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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
September 28, 1999
Prudential Securities Secured Financing Corporation
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(Exact Name of Registrant as Specified in its Charter)
Delaware 333-75489 13-3526694
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
One New York Plaza
New York, New York 10292
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(Address of Principal (Zip Code)
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)
<PAGE>
Item 2. Acquisition or Disposition of Assets
Description of the Notes and the Mortgage Loans
Prudential Securities Secured Financing Corporation registered
issuances of up to $1,500,000,000 principal amount of Mortgage-Back 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 1999-3 (the
"Trust") issued approximately $218,900,000 in aggregate principal amount of its
Mortgage-Backed Notes (the "Notes"), on September 28, 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 Notes, the forms of
which were field 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 September 1, 1999, between ABFS
Mortgage Loan Trust 1999-3 (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 classes of Trust Certificates (the "Trust
Certificates").
Only the Class A Notes were offered.
The assets of the Trust consist primarily of fixed-rate, closed-end,
conventional, monthly pay, generally fully amortizing, business purpose loans
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 payments on the Class A Notes are based on the Notes Principal
Balance thereof and the then applicable Interest Rate thereof. The Interest Rate
for the Class A-1 Notes is 7.49% per annum. The Interest 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 $186,065,000 and $32,835,000 respectively.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated June 23, 1999 and the Prospect
Supplement dated September 17, 1999 filed pursuant to Rule 424(b) (5) of the Act
on September 28, 1999.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
1.1 Underwriting Agreement, date August 31, 1999, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
1.2 Indemnification Agreement, dated as of September 17, 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 1999-3, Inc., and
Financial Security Assurance Inc.
4.1 Indenture, dated as of September 1, 1999, between ABFS
Mortgage Loan Trust 1999-3 and The Chase Manhattan Bank, as
indenture trustee.
4.2 Unaffiliated Seller's Agreement, dated as of September 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 1999-3, Inc.
4.3 Sale and Servicing Agreement, dated as of September 1, 1999,
among Prudential Securities Secured Financing Corporation,
American Business Credit, Inc., ABFS Mortgage Loan Trust
1999-3, Chase Bank of Texas, N.A., and The Chase Manhattan
Bank.
8.1 Opinion of Brown & Wood LLP, Counsel to Prudential Securities
Secured Corporation regarding certain tax matters.
10.1 Financial Guaranty Insurance Policy, dated September 28, 1999.
23.1 Consent of PricewaterhouseCoopers, L.L.P. regarding financial
statements of the Financial Security Assurance Inc. and their
report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By: /s/ Evan Mitnick
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Name: Evan Mitnick
Title: Vice President
Dated:
<PAGE>
EXHIBIT INDEX
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Exhibit No. Description
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1.1 Underwriting Agreement, dated August 31, 1999, between
Prudential Securities Secured Financing Corporation and
Prudential Securities Incorporated.
1.2 Indemnification Agreement, dated as of September 17, 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
1999-3, Inc., and Financial Security Assurance Inc.
4.1 Indenture, dated as of September 1, 1999, between ABFS
Mortgage Loan Trust 1999-3 and The Chase Manhattan Bank,
as indenture trustee.
4.2 Unaffiliated Seller's Agreement, dated as of September 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 1999-3, Inc.
4.3 Sale and Servicing Agreement, dated as of September 1,
1999, among Prudential Securities Secured Financing
Corporation, American Business Credit, Inc., ABFS Mortgage
Loan Trust 1999-3, Chase Bank of Texas, N.A., and The
Chase Manhattan Bank.
8.2 Opinion of Brown & Wood LLP, Counsel to Prudential
Securities Secured Corporation regarding certain tax
matters.
10.1 Financial Guaranty Insurance Policy, dated September 28,
1999.
23.1 Consent of PricewaterhouseCoopers, L.L.P. regarding
financial statements of the Financial Security Assurance
Inc. and their report.
ABFS MORTGAGE LOAN TRUST 1999-3
MORTGAGE LOAN BACKED NOTES
SERIES 1999-3
UNDERWRITING AGREEMENT
<PAGE>
UNDERWRITING AGREEMENT
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292
August 31, 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 August 31, 1999 (the "Standard
Provisions"), between the Depositor and Prudential Securities Incorporated, to
issue and sell to you (the "Underwriter") the Securities specified in Schedule I
hereto (the "Offered Securities"). The Depositor agrees that each of the
provisions of the Standard Provisions is incorporated herein by reference in its
entirety, and shall be deemed to be a part of this 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]
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon acceptance hereof by you,
this letter and such acceptance hereof, including the provisions of the Standard
Provisions incorporated herein by reference, shall constitute a binding
agreement between the Underwriter and the Depositor.
Yours truly,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:____________________________
Name:
Title:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:____________________________
Name:
Title:
[Signature Page to Underwriting Agreement]
<PAGE>
SCHEDULE I
Title of Offered Securities: ABFS Mortgage Loan Trust 1999-3, Mortgage
Backed Notes, Series 1999-3, Class A-1 and
Class A-2.
Terms of Offered Securities: The Offered Securities shall have the terms
set forth in the Prospectus and shall conform
in all material respects to the descriptions
thereof contained therein, and shall be
issued pursuant to an Indenture, to be dated
as of September 1, 1999, between the ABFS
Mortgage Loan Trust 1999-3, as issuer, and
The Chase Manhattan Bank, as indenture
trustee.
Purchase Price: The purchase price for the Offered Securities
shall be 99.70% and 99.6375% of the aggregate
note principal balance of the Class A-1 Notes
and Class A-2 Notes, respectively, as of the
Closing Date, plus accrued interest at the
rate of 7.49% per annum, on the aggregate
note principal balance of the Class A-1 Notes
from, and including September 1, 1999 to, but
not including the Closing Date.
Specified funds for payment of
Purchase Price: Federal Funds (immediately available funds).
Required Ratings: Aaa by Moody's Investors Service, Inc.
AAA by Standard & Poor's Ratings Services
Closing Date: On or about September 28, 1999 at 10:00 A.M.
eastern standard time or at such other time
as the Depositor and the Underwriter shall
agree.
Closing Location: Brown & Wood LLP, 815 Connecticut Avenue,
N.W., Washington, D.C. 20006.
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
<PAGE>
STANDARD PROVISIONS TO UNDERWRITING AGREEMENT
August 31, 1999
From time to time, Prudential Securities Secured Financing
Corporation, a Delaware corporation (the "Depositor") may enter into one or more
underwriting agreements (each, an "Underwriting Agreement") that provide for the
sale of designated securities to the several underwriters named therein (such
underwriters constituting the "Underwriters" with respect to such Underwriting
Agreement and the securities specified therein). The several underwriters named
in an Underwriting Agreement will be represented by one or more representatives
as named in such Underwriting Agreement (collectively, the "Representative").
The term "Representative" also refers to a single firm acting as sole
representative of the Underwriters and to Underwriters who act without any firm
being designated as their representative. The standard provisions set forth
herein (the "Standard Provisions") may be incorporated by reference in any
Underwriting Agreement. 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
business purpose loans and home equity loan backed notes (the "Securities")
representing indebtedness secured primarily by the property of a trust which
consists of two pools of business purpose loans and home equity loans (the
"Mortgage Loans") and certain related property. The Securities will be issued
pursuant to an Indenture (the "Indenture") by and between ABFS Mortgage Loan
Trust 1999-3, as issuer (the "Issuer"), and The Chase Manhattan Bank, as
indenture trustee (the "Indenture Trustee"). The Mortgage Loans will be
purchased by the Depositor pursuant to an Unaffiliated Seller's Agreement (the
"Unaffiliated Seller's Agreement") by and among the Depositor, ABFS 1999-3, Inc.
(the "Unaffiliated Seller"), American Business Credit, Inc. ("ABC"),
HomeAmerican Credit, Inc. d/b/a Upland Mortgage ("Upland") and New Jersey
Mortgage and Investment Corp ("NJMIC" and, collectively with ABC and Upland, the
"Originators"). The Mortgage Loans will be sold by the Depositor to the Issuer
pursuant to the terms of a Sale and Servicing Agreement (the "Sale and Servicing
Agreement") among the Issuer, the Depositor, the Indenture Trustee, Chase Bank
of Texas, N.A., as collateral agent (the "Collateral Agent"), and ABC, as
servicer (in such capacity, the "Servicer").
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. 333-75489),
including a prospectus relating to the Securities under the Securities Act of
1933, as amended (the "1933 Act"). The term "Registration Statement" means such
registration statement as amended to the date of the Underwriting Agreement. The
term "Base Prospectus" means the prospectus included in the Registration
Statement. The term "Prospectus" means the Base Prospectus together with the
prospectus supplement specifically relating to the Offered Securities, as first
filed with the Commission pursuant to Rule 424. The term "Preliminary
Prospectus" means a preliminary prospectus supplement specifically relating to
the Offered Securities together with the Base Prospectus.
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
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 Servicer made in any certificates pursuant to the provisions hereof and
of the Underwriting Agreement, to the performance by the Depositor of its
covenants and agreements contained herein and to the following additional
conditions precedent:
(a) All actions required to be taken and all filings required to be
made by or on behalf of the Depositor under the 1933 Act and the Securities
Exchange Act of 1934, as amended (the "1934 Act") prior to the sale of the
Offered Securities shall have been duly taken or made.
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall be in effect; (ii) no proceedings for such purpose shall be
pending before or threatened by the Commission, or by any authority
administering any state securities or "Blue Sky" laws; (iii) any requests
for additional information on the part of the Commission shall have been
complied with to the Representative's reasonable satisfaction; (iv) since
the respective dates as of which information is given in the Registration
Statement and the Prospectus except as otherwise stated therein, there
shall have been no material adverse change in the condition, financial or
otherwise, earnings, affairs, regulatory situation or business prospects of
the Depositor; (v) there are no material actions, suits or proceedings
pending before any court or governmental agency, authority or body or
threatened, affecting the Depositor or the transactions contemplated by the
Underwriting Agreement; (vi) the Depositor is not in violation of its
charter or its by-laws or in default in the performance or observance of
any obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which it is a party 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.
(e) The Representative shall have received, on the Closing Date, an
opinion of Brown & Wood 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 Unaffiliated Seller and the
Originators, 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 Brown & Wood 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;
(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 June 30, 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.
(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.
(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
applicable Sale and Servicing Agreement, (ii) the annual independent public
accountants' servicing report furnished to the Indenture Trustee pursuant
to the applicable Sale and 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. The Depositor
represents and warrants to, and agrees with, each Underwriter, as of the date of
the Underwriting Agreement, as follows:
(a) The Registration Statement including a prospectus relating to the
Securities and the offering thereof from time to time in accordance with
Rule 415 under the 1933 Act has been filed with the Commission and such
Registration Statement, as amended to the date of the Underwriting
Agreement, has become effective. No stop order suspending the effectiveness
of such Registration Statement has been issued and no proceeding for that
purpose has been initiated or threatened by the Commission. A prospectus
supplement specifically relating to the Offered Securities will be filed
with the Commission pursuant to Rule 424 under the 1933 Act; provided,
however, that a supplement to the Prospectus prepared pursuant to Section
5(b) hereof shall be deemed to have supplemented the base Prospectus only
with respect to the Offered Securities to which it relates. The conditions
to the use of a registration statement on Form S-3 under the 1933 Act, as
set forth in the General Instructions on Form S-3, and the conditions of
Rule 415 under the 1933 Act, have been satisfied with respect to the
Depositor and the Registration Statement. There are no contracts or
documents of the Depositor that are required to be filed as exhibits to the
Registration Statement pursuant to the 1933 Act or the rules and
regulations thereunder that have not been so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the base Prospectus conformed in all material
respects to the requirements of the 1933 Act and the rules and regulations
thereunder, and did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; on the date of the
Underwriting Agreement and as of the Closing Date, the Registration
Statement and the Prospectus conform, and as amended or supplemented, if
applicable, will conform in all material respects to the requirements of
the 1933 Act and the rules and regulations thereunder, and on the date of
the Underwriting Agreement and as of the Closing Date, neither of such
documents includes any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and neither of such documents as
amended or supplemented, if applicable, will include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing does not apply to statements or
omissions in any of such documents based upon written information furnished
to the Depositor by any Underwriter specifically for use therein.
(c) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated
therein, there has been no material adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory situation or business
prospects of the Depositor, whether or not arising in the ordinary course
of the business of the Depositor.
(d) The Depositor has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(e) The Depositor has all requisite power and authority (corporate and
other) and all requisite authorizations, approvals, orders, licenses,
certificates and permits of and from all government or regulatory officials
and bodies to own its properties, to conduct its business as described in
the Registration Statement and the Prospectus and to execute, deliver and
perform these Standard Provisions, the Underwriting Agreement, the
Unaffiliated Seller's Agreement and the Sale and Servicing Agreement,
except such as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution by the Underwriter of the
Offered Securities; all such authorizations, approvals, orders, licenses,
certificates are in full force and effect and contain no unduly burdensome
provisions; and, except as set forth or contemplated in the Registration
Statement or the Prospectus, there are no legal or governmental proceedings
pending or, to the best knowledge of the Depositor, threatened that would
result in a material modification, suspension or revocation thereof.
(f) The Offered Securities have been duly authorized, and when the
Offered Securities are issued and delivered pursuant to the Underwriting
Agreement, the Offered Securities will have been duly executed, issued and
delivered and will be entitled to the benefits provided by the 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.
(g) The execution and delivery by the Depositor of these Standard
Provisions, the Underwriting Agreement, the Unaffiliated Seller's Agreement
and the Sale and Servicing Agreement 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, the Unaffiliated Seller's
Agreement and the Sale and Servicing Agreement, 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.
(h) The Underwriting Agreement has been, and at the Closing Date the
Unaffiliated Seller's Agreement and the Sale and Servicing Agreement will
have been, duly authorized, executed and delivered by the Depositor.
(i) At the Closing Date, each of the Underwriting Agreement, the
Unaffiliated Seller's Agreement and the Sale and Servicing Agreement will
constitute a legal, valid and binding obligation of the Depositor,
enforceable against the Depositor, in accordance with its terms, subject,
as to the enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting the rights
of creditors generally, and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law).
(j) No filing or registration with, notice to, or consent, approval,
non-disapproval, authorization or order or other action of, any court or
governmental authority or agency is required for the consummation by the
Depositor of the transactions contemplated by the Underwriting Agreement,
the Unaffiliated Seller's Agreement or the Sale and Servicing Agreement,
except such as have been obtained and except such as may be required under
the 1933 Act, the rules and regulations thereunder, or state securities or
"Blue Sky" laws, in connection with the purchase and distribution of the
Offered Securities by the Underwriters.
(k) The Depositor owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease, own or license, as the case may be, and
to operate, its properties and to carry on its business as presently
conducted and has received no notice of proceedings relating to the
revocation of any such license, permit, consent, order or approval, which
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially adversely affect the conduct of the
business, results of operations, net worth or condition (financial or
otherwise) of the Depositor.
(l) Other than as set forth or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Depositor is
a party or of which any property of the Depositor is the subject which, if
determined adversely to the Depositor would individually or in the
aggregate have a material adverse effect on the condition (financial or
otherwise), earnings, affairs, or business or business prospects of the
Depositor and, to the best of the Depositor's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(m) Each of the Offered Securities will, when issued, be a "mortgage
related security" as such term is defined in Section 3(a)(41) of the 1934
Act.
(n) At the Closing Date or any Subsequent Transfer Date, as the case
may be, each of the Mortgage Loans which is a subject of the Unaffiliated
Seller's Agreement and the Sale and Servicing Agreement and all such
Mortgage Loans 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 both the Unaffiliated Seller's Agreement and the Sale and
Servicing Agreement will be true and correct as of such date.
(o) At the time of execution and delivery of the Unaffiliated Seller's
Agreement and the Sale and Servicing Agreement and on any Subsequent
Transfer Date, as the case may be, the Depositor will have good and
marketable title to the Mortgage Loans being transferred to the Issuer
pursuant to the Sale and Servicing Agreement, 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 Mortgage Loans or in such Unaffiliated Seller's
Agreement or such Sale and Servicing Agreement or the Offered Securities
being issued pursuant thereto, the Depositor will have the power and
authority to transfer such Mortgage Loans to the Issuer and to transfer the
Offered Securities to each of the Underwriters, and upon execution and
delivery to the Issuer of the Sale and Servicing Agreement and delivery to
each of the Underwriters of the Offered Securities, and on any Subsequent
Transfer Date, as the case may be, the Issuer will have good and marketable
title to the Mortgage Loans and each of the Underwriters will have good and
marketable title to the Offered Securities, in each case free and clear of
any Liens.
(p) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of the Underwriting Agreement, these
Standard Provisions, the Indenture, the Sale and Servicing Agreement and
the Offered Securities have been or will be paid at or prior to the Closing
Date.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Depositor agrees to indemnify and hold harmless each
Underwriter (including Prudential Securities Incorporated acting in its capacity
as Representative and as one of the Underwriters), and each person, if any, who
controls any Underwriter within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter or
such controlling person may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Depositor will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with (1)
written information furnished to the Depositor by any Underwriter through the
Representative specifically for use therein or (2) information regarding the
Mortgage Loans except to the extent that the Depositor has been indemnified by
the Servicer. This indemnity agreement will be in addition to any liability
which the Depositor may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Depositor,
each of the Depositor's directors, each of the Depositor's officers who signed
the Registration Statement and each person, if any, who controls the Depositor,
within the meaning of the 1933 Act, against any losses, claims, damages or
liabilities to which the Depositor, or any such director, officer or controlling
person may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration 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.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in the preceding
parts of this Section 7 is for any reason held to be unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect thereof);
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by the
Depositor on the one hand, and the Underwriters on the other, from the offering
of the Offered Securities (taking into account the portion of the proceeds of
the offering realized by each), the Depositor's and the Underwriters' relative
knowledge and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Depositor and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity for such
purpose). No Underwriter or person controlling such Underwriter shall be
obligated to make contribution hereunder which in the aggregate exceeds the
total underwriting fee of the Offered Securities purchased by such Underwriter
under the Underwriting Agreement, less the aggregate amount of any damages which
such Underwriter and its controlling persons have otherwise been required to pay
in respect of the same or any substantially similar claim. The Underwriters'
obligation to contribute hereunder are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Section 7, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Depositor, each officer of the Depositor who signed the
Registration Statement, and each person, if any, who controls the Depositor
within the meaning of Section 15 of the 1933 Act, shall have the same rights to
contribution as the Depositor.
(d) 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 Servicer, the Originators, the
Unaffiliated Seller, 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, its officers and the several Underwriters set forth
in, or made pursuant to, the Underwriting Agreement shall remain in full force
and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter, the Depositor, or any of the
officers or directors or any controlling person of any of the foregoing, and
shall survive the delivery of and payment for the Offered Securities.
9. TERMINATION.
(a) The Underwriting Agreement may be terminated by the Depositor by
notice to the Representative in the event that a stop order suspending the
effectiveness of the Registration Statement shall have been issued or
proceedings for that purpose shall have been instituted or threatened.
(b) The Underwriting Agreement may be terminated by the Representative
by notice to the Depositor in the event that the Depositor shall have failed,
refused or been unable to perform all obligations and satisfy all conditions to
be performed or satisfied hereunder by the Depositor at or prior to the Closing
Date.
(c) Termination of the Underwriting Agreement pursuant to this Section
9 shall be without liability of any party to any other party other than as
provided in Sections 7 and 11 hereof.
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.
11. EXPENSES. The Depositor agrees with the several Underwriters that:
(a) whether or not the transactions contemplated in the Underwriting
Agreement are consummated or the Underwriting Agreement is terminated, the
Depositor will pay all fees and expenses incident to the performance of its
obligations under the Underwriting Agreement, including, but not limited
to, (i) the Commission's registration fee, (ii) the expenses of printing
and distributing the Underwriting Agreement and any related underwriting
documents, the Registration Statement, any preliminary Prospectus, the
Prospectus, any amendments or supplements to the Registration Statement or
the Prospectus, and any Blue Sky memorandum or legal investment survey and
any supplements thereto, (iii) fees and expenses of rating agencies,
accountants and counsel for the Depositor, (iv) the expenses referred to in
Section 5(e) hereof, and (v) all miscellaneous expenses referred to in Item
30 of the Registration Statement;
(b) all out-of-pocket expenses, including counsel fees, disbursements
and expenses, reasonably incurred by the Underwriters in connection with
investigating, preparing to market and marketing the Offered Securities and
proposing to purchase and purchasing the Offered Securities under the
Underwriting Agreement will be borne and paid by the Depositor if the
Underwriting Agreement is terminated by the Depositor pursuant to Section
9(a) hereof or by the Representative on account of the failure, refusal or
inability on the part of the Depositor to perform all obligations and
satisfy all conditions on the part of the Depositor to be performed or
satisfied hereunder; and
(c) the Depositor will pay the cost of preparing the certificates for
the Offered Securities.
Except as otherwise provided in this Section 11, the Underwriters
agree to pay all of their expenses in connection with investigating, preparing
to market and marketing the Offered Securities and proposing to purchase and
purchasing the Offered Securities under the Underwriting Agreement, including
the fees and expenses of their counsel and any advertising expenses incurred by
them in making offers and sales of the Offered Securities.
12. NOTICES. All communications under the Underwriting Agreement shall
be in writing and, if sent to the Underwriters, shall be mailed, delivered or
telegraphed and confirmed to the Representative at the address and to the
attention of the person specified in the Underwriting Agreement, and, if sent to
the Depositor, shall be mailed, delivered or telegraphed and confirmed to
Prudential Securities Secured Financing Corporation, One New York Plaza, New
York, New York 10292, Attention: Managing Director-Asset Backed Finance Group;
provided, however, that any notice to any Underwriter pursuant to the
Underwriting Agreement shall be mailed, delivered or telegraphed and confirmed
to such Underwriter at the address furnished by it.
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.
14. SUCCESSORS. The Underwriting Agreement shall inure to the benefit
of and shall be binding upon the several Underwriters and the Depositor and
their respective successors and legal representatives, and nothing expressed or
mentioned herein or in the Underwriting Agreement is intended or shall be
construed to give any other person any legal or equitable right, remedy or claim
under or in respect of the Underwriting Agreement, or any provisions herein
contained, the Underwriting Agreement and all conditions and provisions hereof
being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the
representations and warranties of the Depositor contained herein or in the
Underwriting Agreement shall also be for the benefit of any person or persons
who controls or control any Underwriter within the meaning of Section 15 of the
1933 Act, and (ii) the indemnities by the several Underwriters shall also be for
the benefit of the directors of the Depositor, the officers of the Depositor who
have signed the Registration Statement and any person or persons who control the
Depositor within the meaning of Section 15 of the 1933 Act. No purchaser of the
Offered Securities from any Underwriter shall be deemed a successor because of
such purchase. 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]
<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:
Accepted as of the date hereof:
PRUDENTIAL SECURITIES INCORPORATED
By:_____________________________
Name:
Title:
[Signature Page to Underwriting Agreement Standard Provisions]
<PAGE>
Exhibit A
Opinions of Brown & Wood LLP,
special counsel for the Depositor
---------------------------------
(1) Each of the Unaffiliated Seller's Agreement, the Sale and
Servicing Agreement, the Underwriting Agreement and the Standard Provisions
(collectively, with the Indenture and 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 Indenture, or of the Sale
and Servicing Agreement or of the Unaffiliated Seller's Agreement, are fair and
accurate in all material respects.
<PAGE>
Exhibit B
Opinions of Counsel to
the Servicer
----------------------
(1) The Servicer 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 State of Pennsylvania.
(2) The Servicer 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 Documents to which it is a party.
(3) Each of the Documents to which the Servicer is a party have been
duly and validly authorized, executed and delivered by the Servicer, all
requisite corporate action having been taken with respect thereto, and each
constitutes the valid, legal and binding agreement of the Servicer, and are
enforceable against the Servicer in accordance with their respective terms.
(4) Neither the transfer of the Mortgage Loans to the Unaffiliated
Seller, nor the execution, delivery or performance by the Servicer 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 Servicer; (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 Servicer 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 Trust Estate or upon the Notes, except as otherwise
contemplated by the Indenture.
(5) The endorsement and delivery of each Mortgage Note, and the
preparation, delivery and recording of an Assignment of Mortgage with respect to
each Mortgage is sufficient fully to transfer to the Unaffiliated Seller and its
assignees all right, title and interest of the Servicer in the Mortgage Note and
Mortgage, as noteholder and mortgagee or assignee thereof.
(6) No consent, approval, authorization or order of, registration or
qualification of or with or notice to, any 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 Documents to which it is a party or the consummation of any other
transaction contemplated thereby by the Servicer, except such which have been
obtained.
(7) There are no legal or governmental suits, proceedings or
investigations pending or, to such counsel's knowledge, threatened against the
Servicer 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 Servicer; (ii) the Servicer's ability to perform its obligations under, or
the validity or enforceability of, each of the Documents to which it is a party;
(iii) any Mortgage Note or Mortgaged Property, or the title of any Mortgagor to
any Mortgaged Property; or (B) which have not otherwise been disclosed in the
Registration Statement and to the best of such counsel's knowledge, no such
proceedings or investigations are threatened or contemplated by governmental
authorities or threatened by others.
<PAGE>
Exhibit C
Opinions of Counsel to
the 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.
- ------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ABFS 1999-3, 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 1999-3
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of September 17, 1999
ABFS Mortgage Loan Trust 1999-3
Mortgage Backed Notes Series 1999-3
$218,900,000 Class A- I and Class A-2 Notes
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Section 1. Definitions.................................................................................3
Section 2. Representations, Warranties and Agreements of Financial Security............................5
Section 3. Representations, Warranties and Agreements of the Underwriter...............................7
Section 4. Indemnification.............................................................................7
Section 5. Indemnification Procedures..................................................................8
Section 6. Contribution................................................................................9
Section 7. Miscellaneous..............................................................................10
</TABLE>
EXHIBIT
Exhibit A.........Opinion of General Counsel
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of September 17, 1999, among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION (the "Depositor"), AMERICAN BUSINESS CREDIT, INC. (the
"Company"), ABFS 1999-3, 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 1999-3 (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
"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 September 1, 1999, between
the Issuer and the Indenture Trustee.
"Indenture Trustee" means The Chase Manhattan Bank.
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated
as of September 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 Rinds 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
19993, Class A- I 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 September 17, 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.
"Underwriting Agreement" means the Underwriting Agreement dated as of
August 31, 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).
(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.
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 1, 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.
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.
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.
(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.
If to Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: ABFS Mortgage Loan Trust 1999-3
Mortgage Backed Notes, Series 1999-3
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 1999-3, 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 1999-3
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.
(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 1999-3, 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:
PRUDENTIAL SECURITIES INCORPORATED
By___________________________________________
Name:
Title:
ABFS MORTGAGE LOAN TRUST 1999-3
By___________________________________________
Name:
Title:
By FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION not in its
individual capacity but solely as
Owner Trustee under the Trust
Agreement
By:__________________________________________
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).
6. 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 September 17, 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).
INDENTURE
dated as of September 1, 1999
by and between
ABFS MORTGAGE LOAN TRUST 1999-3,
as Issuer
and
THE CHASE MANHATTAN BANK,
as Indenture Trustee
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
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ARTICLE I
DEFINITIONS
<S> <C>
Section 1.01. General Definitions.................................................................................2
ARTICLE II
THE NOTES; PLEDGE OF SUBSEQUENT MORTGAGE LOANS
Section 2.01. Forms Generally.....................................................................................2
Section 2.02. Form of Certificate of Authentication...............................................................2
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................................................................................7
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
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........................................................13
Section 3.04. Existence of Trust.................................................................................15
Section 3.05. Protection of Trust Estate.........................................................................16
Section 3.06. Opinions as to the Trust Estate....................................................................16
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................................................................................18
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
Section 4.01. Satisfaction and Discharge of Indenture............................................................19
Section 4.02. Application of Trust Money.........................................................................20
ARTICLE V
DEFAULTS AND REMEDIES
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..............................27
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.............................................................31
Section 5.21. Note Insurer Default...............................................................................31
ARTICLE VI
THE INDENTURE TRUSTEE
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......................................................................35
Section 6.08. Indenture Trustee's Capital and Surplus............................................................35
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..............................................................................39
Section 6.15. Review of Mortgage Files...........................................................................40
Section 6.16. Indenture Trustee Fees and Expenses................................................................40
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
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.......................................................................42
Section 7.04. Reports by Trust...................................................................................42
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Accounts; Investment; Collection of Moneys.........................................................42
Section 8.02. Payments; Statements...............................................................................46
Section 8.03. Claims against the Note Insurance Policy...........................................................46
Section 8.04. General Provisions Regarding the Payment Accounts and Mortgage Loans...............................49
Section 8.05. Releases of Deleted Mortgage Loans.................................................................50
Section 8.06. Reports by Indenture Trustee to Noteholders; Access to Certain Information.........................50
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............................51
Section 8.10. Servicer as Agent..................................................................................51
Section 8.11. Termination of Servicer............................................................................51
Section 8.12. Opinion of Counsel.................................................................................51
Section 8.13. Appointment of Collateral Agents...................................................................52
Section 8.14. Rights of the Note Insurer to Exercise Rights of Noteholders.......................................52
Section 8.15. Trust Estate and Accounts Held for Benefit of the Note Insurer.....................................52
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.............................................53
Section 9.02. Supplemental Indentures With Consent of Noteholders................................................53
Section 9.03. Execution of Supplemental Indentures...............................................................55
Section 9.04. Effect of Supplemental Indentures..................................................................55
Section 9.05. Conformity With Trust Indenture Act................................................................55
Section 9.06. Reference in Notes to Supplemental Indentures......................................................55
Section 9.07. Amendments to Governing Documents..................................................................56
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption........................................................................................56
Section 10.02. Form of Redemption Notice.........................................................................57
Section 10.03. Notes Payable on Optional Redemption..............................................................58
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions..............................................................58
Section 11.02. Form of Documents Delivered to Indenture Trustee..................................................58
Section 11.03. Acts of Noteholders...............................................................................59
Section 11.04. Notices, etc., to Indenture Trustee, the Note Insurer and Trust...................................60
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices.............................................61
Section 11.06. Rules by Indenture Trustee........................................................................62
Section 11.07. Conflict With Trust Indenture Act.................................................................62
Section 11.08. Effect of Headings and Table of Contents..........................................................62
Section 11.09. Successors and Assigns............................................................................62
Section 11.10. Separability......................................................................................62
Section 11.11. Benefits of Indenture.............................................................................62
Section 11.12. Legal Holidays....................................................................................62
Section 11.13. Governing Law.....................................................................................62
Section 11.14. Counterparts......................................................................................63
Section 11.15. Recording of Indenture............................................................................63
Section 11.16. Trust Obligation..................................................................................63
Section 11.17. No Petition.......................................................................................63
Section 11.18. Inspection........................................................................................63
Section 11.19. Usury.............................................................................................64
Section 11.20. Note Insurer Default..............................................................................64
Section 11.21. Third-Party Beneficiary...........................................................................64
</TABLE>
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
<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
<TABLE>
<CAPTION>
Trust Indenture Act of 1939 Indenture Section
- --------------------------- -----------------
<S> <C>
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)
(d)........................................................................ 7.03(a)
Section 313
(a).................................................................... 7.03(a)
(b).................................................................... 7.03(a)
(c).................................................................... 11.05
(d).................................................................... 7.03(b)
Section 314
(a)(1)................................................................. 7.04
(a)(2)................................................................. 7.04
(a)(3)................................................................. 7.04
(a)(4)................................................................. 7.04
(b)(1)................................................................. 2.11(c), 11.01
(b)(2)................................................................. 3.06
(c)(1)................................................................. 2.11(d), 4.01,
8.02(d), 11.01
(c)(2)................................................................. 2.11(c), 4.01,
8.02(d), 11.01
(c)(3)................................................................. 8.02(d)
(d)(1)................................................................. 11.01(a)
(d)(2)................................................................. 11.01(a)
(d)(3)................................................................. 11.01(a)
(e).................................................................... 11.0 1(b)
Section 315
(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
</TABLE>
- ------------------
1 This Cross-Reference Table is not part of the Indenture.
<PAGE>
This INDENTURE, dated as of September 1, 1999 (as amended or
supplemented from time to time as permitted hereby, this "Indenture"), is
between ABFS MORTGAGE LOAN TRUST 1999-3, 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 1999-3 (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 Payment 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.
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.
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 1999-3, Mortgage Backed Notes, Series 1999-3".
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
$186,065,000 of Class A-1 Notes and $32,835,000 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 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.
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. egistration, 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.
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.
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 Payment Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is
registered at the close of business on the Record Date for such Class of Notes
and such Payment Date by either (i) check mailed to such Person's address as
it appears in the Note Register on such Record Date, or (ii) by wire transfer
of immediately available funds to the account of a Noteholder, if such
Noteholder (A) is the registered holder of Definitive Notes having an initial
principal amount of at least $1,000,000 and (B) has provided the Indenture
Trustee with wiring instructions in writing by five (5) Business Days prior to
the related Record Date or has provided the Indenture Trustee with such
instructions for any previous Payment Date, except for the final installment
of principal payable with respect to such Note, 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 Payment Date shall be binding upon all Holders of such Note
and of any Note issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, whether or not such payment is
noted on such Note. The final installment of principal of each Note shall
be payable only upon presentation and surrender thereof on or after the
Payment 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 Payment
Date, other than pursuant to a redemption pursuant to Article X, it shall, no
later than two (2) Business Days prior to such Payment Date, telecopy or hand
deliver to each Person in whose name a Note to be so retired is registered at
the close of business on such otherwise applicable Record Date a notice to the
effect that:
(i) the Indenture Trustee expects that funds sufficient to pay such
final installment will be available in the related Payment Account on
such Payment Date; and
(ii) if such funds are available, (A) such final installment will be
payable on such Payment Date, but only upon presentation and surrender of
such Note at the office or agency of the Note Registrar maintained for
such purpose pursuant to Section 3.02 (the address of which shall be set
forth in such notice) and (B) no interest shall accrue on such Note after
such Payment Date.
A copy of such form of notice shall be sent to the Note Insurer by
the Indenture Trustee.
Notices in connection with redemptions of Notes shall be mailed to
Noteholders in accordance with Section 10.02 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
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 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.
(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. (a) 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 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:
(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;
(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 Certificateholders, 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.
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 Payment Account pursuant to
Sections 5.07 or 8.02 hereof shall be made on behalf of the Trust by the
Indenture Trustee, and no amounts so withdrawn from the related Payment
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 Payment Date, direct the Indenture
Trustee to deposit with such Paying Agent an aggregate sum sufficient to pay
the amounts then becoming due (to the extent funds are then available for such
purpose in the related Payment 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 Payment 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 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 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.
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;
(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. (a) 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:
(b) 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
(c) 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.
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 Payment 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,
(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,
(D) 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 Payment 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.
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 Payment Date, any Interest Payment Amount or shall fail to pay any
Net Mortgage Loan Interest Shortfalls on the Final Stated Maturity Date
for the applicable Class of Notes or shall fail to pay on the Final
Stated Maturity Date of the Class A-2 Notes, any Class A-2 Available
Funds Cap Carry-Forward Amount due on the Notes;
(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 Payment Date, an amount equal to the Principal Payment Amount
due on the Notes on such Payment 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;
(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
(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;
(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.
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 Payment 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 Payment 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
Payment 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 Payment 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;
(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 Payment Date
for such installments of interest, to receive payment of each installment of
principal of such Note when due (or, in the case of any Note called for
redemption, on the date fixed for such redemption) and to institute suit for
the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
Section 5.10. Restoration of Rights and Remedies. If the Indenture
Trustee, the Note Insurer or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason, or has been determined 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
(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 Payment Amount or Principal Payment Amount on any Note on or after
the related Payment Date or for the enforcement of the payment of principal of
any Note on or after the Final 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.
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
Payment Date next succeeding the date of such Sale.
The purchase by the Indenture Trustee of all or any portion of the
Trust Estate at a private Sale shall not be deemed a Sale or disposition
thereof for purposes of this Section 5.17(b). In the absence of a Note Insurer
Default, no Sale hereunder shall be effective without the consent of the Note
Insurer.
(c) Unless the Holders of all Outstanding Notes have otherwise
consented or directed the Indenture Trustee, at any public Sale of all or
any portion of the Trust Estate at which a minimum bid equal to or
greater than the amount described in paragraph (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) 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 Payment
Date next succeeding the date of such Sale and (B) the expenses of
the Sale and of any Proceedings in connection therewith which are
reimbursable to it, without being required to produce the Notes in
order to complete any such Sale or in order for the net Sale price
to be credited against such Notes, and any property so acquired by
the Indenture Trustee shall be held and dealt with by it in
accordance with the provisions of this Indenture;
(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
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
(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 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 Payment 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 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 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 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.
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:
(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 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 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 December 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 Payment 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.
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 Payment Date occurring
closest to six (6) months after the Closing Date and each Payment 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.
(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 "Payment Account" for such
Class. The Indenture Trustee shall promptly deposit in the related Payment
Account (i) the Servicer Remittance Amount for the related Pool received by it
from the Servicer on the Servicer Payment 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 Payment 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 Payment Date, in
accordance with the Servicer Remittance Report, the Shortfall Amount for the
related Class, until paid in full, first, from the Payment Account relating to
the other Class of Notes, to the extent of the Net Monthly Excess Cashflow
from the other Pool of Mortgage Loans, 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, (vii) on each Payment Date, in accordance with the Servicer
Remittance Report, the Net Mortgage Loan Interest Shortfalls for the related
Class of Notes, to the extent of the Net Monthly Excess Cashflow from the
other Pool of Mortgage Loans remaining after payment of: first, the Shortfall
Amount for the related Class, second, the Over-collateralization Increase
Amount for such other Pool and, third, the Reserve Payment Amount for such
other Pool and (viii) all other amounts for such Pool received for deposit in
such Payment 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 Payment Account are subject to withdrawal
by the Indenture Trustee for the purposes set forth in Sections 8.02 hereof.
All funds withdrawn from a Payment 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 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 October 1999 or the November 1999 Payment Date, then,
on such Payment 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 Payment 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 Payment Date;
(iii) if any amounts remain on deposit in either Pre-Funding
Account at the close of business on November 30, 1999, the Indenture
Trustee shall withdraw, from such Pre-Funding Account on the
following Payment Date and deposit in the Payment 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 Payment
Date; and
(iv) on the October 1999, November 1999 and December 1999
Payment Dates, the Indenture Trustee shall transfer from each
Pre-Funding Account to the related Payment Account, the Pre-Funding
Earnings, if any, applicable to such Payment 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 October 1999, November 1999 and December 1999
Payment Dates, the Indenture Trustee shall transfer from each
Capitalized Interest Account to the related Payment Account, the
applicable Capitalized Interest Requirement, if any, for such Class
and such Payment Date; and
(ii) on the Payment 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
Payment 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 Payment Date.
All income or other gains, if any, from investment of moneys
deposited in the Payment and Collection Accounts shall be for the benefit of
the Servicer and on each Payment 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
Payment 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 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 Payment 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 Payment 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
Payment 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. Payments; Statements. On each Payment 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 Payment Account on any
Payment Date or Redemption Date shall be withdrawn from such Payment Account,
in the amounts required (based solely on the Servicer's Remittance Report
delivered to the Indenture Trustee on or before such Payment Date), for
application on such Payment Date in respect of payments for 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 Payment
Account (excluding any Insured Payments), to the Note Insurer, the
lesser of (x) the excess of (i) the amount then on deposit in such
Payment Account over (ii) the Insured Payment Amount for such Pool
on such Payment 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 Payment 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 Payment
Account, to the Holders of the related Class of Notes, the Payment
Amount for such Class;
(iv) from amounts then on deposit in the related Payment
Account, to the Cross-collateralization Reserve Account relating to
the other Class of Notes, the Reserve Payment Amount for such Class;
(v) from amounts then on deposit in the related Payment
Account, to the Holders of the related Class of Notes, the amount of
any Net Mortgage Loan Interest Shortfalls for such Class;
(vi) with respect to the Class A-2 Notes, from amounts then on
deposit in the Payment 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; and
(vii) following the making by the Indenture Trustee of all
allocations, transfers and disbursements described above, from
amounts then on deposit in the related Payment Account, the
Indenture Trustee shall distribute to the Holders of the related
Trust Certificates, the amount remaining on such Payment 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 Payment
Date, the amount to be on deposit in each Payment Account on such Payment Date
as a result of the (i) Servicer's remittance of the Servicer Remittance Amount
on the related Servicer Payment Date, and (ii) any transfers to each Payment
Account made from the related Capitalized Interest Account and/or the related
Pre-Funding Account relating to such Payment 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 Payment Date.
(b) If on any Payment 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 Payment 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 Payment 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
the extent needed to pay the Insured Payment Amount shall be transferred
to the related Payment Account on the related Payment 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 Payment 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 Payment 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
payment 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.
(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 Payment Accounts and
Mortgage Loans. (a) Each Payment 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 Payment Account shall not be commingled with the other
Payment 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 Payment 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 Payment Account.
(b) If any amounts are needed for payment from a Payment 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 Payment
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 Payment 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 Payment 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 Payment 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 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 Payment Account on or prior to the related Servicer Payment 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 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.
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
(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 Payment Date or the Final Stated Maturity Date of the
Notes or, with respect to the Notes, reduce the Note Principal Balance
thereof or the Note Rate thereon, 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;
(f) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the Interest Payment Amount or Principal
Payment Amount for any Payment 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.
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 Holders of 100% of the
Percentage Interests of the Trust Certificates in respect of which the larger
pool of Mortgage Loans (by Aggregate Principal Balance) is remaining or, if
such Holders fail to exercise such option, at the option of the Servicer, and,
in each case at such parties' sole cost and expense, 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 at the Termination Price.
(b) Any such purchase or redemption shall be accomplished by deposit
by the exercising party, into the related Payment Account or Accounts of
the Termination Price on the Servicer Payment 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 by the Trust Certificateholders refereed to in paragraph
(a) of this Section 10.01 of the election to redeem the 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 Payment 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 Trust Certificateholders exercising
such redemption or the Servicer, as the case may be.
If the Indenture Trustee does not receive notice from the Trust
Certificateholders referred to in paragraph (a) of this Section 10.01
that they intend to exercise their option to redeem the Notes at least
thirty (30) days prior to the first Payment Date on which they are
entitled to do so, the Indenture Trustee shall promptly notify the
Servicer that it may effect a redemption of the Notes by responding to
the Indenture Trustee's notice no later than fifteen (15) days prior to
the next succeeding Payment Date.
(d) Upon the redemption of all of the Notes, the Mortgage Loans in
the Trust Estate shall be released and delivered to the Trust
Certificateholders effecting such redemption or the Servicer, as the case
may be.
(e) Upon receipt of the notice from the relevant Trust
Certificateholders or the Servicer of their respective election to redeem
the Notes pursuant to Section 10.01(a) hereof (which shall state, in the
case of an election by the Servicer, 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
Payment 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 Payment Date, and to the Note
Insurer.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the price at which the Notes of such Class will be redeemed; and
(c) the fact of payment in full on such Notes, the place where such
Notes are to be surrendered for final payment (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 and
(unless the Trust shall default in such payment) no interest shall accrue on
such Notes for any period after such Redemption Date; provided, however, that
if such payment is not made 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
(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 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 1999-3,
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 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 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 Payment
Date, Redemption Date or any other date on which principal of or interest on
any Note is proposed to be paid shall not be a Business Day, then
(notwithstanding any other provision of the Notes or this Indenture) payment
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on the nominal date of any such
Payment Date, Redemption Date or other date for the payment of principal of or
interest on any Note and no interest shall accrue for the period from and
after any such nominal date, provided such payment is made in full on such
next succeeding Business Day.
Section 11.13. Governing Law. IN VIEW OF THE FACT THAT NOTEHOLDERS ARE
EXPECTED TO RESIDE IN MANY STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE
TO ESTABLISH WITH CERTAINTY THAT THIS INDENTURE WILL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF A STATE HAVING A
WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL LAW RELEVANT TO TRANSACTIONS
OF THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND EACH NOTE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
Section 11.14. Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.15. Recording of Indenture. This Indenture is subject to
recording in any appropriate public recording offices, such recording to be
effected by the 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.
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.
[Remainder of Page Intentionally Left Blank]
<PAGE>
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 1999-3
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>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[See Schedule 1 to Unaffiliated Seller's Agreement.]
<PAGE>
EXHIBIT A
FORM OF NOTE
ABFS MORTGAGE LOAN TRUST 1999-3
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 Payment Date:
As of September 1, 1999 October 15, 1999
------------------------------------------
<PAGE>
ABFS MORTGAGE LOAN TRUST 1999-3
MORTGAGE BACKED NOTES, SERIES 1999-3, CLASS A-[1][2]
ABFS Mortgage Loan Trust 1999-3, 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 Payment 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 Payment Account in respect of
principal on the Class A-[1][2] Notes, pursuant to the Indenture, dated as of
September 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 Payment Date occurring in December
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
15th day of each month or, if such day is not a Business Day, on the Business
Day immediately following such 15th day (each a "Payment Date"), commencing on
the first Payment 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 Payment Date, all as more specifically set
forth in the Indenture.
Notwithstanding the foregoing, in the case of Definitive Notes, upon
written request at least five (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 Payment Date, Noteholders will be entitled to receive
interest payments in an aggregate amount equal to the Current Interest for
such Class for such Payment Date, together with principal payments in an
aggregate amount equal to the Principal Payment Amount for such Class for such
Payment Date, plus, until the Over-collateralization Amount for the related
Pool and such Payment Date is equal to the Specified Over-collateralization
Amount for such Pool and such Payment Date, the Net Monthly Excess Cashflow,
if any, for such Pool and such Payment 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.
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 1999-3, Mortgage Backed Notes,
Series 1999-3, 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 1999-3, Mortgage Backed Notes,
Series 1999-3, 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 Payment Date, after the Noteholders have been
paid all amounts to which they are entitled, the Note Insurer will be entitled
to be reimbursed for any unreimbursed Insured Payments, unreimbursed Premium
Amounts (each with interest thereon at the "Late Payment Rate" specified in
the Insurance Agreement) and any other amounts owed under the 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 Payment
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
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 Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee,
in the name of and on behalf of the Trust, will notify the Person who was the
Holder hereof as of the Record Date preceding such Payment Date by notice
mailed or transmitted by facsimile prior to such Payment Date, and the amount
then due and payable shall be payable only upon presentation and surrender of
this Note at the Indenture Trustee's principal Corporate Trust Office or at
the office of the Indenture Trustee's agent appointed for such purposes.
As provided in the Indenture, both Classes of Notes may be redeemed
in whole, but not in part, at the option of the holders of 100% of the
Percentage Interests of the Trust Certificates in respect of which the larger
pool of Mortgage Loans (by Aggregate Principal Balance) is remaining or, if
such Certificateholders elect not to exercise such option, by the Servicer, on
any Payment Date on and after the date on which the aggregate unpaid Note
Principal Balance of the Notes is less than or equal to 10% of the aggregate
Original Note Principal Balance of the 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.
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.
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.
<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 1999-3
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
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
-----------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints
__________________________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated:_______________________________________________*/
Signature Guaranteed:
_____________________________________________________*/
*/ NOTICE: The signature to this assignment must correspond with the
name of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may
be determined by the Note Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B
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 1999-3, 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
September 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.
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 Owner Trustee, 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.
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]
<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
1999-3, 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]
<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 1999-3;
Mortgage Backed Notes, Series 1999-3
------------------------------------
Ladies and Gentlemen:
Reference is made to the Indenture, dated as of September 1, 1999
(the "Indenture"), by and between ABFS Mortgage Loan Trust 1999-3, 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:
UNAFFILIATED SELLER'S AGREEMENT
dated as of September 1, 1999
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
ABFS 1999-3, 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
Page
----
ARTICLE I DEFINITIONS .........................................................1
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......................................................28
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.....................................35
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
SCHEDULES AND EXHIBITS
Schedule I - Mortgage Loan Schedule
Exhibit A - Form of Subsequent Transfer Agreement
<PAGE>
This UNAFFILIATED SELLER'S AGREEMENT, dated as of September 1, 1999
(this "Agreement"), by and among PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, a Delaware corporation, (the "Depositor"), ABFS 1999-3, 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 purpose loans 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; and
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 1999-3,
a Delaware statutory business trust (the "Trust") pursuant to a Sale and
Servicing Agreement to be dated as of September 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 September 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.
"Prospectus Supplement" means the Prospectus Supplement dated September
17, 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.
(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 Brown & Wood LLP, Washington, D.C., at 10:00 a.m.,
New York, 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. (a)
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.
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) 99.70% and 99.6375% 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 7.49% per annum, from (and including)
September 1, 1999 to (but not including) the Closing Date, 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) 99.70% and 99.6375% 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 7.49% per annum, from (and including)
September 1, 1999 to (but not including) the Closing Date, 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.
(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.
(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 an 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 agree 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.
(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.
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;
(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;
(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.
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;
(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;
(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;
(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 9.19% per annum in Pool I and 9.20% per annum in
Pool II and the weighted average Mortgage Interest Rate of the Mortgage
Loans is 11.38% in Pool I and 12.44% 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 253 months for the Mortgage Loans in
Pool I and 247 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;
(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% for Pool I and 100% for Pool II, and the weighted average CLTV of
all Mortgage Loans as of the Initial Cut-Off Date is approximately 76.92%
in Pool I and 73.77% 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:
<PAGE>
Pool I
-----------------------------------------------------------
Percentage of Cut-Off
Date Aggregate
State Principal Balance
-------------------------- --------------------------
Alabama 0.09%
Arizona 0.06
Arkansas 0.03
Colorado 0.06
Connecticut 1.30
Delaware 1.58
Florida 10.65
Georgia 4.71
Illinois 2.34
Indiana 0.28
Kentucky 0.11
Louisiana 0.07
Maine 0.05
Maryland 2.39
Michigan 0.51
Minnesota 0.05
Mississippi 0.09
Missouri 0.06
Montana 0.12
New Hampshire 0.03
New Jersey 18.44
New York 25.38
North Carolina 1.84
North Dakota 0.01
Ohio 3.66
Oregon 0.05
Pennsylvania 23.02
Rhode Island 0.09
South Carolina 0.45
Tennessee 0.30
Texas 0.08
Vermont 0.02
Virginia 1.74
West Virginia 0.20
Wisconsin 0.14
-------------------------
100.00%
=========================
Pool II
-----------------------------------------------------------
Percentage of Cut-Off
Date Aggregate
State Principal Balance
-------------------------- --------------------------
Georgia 2.75%
Maryland 0.65
Massachusetts 0.48
New Jersey 37.08
New York 37.94
North Carolina 2.00
Ohio 2.61
Pennsylvania 11.32
Texas 5.00
Virginia 0.16
-------------------------
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;
(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;
(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;
(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;
(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;
(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 89.45% of the Mortgage Loans in
Pool I and 70.88% 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];
(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 and (uu) through
(ww) below 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 correct: (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 9.25% for Pool I and 9.25% 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 $500,000 for Pool II; (vi) no more than 14.90% for
Pool I and 45.20% 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, 100% for Pool I and 100% for Pool II, and (b) for business purpose
loans, 80% for Pool I and 80% for Pool II; (viii) no more than 45% for Pool
I and 50% for Pool II of such Subsequent Mortgage Loans may be Balloon
Loans; (ix) no more than 6% for Pool I and 28% 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 10.92% for Pool I and 10.92% for Pool II and (II) for business
purpose loans, of at least 15.85% for Pool I and 15.21% for Pool II; and
(b) will have a weighted average CLTV of not more than (I) for consumer
purpose loans, 78% for Pool I and 78.50% for Pool II, and (II) for business
purpose loans, 62% for Pool I and 65% for Pool II.
(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, if any,
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);
(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 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.
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.
(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 by 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.
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.
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.
(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.
(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.
(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 August 31, 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);
(vii) a letter from Moody's to the effect that it has assigned a
rating of "Aaa" to the Notes;
(viii) a letter from S&P to the effect 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.
(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.
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, 3411 Silverside Road, 103 Springer Bldg., Wilmington,
Delaware 19810, Attention: Jeffrey Ruben, or to 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.
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.
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 (i) an Opinion of Counsel, at the expense of
the party requesting the change, delivered to the Indenture Trustee or (ii) a
letter from each Rating Agency confirming that such amendment will not result in
the reduction, qualification or withdrawal of the then current rating of the
Notes, 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.
(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]
<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 1999-3, 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 1999-3, 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 August 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 September 1, 1999 (the "Indenture"), by and
between the ABFS Mortgage Loan Trust 1999-3 (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.
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.
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 Owner Trustee, 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), and to the extent such amendment
materially affects the interests of the Owner Trustee, upon written notice to
the Owner Trustee.
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.
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]
<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 1999-3, INC.
By:_________________________________
Name:
Title:
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By:_________________________________
Name:
Title:
[Signature Page to Subsequent Transfer Agreement]
SALE AND SERVICING AGREEMENT
dated as of September 1, 1999
by and among
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor,
ABFS MORTGAGE LOAN TRUST 1999-3,
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>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
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
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
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
Section 4.01. Representations and Warranties Concerning the
Mortgage Loans ...............................................14
Section 4.02. Purchase and Substitution.......................................14
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
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.......................20
Section 5.07. Indenture Trustee to Cooperate..................................21
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.........22
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 ...........................................23
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
Section 6.01. Deposits to the Payment 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
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
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
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.................42
Section 9.08. Successor Collateral Agent......................................43
Section 9.09. Merger or Consolidation of Collateral Agent.....................44
ARTICLE X
MISCELLANEOUS PROVISIONS
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...................................................46
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
<PAGE>
SALE AND SERVICING AGREEMENT, dated as of September 1, 1999 (this
"Agreement"), by and among PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
a Delaware corporation, as depositor (the "Depositor"), ABFS MORTGAGE LOAN TRUST
1999-3, 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 September 1, 1999 (the "Indenture"), between the Trust and the
Indenture Trustee, and issue the ABFS Mortgage Loan Trust 1999-3, 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 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.
(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 payments 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.
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 Payment Date, the Servicer will deposit into the Payment 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) 99.70%
and 99.6375% 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 7.49% per annum from (and including) September 1, 1999 to (but not
including) the Closing Date, minus (C) the Original Pre-Funded Amount and the
Original Capitalized Interest Amount with respect to 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.
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);
(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 September
1, 1999, ABFS Mortgage Loan Trust 1999-3."
(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.
(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 the 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.
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.
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.
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 Payment 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.
(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:
(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;
(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;
(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).
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.
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 Payment 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 Payment 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.
(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 Depositor, 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,
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 lesser
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 related 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 related 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
(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 Payment Date next following the date of such investment
(except that any investment held by the Indenture Trustee may mature on such
Servicer Payment 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 Payment 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 Payment 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 payment of any such amounts on the Servicer
Payment Date upon which the proceeds of such purchase are paid would make the
total amount distributed in respect of any such Mortgage Loan on such Servicer
Payment 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;
(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.
(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.
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. Notwithstanding the foregoing, 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 Payment Date on which such amounts are to be
paid 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.
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 Payment 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.
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.
Section 5.14. Reports to the Indenture Trustee; Collection Account
Statements. Not later than fifteen (15) days after each Payment 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
Payment Date, stating that all payments required by this Agreement to be made by
the Servicer on behalf of the Indenture Trustee have been made (or if any
required payment 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 Payment
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 Sections 5.15(b) and 5.15(c), 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 any Mortgage Loans which are 90 days or more Delinquent
in an 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
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.
(c) After the Unaffiliated Seller or an Affiliate of the Unaffiliated
Seller has repurchased any Mortgage Loans which are 90 days or more Delinquent
in an Aggregate Principal Balance equal to 5% 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 not repurchase
such additional Mortgage Loans. Any request by the Unaffiliated Seller or
Affiliate to the Note Insurer for consent to repurchase Mortgage Loans that are
not the most 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 Payment Date, the Servicer shall deliver to
the Indenture Trustee a Servicer Remittance Report for such Payment Date,
setting forth the information required in the definition of "Indenture Trustee's
Remittance Report."
(b) On each Servicer Payment 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);
(v) the weighted average Mortgage Interest Rate as of the Due
Date occurring in the Due Period related to such Payment 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 Payment Date
shall be offset on such Payment 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 Payment Date. The amount of any offset against the Monthly Servicing Fee
with respect to any Payment 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 Payment Date, the Servicer determines that any Monthly Payments due on
the Due Date immediately preceding such Servicer Payment 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 with respect to the
related Payment Date. The Servicer shall, one (1) Business Day after such
Servicer Payment Date, deliver a magnetic tape or diskette to the Indenture
Trustee indicating the payment status of each Mortgage Loan as of such Servicer
Payment Date. The Servicer shall include in the amount to be deposited in the
Collection Account on such Servicer Payment 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 payment or withdrawal on or in
connection with Payment Dates in subsequent months. Any funds being held for
future payment 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 Payment Date to the extent that funds in the
Collection Account on such Servicer Payment 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 Payment Date occurring in
October 1999, of $359,892.86, with respect to interest on Mortgage Loans in Pool
I not having their first payment due until after September 1999 and $95,949.70
with respect to interest on Mortgage Loans in Pool II not having their first
payment due until after September 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 Documents. 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
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 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 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
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 Payment Account. On each Servicer Payment
Date, the Servicer shall cause to be deposited in the Payment 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 Payment Date, minus any portion thereof payable to the Servicer pursuant
to Section 5.03. On each Servicer Payment Date, the Servicer shall also deposit
into the Payment Account any Periodic Advances with respect to the related
Payment 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 Payment Date occurring in
October 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.
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 Payment
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 Payment 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 Payment Date, the Servicer shall
remit to the Indenture Trustee (without right to reimbursement therefor) for
deposit into the related Payment Account, an amount equal to, for each Mortgage
Loan, the lesser of (a) the Prepayment Interest Shortfall for such Mortgage Loan
for the related Payment 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 (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.
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 ninety (90) 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;
(vii) the Note Insurer shall notify the Indenture Trustee of any
"event of default" under the Insurance Agreement;
(viii) if on any Payment Date the Rolling Six Month Delinquency
Rate exceeds 12.75% of the aggregate outstanding Principal Balance for
the Mortgage Loans;
(ix) if on any Payment Date, commencing in September 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 Payment Date occurring before September 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
Payment Date on or after September 1, 2000 and before September 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
Payment Date on or after September 1, 2001 and before September 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
Payment Date on or after September 1, 2002 and before September 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
Payment Date on or after September 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 Payment 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, except for the Servicer's
indemnification obligation under Section 5.19, 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 Servicer under this
Agreement, except for the Servicer's indemnification obligations under Section
5.19, 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,
except for the Servicer's indemnification obligations under Section 5.19, 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.
(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 payment 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.
(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 payment 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.
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.
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, certain of the Trust
Certificateholders or the Servicer may, at their respective option and at their
respective sole cost and expense, call the Notes or terminate the Trust in
accordance with the terms of Section 10.01 of the Indenture.
(c) If on any Payment 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 Payment Account, the Servicer shall send a final payment
notice promptly to each Noteholder in accordance with Section 8.01(d).
(d) Notice of any termination, specifying the Payment Date upon which
the Trust will terminate and the Noteholders shall surrender their Notes to the
Indenture Trustee for final payment and cancellation, shall be given promptly by
the Servicer by letter to Noteholders mailed during the month of such final
payment before the Servicer Payment Date in such month, specifying (i) the
Payment 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 Payment 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 payment 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.
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 December 31, 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.
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;
(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;
(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.
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. 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.
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
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.
(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 (i) an Opinion of Counsel,
at the expense of the party requesting the change, delivered to the Indenture
Trustee or (ii) a letter from each Rating Agency confirming that such action
will not result in the reduction, qualification or withdrawal of the
then-current ratings on the Notes, 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 paid 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 Holder of the majority of the Percentage Interest
of 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 paid 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.
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 or the
Originators, 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
Unaffiliated Seller, 3411 Silverside Road, 103 Springer Bldg., Wilmington,
Delaware 19810, Attention: Jeffrey Ruben, Executive Vice President; (iii) in the
case of the Trust, ABFS Mortgage Loan Trust 1999-3, c/o the Owner Trustee at its
Corporate Trust Office, Attention: Corporate Trust Administration; (iv) in the
case of the Collateral Agent, Chase Bank of Texas, N.A., at its Corporate Trust
Office, Attention: Document Custody Manager; (v) 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; (vi) 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; (vii) 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"); (viii) in the case of Standard & Poor's Rating
Services, 55 Water Street, New York, New York 10041 Attention: Residential
Mortgage Surveillance Group; (ix) in the case of Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007 Attention: Home Equity
Monitoring Group; and (x) 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.
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
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]
<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 1999-3
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>
SCHEDULE I
MORTGAGE LOAN SCHEDULE
[See Schedule I to Unaffiliated Seller's Agreement]
<PAGE>
APPENDIX I
DEFINED TERMS
[See Appendix I to Indenture]
BROWN & WOOD LLP
815 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20006-4004
TELEPHONE: 202-973-0600
FACSIMILE: 202-223-0485
September 28, 1999
The Addressees Listed
on Schedule I Hereto
Re: ABFS Mortgage Loan Trust 1999-3,
Mortgage Backed Notes, Series 1999-3
------------------------------------
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 1999-3, Mortgage Backed Notes, Series 1999-3, 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 September 1, 1999
(the "Indenture"), by and between the ABFS Mortgage Loan Trust 1999-3 (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 September 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 1999-3, 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 opinion set forth below, including
the following: (a) a Prospectus, dated June 23, 1999, and a Prospectus
Supplement, dated September 17, 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.
<PAGE>
To the Addressees Listed
on Schedule I Hereto
September 28, 1999
Page 2
In rendering this opinion, we do not express any opinion concerning any
law other than the Federal tax law of the United States. In addition, we do not
express any opinion on any issue not expressly addressed below. In rendering
this opinion, we have relied on the Code, Treasury regulations issued
thereunder, as well as various judicial and administrative precedents, all of
which are subject to change and any such change can be retroactively effective.
We undertake no obligation to update this opinion in the event of any such
changes.
Based upon and subject to the foregoing, we are of the opinion that for
Federal income tax purposes:
1. The statements under the caption "Material Federal Income
Tax Consequences" in the Prospectus are accurate and complete in all
material respects.
2. The Notes will be treated as indebtedness.
3. The Trust will not be classified as an association or as a
publicly traded partnership taxable as a corporation or as a taxable
mortgage pool.
4. Neither the sub-trust will be classified as an association
or as a publicly traded partnership taxable as a corporation or as a
taxable mortgage pool.
This opinion 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 may not be furnished to any other person or entity, nor may any
portion of this opinion be quoted, circulated or referred to in any other
document, without our prior written consent.
Very truly yours,
<PAGE>
SCHEDULE I
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
as Collateral Agent Financing Corporation
801 West Greens Road One New York Plaza
Suite 200 New York, New York 10292
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 1999-3 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
FINANCIAL FINANCIAL GUARANTY
SECURITY INSURANCE POLICY
ASSURANCE(R)
Obligor: As described in Endorsement No. 1 Policy No.: 50861-N
Obligations: $218,900,000 ABFS Mortgage Loan Date of Issuance: 9/28/99
Trust 1999-3 Mortgage Backed Notes,
Series 19993, Class A1 and Class A2
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 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. 100226022 (212) 826-0100
Form 1OONY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
OBLIGOR: ABFS MORTGAGE LOAN TRUST 1999-3
OBLIGATIONS: $218,900,000 ABFS Mortgage Loan Trust 1999-3 Mortgage
Backed Notes, Series 19993, Class A-1 and Class A-2
POLICY NO. 50861-N
DATE OF ISSUANCE: September 28, 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 September 1, 1999, between
ABFS Mortgage Loan Trust 1999-3 as Issuer and the Indenture Trustee, as amended
from time to time with the consent of Financial Security.
"Indenture Trustee" means The Chase Manhattan Bank, 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 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 September 1, 1999, among ABFS Mortgage Loan Trust
1999-3 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 Payment Amounts, 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
<PAGE>
Policy No.: 50861-N Date of Issuance: September 28, 1999
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 'g 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
nonappealable 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 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
<PAGE>
Policy No.: 50861-N Date of Issuance: September 28, 1999
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 an 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.
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.
7. 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 1999-3
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.
<PAGE>
Policy No.: 50861-N Date of Issuance: September 28, 1999
8. 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 H 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.
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
<PAGE>
Policy No.: 50861-N Date of Issuance: September 28, 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. 50861-N, dated September 28, 1999, (the "Policy"), issued by Financial
Security in respect of ABFS Mortgage Loan Trust 1999-3, Mortgage Backed Notes,
Series 1999-3:
(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 Indenture 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
1[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 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
<PAGE>
Policy No.: 50861-N Date of Issuance: September 28, 1999
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 referential 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.
<PAGE>
Policy No.: 50861-N Date of Issuance: September 28, 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 _______________________________________________
PRICEWATERHOUSECOOPERS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York NY 10036
Telephone (212) 596-8000
Facsimile (212) 596 8910
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
1999-3 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
September 24, 1999
