligor within the meaning
of Section 4.01 of the Indenture, (ii) any period during which any Scheduled
Payment could have been avoided in whole or in part as a preference payment
under applicable bankruptcy, insolvency, receivership or similar law has
expired, and (iii) if any proceedings requisite to avoidance as a preference
payment have been commenced prior to the occurrence of (i) and (ii), a final and
non-appealable order in resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments out of the funds of Financial Security on the later to occur of (a)
12:00 noon, New York City time, on the second Business Day following such
Receipt; and (b) 12:00 noon, New York City time, on the Payment Date to which
such claim relates. Payments due hereunder in respect of Scheduled Payments will
be disbursed by wire transfer of immediately available funds to the Policy
Payments Account established pursuant to the Sale and Servicing Agreement or, if
no such Policy Payments Account has been established, to the Indenture Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments on the Obligations, including any amounts due on
the Obligations on an accelerated basis, whether or not any notice and
certificate shall have been Received by
A-2
<PAGE>
Policy No.: 50824-N Date of Issuance: June 29, 1999
Financial Security as provided above; provided, however, that by acceptance of
this Policy the Indenture Trustee agrees to provide upon request to Financial
Security a notice and certificate in respect of any such payments made by
Financial Security. Financial Security shall be entitled to pay hereunder any
amount due on the Obligations on an accelerated basis at any time or from time
to time, in whole or in part, prior to the scheduled date of payment thereof.
Scheduled Payments insured hereunder shall not include interest, in respect of
principal paid hereunder on an accelerated basis, accruing from after the date
of such payment of principal. Financial Security's obligations hereunder in
respect of Scheduled Payments shall be discharged to the extent such amounts are
paid by the Issuer in accordance with the Indenture or disbursed by Financial
Security as provided herein whether or not such funds are properly applied by
the Indenture Trustee except as otherwise proved in paragraph 3 of this
Endorsement.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (A) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the relevant Holder is required to
return principal or interest distributed with respect to the Obligations during
the Term of this Policy because such distributions were avoidable as preference
payments under applicable bankruptcy law (the "Order"), (B) a certificate of the
relevant Holder that the Order has been entered and is not subject to any stay
and (C) an assignment duly executed and delivered by the relevant Holder, in
such form as is reasonably required by Financial Security and provided to the
relevant Holder by Financial Security, irrevocably assigning to Financial
Security all rights and claims of the relevant Holder relating to or arising
under the Obligations against the estate of the Obligor or otherwise with
respect to such preference payment or (ii) the date of Receipt by Financial
Security from the Indenture Trustee of the items referred to in clauses (A), (B)
and (C) above if, at least four Business Days prior to such date of Receipt,
Financial Security shall have Received written notice from the Indenture Trustee
that such items were to be delivered on such date and such date was specified in
such notice. Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order and not to the
Indenture Trustee or any Holder directly (unless a Holder has previously paid
such amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, in which case such payment shall be disbursed to
the Indenture Trustee for distribution to such Holder upon proof of such payment
reasonably satisfactory to Financial Security). In connection with the
foregoing, Financial Security shall have the rights provided pursuant to Section
6.06 of the Sale and Servicing Agreement and Section 8.03(f) of the Indenture.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
A-3
<PAGE>
Policy No.: 50824-N Date of Issuance: June 29, 1999
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Indenture specifying the name and notice address of the Fiscal
Agent. From and after the date of receipt of such notice by the Indenture
Trustee, (i) copies of all notices and documents required to be delivered to
Financial Security pursuant to this Policy shall be simultaneously delivered to
the Fiscal Agent and to Financial Security and shall not be deemed Received
until Received by both and (ii) all payments required to be made by Financial
Security under this Policy may be made directly by Financial Security or by the
Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the agent of
Financial Security only and the Fiscal Agent shall in no event be liable to any
Owner for any acts of the Fiscal Agent or any failure of Financial Security to
deposit, or cause to be deposited, sufficient funds to make payments due under
this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Owner, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance Department
Re: ABFS Mortgage Loan Trust 1999-2
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or
addresses by writing mailed or delivered to the Indenture Trustee.
Priorities. In the event any term or provision of the face of this Policy is
inconsistent with the provisions of this Endorsement, the provisions of this
Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
1 of Part 2 of Division 1 of the California Insurance Code.
A-4
<PAGE>
Policy No.: 50824-N Date of Issuance: June 29, 1999
10. Surrender of Policy. The Indenture Trustee shall surrender this
Policy to Financial Security for cancellation upon expiration of the Term of
this Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:____________________________________
Authorized Officer
A-5
<PAGE>
Policy No.: 50824-N Date of Issuance: June 29, 1999
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of The Chase
Manhattan Bank (the "Indenture Trustee"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. 50824, dated June 29, 1999 (the "Policy"), issued by
Financial Security in respect of ABFS Mortgage Loan Trust 1999-2, Mortgage
Backed Notes, Series 1999-2:
(i) The Indenture Trustee is the Indenture Trustee under the Indenture for
the Holders.
(ii) The sum of all amounts on deposit or scheduled to be on deposit) in
the Note Account and available for distribution to the Holders
pursuant to the Indenture and the Sale and Servicing Agreement will be
$_______________ (the "Shortfall") less than the aggregate amount of
Scheduled Payments due on _______________.
(iii) The Trustee is making a claim under the Policy for the Shortfall to be
applied to the payment of Scheduled Payments.
(iv) The Indenture Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Scheduled Payments on the
Obligations when due; (b) not apply such funds for any other purpose;
(c) not commingle such funds with other funds held by the Indenture
Trustee and (d) maintain an accurate record of such payments with
respect to each Obligation the corresponding claim on the Policy and
proceeds thereof and, if the Obligation is required to be surrendered
for such payment, shall stamp on each such Obligation the legend
"$[insert applicable amount] paid by Financial Security and the
balance hereof has been cancelled and reissued" and then shall deliver
such Obligation to Financial Security.
(v) The Indenture Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the Trust
Estate to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Obligations. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such
A-6
<PAGE>
Policy No.: 50824-N Date of Issuance: June 29, 1999
payments. The Indenture Trustee shall take such action and deliver
such instruments as may be reasonably requested or required by
Financial Security to effectuate the purpose or provisions of this
clause (v).
(vi) The Indenture Trustee, on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney-in-fact for
the Indenture Trustee and each such Holder in any legal proceeding
with respect to the Obligations. The Indenture Trustee hereby agrees
that Financial Security may at any time during the continuation of any
proceeding by or against the Seller under the United States Bankruptcy
Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") direct all
matters relating to such Insolvency Proceeding, including without
limitation, (A) all matters relating to any claim in connection with
an Insolvency Proceeding seeking the avoidance as a preferential
transfer of any payment with respect to the Obligations (a "Preference
Claim"), (B) the direction of any appeal of any order relating to any
Preference Claim at the expense of Financial Security but subject to
reimbursement as provided in the Insurance Agreement and (C) the
posting of any surety, supersedeas or performance bond pending any
such appeal. In addition, the Indenture Trustee hereby agrees that
Financial Security shall be subrogated to, and the Indenture Trustee
on its behalf and on behalf of each Holder, hereby delegates, and
assigns, to the fullest extent permitted by law, the rights of the
Indenture Trustee and each Holder in the conduct of any Insolvency
Proceeding, including, without limitation, all rights of any party to
an adversary proceeding or action with respect to any court order
issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the [SPECIFY
INSURANCE ACCOUNT].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
A-7
<PAGE>
Policy No.: 50824-N Date of Issuance: June 29, 1999
IN WITNESS WHEREOF, the Indenture Trustee has executed and
delivered this Notice of Claim and Certificate as of the ____ day of
___________________, _____.
THE CHASE MANHATTAN BANK
as Indenture Trustee
By:_______________________________
Title:____________________________
- --------------------------------------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent _______________ by ____________________________
Confirmation Number ______________________________
A-8
<PAGE>
Exhibit 23.1
[PricewaterhouseCoopers LLP Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
-------------
We consent to the incorporation by reference in the Prospectus Supplement of
Prudential Securities Secured Financing Corporation relating to ABFS Mortgage
Loan Trust 1999-2 of our report dated January 26, 1999 on our audits of the
consolidated financial statements of Financial Security Assurance Inc. and
Subsidiaries as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998. We also consent to the reference to our
Firm under the caption "Experts".
PricewaterhouseCoopers LLP
June 25, 1999
