<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1996
REGISTRATION STATEMENT NO. 333-3418
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DELTA FUNDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 11-2609517
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1000 WOODBURY ROAD
WOODBURY, NEW YORK 11797
(516) 364-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD BLASS
VICE PRESIDENT
DELTA FUNDING CORPORATION
1000 WOODBURY ROAD
WOODBURY, NEW YORK 11797
(516) 364-8500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copy to:
ROBERT C. WIPPERMAN
STROOCK & STROOCK & LAVAN
SEVEN HANOVER SQUARE
NEW YORK, NEW YORK 10004
(212) 806-5400
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE(2)
- ------------------------------ ------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Asset Backed Securities....... $1,500,000,000 100% $1,500,000,000 $517,241.38
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Of this amount, $344.83 previously has been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 5, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1996)
$
DELTA FUNDING HOME EQUITY LOAN TRUST 199 -
$ CLASS A-1 % CERTIFICATES
$ CLASS A-2 % CERTIFICATES
$ CLASS A-3 % CERTIFICATES
$ CLASS A-4 % CERTIFICATES
$ CLASS A-5 % CERTIFICATES
HOME EQUITY LOAN ASSET-BACKED CERTIFICATES, SERIES 199 -
------------------------
DELTA FUNDING CORPORATION, AS SELLER AND SERVICER
------------------------
The Home Equity Loan Asset-Backed Certificates, Series 199 - (the
'Certificates'), will consist of six Classes (each, a 'Class') of senior
Certificates, the Class A-1 Certificates, the Class A-2 Certificates, the Class
A-3 Certificates, the Class A-4 Certificates and the Class A-5 Certificates
(collectively the 'Class A Certificates') and the Class S Certificates
(collectively with the Class A Certificates, the 'Senior Certificates'), and one
Class of subordinated Certificates (the 'Class R Certificates'). Only the Class
A Certificates (the 'Offered Certificates') are being offered hereby.
The Certificates will evidence in the aggregate the entire beneficial
interest in a pool (the 'Mortgage Pool') of closed-end, fixed rate, home equity
loans (the 'Home Equity Loans') held by Delta Funding Home Equity Loan Trust
199 - (the 'Trust') to be formed pursuant to a Pooling and Servicing Agreement
between Delta Funding Corporation ('Delta'), as Seller and Servicer, and
, as Trustee. The Home Equity Loans are secured by first
and second deeds of trust or mortgages primarily on one- to four-family
residential properties.
The aggregate undivided interest in the Trust represented by the Offered
Certificates will initially be equal to $ , which as of , 199
(the 'Cut-off Date') is 100% of the sum of the outstanding Principal Balances
(as defined herein) of the Initial Loans and the amount to be deposited in a
trust account (the 'Pre-Funding Account') on the Closing Date.
Distributions on the Offered Certificates will be made on the 25th day of
each month or, if such date is not a Business Day, then on the next succeeding
Business Day (each, a 'Distribution Date'), commencing in 199 . On
each Distribution Date, holders of the Offered Certificates will be entitled to
receive, from and to the limited extent of funds available in the Distribution
Account (as defined herein), distributions calculated as set forth herein.
The Certificates are not guaranteed by the Seller, the Servicer, the Trustee
or any affiliate thereof. However, the Offered Certificates will have the
benefit of an irrevocable and unconditional certificate guaranty insurance
policy (the 'Policy') issued by (the 'Certificate
Insurer') pursuant to which the Certificate Insurer will guarantee payments to
the holders of Senior Certificates as described herein. See 'DESCRIPTION OF THE
CERTIFICATES--The Policy' herein.
[LOGO]
There is currently no market for the Offered Certificates and there can be
no assurance that such a market will develop or if it does develop that it will
continue. See 'RISK FACTORS' herein.
(Continued on next page)
------------------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER 'RISK
FACTORS' ON PAGE S-14 HEREIN AND ON PAGE 13 IN THE
ACCOMPANYING PROSPECTUS.
------------------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SERVICER, THE TRUSTEE OR ANY
AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE HOME EQUITY LOANS
ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The Offered Certificates are being offered by the Underwriters from time to
time in negotiated transactions or otherwise at varying prices to be determined,
in each case, at the time of sale.
The aggregate proceeds to the Seller from the sale of the Offered
Certificates will be approximately $ plus accrued interest, before
deducting expenses payable by the Seller, estimated to be $ in the
aggregate.
------------------------
The Offered Certificates are offered subject to prior sale and subject to
the Underwriters' right to reject orders in whole or in part. It is expected
that delivery of the Offered Certificates will be made in book-entry form only
through the facilities of The Depository Trust Company, CEDEL S.A., and the
Euroclear System on or about , 199 (the 'Closing Date'). The Offered
Certificates will be offered in Europe and the United States of America.
------------------------
[NAMES OF UNDERWRITERS]
, 199
<PAGE>
(Continued from previous page)
Separate elections will be made to treat the certain assets of the Trust as
a 'real estate mortgage investment conduit' (a 'REMIC') for federal income tax
purposes. As described more fully herein and in the Prospectus, the Offered
Certificates will constitute 'regular interests' in the Upper Tier REMIC. See
'DESCRIPTION OF THE CERTIFICATES--Separate REMIC Structure' herein and 'FEDERAL
INCOME TAX CONSIDERATIONS' in the Prospectus.
------------------------
The Pooling and Servicing Agreement provides that additional closed-end,
fixed rate home equity loans (the 'Subsequent Loans') may be purchased by the
Trust from the Seller from time to time on or before , 199 from
funds on deposit in the Pre-Funding Account. On the Closing Date an aggregate
cash amount of approximately $ will be deposited with the Trustee
in the Pre-Funding Account. The Home Equity Loans transferred to the Trust on
the Closing Date will be collectively referred to herein as the 'Initial Loans'
and the Initial Loans and the Subsequent Loans will be collectively referred to
as the 'Home Equity Loans.'
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and
Prospectus. This is in addition to the obligation of dealers acting as
underwriters to deliver a Prospectus supplement and Prospectus with respect to
their unsold allotments or subscriptions.
------------------------
The Offered Certificates constitute part of a separate series of
Asset-Backed Securities being offered by Delta Funding Corporation from time to
time pursuant to its Prospectus dated , 1996. This Prospectus
Supplement does not contain complete information about the offering of the
Offered Certificates. Additional information is contained in the Prospectus and
investors are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Offered Certificates may not be consummated unless the
purchaser has received both this Prospectus Supplement and the Prospectus.
S-2
<PAGE>
SUMMARY
The following summary of certain pertinent information is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus. Certain capitalized terms
used in the Summary are defined elsewhere in this Prospectus Supplement or in
the Prospectus. Reference is made to the Glossary of Terms in the Prospectus for
the definitions of certain capitalized terms.
<TABLE>
<S> <C>
Trust.................... Delta Funding Home Equity Loan Trust 199 - (the
'Trust') will be formed pursuant to a pooling and
servicing agreement (the 'Agreement') to be dated as
of , 199 (the 'Cut- Off Date') between
Delta Funding Corporation ('Delta'), as seller and
servicer (together with any successor in such
capacity, the 'Seller' and the 'Servicer',
respectively), and
, as trustee (the 'Trustee'). The property
of the Trust will include: a pool of closed-end, fixed
rate home equity loans (the 'Home Equity Loans'),
secured by first and second deeds of trust or
mortgages on residential properties that are primarily
one- to four-family properties (the 'Mortgaged
Properties'); payments in respect of the Home Equity
Loans received after the Cut-Off Date, or after the
Subsequent Cut-Off Date, as applicable, other than
payments of interest on the Initial Loans due on or
before , 199 ; property that secured a
Home Equity Loan which is acquired by foreclosure or
deed in lieu of foreclosure; rights under certain
hazard insurance policies covering the Mortgaged
Properties; funds on deposit in a trust account (the
'Pre-Funding Account'); funds on deposit in a trust
account (the 'Capitalized Interest Account'); and
certain other property, as described more fully
herein. In addition, the Seller has caused the
Certificate Insurer to issue an irrevocable and
unconditional certificate guaranty insurance policy
(the 'Policy') for the benefit of the holders of
Senior Certificates (the 'Senior Certificateholders')
pursuant to which the Certificate Insurer will
guarantee payments to the Senior Certificateholders as
described herein. The 'Subsequent Cut-Off Date' for
any Subsequent Loan is the first day of the Due Period
in which such Subsequent Loan is transferred to the
Trust.
The Trust property initially will include the unpaid
principal balance of each Initial Loan as of the
Cut-Off Date and the amount of funds on deposit in the
Pre-Funding Account as of the Closing Date. With
respect to any date, the 'Pool Balance' will be equal
to the aggregate of the Principal Balances of all Home
Equity Loans as of such date and the amount on deposit
in the Pre-Funding Account as of such date. The
'Cut-Off Date Principal Balance' with respect to each
Initial Loan is the unpaid principal balance thereof
as of the Cut-Off Date and with respect to each
Subsequent Loan is the unpaid principal balance
thereof as of the related Subsequent Cut-Off Date. The
'Principal Balance' of a Home Equity Loan (other than
a Liquidated Home Equity Loan) on any day is equal to
its Cut-Off Date Principal Balance, minus all
collections applied in reduction of the Cut-Off Date
Principal Balance of such Home Equity Loan. The
Principal Balance of a Liquidated Home Equity Loan (as
defined herein) after final recovery of related
Liquidation Proceeds (as defined herein) will be zero.
</TABLE>
S-3
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<TABLE>
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Securities Offered....... The Home Equity Loan Asset-Backed Certificates, Series
199 - (the 'Certificates') will consist of six Classes
of senior certificates, the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3
Certificates, the Class A-4 Certificates and the Class
A-5 Certificates (collectively, the 'Class A
Certificates') and the Class S Certificates
(collectively with the Class A Certificates, the
'Senior Certificates') and one Class of subordinated
certificates (the 'Class R Certificates'). Only the
Class A Certificates (the 'Offered Certificates') are
offered hereby. Each Class of Offered Certificates
represents the right to receive payments of interests
at the rates described below (with respect to each
such Class the 'Certificate Rate'), payable monthly,
and payments of principal to the extent provided
below. The aggregate undivided interest in the Trust
represented by the Class A Certificates as of the
Cut-Off Date will equal approximately $
of principal (the 'Original Class A Principal
Balance'), which represents the sum of 100% of the
aggregate Cut-Off Date Principal Balances of the
Initial Loans and the amount on deposit in the
Pre-Funding Account as of the Closing Date. The
principal amount of a Class of Class A Certificates
(each, a 'Class Principal Balance') on any date is
equal to the applicable Class Principal Balance on the
Closing Date minus the aggregate of amounts actually
distributed as principal to the holders of such Class
of Class A Certificates.
The Home Equity Loans.... The Initial Loans are expected to consist of
$ in principal amount of closed-end,
fixed rate home equity loans secured by first and
second deeds of trust or mortgages on Mortgaged
Properties located in states and the District of
Columbia.
The original combined loan-to-value ratio of each
Initial Loan, computed taking into account the amounts
of any related senior mortgage loans (the 'Combined
Loan-to-Value Ratio') did not exceed % as of the
Cut-Off Date. The weighted average original Combined
Loan-to-Value Ratio of the Initial Loans was % as
of the Cut-Off Date. Interest on each Home Equity Loan
is payable monthly on the outstanding Principal
Balance thereof at a rate per annum (the 'Loan Rate')
specified in the related Mortgage Note. As of the
Cut-Off Date, the Loan Rates range from % to
% per annum and the weighted average Loan Rate is
% per annum. The Cut-Off Date Principal Balances
of the Initial Loans ranged from $ to $
and averaged $ . Each Initial Loan was
originated in the period from 199 to
, 199 . See 'DESCRIPTION OF THE HOME
EQUITY LOANS' herein.
Pre-Funding Account...... On the Closing Date, an aggregate cash amount of
approximately $ (the 'Pre-Funded
Amount') will be deposited in a trust account in the
name of the Trustee (the 'Pre-Funding Account'). Such
amount will be funded from the sale of the Class A
Certificates and is expected to be used to acquire
Subsequent Loans during the Funding Period. The
'Funding Period' is the period from the Closing Date
until the earliest of (i) the date on which the amount
on deposit in the Pre-Funding Account is less than
$100,000, (ii) the date on which an Event of Default
occurs and
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
(iii) , 199 . The Pre-Funded Amount will be
reduced during (the Funding Period by the amount
thereof, if any, used to purchase Subsequent Loans in
accordance with the Agreement. Subsequent Loans
purchased by and transferred to the Trust on any date
(each, a 'Subsequent Transfer Date' and together with
the Closing Date, each a 'Transfer Date') must satisfy
the criteria set forth in the Agreement. Any portion
of the Pre-Funded Amount remaining at the end of the
Funding Period will be applied as a distribution of
principal to the Classes of Class A Certificates then
entitled to distributions of principal on the
Distribution Date which immediately follows the end of
the Funding Period. The Pre-Funding Account will not
be an asset of either REMIC. See 'PREPAYMENT AND YIELD
CONSIDERATIONS--Mandatory Prepayment' herein.
Capitalized Interest
Account................ On the Closing Date, cash will be deposited in a trust
account (the 'Capitalized Interest Account') in the
name of the Trustee on behalf of the Trust. The amount
thereon, will be used by the Trustee to fund certain
interest shortfalls during the Funding Period as
described herein under 'DESCRIPTION OF THE
CERTIFICATES--Capitalized Interest Account.' Amounts
remaining in the Capitalized Interest Account at the
end of the Funding Period and not used for such
purposes are required to be paid to the Class R
Certificateholders. The Capitalized Interest Account
will not be an asset of either REMIC.
Denominations............ The Class A Certificates will be offered for purchase
in denominations of $25,000 and multiples of $1 in
excess thereof. The interest in the Trust evidenced by
a Class A Certificate (the 'Percentage Interest') will
be equal to the percentage derived by dividing the
denomination of such Certificate by the Original
Aggregate Class A Principal Balance.
Registration of Class A
Certificates........... The Class A Certificates will initially be issued in
book-entry form. Persons acquiring beneficial
ownership interests in the Class A Certificates
('Certificate Owners') will hold their Class A
Certificate interests through The Depository Trust
Company ('DTC'), in the United States, or Centrale de
Livraison de Valeurs Mobilieres S.A ('CEDEL') or the
Euroclear System ('Euroclear'), in Europe. Transfers
within DTC, CEDEL or Euroclear, as the case may be,
will be in accordance with the usual rules and
operating procedures of the relevant system. So long
as the Class A Certificates are Book-Entry
Certificates (as defined herein), such Certificates
will be evidenced by one or more Certificates
registered in the name of Cede & Co. ('Cede'), as the
nominee of DTC, or one of the relevant depositaries
(collectively. the 'European Depositaries').
Cross-market transfers between persons holding
directly or indirectly through DTC, on the one hand,
and counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will be
effected in DTC through Citibank N.A. ('Citibank') or
Morgan Guaranty Trust Company of New York ('Morgan'),
the relevant depositaries of CEDEL and Euroclear,
respectively, and each a participating member of DTC.
The interests of such Certificateholders will be
represented by book-entries on the records of DTC and
participating members thereof.
</TABLE>
S-5
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<TABLE>
<S> <C>
No Certificate Owner will be entitled to receive a
definitive certificate representing such person's
interest, except in the event that Definitive
Certificates (as defined herein) are issued under the
limited circumstances described herein. All references
in this Prospectus Supplement to any Class A
Certificates reflect the rights of Certificate Owners
only as such rights may he exercised through DTC and
its participating organizations for so long as such
Class A Certificates are held by DTC. See 'RISK
FACTORS--Book-Entry Registration May Affect
Liquidity,' 'DESCRIPTION OF THE CERTIFICATES--
Book-Entry Certificates' and ANNEX I hereto.
Seller and Servicer...... Delta Funding Corporation (the 'Seller' or the
'Servicer', as applicable). The principal executive
offices of the Seller and the Servicer are located at
1000 Woodbury Road, Woodbury, New York 11797
(telephone (516) 364-8500). See 'THE SELLER AND THE
SERVICER' in the Prospectus.
Certificate Rate......... The 'Certificate Rate' applicable to each Class of
Offered Certificates on any Distribution Date is the
respective rate per annum set forth on the cover
hereof. Interest on each Class of Offered Certificates
in respect of any Distribution Date will accrue from
the first day of the calendar month preceding the
month of such Distribution Date through the last day
of such calendar month (each such period, an 'Interest
Period') on the basis of a 360-day year consisting of
twelve 30-day months.
Distributions............ On the 25th day of each month, or if such a day is not
a Business Day, then the next succeeding Business Day,
commencing in 199 (each such day, a
'Distribution Date'), the Trustee will be required to
distribute from funds available therefor in the
Distribution Account (as described herein) to the
holders of the Offered Certificates (the 'Offered
Certificateholders') of record as of the last day of
the calendar month immediately preceding the calendar
month in which such Distribution Date occurs (the
'Record Date'), in the priorities described below, in
the aggregate an amount equal to the sum of (a) the
Class Interest Distribution for each Class of Senior
Certificates, and (b) the Class A Principal
Distribution. So long as an Insurer Default has not
occurred, distributions of principal in the amounts
described below will be applied sequentially to the
Class A-1, Class A-2, Class A-3 and Class A-4
Certificates (the 'Sequential Certificates'), in that
order, such that no Class of Sequential Certificates
having a higher numerical designation is entitled to
distributions of principal until the Class Principal
Balance of each such Class of Sequential Certificates
having a lower numerical designation has been reduced
to zero. The Class A-5 Certificates are entitled to
distributions of principal in the amounts described
below concurrently with the Class of Sequential
Certificates then entitled to distribution of
principal. On any Distribution Date during the
continuance of an Insurer Default, the Class A
Principal Distribution will be distributed to each
Class of Class A Certificates outstanding on a pro
rata basis in accordance with the Class Principal
Balance of each such Class. See 'DESCRIPTION OF THE
CERTIFICATES--Distributions' herein.
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
Interest
On each Distribution Date, to the extent of funds
available therefor as described herein interest will
he distributed with respect to each Class of Senior
Certificates in an amount (each a 'Class Interest
Distribution') equal to the sum of (a) one month's
interest at the related Certificate Rate on the
related Class Principal Balance, or Notional Amount,
as the case may be, of such Class immediately prior to
such Distribution Date (the 'Class Monthly Interest
Distributable Amount') and (b) any Class Interest
Carryover Shortfall for such Class of Senior
Certificates with respect to previous Distribution
Dates. As to any Distribution Date and Class of Senior
Certificates. 'Class Interest Carryover Shortfall' is
the sum of (i) the excess, if any, of the related
Class Monthly Interest Distributable Amount for the
preceding Distribution Date plus any outstanding Class
Interest Carryover Shortfall with respect to such
Class on such preceding Distribution Date, over the
amount in respect of interest that is actually
distributed to the related Senior Certificateholders
on such preceding Distribution Date plus (ii) one
month's interest on such excess, to the extent
permitted by law, at the Certificate Rate. The
interest entitlement described in (a) above will be
reduced by such Class' pro rata share of Civil Relief
Act Interest Shortfalls, if any, for such Distribution
Date. Civil Relief Act Interest Shortfalls will not be
covered by payments under the Policy. See 'DESCRIPTION
OF THE CERTIFICATES' herein.
The Class S Certificates are entitled to distributions
of interest on a pro rata basis with the Class A
Certificates. The Certificate Rate for the Class S
Certificates is the weighted average of the Strip
Rates relating to each Class of Class A Certificates.
Interest to be distributed on the Class S Certificates
accrues on the basis of the Notional Amount described
below.
The Certificate Rate for the Class S Certificates is
equal to the average of the Strip Rates relating to
each Class of Class A Certificates, weighted on the
basis of the Class Principal Balance of each Class of
Class A Certificates immediately prior to a
Distribution Date. The Strip Rate relating to each
Class of Class A Certificates is as follows:
Class A-1 %
Class A-2 %
Class A-3 %
Class A-4 %
Class A-5 %
As of the Closing Date, the weighted average of the
Strip Rates is % per annum.
The 'Notional Amount' is the sum of the Class
Principal Balances of each Class of Class A
Certificates immediately prior to a Distribution Date
and is used to calculate the amount of the Class
Monthly Interest Distributable Amount for the Class S
Certificates.
On each Distribution Date, the Class Interest
Distribution relating to each Class of Senior
Certificates will be distributed on an equal priority
and any shortfall in the amount required to be
distributed as
</TABLE>
S-7
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<TABLE>
<S> <C>
interest thereon to each such Class will be allocated
between such Classes pro rata based on the amount that
would have been distributed on each such Class in the
absence of such shortfall.
Principal
'Class A Principal Distribution' means, with respect
to any Distribution Date, to the extent of funds
available therefor as described herein, the sum of the
Class A Monthly Principal Distributable Amount for
such Distribution Date and any outstanding Class A
Principal Carryover Shortfall as of the close of the
preceding Distribution Date; provided, however, that
the Class A Principal Distribution will not exceed the
Class A Principal Balance.
The Class A Principal Distribution will be distributed
to the Class A Certificates in the following order:
first, concurrently. % to the Class A-1
Certificates and % to the Class
Certificates until the Class Principal Balance of the
Class A-1 Certificates has been reduced to zero;
second, concurrently, % to the Class A-2
Certificates and % to the Class A-5
Certificates until the Class Principal Balance of the
Class A-2 Certificates has been reduced to zero;
third, concurrently, % to the Class A-3
Certificates and % to the Class A-5
Certificates until the Class Principal Balance of the
Class A-3 Certificates has been reduced to zero;
fourth, concurrently, % to the Class A-4
Certificates and % to the Class A-5
Certificates until the Class Principal Balance of the
Class A-4 Certificates has been reduced to zero; and
fifth, % to the Class A-5 Certificates
until the Class Principal Balance thereof has been
reduced to zero.
'Class A Monthly Principal Distributable Amount'
means, with respect to any Distribution Date, to the
extent of funds available therefor as described
herein, the amount equal to the sum of the following
amounts (without duplication) with respect to the
immediately preceding Due Period (as defined below):
(i) each payment of principal on a Home Equity Loan
received by the Servicer during such Due Period,
including all full and partial principal prepayments;
(ii) the Principal Balance of all Home Equity Loans
that became Liquidated Home Equity Loans during the
related Due Period; (iii) the portion of the Purchase
Price allocable to principal of all repurchased
Defective Home Equity Loans with respect to such Due
Period; (iv) any Substitution Adjustment Amounts
received on or prior to the related Determination Date
and not previously distributed; (v) the amount of
Distributable Excess Spread (as defined below) in
respect of such Distribution Date; and (vi) the
Pre-Funded Amount remaining on deposit in the Pre-
Funding Account immediately following the end of the
Pre-Funding Period.
If the required level of overcollateralization is
reduced below the then existing amount of
overcollateralization (described below) or if the
required level of overcollateralization is satisfied,
the amount of the Class A Monthly Principal
Distributable Amount on the following Distribution
Date will be correspondingly reduced by the amount of
such reduction or by the amount necessary such that
the
</TABLE>
S-8
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overcollateralization will not exceed the required
level of overcollateralization after giving effect to
the distribution in respect of principal to be made on
such Distribution Date.
'Due Period' means (a) with respect to the first
Determination Date (i) for collections of principal
the period from and including 1, 199
through and including 1, 199 and (ii) for
collections of interest the period from and including
, 199 through and including ,
199 and (b) with respect to each Determination Date
thereafter for collections of both interest and
principal the period from and including the second day
of the month preceding the month of such Determination
Date to and including the first day of the month of
such Determination Date.
For a description of a 'Liquidated Home Equity Loan'
see 'DESCRIPTION OF THE CERTIFICATES--Distributions'
herein.
'Excess Spread' means, with respect to any
Distribution Date, the positive excess, if any, of (x)
the sum of the amounts deposited to the Distribution
Account as described in clauses (i) through (vi) under
'DESCRIPTION OF THE CERTIFICATES--Deposits to the
Distribution Account' herein with respect to such
Distribution Date (excluding amounts received from the
Certificate Insurer) over (y) the amount required to
be distributed pursuant to priorities (i) through
(vii) set forth under the heading 'DESCRIPTION OF THE
CERTIFICATES--Distributions' on such Distribution
Date.
'Distributable Excess Spread' means, with respect to
any Distribution Date, such portion (not greater than
100%) of Excess Spread, if any, required to be
distributed on such Distribution Date to satisfy the
required level of overcollateralization (see
'DESCRIPTION OF THE CERTIFICATES--
Overcollateralization Provisions' herein) for such
Distribution Date.
Distributions to the Class A Certificateholders of
Distributable Excess Spread will result in
acceleration of principal payments to the holders of
the Class A Certificates and reduce the weighted
average life of the Class A Certificates. See
'DESCRIPTION OF THE CERTIFICATES--
Overcollateralization Provisions' and 'PREPAYMENT AND
YIELD CONSIDERATIONS' herein.
The last scheduled Distribution Date for each Class of
Class A Certificates is as follows: Class A-1
Certificates, 25, , Class A-2
Certificates, 25, , Class A-3
Certificates, 25, , Class A-4
Certificates, 25, and Class A-5
Certificates, 25, . It is expected that
the actual last Distribution Date for each Class of
Class A Certificates will occur significantly earlier
than such scheduled Distribution Dates. See
'PREPAYMENT AND YIELD CONSIDERATIONS' herein.
Credit Enhancement....... The credit enhancement provided for the benefit of the
Offered Certificateholders consists of (a) the
overcollateralization created by
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<TABLE>
<S> <C>
the application of the internal cash flows of the
Trust, as described herein, and (b) the Policy.
Overcollateralization: The credit enhancement
provisions of the Trust will result in a limited
acceleration of the Offered Certificates relative to
the amortization of the Home Equity Loans. This
acceleration feature creates overcollateralization
(i.e., the excess of the current Pool Balance over the
Class A Principal Balance). Once the required level of
overcollateralization is reached, unless the required
level of overcollateralization is increased as
described below, and subject to the next paragraph,
the acceleration feature will cease.
The Agreement provides that, subject to certain
floors, caps and triggers, the required level of
overcollateralization may increase or decrease over
time. An increase in the required level of
overcollateralization will result if the delinquency
or default experience on the Home Equity Loans exceeds
certain levels set forth in the Agreement. In that
event, amortization of the Offered Certificates would
be accelerated until the level of
overcollateralization reaches its required level. The
required level of overcollateralization may be
decreased under certain circumstances, which will slow
the amortization of the Offered Certificates.
Accelerated amortization and the resulting
overcollateralization is accomplished by distributing
a portion of the interest receipts on the Home Equity
Loans as a payment of principal on the Class A
Certificates. See 'DESCRIPTION OF THE CERTIFICATES--
Overcollateralization Provisions' herein.
The Policy: The Policy will unconditionally and
irrevocably guarantee principal payments (as described
in the next sentence) on the Class A Certificates plus
accrued and unpaid interest due on the Senior
Certificates. On each Distribution Date, a draw will
be made on the Policy equal to the sum of (a) the
amount for each Class of Senior Certificates by which
interest accrued at the applicable Certificate Rate on
the related outstanding Class Principal Balance or
Notional Amount, as the case may be, exceeds the
amount on deposit in the Distribution Account
available to be distributed therefor on such
Distribution Date and (b) the amount (the 'Class A
Guaranteed Principal Distribution Amount'), if any, by
which the Class A Principal Balance exceeds the sum of
the Principal Balances of the Home Equity Loans at the
end of the previous month and the amount, if any, on
deposit in the Pre-Funding Account on such date (after
giving effect to all amounts distributable and
allocable to principal on the Class A Certificates on
such Distribution Date). In addition. the Policy will
guarantee the payment in full of the Class A Principal
Balance on the Distribution Date in 20
(after giving effect to all other amounts
distributable and allocable to principal on the Class
A Certificates on such Distribution Date).
In the absence of payments under the Policy, Senior
Certificateholders will directly bear the credit and
other risks associated with their undivided interest
in the Trust. See 'DESCRIPTION OF THE CERTIFICATES--
The Policy' herein.
</TABLE>
S-10
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<TABLE>
<S> <C>
The Certificate
Insurer................ a stock insurance company (the
'Certificate Insurer'). See 'DESCRIPTION OF THE
CERTIFICATES--The Policy' and 'THE CERTIFICATE
INSURER' herein.
Servicing................ The Servicer will be responsible for servicing,
managing and making collections on the Home Equity
Loans. The Servicer will deposit all collections in
respect of the Home Equity Loans into the Collection
Account as described herein. Not later than the fourth
Business Day prior to each Distribution Date (the
'Determination Date'), the Servicer will calculate the
amounts to be paid, as described herein, to the
Certificateholders on such Distribution Date. See
'DESCRIPTION OF THE CERTIFICATES--Distributions.' With
respect to each Due Period, the Servicer will receive
from payments in respect of interest on the Home
Equity Loans a portion of such payments as a monthly
servicing fee (the 'Servicing Fee') in the amount of
% per annum (the 'Servicing Fee Rate') on the
Principal Balance of each Home Equity Loan as of the
first day of each such Due Period. See 'DESCRIPTION OF
THE CERTIFICATES--Servicing Compensation, Payment of
Expenses and Prepayment Interest Shortfalls.' In
certain limited circumstances, the Servicer may resign
or be removed, in which event either the Trustee or a
third-party servicer will be appointed as successor
Servicer. See 'DESCRIPTION OF THE CERTIFICATES--
Certain Matters Regarding the Servicer.'
Trustee.................. , a national banking association
(the 'Trustee').
Monthly Advances......... The Servicer is required to remit to the Trustee no
later than the close of business on the Determination
Date for each Distribution Date, for deposit in the
Distribution Account, an amount equal to the scheduled
installment of interest due on each Home Equity Loan
but not received by the Servicer during the related
Due Period (a 'Monthly Advance'). Such obligation of
the Servicer continues with respect to each Home
Equity Loan until such Home Equity Loan becomes a
Liquidated Home Equity Loan. The Servicer is not
required to make any Monthly Advances which it
determines would be nonrecoverable. Monthly Advances
are reimbursable to the Servicer subject to certain
conditions and restrictions, and are intended to
provide sufficient funds for the payment of interest
on the Senior Certificates. See 'DESCRIPTION OF THE
CERTIFICATES--Advances' herein.
Prepayment Interest
Shortfalls............. Not later than the Determination Date, the Servicer is
required to remit to the Trustee, without any right of
reimbursement, an amount equal to, with respect to
each Home Equity Loan as to which a principal
prepayment in full was received during the related Due
Period, the lesser of (a) the excess, if any, of 30
days' interest on the Principal Balance of such Home
Equity Loan at the Loan Rate (or at such lower rate as
may be in effect for such Home Equity Loan because of
application of the Soldiers' and Sailors Civil Relief
Act of 1940, as amended (the 'Civil Relief Act')),
minus the Servicing Fee for such Home Equity Loan over
the amount of interest actually paid by the related
Mortgagor in connection with such principal prepayment
(with respect to all such Home Equity Loans, the
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
'Prepayment Interest Shortfall') and (b) the sum of
aggregate Servicing Fee received by the Servicer in
the most recently ended Due Period.
Civil Relief Act Interest Shortfalls will not be
covered by the Policy, although Prepayment Interest
Shortfalls, after application of the Servicing Fee
will be so covered. The Servicer is not obligated to
offset any of the Servicing Fee against, or to provide
any other funds to cover, any shortfalls in interest
collections on the Home Equity Loans that are
attributable to the application of the Civil Relief
Act ('Civil Relief Act Interest Shortfalls'). See
'RISK FACTORS-- Prepayments and Simple Interest Loans
May Affect Interest Collections' herein.
Optional Termination
by the Servicer........ The Servicer may, at its option, terminate the
Agreement on the Distribution Date following the Due
Period at the end of which the aggregate Principal
Balance of the Home Equity Loans is less than 10% of
the sum of the Principal Balances of the Initial Loans
and Subsequent Loans as of the Cut-Off Date and
related Subsequent Cut-Off Date, as the case may be.
See 'DESCRIPTION OF THE CERTIFICATES--Termination;
Purchase of Home Equity Loans' herein.
Optional Purchase of
Defaulted Home Equity
Loans.................. The Servicer has the option, but is not obligated, to
purchase from the Trust any Home Equity Loan 90 days
or more delinquent at a purchase price equal to the
outstanding Principal Balance as of the date of
purchase, plus all accrued and unpaid interest on such
Principal Balance through the date of purchase,
computed at the Loan Rate net of the Servicing Fee
Rate. See 'DESCRIPTION OF THE CERTIFICATES--Optional
Purchase of Defaulted Home Equity Loans' herein.
Federal Income Tax
Considerations......... For federal income tax purposes, separate elections
will be made to treat certain assets of the Trust as a
'real estate mortgage investment conduit' (the 'Upper
Tier REMIC' and 'Lower Tier REMIC,' respectively). The
Offered Certificates will represent beneficial
ownership of 'regular interests' in the Upper Tier
REMIC and will be treated as debt instruments of the
Upper Tier REMIC for federal income tax purposes with
payment terms equivalent to the terms of such
Certificates. The Class R Certificates (the 'Residual
Certificates') will represent beneficial ownership of
'residual interests' in both the Upper Tier REMIC and
the Lower Tier REMIC and will be the Class of Residual
Certificates, as described in the Prospectus.
The holders of the Offered Certificates will be
required to include in income interest on such
Certificates in accordance with the accrual method of
accounting, and the Offered Certificates may,
depending on their issue price, be treated as having
been issued with original issue discount for federal
income tax purposes. For further information regarding
the federal income tax consequences of investing in
the Offered Certificates, see 'FEDERAL INCOME TAX
CONSIDERATIONS' herein and in the Prospectus.
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
ERISA Considerations..... The acquisition of an Offered Certificate by a pension
or other employee benefit plan (a 'Plan') subject to
the Employee Retirement Income Security Act of 1974,
as amended ('ERISA'), could, in some instances, result
in a 'prohibited transaction' or other violation of
the fiduciary responsibility provisions of ERISA and
Code Section 4975. Certain exemptions from the
prohibited transaction rules could be applicable to
the acquisition of such Certificates. Any Plan
fiduciary considering whether to purchase any Offered
Certificate on behalf of a Plan should consult with
its counsel regarding the applicability of the
provisions of ERISA and the Code. See 'ERISA
CONSIDERATIONS' herein and in the Prospectus.
Subject to the considerations and conditions described
under 'ERISA CONSIDERATIONS' herein, it is expected
that the Offered Certificates may be purchased by a
Plan upon conclusion of the Funding Period.
Legal Investment
Considerations......... The Offered Certificates will not constitute 'mortgage
related securities' for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 ('SMMEA'),
because some of the Mortgages securing the Home Equity
Loans are not first mortgages. Accordingly, many
institutions with legal authority to invest in
comparably rated securities based solely on first
mortgages may not be legally authorized to invest in
the Offered Certificates. See 'LEGAL INVESTMENT' in
the Prospectus.
Certificate Rating....... It is a condition to the issuance of the Offered
Certificates that they receive ratings of 'AAA' by
Standard & Poor's Rating Services ('Standard &
Poor's') and 'Aaa' by Moody's Investors Service, Inc.
('Moody's') (each a 'Rating Agency'). In general,
ratings address credit risk and do not address the
likelihood of prepayments. See 'RATINGS' herein and
'RISK FACTORS--Ratings Are Not Recommendations' in the
Prospectus.
</TABLE>
S-13
<PAGE>
RISK FACTORS
Investors should consider, among other things, the following risk factors
and the risk factors set forth on page 13 of the Prospectus in connection with
the purchase of the Offered Certificates.
Book-entry Registration May Affect Liquidity. Issuance of the Offered
Certificates in book-entry form may reduce the liquidity of such Certificates in
the secondary trading market since investors may be unwilling to purchase Class
A Certificates for which they cannot obtain physical certificates.
Since transactions in the Offered Certificates can be effected only through
DTC, CEDEL, Euroclear, participating organizations, indirect participants and
certain banks, the ability of a Certificate Owner to pledge an Offered
Certificate to persons or entities that do not participate in the DTC, CEDEL or
Euroclear system or otherwise to take actions in respect of such Certificates,
may be limited due to lack of a physical certificate representing the Offered
Certificates.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Offered Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein) which will
thereafter credit them to the accounts of Certificate Owners either directly or
indirectly through indirect participants. See 'DESCRIPTION OF THE
CERTIFICATES--Book-Entry Certificates' herein.
Balloon Loans May Adversely Affect Performance. With respect to
% of the Initial Loans (by Cut-Off Date Principal Balance) the
borrowers are not required to make monthly payments of principal that will be
sufficient to amortize such Home Equity Loans by their maturity (collectively,
'Balloon Loans'). As a result, a borrower generally will be required to pay the
entire remaining principal amount of the Initial Loan at its maturity. The
ability of a borrower to make such a payment may depend on the ability of the
borrower to obtain refinancing of the balance due on the Initial Loan. An
increase in interest rates over the Loan Rate applicable at the time the Initial
Loan was originated may have an adverse effect on the borrower's ability to
obtain refinancing or to pay the required monthly payment.
With respect to Balloon Loans, general credit risk may also be greater to
Certificateholders than to holders of instruments representing interests in
level payment fully amortizing first mortgage loans.
Risk of Early Defaults. All of the Initial Loans were originated within 12
months prior to the initial Cut-Off Date. The weighted average remaining term to
maturity of the Initial Loans as of such Cut-Off Date is approximately
months. Although little data is available, defaults on mortgage loans, including
home equity loans similar to the Initial Loans, are generally expected to occur
with greater frequency in the early years of the terms of mortgage loans.
Prepayments May Vary. All of the Home Equity Loans may be prepaid in whole
or in part at any time. However, Home Equity Loans secured by first liens on
Mortgaged Properties in New York are subject to a prepayment penalty for the
first 12 months following determination. In addition, Home Equity Loans secured
by Mortgaged Properties in other jurisdictions may be subject to prepayment
penalties to the extent permitted by law. Home equity loans, such as the Home
Equity Loans, have been originated in significant volume only during the past
few years and the Seller is not aware of any publicly available studies or
statistics on the rate of prepayment of such loans. Generally, home equity loans
are not viewed by borrowers as permanent financing. Accordingly, the Home Equity
Loans may experience a higher rate of prepayment than traditional loans. The
Trust's prepayment experience may be affected as a wide variety of factors,
including general economic conditions, interest rates, the availability of
alternate financing and homeowner mobility. In addition, substantially all of
the Home Equity Loans contain due-on-sale provisions and the Servicer is
required by the Agreement to enforce such provisions unless (i) such enforcement
is not permitted by applicable law or (ii) the Servicer, in a manner consistent
with reasonable commercial practice, permits the purchaser of the related
Mortgaged Property to assume the Home Equity Loan. To the extent permitted by
applicable law, such assumption will not release the original borrower from its
obligation under any such Home Equity Loan See 'CERTAIN LEGAL ASPECTS OF
LOANS--Due-on-Sale Clauses in Home Equity Loans' in the Prospectus.
Second Liens Create Risks. Based on appraisals at the time of origination
of each Home Equity Loan, each such Home Equity Loan will have been fully
secured at such time. However, even if the Mortgaged Properties
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<PAGE>
provide adequate security for the Home Equity Loans, substantial delays could be
encountered in connection with the liquidation of Home Equity Loans that are
delinquent and resulting shortfalls in distributions to Offered
Certificateholders could occur if the Certificate Insurer were unable to perform
its obligations under the Policy. Further, liquidation expenses (such as legal
fees, real estate taxes, and maintenance and preservation expenses) will reduce
the proceeds payable to Certificateholders and thereby reduce the security for
the Home Equity Loans. In the event any of the Mortgaged Properties fail to
provide adequate security for the related Home Equity Loans, Offered
Certificateholders could experience a loss if the Certificate Insurer were
unable to perform its obligations under the Policy.
The Initial Loans are secured by first and second mortgages or deeds of
trust (representing approximately % and %, respectively, of the
aggregate Cut-Off Date Principal Balance of the Initial Loans). With respect to
Home Equity Loans that are junior in priority to liens having a first priority
with respect to the related Mortgaged Property ('First Liens'), the Servicer has
the power under certain circumstances to consent to a new mortgage lien on such
Mortgaged Property having priority over such Home Equity Loan in connection with
the refinancing of such First Lien. Home Equity Loans secured by second
mortgages are entitled to proceeds that remain from the sale of the related
Mortgaged Property after any related senior mortgage loan and prior statutory
liens have been satisfied. In the extent that such proceeds are insufficient to
satisfy such loans and prior liens in the aggregate and the Certificate Insurer
is unable to perform its obligations under the Policy, the Trust and,
accordingly, the Certificateholders, bear (i) the risk of delay in distributions
while a deficiency judgment against the borrower is sought and (ii) the risk of
loss if the deficiency judgment cannot be obtained or is not realized upon. See
'CERTAIN LEGAL ASPECTS OF LOANS' in the Prospectus.
Pre-Funding May Adversely Affect Yield. To the extent that amounts on
deposit in the Pre-Funding Account have not been fully applied to the purchase
of Subsequent Loans by the Trust by the end of the Funding Period, the Classes
of Offered Certificates then entitled to distributions of principal will receive
a prepayment of principal in an amount equal to the Pre-Funded Amount remaining
in the Pre-Funding Account on the Distribution Date following the end of the
Funding Period (in no event later than the 1991 Distribution Date).
Although no assurances can be given the Seller intends that the principal amount
of Subsequent Loans sold to the Trust will require the application of
substantially all amounts on deposit in the Pre-Funding Account and that there
will be no material principal prepayment to the Class A Certificateholders.
The Seller will not select Subsequent Loans in a manner that it believes is
adverse to the interest of the Offered Certificateholders. However. Subsequent
Loans may have been originated more recently than, and have credit criteria
different from those which were applied to, the Initial Loans. Therefore,
following the transfer of Subsequent Loans to the Trust, the aggregate
characteristics of the Home Equity Loans then held in the Trust may vary from
those of the Initial Loans. See 'DESCRIPTION OF THE HOME EQUITY LOANS--
Conveyance of Subsequent Loans' herein.
The ability of the Trust to invest in Subsequent Loans is largely dependent
upon the ability of the Seller to originate or purchase additional loans. The
ability of the Seller to originate or purchase additional loans may be affected
as a result of a variety of economic factors, including interest rates,
unemployment levels, the rate of inflation and consumer perception of economic
conditions generally.
Prepayments and Simple Interest Loans Affect Interest Collections. When a
principal prepayment in full is made on Home Equity Loan, the Mortgagor is
charged interest only up to the date of such prepayment, instead of for a full
month which may result in a Prepayment Interest Shortfall. The Servicer is
obligated to pay, without any right of reimbursement, those shortfalls in
interest collections payable on the Senior Certificates that are attributable to
Prepayment Interest Shortfalls, but only to the extent of the Servicing Fee for
the related Due Period (any such payment, 'Compensating Interest').
Approximately 100% of the Home Equity Loans are simple interest mortgage
loans ('Simple Interest Loans') pursuant to which interest is computed and
charged to the Mortgagor on the outstanding Principal Balance of the related
Home Equity Loan based on the number of days elapsed between the date through
which interest was last paid on the Home Equity Loan through receipt of the
Mortgagor's most current payment, and the portions of each monthly payment that
are allocated to interest and principal are adjusted based on the actual amount
of interest charged on such basis. Consequently, if less than a full month has
elapsed between the interest paid to date and the next payment on a Home Equity
Loan, the amount of interest actually paid by the Mortgagor
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will be less than a full month's interest on the principal balance of such
Mortgage Loan. Conversely, if more than a full month has elapsed between (the
interest paid to date and the next payment on a Home Equity Loan, the amount of
interest actually paid by the Mortgagor will be greater than a full month's
interest on the principal balance of such Home Equity Loan. To the extent that
the aggregate of such shortfalls exceeds the aggregate of such excesses, a 'Net
Simple Interest Shortfall' will result. The Servicing Fee will not be available
to cover any shortfalls in interest collections on the Home Equity Loans that
are attributable to Civil Relief Act Interest Shortfalls or Net Simple Interest
Shortfalls. Civil Relief Act Interest Shortfalls will not be covered by payments
under the Policy, although Prepayment Interest Shortfalls, after application of
the Servicing Fee as described above, and Net Simple Interest Shortfalls, will
be so covered.
Underwriting Standards May Affect Performance. As described herein, the
Seller's underwriting standards generally are less stringent than those of FNMA
or FHLMC with respect to a borrower's credit history and in certain other
respects. A borrower's past credit history may not preclude the Seller from
making a loan; however, it will reduce the size (and consequently the Combined
Loan-to-Value Ratio) of the loan that the Seller is willing to make. As a result
of this approach to underwriting, the Home Equity Loans in the Mortgage Pool may
experience higher rates of delinquencies, defaults and foreclosures than
mortgage loans underwritten in a more traditional manner.
Geographic Concentration. The Mortgaged Properties relating to the Initial
Loans are located in states and the Distinct of Columbia. However,
approximately %, (by aggregate principal balance as of the Cut-Off Date)
of the Mortgaged Properties relating to the Initial Loans are located in New
York. To the extent that the Northeast region has experienced or may experience
in the future weaker economic conditions or greater rates of decline in real
estate values than the United States generally, such a concentration of the Home
Equity Loans may be expected to exacerbate the foregoing risks. The Seller can
neither quantify the impact of any recent property value declines on the Home
Equity nor predict whether, to what extent or for how long such declines may
continue.
THE CERTIFICATE INSURER
The information set forth in this section and in the financial statements
of the Certificate Insurer set forth in Appendix A and Appendix B hereto have
been provided by the Certificate Insurer. No representation is made by any
Underwriter, the Seller, the Servicer, or any of their affiliates as to the
accuracy or completeness of any such information.
The Certificate Insurer is the principal operating subsidiary of
. is not obligated to pay the debts of
or claims against the Certificate Insurer. The Certificate Insurer is domiciled
in the State of and licensed to do business in all 50 states.
The tables below present selected financial information of the Certificate
Insurer determined in accordance with statutory accounting practices prescribed
or permitted by insurance regulatory authorities ('SAP') and generally accepted
accounting principles ('GAAP'):
<TABLE>
<CAPTION>
SAP
---------------------------------------
DECEMBER 31, 199 SEPTEMBER 30, 199
----------------- ------------------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Admitted Assets............... $ $
Liabilities...................
Capital and Surplus...........
</TABLE>
<TABLE>
<CAPTION>
GAAP
---------------------------------------
DECEMBER 3, 199 SEPTEMBER 30, 199
----------------- ------------------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Assets........................ $ $
Liabilities...................
Shareholders Equity...........
</TABLE>
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<PAGE>
Audited financial statements of the Certificate Insurer as of December 31,
199 and 199 and for each of the three years in the period ended December 31,
199 are included herein as Appendix A. Unaudited financial statements of the
Certificate Insurer for the nine-month period ended September 30, 199 are
included herein as Appendix B. Such financial statements have been prepared on
the basis of generally accepted accounting principles. Copies of the Certificate
Insurer's 199 year-end audited financial statements prepared in accordance with
statutory accounting practices are available from the Certificate Insurer.
A copy of the Annual Report on Form 10-K of is available from the
Certificate Insurer or the Securities and Exchange Commission. The address of
the Certificate Insurer is .
Moody's Investors Service, Inc. rates the claims paying ability of the
Certificate Insurer 'Aaa'.
Standard & Poor's Rating Services rates the claims paying ability of the
Certificate Insurer 'AAA'.
Fitch Investors Service L.P. rates the claims paying ability of the
Certificate Insurer 'AAA'.
Each rating of the Certificate Insurer should be evaluated independently.
The ratings reflect the respective rating agency's current assessment of the
creditworthiness of the Certificate Insurer and its ability to pay claims on its
policies of insurance. Any further explanation as to the significance of the
above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
Certificates, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the
Certificates. The Certificate Insurer does not guaranty the market price of the
Certificates nor does it guaranty that the ratings on the Certificates will not
be revised or withdrawn.
The Certificate Insurer does not accept any responsibility for the accuracy
or completeness of this Prospectus Supplemental or the Prospectus or any
information or disclosure contained herein or omitted herefrom, other than with
respect to the accuracy of the information regarding the Policy and the
Certificate Insurer set forth under the headings 'THE CERTIFICATE INSURER' and
'DESCRIPTION OF THE CERTIFICATES--The Policy' and in Appendices A and B.
S-17
<PAGE>
THE SELLER'S HOME EQUITY LOAN PROGRAM
UNDERWRITING
The following is a description of the underwriting procedures customarily
employed by Delta with respect to mortgage loans secured by first or second
liens on one- to four-family residential properties. Delta's underwriting
process, which is centralized at its corporate headquarters, is intended to
assess the applicant's credit standing and repayment ability and the value and
adequacy of the real property security as collateral for the proposed loan.
Delta considers itself to be a credit lender as opposed to an equity lender,
focusing primarily on the borrower's ability and willingness to repay, and only
secondarily on the potential value of the collateral upon foreclosure, in
determining whether or not to make a mortgage loan.
All loan applications, regardless of source, must be approved by Delta in
accordance with its underwriting criteria, including loan-to-value ratios,
borrower income qualifications, necessary insurance coverages and property
appraisal requirements. Delta does not delegate underwriting authority to any
broker, correspondent or third-party contract underwriter. All applications are
documented on standard FNMA/FHLMC forms. Delta employs 15 full-time loan
underwriters. Delta's underwriting personnel function independently of its
mortgage loan origination and marketing departments and do not report to any
individual directly involved in the origination process.
Delta purchases and originates mortgage loans with different credit
characteristics depending on the credit profiles of individual borrowers. Except
for Balloon Loans, the mortgage loans originated by Delta have amortization
schedules ranging from 5 years to 30 years, generally bear interest at fixed
rates and require equal monthly payments which are due as of a scheduled day of
each month which is fixed at the time of origination. Substantially all of
Delta's mortgage loans are simple interest loans. Delta primarily purchases
fixed rate loans which amortize over a period not to exceed 30 years. Delta also
acquires and originates Balloon Loans, which generally provide for scheduled
amortization over 30 years, but in some instances over 20 years, with a due date
and a Balloon Payment at the end of the fifteenth year. The principal amounts of
the loans purchased or originated by Delta generally range from a minimum of
$6,000 to a maximum of $325,000. Delta generally does not acquire or originate
any mortgage loans where the Combined Loan-to-Value Ratio exceeds 90%. The
collateral securing loans acquired or originated by Delta are generally one- to
four-family residences, including condominiums and townhomes, and such
properties may or may not be occupied by the owner. It is Delta's policy not to
accept mobile or manufactured housing, commercial properties or unimproved land
as collateral. However, Delta will accept mixed-use properties such as a
property where more than 50% is used for residential purposes and the balance is
used for commercial purposes. Delta does not purchase loans where any senior
mortgage contains open-end advance, negative amortization or shared appreciation
provisions.
A credit report by an independent, nationally recognized credit reporting
agency reflecting the applicant's complete credit history is required. The
credit report typically contains information reflecting delinquencies,
repossessions, judgments, foreclosures, garnishments, bankruptcies and similar
instances of adverse credit that can be discovered by a search of public
records. An applicant's past credit performance weighs heavily in the evaluation
of risk by Delta. The credit report is used to evaluate the borrower's record
and must be current at the time of application. A record of closed accounts is
particularly important where the borrower has no active accounts, a recent
rating is weak, or income is marginal. However, a lack of credit history will
not necessarily preclude a loan if the borrower has sufficient equity in the
property. Slow payments on the borrower's credit report must be satisfactorily
explained and will normally reduce the amount of the loan for which the
applicant can be approved.
Delta requires that a full appraisal of the property used as collateral for
any loan that it acquires or originates be performed in connection with the
origination of the loan. Appraisals are performed by third party, fee-based
appraisers and generally conform to current FNMA/FHLMC secondary market
requirements for residential property appraisals. Each such appraisal includes.
among other things, an inspection of the exterior and interior of the subject
property and, where available, data from sales within the preceding 12 months of
similar properties within the same general location as the subject property.
Delta's mortgage loan program includes (i) a full documentation program for
salaried borrowers and (ii) a non-income verification program for self-employed
borrowers. Under the full documentation program, the total
S-18
<PAGE>
monthly debt obligations (which include principal and interest on the new loan
and all other mortgages, loans, charge accounts and scheduled indebtedness)
generally cannot exceed 50% of the borrower's monthly gross income. A higher
debt to income ratio will be considered for a loan with a lower Combined
Loan-to-Value Ratio, or with a combined total gross income greater than $50,000
in conjunction with the loan applicant's favorable credit history. and each
approval for such a loan will be supported by documentation Loans to borrowers
who are salaried employees must be supported by current employment information
in addition to employment history. This information for salaried borrowers is
verified based on written confirmation from employers, one or more pay-stubs,
recent W-2 tax forms, recent tax returns or telephone confirmation from the
employer. For Delta's non-income verification program, proof of self-employment
in the same business plus proof of current self-employed status is required.
Delta generally requires lower Combined Loan-to-Value Ratios with respect to
loans made to self-employed borrowers.
Delta requires title insurance coverage issued by an approved ALTA title
insurance company on all properties securing mortgage loans it originates or
purchases. The loan originator and its assignees are generally named as the
insured. Title insurance policies indicate the lien position of the mortgage
loan and protect Delta against loss if the title or lien position is not as
indicated. The applicant is also required to secure hazard and, in certain
instances, flood insurance in an amount sufficient to cover the new loan and any
senior mortgage, subject to the maximum amount available under the National
Flood Insurance Program (FEMA).
Subsequent to funding, each loan file is checked to confirm that lending
and documentation standards have been met and the loan is entered into Delta's
computerized loan tracking system. Delta also conducts, on an ongoing basis,
quality compliance reviews with respect to a sample of the mortgage loans, which
can include a full underwriting and regulatory compliance review as well as
reverification of credit, employment and income.
SERVICING
The following is a description of the servicing policies and procedures
customarily and currently employed by Delta with respect to its mortgage loan
portfolio. Delta revises such policies and procedures from time to time in
connection with changing economic and market conditions and changing legal
requirements.
Centralized controls and standards have been established by Delta for the
servicing and collection of mortgage loans in its portfolio. Servicing of
Delta's portfolio is conducted through its primary office in Woodbury, New York.
Servicing includes, but is not limited to, post-origination loan processing,
customer service, collections and liquidations.
Borrowers are billed monthly in advance of the due date. Delta's collection
policy emphasizes working with borrowers in default in an effort to bring
payments current and avoid foreclosures. If timely payment is not received,
collection procedures are generally initiated the day immediately following the
end of the grace period. Initial collection procedures involve attempting to
contact the borrower by telephone to make payment arrangements. Follow-up
telephone contacts are attempted until the account is current or other payment
arrangements are made. A standard form letter is utilized when attempts to reach
the borrower by telephone fail.
Regulations and practices regarding the liquidation of properties (e.g.,
foreclosure) and the rights of the borrower in default vary greatly from state
to state. Delta will decide that liquidation is the appropriate course of action
only if a delinquency cannot otherwise be cured. Generally, Delta commences
foreclosure proceedings when a loan is 90 days delinquent. If Delta determines
that purchasing a property securing a mortgage loan will minimize the loss
associated with such defaulted loan. Delta may hid at the foreclosure sale for
such property or accept a deed in lieu of foreclosure.
Servicing and collection practices may change over in accordance with,
among other things, Delta's business judgment, changes in the portfolio and
applicable laws and regulations. Any realization from the sale of foreclosed
property is taken as a recovery. After Delta acquires title to a mortgaged
property by foreclosure or deed in lieu of foreclosure, an approved realtor is
selected to list and advertise the property.
Delta may not foreclose on the property securing a junior mortgage loan
unless it forecloses subject to all senior mortgages. If any senior mortgage
loan is in default after Delta has initiated its foreclosure actions, Delta may
advance funds to keep such senior mortgage loan current until such time as Delta
satisfies such senior mortgage loan. Such amounts are added to the balance of
the mortgage loan. In the event that foreclosure
S-19
<PAGE>
proceedings have been instituted on any senior mortgage prior to the initiation
of Delta's foreclosure action, Delta will either satisfy the senior mortgage
loan at the time of the foreclosure sale or take other action to protect its
interest in the related property.
DELINQUENCY AND LOSS EXPERIENCE
The following table sets forth information relating to the delinquency and
loss experience of Delta for its servicing portfolio of mortgage loans
(including mortgage loans serviced for others) for the periods indicated.
The information in the tables below has not been adjusted to eliminate the
effect of the significant growth in the size of Delta's mortgage loan portfolio
during the periods shown. Accordingly, loss and delinquency as percentages of
aggregate principal balance of mortgage loans serviced for each period would be
higher than those shown if a group of mortgage loans were artificially isolated
at a point in time and the information showed the activity only in that isolated
group. However, since most of the mortgage loans in Delta's mortgage loan
portfolio are not fully seasoned, the delinquency and loss information for such
an isolated group would also be distorted to some degree.
S-20
<PAGE>
DELTA FUNDING CORPORATION'S
HISTORIC SERVICING PORTFOLIO INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Total Outstanding Principal Balance.....................
Average Outstandings(1).................................
DELINQUENCY
30-59 Days:
Principal Balance.....................................
Percent of Delinquency by Dollar(2).....................
60-89 Days:
Principal Balance.....................................
Percent of Delinquency by Dollar(2).....................
90 Days or More:
Principal Balance.....................................
Percent of Delinquency by Dollar(2).....................
Total Delinquencies:
Principal Balance.....................................
Percent of Delinquency by Dollar(2).....................
FORECLOSURES
Principal Balance.....................................
Percent of Foreclosures by Dollar(2)....................
REO.....................................................
Net Gains/(Losses) on liquidated loans..................
Percentage of Net Gains/(Losses) on liquidated
loans(2)..............................................
Percentage of Net Gains/(Losses) on liquidated loans
(based on Average Outstanding Principal Balance)......
</TABLE>
- ------------------
(1) Calculated by summing the actual outstanding principal balances at the end
of each month and dividing the total by the number of months in the
applicable period.
(2) Percentages are expressed based upon the total outstanding principal balance
at the end of the indicated period.
[As reflected in the table, the Total Delinquencies (Percent of Delinquency
by Dollar) have [increased] [decreased] from % for 1994 to % for 1995.
At the same time, the Percentage of Net Gains/(Losses) on liquidated loans
[increased] [decreased] from % for 1994 to % for 1995. The Seller
believes that this [increase [decrease] was primarily attributable to .]
While the above delinquency and foreclosure and loss experiences reflect
Delta's experiences for the periods indicated, there can be no assurance that
the delinquency and foreclosure and loss experiences on the Home Equity Loans
will be similar. Accordingly, this information should not be considered to
reflect the credit quality of the Home Equity Loans included in the Trust, or as
a basis of assessing the likelihood, amount or severity of losses on the Home
Equity Loans. The statistical data in the table is based on all of the loans in
Delta's servicing portfolio. The Home Equity Loans may, in general, be more
recently originated than, and are likely to have other characteristics which
distinguish them from, the majority of the loans in Delta's servicing portfolio.
S-21
<PAGE>
DESCRIPTION OF THE HOME EQUITY LOANS
GENERAL
The statistical information presented in this Prospectus Supplement is only
with respect to the Initial Loans and describes the Initial Loans as of the
Cut-Off Date.
The Subsequent Loans are intended to be purchased by the Trust from the
Seller from time to time on or before , 199 , from funds on deposit
in the Pre-Funding Account. The Initial Loans and the Subsequent Loans, if
available, to be purchased by the Trust will be originated or purchased by the
Seller and sold by the Seller to the Trust. The Agreement will provide that the
Home Equity Loans, following the conveyance of the Subsequent Loans, must in the
aggregate conform to certain specified characteristics described below under
'--Conveyance of Subsequent Loans.'
The Mortgage Pool consists of Initial Loans with an aggregate
principal balance outstanding as of the Cut-Off Date of $ ,
together with any Subsequent Loans acquired as described herein. The Initial
Mortgage Pool consists of closed end, fixed rate home equity loans with
remaining terms to maturity of not more than 360 months (including both fully
amortizing and Balloon Loans). Approximately % of the Initial Loans (by
Principal Balance as of the Cut-Off Date) are secured by first lien mortgages on
the related Mortgaged Properties and % (by Principal Balance as of the
Cut-Off Date) are secured by junior liens on the related Mortgaged Properties.
With respect to approximately % of the Initial Loans by Cut-Off Date
Principal Balance the related Mortgages are secured by a primary residence of
the Mortgagor. Except for approximately % of the Initial Loans (by Principal
Balance as of the Cut-Off Date) which are between 30 and 89 days delinquent, the
Initial Loans were not more than 30 days delinquent as of the Cut-Off Date. With
respect to the Initial Loans, the average Cut-Off Date Principal Balance was
$ , the minimum Cut-Off Date Principal Balance was $ , the maximum
Cut-Off Date Principal Balance was $ , the minimum Loan Rate and the
maximum Loan Rate on the Cut-Off Date were % and % per annum,
respectively, and the weighted average Loan Rate on the Cut-Off Date was %
per annum. The weighted average original Combined Loan-to-Value Ratio of the
Initial Loans was % as of the Cut-Off Date.
The sole basis for determination of whether a Mortgage is secured by a
primary residence of a borrower ('Mortgagor') will be either (a) a
representation by the Mortgagor at origination of the Mortgage Loan that the
Mortgaged Property will be used for a period of at least six months every year,
or that he intends to use the Mortgaged Property as his primary residence or (b)
that the address of the Mortgaged Property is the Mortgagor's mailing address as
reflected in the Seller's records.
The Home Equity Loans provide that interest is charged to the Mortgagors
thereunder, and payments are due from such Mortgagors, as of a scheduled day of
each month which is fixed at the time of origination. All of the Home Equity
Loans provide for monthly installments of principal and interest. Certain Home
Equity Loans provide for full amortization of the principal amount thereof over
the term of the Home Equity Loan. Certain other Home Equity Loans provide for
amortization of a portion of the principal amount thereof over the term of the
Home Equity Loan and a balloon payment of the remaining principal amount thereof
at the end of the term of the Home Equity Loan.
POOL STATISTICS
The sum of the columns below may not equal the total indicated due to
rounding. In addition, unless otherwise set forth herein, all percentages set
forth with respect to the Initial Loans are measured by the respective aggregate
Principal Balances thereof as of the Cut-Off Date.
S-22
<PAGE>
CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
NUMBER OF AGGREGATE DATE AGGREGATE
CUT-OFF DATE PRINCIPAL BALANCES INITIAL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- --------------------------------- ------------- ----------------- -----------------
<S> <C> <C> <C>
$ 0.01 to $ 10,000.00....... $ %
$ 10,000.01 to $ 20,000.00.......
$ 20,000.01 to $ 30,000.00.......
$ 30,000.01 to $ 40,000.00.......
$ 40,000.01 to $ 50,000.00.......
$ 50,000.01 to $ 60,000.00.......
$ 60,000.01 to $ 70,000.00.......
$ 70,000.01 to $ 80,000.00.......
$ 80,000.01 to $ 90,000.00.......
$ 90,000.01 to $100,000.00.......
$100,000.01 to $110,000.00.......
$110,000.01 to $120,000.00.......
$120,000.01 to $130,000.00.......
$130,000.01 to $140,000.00.......
$140,000.01 to $150,000.00.......
$150,000.01 to $160,000.00.......
$160,000.01 to $170,000.00.......
$170,000.01 to $180,000.00.......
$180,000.01 to $190,000.00.......
$190,000.01 to $200,000.00.......
$200,000.01 to $210,000.00.......
$210,000.01 to $220,000.00.......
$230,000.01 to $240,000.00.......
$240,000.01 to $250,000.00.......
$250,000.01 to $260,000.00.......
$260,000.01 to $270,000.00.......
$270,000.01 to $280,000.00.......
$280,000.01 to $290,000.00.......
$290,000.01 to $300,000.00.......
$310,000.01 to $320,000.00.......
$320,000.01 to $330,000.00.......
------------- ----------------- -----------------
Total.......................... $ %
------------- ----------------- -----------------
------------- ----------------- -----------------
</TABLE>
S-23
<PAGE>
DISTRIBUTION BY GEOGRAPHIC REGION(1)
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
NUMBER OF AGGREGATE DATE AGGREGATE
GEOGRAPHIC REGION INITIAL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
Arizona................. $ %
California..............
Colorado................
Connecticut.............
Delaware................
District of Columbia....
Florida.................
Georgia.................
Illinois................
Indiana.................
Kentucky................
Maine...................
Maryland................
Massachusetts...........
Michigan................
Minnesota...............
Missouri................
Nevada..................
New Hampshire...........
New Jersey..............
New York................
North Carolina..........
Ohio....................
Oregon..................
Pennsylvania............
Rhode Island............
South Carolina..........
Tennessee...............
Virginia................
Washington..............
West Virginia...........
Total.................
------------- ----------------- -----------------
$ 100.00%
------------- ----------------- -----------------
------------- ----------------- -----------------
</TABLE>
- ------------------
(1) Determined by property address designated as such in the related Mortgage.
S-24
<PAGE>
COMBINED LOAN-TO-VALUE RATIOS(1)
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
NUMBER OF AGGREGATE DATE AGGREGATE
COMBINED LOAN-TO-VALUE RATIO INITIAL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------------- ------------- ----------------- -----------------
<S> <C> <C> <C>
5.01% to 10.00%............ $ %
10.01% to 15.00%............
15.01% to 20.00%............
20.01% to 25.00%............
25.01% to 30.00%............
30.01% to 35.00%............
35.01% to 40.00%............
40.01% to 45.00%............
45.01% to 50.00%............
50.01% to 55.00%............
55.01% to 60.00%............
60.01% to 65.00%............
65.01% to 70.00%............
70.01% to 75.00%............
75.01% to 80.00%............
80.01% to 85.00%............
85.01% to 90.00%............
------------- ----------------- -----------------
Total..................... $ %
------------- ----------------- -----------------
------------- ----------------- -----------------
</TABLE>
- ------------------
(1) The original Combined Loan-to-Value Ratios ('CLTV') shown above are equal,
with respect to each Initial Loan, to (i) the sum of (a) the original
principal balance of such Home Equity Loan at the date of origination plus
(b) the remaining balance of the senior lien(s), if any, at the date of
origination of such Home Equity Loan divided by the value of the related
Mortgaged Property, based upon the appraisal made at the time of origination
of such Home Equity Loan. No assurance can be given that the values of such
Mortgaged Properties have remained or will remain at their levels as of the
dates of origination of the related Initial Home Equity Loans. If the
residential real estate market should experience an overall decline in
property values such that the outstanding balances of such Home Equity Loans
together with the outstanding balances of the related first liens become
equal to or greater than the value of the related Mortgaged Properties, the
actual losses could be higher than those now generally experienced in the
mortgage lending industry.
S-25
<PAGE>
LOAN RATES
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
NUMBER OF INITIAL AGGREGATE DATE AGGREGATE
LOAN RATES LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
8.000% to 8.500%........ $ %
8.501% to 9.000%........
9.001% to 9.500%........
9.501% to 10.000%........
10.001% to 10.500%........
10.501% to 11.000%........
11.001% to 11.500%........
11.501% to 12.000%........
12.001% to 12.500%........
12.501% to 13.000%........
13.001% to 13.500%........
13.501% to 14.000%........
14.001% to 14.500%........
14.501% to 15.000%........
15.001% to 15.500%........
15.501% to 16.000%........
16.001% to 16.500%........
16.501% to 17.000%........
17.001% to 17.500%........
17.501% to 18.000%........
18.001% to 18.500%........
18.501% to 19.000%........
----------------- ----------------- -----------------
Total................... $ %
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
REMAINING MONTHS NUMBER OF INITIAL AGGREGATE DATE AGGREGATE
TO STATED MATURITY MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
49 to 60................ $ %
73 to 84................
109 to 120................
133 to 144................
169 to 180................
229 to 240................
289 to 300................
349 to 360................
----------------- ----------------- -----------------
Total................... $ %
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>
S-26
<PAGE>
MONTHS SINCE ORIGINATION
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
REMAINING MONTHS NUMBER OF AGGREGATE DATE AGGREGATE
TO STATED MATURITY INITIAL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
1 to 12................. $ 100.00%
------------- ----------------- -----------------
Total................. $ 100.00%
------------- ----------------- -----------------
------------- ----------------- -----------------
</TABLE>
PROPERTY TYPE
<TABLE>
<CAPTION>
CUT-OFF DATE % OF CUT-OFF
REMAINING MONTHS NUMBER OF AGGREGATE DATE AGGREGATE
TO STATED MATURITY INITIAL LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------ ------------- ----------------- -----------------
<S> <C> <C> <C>
Single Family........... $ %
Two- to Four-Family.....
Condominiums............
Other...................
------------- ----------------- -----------------
Total................. $ 100.00%
------------- ----------------- -----------------
------------- ----------------- -----------------
</TABLE>
CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS
The Agreement permits the Trust to acquire up to approximately $
aggregate balance of Subsequent Loans. Accordingly, the statistical
characteristics of the Home Equity Loans vary as of any Subsequent Transfer Date
upon the acquisition of Subsequent Loans.
The obligation of the Trust to purchase Subsequent Loans on a Subsequent
Transfer Date is subject to the following requirements, any of which
requirements (except for the requirement stated in clause (v) of this paragraph)
may be waived or modified in any respect by the Certificate Insurer: (i) such
Subsequent Loan may not be 30 or more days contractually delinquent as of the
related Subsequent Cut-Off Date; (ii) the remaining term to stated maturity of
such Subsequent Loan may not exceed 30 years for fully amortizing loans or 15
years for 'Balloon Loans'; (iii) such Subsequent Mortgage Loan will be secured
by a Mortgage in a first or second lien position; (iv) such Subsequent Loan will
not have a Loan Rate less than %; (v) such Subsequent Loan will be
otherwise acceptable to the Certificate Insurer; (vi) following the purchase of
such Subsequent Loan by the Trust on a Subsequent Transfer Date, the Home Equity
Loans (including such Subsequent Loan) as of the related Subsequent Cut-Off
Date: (a) will have a weighted average Loan Rate of at least 11.50%; (b) will
have a weighted average remaining term to stated maturity of not more than
months; (c) will have a weighted average Combined Loan-to-Value Ratio of not
more than %; (d) will not have more than % by aggregate principal balance
'Balloon Loans'; (e) will have no Home Equity Loan with a principal balance in
excess of $350,000; (f) will have a state concentration not in excess of % for
any one state; (g) will have not more than % in aggregate principal balance
of the Home Equity Loans concentrated in any single zip code; (h) will have not
more than % in aggregate principal balance of Home Equity Loans relating
to non-owner occupied properties; and (i) will not include Home Equity Loans in
excess of % by aggregate principal balance secured by Mortgages in a second
lien position; (vii) such Subsequent Loan shall be secured by a mortgage on
property which, at the time of the origination of such Subsequent Loan, has an
appraised value of not more than $1,000,000; and (viii) the first payment on
such Subsequent Loan is due no later than the last day of the month in which the
purchase occurs, unless there is deposited into the Certificate Account an
amount equal to 30 days' interest on any such Subsequent Loan at the Loan Rate
less the Servicing Fee Rate, then the first payment on such Subsequent Loan is
due no later than the last day of the month following the month in which the
purchase occurs.
S-27
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
GENERAL
The rate of principal payments on the Offered Certificates,the aggregate
amount of distributions on the Offered Certificates and the yield to maturity of
the Offered Certificates will be related to the rate and timing of payments of
principal on the Home Equity Loans. The rate of principal payments on the Home
Equity Loans will in turn be affected by the amortization schedules of the Home
Equity Loans and by the rate of principal prepayments (including for this
purpose prepayments resulting from refinancing, liquidations of the Home Equity
Loans due to defaults, casualties, condemnations and repurchases by Delta). The
Home Equity Loans may be prepaid by the Mortgagors at any time. However, Home
Equity Loans secured by first liens on Mortgaged Properties in New York are
subject to a prepayment penalty for the first 12 months following origination.
In addition, Home Equity Loans secured by Mortgaged Properties in other
jurisdictions may be subject to prepayment penalties to the extent permitted by
law.
Prepayments, liquidations and purchases of the Home Equity Loans (including
any optional purchase by the Servicer of a Home Equity Loan and any optional
purchase of the remaining Home Equity Loans in connection with the termination
of the Trust, in each case as described herein) will result in distributions on
the Classes of Offered Certificates then entitled to distributions of principal
which would otherwise be distributed over the remaining terms of the Home Equity
Loans. Since the rate of payment of principal of the Home Equity Loans will
depend on future events and a variety of factors, no assurance can be given as
to such rate or the rate of principal prepayments. The extent to which the yield
to maturity of a Class of Offered Certificates may vary from the anticipated
yield will depend upon the degree to which a Certificate of such Class is
purchased at a discount or premium, and the degree to which the timing of
payments thereon is sensitive to prepayments, liquidations and purchases of such
Home Equity Loans. An additional factor affecting the yield to maturity of the
Offered Certificates is the overcollateralization amount. The
overcollateralization will accelerate the amortization of the Offered
Certificates relative to the amortization of the Home Equity Loans because all
principal payments received on the Home Equity Loans will be distributed to the
Offered Certificateholders as long as the amount of overcollateralization is
less than the required level of overcollateralization.
The rate of prepayment on the Home Equity Loans cannot be predicted. Home
equity loans such as the Home Equity Loans have been originated in significant
volume only during the past few years and the Seller is not aware of any
publicly available studies or statistics on the rate of prepayment of such Home
Equity Loans. Generally, home equity loans are not viewed by borrowers as
permanent financing. Accordingly, the Home Equity Loans may experience a higher
rate of prepayment than traditional first mortgage loans. The prepayment
experience of the Trust with respect to the Home Equity Loans may be affected by
a wide variety of factors, including economic conditions, prevailing interest
rate levels, the availability of alternative financing and homeowner mobility
and changes affecting the deductibility for Federal income tax purposes of
interest payments on home equity loans. Substantially all of the Home Equity
Loans contain 'due-on-sale' provisions and the Servicer is required by the
Agreement to enforce such provisions, unless such enforcement is not permitted
by applicable law. The enforcement of a 'due-on-sale' provision will have the
same effect as a prepayment of the related Home Equity Loan. See 'CERTAIN LEGAL
ASPECTS OF LOANS--Due-on-Sale Clauses in Home Equity Loans' in the Prospectus.
In addition to the foregoing factors affecting the weighted average lives
of the Offered Certificates, the use of Distributable Excess Spread to pay
principal of the Offered Certificates will result in acceleration of the Class
A-1 and Class A-5 Certificates relative to the amortization of the Home Equity
Loans in the early months of the transaction as well as accelerating the first
date on which each other Class of Offered Certificates will begin to receive
distribution of principal. This acceleration feature creates
overcollateralization which results from the excess of the sum of aggregate
Principal Balance of the Home Equity Loans and the amount on deposit in the
Pre-Funding Account over the Class A Principal Balance. Once the required level
of overcollaterlization is reached, the acceleration feature will cease, unless
necessary to maintain the required level of overcollateralization.
S-28
<PAGE>
MANDATORY PREPAYMENT
The approximate original Pre-Funded Amount of $ will be
funded from the proceeds of the sale of the Offered Certificates and may be used
to acquire Subsequent Loans. In the event that, on the last day of the Funding
Period, not all of the original Pre-Funded Amount has been used to acquire
Subsequent Loans, then the Classes of Offered Certificates then entitled to
distributions of principal will receive a partial prepayment on the Distribution
Date immediately following the last day of the Funding Period in an amount equal
to the amount remaining in the Pre-Funding Account (after taking into account
the purchase of Subsequent Loans on such date).
Although no assurances can be given, the Seller intends that the principal
amount of Subsequent Loans sold to the Trust will require the application of
substantially all the amount on deposit in the Pre-Funding Account and that
there should be no material principal prepaid to the Holders of any of the Class
A Certificates.
PAYMENT DELAY FEATURE OF OFFERED CERTIFICATES
The effective yield to the Certificateholders of each Class of Offered
Certificates will be lower than the yield otherwise produced by the Certificate
Rate for each such Class and the purchase price of such Certificates because
distributions will not be payable to the Certificateholders until the 25th day
of the month following the month of accrual (without any additional distribution
of interest or earnings thereon in respect of such delay).
WEIGHTED AVERAGE LIVES
Generally, greater than anticipated prepayments of principal will increase
the yield on Offered Certificates purchased at a price less than par. Generally,
greater than anticipated prepayments of principal will decrease the yield on
Offered Certificates purchased at a price greater than par. The effect on an
investor's yield due to principal payments on the Home Equity Loans occurring at
a rate that is faster (or slower) than the rate anticipated by the investor in
the period immediately following the issuance of the Certificates will not be
entirely offset by a subsequent like reduction (or increase) in the rate of
principal payments. The weighted average life of the Offered Certificates will
also be affected by the amount and timing of delinquencies and defaults on the
Home Equity Loans and the recoveries, if any, on Liquidated Home Equity Loans
and foreclosed properties.
The 'weighted average life' of a Certificate refers to the average amount
of time that will elapse from the date of issuance to the date each dollar in
respect of principal of such Certificate is repaid. The weighted average life of
any Class of the Class A Certificates will be influenced by, among other
factors, the rate at which principal payments are made on the Home Equity Loans,
including final payments made upon the maturity of Balloon Loans.
Prepayments on Home Equity Loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement (the
'Prepayment Assumption'), represents an assumed rate of prepayment each month
relative to the then outstanding principal balance of the pool of mortgage loans
for the life of such mortgage loans. A 100% Prepayment Assumption assumes a
constant prepayment rate ('CPR') of 4% per annum of the outstanding principal
balance of such mortgage loans in the first month of the life of the mortgage
loans and an additional 1.455% (precisely 16/11) (expressed as a percentage per
annum) in each month thereafter until the twelfth month; beginning in the
twelfth month and in each month thereafter during the life of the mortgage
loans, a constant prepayment rate of 20% per annum each month is assumed. As
used in the table below, 0% Prepayment Assumption assumes a constant prepayment
rate equal to 0% of the Prepayment Assumption, i.e., no prepayments.
Correspondingly, 80% Prepayment Assumption assumes prepayment rates equal to 80%
of the Prepayment Assumption, and so forth. The Prepayment Assumption does not
purport to be an historical description of prepayment experience or a prediction
of the anticipated rate of prepayment of any pool of mortgage loans, including
the Home Equity Loans.
Since the tables were prepared on the basis of the assumptions in the
following paragraph, there are discrepancies between characteristics of the
actual Home Equity Loans and the characteristics of the Home Equity Loans
assumed in preparing the tables. Any such discrepancy may have an effect upon
the percentages of the Principal Balances outstanding and weighted average lives
of the Certificates set forth in the tables. In addition, since the actual Home
Equity Loans in the Trust have characteristics which differ from those assumed
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<PAGE>
in preparing the tables set forth below, the distributions of principal on the
Certificates may be made earlier or later than as indicated in the tables.
For the purpose of the tables below, it is assumed that: (i) the Home
Equity Loans consist of pools of loans with the level-pay and balloon
amortization characteristics set forth below, (ii) all the Subsequent Loans
purchased with funds from the Pre-Funding Account are purchased on ,
199 , (iii) the Closing Date for the Class A Certificates is , 199 ,
(iv) distributions on the Class A Certificates are made on the 25th day of each
month regardless of the day on which the Distribution Date actually occurs,
commencing in 199 and are made in accordance with the priorities
described herein, (v) the scheduled monthly payments of principal and interest
on the Home Equity Loans will be timely delivered on the last day of each month
(with no defaults, commencing in 199 ), (vi) the Home Equity Loans'
prepayment rates are a multiple of the applicable Prepayment Assumption, (vii)
all prepayments are prepayments in full received on the last day of each month
(commencing 199 ) and include 30 days' interest thereon, (viii) no
optional termination or mandatory termination is exercised, (ix) the Class A
Certificates of each Class have the respective Certificate Rates and Original
Class Principal Balances as set forth on the cover hereof, and (x) all of the
Pre-Funded Amount is used to acquire Subsequent Loans.
<TABLE>
<CAPTION>
ORIGINAL ORIGINAL REMAINING
AMORTIZATION TERM TO TERM TO
PRINCIPAL LOAN TERM MATURITY MATURITY
AMORTIZATION METHODOLOGY BALANCE RATE (MONTHS) (MONTHS) (MONTHS)
- ------------------------ --------- ---- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Initial Loans
Level Pay............. $ %
Level Pay............. $ %
Level Pay............. $ %
Balloon............... $ %
Subsequent Loans
Level Pay............. $ %
Level Pay............. $ %
Level Pay............. $ %
Balloon............... $ %
</TABLE>
Subject to the foregoing discussion and assumptions, the following table
indicates the weighted average life of each Class of Class A Certificates, and
sets forth the percentages of the initial Principal Balance of each such Class
of Class A Certificates that would be outstanding after each of the dates shown
at various percentages of the Prepayment Assumption.
S-30
<PAGE>
PERCENT OF INITIAL CLASS PRINCIPAL BALANCE OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2
----------------------------------------- -----------------------------------------
DISTRIBUTION DATE 0% 50% 100% 125% 150% 0% 50% 100% 125% 150%
- ------------------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage.......
Weighted Average Life
(years)*...............
<CAPTION>
CLASS A-3
----------------------------------------
DISTRIBUTION DATE 0% 50% 100% 125% 150%
- ------------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Initial Percentage.......
Weighted Average Life
(years)*...............
</TABLE>
- ------------------
* The weighted average life of a Certificate of any Class is determined by (i)
multiplying the amount of each distribution in reduction of the related
Certificate Principal Balance by the number of years from the date of issuance
of the Certificate to the related Distribution Date, (ii) adding the results,
and (iii) dividing the sum by the highest related Certificate Principal
Balance of the Certificate.
S-31
<PAGE>
PERCENT OF INITIAL CLASS PRINCIPAL BALANCE OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF THE PREPAYMENT ASSUMPTION--(CONTINUED)
<TABLE>
<CAPTION>
CLASS A-4 CLASS A-5
---------------------------------------------- ----------------------------------------------
DISTRIBUTION DATE 0% 50% 100% 125% 150% 0% 50% 100% 125% 150%
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage.......
Weighted Average Life
(years)*...............
</TABLE>
- ------------------
* The weighted average life of a Certificate of any Class is determined by (i)
multiplying the amount of each distribution in reduction of the related
Certificate Principal Balance by the number of years from the date of issuance
of the Certificate to the related Distribution Date, (ii) adding the results,
and (iii) dividing the sum by the highest related Certificate Principal
Balance of the Certificate.
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<PAGE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. A form of the
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus Supplement and the Prospectus is a part. The following summaries
describe certain provisions of the Agreement. The summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Agreement. Wherever particular sections or
defined terms of the Agreement are referred to, such sections or defined terms
are hereby incorporated herein by reference.
GENERAL
The Offered Certificates will be issued in denominations of $25,000 and
multiples of $1 in excess thereof and will evidence specified undivided
interests in the Trust. The property of the Trust will consist of, to the extent
provided in the Agreement: (i) the Home Equity Loans; (ii) payments received
after the Cut-Off Date or after the Subsequent Cut-Off Date as applicable, other
than payments of interest on the Initial Loans due on or before ,
199 ; (iii) Mortgaged Properties relating to the Home Equity Loans that are
acquired by foreclosure or deed in lieu of foreclosure together with all
collections thereon and proceeds thereof; (iv) the Collection Account and the
Distribution Account and such assets deposited therein from time to time and any
investment proceeds thereof; and (v) the Pre-Funding Account, the Capitalized
Interest Account and funds on deposit therein. In addition, the Seller has
caused the Certificate Insurer to issue an irrevocable and unconditional
certificate guaranty insurance policy (the 'Policy') for the benefit of the
Senior Certificateholders pursuant to which it will guarantee payments to such
Senior Certificateholders as described herein. Definitive Certificates (as
defined below), if issued, will be transferable and exchangeable at the
corporate trust office of the Trustee, which will initially act as Certificate
Registrar. See '--Book-Entry Certificates' below. No service charge will be made
for any registration of exchange or transfer of Certificates. but the Trustee
may require payment of a sum sufficient to cover any tax or other governmental
charge.
The aggregate undivided interest in the Trust represented by the Offered
Certificates as of the Closing Date will equal approximately $ of
principal (the 'Original Class A Principal Balance'), which represents 100% of
the sum of the aggregate Cut-Off Date Principal Balance of the Initial Loans and
the original Pre-Funded Amount. The principal amount of a Class of Class A
Certificates (each, a 'Class Principal Balance') on any Distribution Date is
equal to the applicable Class A Principal Balance on the Closing Date minus the
aggregate of amounts actually distributed as principal to the holders of such
Class of Class A Certificates. The Home Equity Loan Asset-Backed Certificates,
Series 199 - will be issued in six Classes of senior certificates, Class A-1
(the 'Class A-1 Certificates'), Class A-2 (the 'Class A-2 Certificates'), Class
A-3 (the 'Class A-3 Certificates'), Class A-4 (the 'Class A-4 Certificates'),
and Class A-5 (the 'Class A-5 Certificates') (collectively the 'Class A
Certificates') and the Class S Certificates (the 'Class S Certificates' and,
collectively with the Class A Certificates, the 'Senior Certificates'). Only the
Class A Certificates are offered hereby (the 'Offered Certificates'). The Class
A-1, Class A-2, Class A-3 and Class A-4 Certificates (the 'Sequential
Certificates') will receive distributions of principal sequentially in the
amounts described below under 'Principal'. The Class A-5 Certificates are
entitled to distributions of principal in the amounts described below under
'Principal' concurrently with the Class of Sequential Certificates then entitled
to distributions of principal. Each Class of Offered Certificates represents the
right to receive payments of interest at the Certificate Rate for such Class and
payments of principal as described below.
The Person in whose name a Certificate is registered as such in the
Certificate Register is referred to herein as a 'Certificateholder.'
The 'Percentage Interest' of a Class A Certificate as of any date of
determination will be equal to the percentage obtained by dividing the
denomination of such Certificate by the Class Principal Balance for the related
Class of Class A Certificates as of the Cut-Off Date.
SEPARATE REMIC STRUCTURE
For federal income tax purposes, the Trust other than the Pre-Funding
Account and the Capitalized Interest Account created by the Pooling and
Servicing Agreement will include two segregated asset pools, each of which will
be treated as a separate REMIC. The assets of the Lower Tier REMIC will
generally consist of the Home
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<PAGE>
Equity Loans. The assets of the Upper Tier REMIC will generally consist of
uncertificated regular interests issued by the Lower Tier REMIC, which in the
aggregate will correspond to the Class A Certificates.
BOOK-ENTRY CERTIFICATES
The Class A Certificates will be book-entry Certificates (the 'Book-Entry
Certificates'). Persons acquiring beneficial ownership interests in the Class A
Certificates ('Certificate Owners') will hold their Class A Certificates through
the Depository Trust Company ('DTC') in the United States, or CEDEL or Euroclear
(in Europe) if they are participants of such systems, or indirectly through
organizations which are participants in such systems. The Book-Entry
Certificates will be issued in one or more certificates which equal the
aggregate principal balance of the Class A Certificates and will initially be
registered in the name of Cede & Co., the nominee of DTC. CEDEL and Euroclear
will hold omnibus positions on behalf of their participants through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries which in turn will hold such positions in customers'
securities accounts in the depositaries' names on the books of DTC. Citibank
will act as depositary for CEDEL and Morgan will act as depositary for Euroclear
(in such capacities, individually the 'Relevant Depositary' and collectively the
'European Depositaries'). Investors may hold such beneficial interests in the
Book-Entry Certificates in minimum denominations representing Certificate
Principal Balances of $25,000 and in multiples of $1 in excess thereof. Except
as described below, no person acquiring a Book-Entry Certificate (each, a
'beneficial owner') will be entitled to receive a physical certificate
representing such Certificate (a 'Definitive Certificate'). Unless and until
Definitive Certificates are issued, it is anticipated that the only
'Certificateholder' of the Class A Certificates will be Cede & Co., as nominee
of DTC. Certificate Owners will not be Certificateholders as that term is used
in the Agreement. Certificate Owners are only permitted to exercise their rights
indirectly through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a 'Financial Intermediary') that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn he recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant and on
the records of CEDEL or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Class A Certificates from the Trustee through DTC and DTC
participants. While the Class A Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the 'Rules'), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Class A Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Class A Certificates.
Participants and indirect participants with whom Certificate Owners have
accounts with respect to Class A Certificates are similarly required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess certificates, the Rules provide a mechanism by which
Certificate Owners will receive distributions and will be able to transfer their
interest.
Certificate Owners will not receive or be entitled to receive certificates
representing their respective interests in the Class A Certificates, except
under the limited circumstances described below. Unless and until Definitive
Certificates are issued, Certificate Owners who are not Participants may
transfer ownership of Class A Certificates only through Participants and
indirect participants by instructing such Participants and indirect participants
to transfer Class A Certificates, by book-entry transfer, through DTC for the
account of the purchasers of such Class A Certificates, which account is
maintained with their respective Participants. Under the Rules and in accordance
with DTC's normal procedures, transfers of ownership of Class A Certificates
will be executed through DTC and the accounts of the respective Participants at
DTC will be debited and credited. Similarly, the Participants and indirect
participants will make debits or credits, as the case may be, on their records
on behalf of the selling and purchasing Certificate Owners.
Because of time zone differences, credits of securities received in CEDEL
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the
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<PAGE>
business day following the DTC settlement date. Such credits or any transactions
in such securities settled during such processing will be reported to the
relevant Euroclear or CEDEL Participants on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant (as defined below) or Euroclear Participant (as defined below) to a
DTC Participant will be received with value on the DTC settlement date but will
be available in the relevant CEDEL or Euroclear cash account only as of the
business day following settlement in DTC. For information with respect to tax
documentation procedures relating to the Certificates, see 'FEDERAL INCOME TAX
CONSIDERATIONS--Foreign Investors' and '--Backup Withholding' herein and 'GLOBAL
CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES--Certain U.S. Federal
Income Tax Documentation Requirements' in Annex I hereto.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver instructions
directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company, performs
services for its participants, some of which (and/or their representatives) own
DTC. In accordance with its normal procedures, DTC is expected to record the
positions held by each DTC participant in the Book-Entry Certificates, whether
held for its own account or as a nominee for another person. In general,
beneficial ownership of Book-Entry Certificates will be subject to the rules,
regulations and procedures governing DTC and DTC participants as in effect from
time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ('CEDEL
Participants') and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
('Euroclear Participants') and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the 'Euroclear Operator'), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
'Cooperative'). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear
S-35
<PAGE>
participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the 'Terms and Conditions'). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable DTC participants
in accordance with DTC's normal procedures. Each DTC participant will be
responsible for disbursing such payments to the beneficial owners of the
Book-Entry Certificates that it represents and to each Financial Intermediary
for which it acts as agent. Each such Financial Intermediary will be responsible
for disbursing funds to the beneficial owners of the Book-Entry Certificates
that it represents.
Under a book-entry format, beneficial owners of the Book-Entry Certificates
may experience some delay in their receipt of payments, since such payments will
be forwarded by the Trustee to Cede. Distributions with respect to Certificates
held through CEDEL or Euroclear will be credited to the cash accounts of CEDEL
Participants or Euroclear Participants in accordance with the relevant system's
rules and procedures, to the extent received by the Relevant Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See 'FEDERAL INCOME TAX CONSIDERATIONS--
Foreign Investors' and '--Backup Withholding' herein. Because DTC can only act
on behalf of Financial Intermediaries, the ability of a beneficial owner to
pledge Book-Entry Certificates to persons or entities that do not participate in
the Depository system, or otherwise take actions in respect of such Book- Entry
Certificates, may be limited due to the lack of physical certificates for such
Book-Entry Certificates. In addition, issuance of the Book-Entry Certificates in
book-entry form may reduce the liquidity of such Certificates in the secondary
market since certain potential investors may be unwilling to purchase
Certificates for which they cannot obtain physical certificates.
Monthly and annual reports on the Trust will be provided to Cede, as
nominee of DTC, and may be made available by Cede to beneficial owners upon
request, in accordance with the rules, regulations and procedures creating and
affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates of such beneficial owners are credited.
DTC has advised the Trustee that, unless and until Definitive Certificates
are issued, DTC will take any action permitted to be taken by the holders of the
Book-Entry Certificates under the Agreement only at the direction of one or more
Financial Intermediaries to whose DTC accounts the Book-Entry Certificates are
credited, to the extent that such actions are taken on behalf of Financial
Intermediaries whose holdings include such Book-Entry Certificates. CEDEL or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a Certificateholder under the Agreement on behalf of a CEDEL
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to the ability of the Relevant Depositary to effect
such actions on its behalf through DTC. DTC may take actions, at the direction
of the related Participants, with respect to some Class A Certificates which
conflict with actions taken with respect to other Class A Certificates.
Definitive Certificates will be issued to beneficial owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC
or the Seller advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the Book-
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<PAGE>
Entry Certificates and the Seller or the Trustee is unable to locate a qualified
successor, (b) the Seller, at its sole option, elects to terminate a book-entry
system through DTC or (c) after the occurrence of an Event of Default (as
defined herein), beneficial owners having Percentage Interests aggregating not
less than 51% of the Aggregate Class A Principal Balance of the Book-Entry
Certificates advise the Trustee and DTC through the Financial Intermediaries and
the DTC participants in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the best interests of
beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Class A Certificates among participants of
DTC, CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Neither the Seller, the Servicer nor the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held by
Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
ASSIGNMENT OF HOME EQUITY LOANS
On the Closing Date the Depositor, will transfer to the Trust all of its
right, title and interest in and to each Home Equity Loan, the related mortgage
note, mortgages and other related documents (collectively, the 'Related
Documents'), including all payments received after the Cut-Off Date or the
Subsequent Cut-Off Date, as applicable, other than payments of interest on the
Initial Loans due on or before , 199 . The Trustee, concurrently
with such initial transfer, will deliver the Certificates to the Seller.
Within 30 days of the Closing Date or the Subsequent Transfer Date, as the
case may be, the Trustee will review the Home Equity Loans and the Related
Documents pursuant to the Agreement and if any Home Equity Loan or Related
Document is found to be defective in any material respect and such defect is not
cured within 90 days following notification thereof to the Seller by the
Trustee, the Seller will be obligated to either (i) substitute for such Home
Equity Loan an Eligible Substitute Loan; however, such substitution is permitted
only within two years of the Closing Date and may not be made unless an opinion
of counsel is provided to the effect that such substitution will not disqualify
the Trust as a REMIC or result in a prohibited transaction tax under the Code or
(ii) purchase such Home Equity Loan at a price (the 'Purchase Price') equal to
the outstanding Principal Balance of such Home Equity Loan as of the date of
purchase, plus unpaid interest thereon from the date interest was last paid or
with respect to which interest was advanced and not reimbursed through the end
of the calendar month in which the purchase occurred, computed at the Loan Rate,
net of the Servicing Fee if the Seller is the Servicer, plus if the Seller is
not the Servicer the amount of any unreimbursed Servicing Advances made by the
Servicer. The Purchase Price will be deposited in the Collection Account on or
prior to the next succeeding Determination Date after such obligation arises.
The obligation of the Seller to repurchase or substitute for a Defective Home
Equity Loan is the sole remedy regarding any defects in the Home Equity Loans
and Related Documents available to the Trustee or the Certificateholders.
In connection with the substitution of an Eligible Substitute Loan, the
Seller will be required to deposit in the Collection Account on or prior to the
next succeeding Determination Date after such obligation arises an amount (the
'Substitution Adjustment') equal to the excess of the Principal Balance of the
related Defective Home Equity Loan over the Principal Balance of such Eligible
Substitute Loan.
An 'Eligible Substitute Loan' is a mortgage loan to be substituted by the
Seller for a Defective Home Equity Loan which must, on the date of such
substitution, (i) have an outstanding principal balance after deducting all
scheduled principal payments due in the month of such substitution (or in the
case of a substitution of more than one Home Equity Loan for a Defective Home
Equity Loan, an aggregate Principal Balance), not in excess of, and not more
than 5% less than, the Principal Balance of the Defective Home Equity Loan; (ii)
have a
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<PAGE>
Loan Rate not less than the Loan Rate of the Defective Home Equity Loan and not
more than 1% in excess of the Loan Rate of such Defective Home Equity Loan;
(iii) have a mortgage of the same or higher level of priority as the mortgage
relating to the Defective Home Equity Loan; (iv) have a remaining term to
maturity not more than six months earlier and not later than the remaining term
to maturity of the Defective Home Equity Loan; (v) comply with each
representation and warranty as to the Home Equity Loans set forth in the
Agreement (deemed to be made as of the date of substitution); and (vi) satisfy
certain other conditions specified in the Agreement.
The Seller will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Trustee with respect to each Home Equity Loan (e.g., Cut-Off Date Principal
Balance and the Loan Rate). In addition, the Seller will represent and warrant,
on the Closing Date, that, among other things: (i) at the time of transfer to
the Trust, the Seller has transferred or assigned all of its right, title and
interest in each Home Equity Loan and the Related Documents, free of any lien;
and (ii) each Home Equity Loan complied, at the time of origination, in all
material respects with applicable state and federal laws. Upon discovery of a
breach of any such representation and warranty which materially and adversely
affects the interests of the Certificateholders or the Certificate Insurer in
the related Home Equity Loan and Related Documents, the Seller will have a
period of 60 days after discovery or notice of the breach to effect a cure. If
the breach cannot be cured within the 60-day period, the Seller will be
obligated to (i) substitute for such Defective Home Equity Loan an Eligible
Substitute Loan or (ii) purchase such Defective Home Equity Loan from the Trust.
The same procedure and limitations that are set forth above for the substitution
or purchase of Defective Home Equity Loans as a result of deficient
documentation relating thereto will apply to the substitution or purchase of a
Defective Home Equity Loan as a result of a breach of a representation or
warranty in the Agreement that materially and adversely affects the interests of
the Certificateholders or the Certificate Insurer.
PAYMENTS ON HOME EQUITY LOANS; DEPOSITS TO COLLECTION ACCOUNT AND DISTRIBUTION
ACCOUNT
The Trustee will establish and maintain in the name of the Trustee a
separate trust account (the 'Collection Account') for the benefit of the holders
of the Certificates. The Collection Account will be an Eligible Account (as
defined herein). Subject to the investment provisions described in the following
paragraphs, upon receipt by the Servicer of amounts in respect of the Home
Equity Loans (excluding amounts representing the Servicing Fee, reimbursement
for Monthly Advances and Servicer Advances and insurance proceeds to be applied
to the restoration or repair of a Mortgaged Property or similar items), the
Servicer will deposit such amounts in the Collection Account. Amounts so
deposited may be invested in Eligible Investments (as described in the
Agreement) maturing no later than one Business Day prior to the date on which
the amount on deposit therein is required to be deposited in the Distribution
Account or on such Distribution Date if approved by the Rating Agencies and the
Certificate Insurer.
The Trustee will establish an account (the 'Distribution Account') into
which will be deposited amounts withdrawn from the Collection Account for
distribution to Certificateholders on a Distribution Date. The Distribution
Account will be an Eligible Account. Amounts on deposit therein (other than
Insured Payments) may be invested in Eligible Investments maturing on or before
the Business Day prior to the related Distribution Date.
An 'Eligible Account' is a segregated account that is (i) maintained with a
depository institution whose debt obligations at the time of any deposit therein
have the highest short-term debt rating by the Rating Agencies and whose
accounts are fully insured by either the Savings Association Insurance Fund
('SAIF') or the Bank Insurance Fund ('BIF') of the Federal Deposit Insurance
Corporation established by such fund with a minimum long-term unsecured debt
rating of A2 by Moody's and A by Standard & Poor's, and which is any of (A) a
federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (B) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (C) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, (D) a principal subsidiary of a
bank holding company, and in each case of (A)-(D) above, approved in writing by
the Certificate Insurer; (ii) a segregated trust account maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company, having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity or (iii) otherwise acceptable to
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<PAGE>
each Rating Agency and the Certificate Insurer as evidenced by a letter from
each Rating Agency and the Certificate Insurer to the Trustee, without reduction
or withdrawal of the then current ratings of the Certificates.
Eligible Investments are specified in the Agreement and are limited to
investments which meet the criteria of the Rating Agencies from time to time as
being consistent with their then current ratings of the Certificates.
ADVANCES
Not later than the close of business on each Determination Date, the
Servicer will remit to the Trustee for deposit in the Collection Account an
amount, to be distributed on the related Distribution Date, equal to the sum of
the interest accrued on each Home Equity Loan through the related Due Date but
not received by the Servicer as of the close of business on the last day of the
related Due Period (net of the Servicing Fee) (the 'Monthly Advance'). Such
obligation of the Servicer continues with respect to each Home Equity Loan until
such Home Equity Loan becomes a Liquidated Home Equity Loan.
In the course of performing its servicing obligations, the Servicer will
pay all reasonable and customary 'out-of-pocket' costs and expenses incurred in
the performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of the Mortgaged
Properties, (ii) any enforcement or judicial proceedings, including
foreclosures, and (iii) the management and liquidation of Mortgaged Properties
acquired in satisfaction of the related Mortgage. Each such expenditure will
constitute a 'Servicing Advance.'
The Servicer's right to reimbursement for Servicing Advances is limited to
late collections on the related Home Equity Loan, including Liquidation
Proceeds, released mortgaged property proceeds, Insurance Proceeds and such
other amounts as may be collected by the Servicer from the related Mortgagor or
otherwise relating to the Home Equity Loan in respect of which such unreimbursed
amounts are owed. The Servicer' s right to reimbursement for Monthly Advances is
limited to late collections of interest on any Home Equity Loan and to
Liquidation Proceeds and Insurance Proceeds on the related Home Equity Loan. The
Servicer's right to such reimbursements is prior to the rights of
Certificateholders.
Notwithstanding the foregoing, the Servicer is not required to make any
Monthly Advance or Servicing Advance if in the good faith judgment and sole
discretion of the Servicer, the Servicer determines that such advance will not
be ultimately recoverable from collections received from the Mortgagor in
respect of the related Mortgage Loan or other recoveries in respect of such Home
Equity Loan (a 'Nonrecoverable Advance'). However, if any Servicing Advance or
Monthly Advance is determined in good faith by the Servicer to be non-
recoverable from such sources, the amount of such Non-Recoverable Advances may
be reimbursed to the Servicer from other amounts on deposit in the Collection
Account.
DISTRIBUTION DATES
On each Distribution Date, the Offered Certificateholders will be entitled
to receive, from amounts then on deposit in the Distribution Account, to the
extent of funds available therefor in accordance with the priority and in the
amounts described below under 'Distributions' in an aggregate amount equal to
the sum of (a) the related Class Interest Distribution for each Class of Offered
Certificates and (b) the Class A Principal Distribution. Distributions will be
made (i) in immediately available funds to Holders of Offered Certificates
holding Certificates the aggregate principal balance of which is at least
$1,000,000, by wire transfer or otherwise, to the account of such
Certificateholder at a domestic bank or other entity having appropriate
facilities therefor, if such Certificateholder has so notified the Trustee, or
(ii) by check mailed to the address of the person entitled thereto as it appears
on the register (the 'Certificate Register') maintained by the Trustee as
registrar (the 'Certificate Registrar').
DEPOSITS TO THE DISTRIBUTION ACCOUNT
The following amounts will be deposited into the Distribution Account in
respect of the related Due Period for each Distribution Date: (i) payments of
principal and interest on the Home Equity Loans (net of amounts representing the
Servicing Fee and reimbursement for Monthly Advances and Servicer Advances);
(ii) Net Liquidation Proceeds and Insurance Proceeds (net of amounts applied to
the restoration or repair of a Mortgaged
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<PAGE>
Property); (iii) the Purchase Price for repurchased Defective Home Equity Loans
and any Substitution Adjustment Amounts; (iv) payments from the Servicer in
connection with (a) Monthly Advances, (b) Prepayment Interest Shortfalls and (c)
the termination of the Trust as provided in the Agreement; (v) transfers from
the Pre-Funding Account of funds not used to purchase Subsequent Loans during
the Funding Period; (vi) transfers from the Capitalized Interest Account during
the Funding Period of funds for the payment of interest on the Class A
Certificates; and (vii) any amounts paid under the Policy.
DISTRIBUTIONS
On each Distribution Date, the Trustee is required to make the following
disbursements and transfers from monies then on deposit in the Distribution
Account (other than amounts paid under the Policy which shall be available only
for distribution to Senior Certificateholders) in respect of the related Due
Period and payable on such Distribution Date, to the extent of funds available
therefor, in the following order of priority:
(i) to the Certificate Insurer, amounts owing to the Certificate
Insurer under the Insurance Agreement for the premium payable pursuant
thereto;
(ii) to the Trustee, the Trustee Fee for such Distribution Date;
(iii) to each Class of Senior Certificates. an amount equal to the
related Class Interest Distribution for such Distribution Date;
(iv) to the Classes of Offered Certificates then entitled to receive
distributions of principal, the Class A Principal Distribution (other than
the portion constituting the Distributable Excess Spread) for such
Distribution Date;
(v) to the Servicer the amount of any accrued and unpaid Servicing
Fee;
(vi) to the Certificate Insurer, for reimbursement for prior draws
made on the Policy together with interest thereon at the rate set forth in
the Agreement;
(vii) to the Servicer the amount of Non-Recoverable Advances not
previously reimbursed;
(viii) to the Classes of Offered Certificates then entitled to receive
distributions of principal, Distributable Excess Spread, if any, for such
Distribution Date;
(ix) to the Certificate Insurer, any other amounts owing to the
Certificate Insurer under the Insurance Agreement; and
(x) to the Class R Certificateholders, any remaining amounts.
INTEREST
With respect to any Distribution Date, the amount of interest to be
distributed on the Senior Certificates, to the extent of funds available
therefor in accordance with the priorities described above under 'Distribution',
is the sum of the Class Interest Distributions for each Class of Senior
Certificates. For each Distribution Date and each Class of Senior Certificates,
the 'Class Interest Distribution' is the sum of (a) one month's interest at the
related Certificate Rate on the related Class Principal Balance or Notional
Amount, as the case may be, immediately prior to such Distribution Date (the
'Class Monthly Interest Distributable Amount') and (b) any Class Interest
Carryover Shortfall for such Class of Senior Certificates for such Distribution
Date. As to any Distribution Date and Class of Senior Certificates, 'Class
Interest Carryover Shortfall' is the sum of (i) the excess of the related Class
Monthly Interest Distributable Amount for the preceding Distribution Date and
any outstanding Class Interest Carryover Shortfall with respect to such Class on
such preceding Distribution Date, over the amount in respect of interest that is
actually distributed to such Class of Senior Certificateholders on such
preceding Distribution Date plus (ii) one month's interest on such excess, to
the extent permitted by law, at the related Certificate Rate. The interest
entitlement described in (a) above will be reduced by such Class' pro rata share
of Civil Relief Act Interest Shortfalls, if any, for such Distribution Date.
Civil Relief Act Interest Shortfalls will not be covered by payments under the
Policy.
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<PAGE>
On each Distribution Date, the Class Interest Distribution for each Class
of Senior Certificates will be distributed on an equal priority and any
shortfall in the amount required to be distributed as interest thereon to each
such Class will be allocated between such Classes pro rata based on the amount
that would have been distributed on each such Class in the absence of such
shortfall.
The Class S Certificates are entitled to distributions of interest on a pro
rata basis with the Class A Certificates. The Certificate Rate for the Class S
Certificates is the weighted average of the Strip Rates relating to each Class
of Class A Certificates. Interest to be distributed on the Class S Certificates
accrues on the basis of the Notional Amount described below.
The Certificate Rate for the Class S Certificates is equal to the average
of the Strip Rates relating to each Class of Class A Certificates, weighted on
the basis of the Class Principal Balance of each Class of Class A Certificates
immediately prior to a Distribution Date. The Strip Rate relating to each Class
of Class A Certificates is as follows:
<TABLE>
<S> <C>
Class A-1.... %
Class A-2.... %
Class A-3.... %
Class A-4.... %
Class A-5.... %
</TABLE>
With respect to the first Distribution Date, the weighted average of the
Strip Rates is expected to be % per annum.
The Notional Amount is used to calculate the amount of the Class Monthly
Interest Distributable Amount for the Class S Certificates and is the sum of the
Class Principal Balances of each Class of Class A Certificates immediately prior
to a Distribution Date.
PRINCIPAL
'Class A Principal Distribution' means, with respect to any Distribution
Date, the sum of the Class A Monthly Principal Distributable Amount for such
Distribution Date and any outstanding Class A Principal Carryover Shortfall as
of the close of business on the preceding Distribution Date; provided, however,
that the Class A Principal Distribution shall not exceed the Class A Principal
Balance.
The Class A Principal Distribution will be distributed to the Class A
Certificates in the following order: first, concurrently, % to the
Class A-1 Certificates and % to the Class A-5 Certificates until the
Class Principal Balance of the Class A- 1 Certificates has been reduced to zero;
second concurrently, % to the Class A-2 Certificates and
% to the Class A-5 Certificates until the Class Principal Balance of
the Class A-2 Certificates has been reduced to zero; third, concurrently,
% to the Class A-3 Certificates and % to the Class A-5
Certificates until the Class Principal Balance of the Class A-3 Certificates has
been reduced to zero; fourth, concurrently, % to the Class A-4
Certificates and % to the Class A-5 Certificates until the Class
Principal Balance of the Class A-4 Certificates has been reduced to zero; and
fifth, % to the Class A-5 Certificates until the Class Principal Balance
thereof has been reduced to zero.
'Class A Monthly Principal Distributable Amount' means, with respect to any
Distribution Date, to the extent of funds available therefor as described
herein, the amount equal to the sum of the following amounts (without
duplication) with respect to the immediately preceding Due Period (as defined
below): (i) each payment of principal on a Mortgage Loan received by the
Servicer during such Due Period, including all full and partial principal
prepayments, (ii) the Principal Balance of all Home Equity Loans that became
Liquidated Home Equity Loans during the related Due Period, (iii) the portion of
the Purchase Price allocable to principal of all repurchased Defective Home
Equity Loans with respect to such Due Period, (iv) any Substitution Adjustment
Amounts received on or prior to the related Determination Date and not
previously distributed, (v) the amount of Distributable Excess Spread, if any,
in respect of such Distribution Date and (vi) the Pre-Funded Amount remaining on
deposit in the Pre-Funding Account immediately following the end of the
Pre-Funding Period.
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<PAGE>
If the required level of overcollateralization is reduced below the then
existing amount of overcollateralization (described below) or the required level
of overcollateralization is satisfied, the amount of the Class A Monthly
Principal Distributable Amount on the following Distribution Date will be
correspondingly reduced by the amount of such reduction or by the amount
necessary such that the overcollateralization will not exceed the required level
of overcollateralization after giving effect to the distribution in respect of
principal to be made on such Distribution Date.
The application of Distributable Excess Spread is intended to create
overcollateralization to provide a source of additional cashflow to cover losses
on the Home Equity Loans. If the amount of losses in a particular Due Period
exceeds the amount of Excess Spread for the Distribution Date, the amount
distributed in respect of principal will be reduced. A draw on the Policy in
respect of principal will not be made until the Class A Principal Balance
exceeds the sum of the aggregate Principal Balance of the Home Equity Loans and
the amount on deposit in the Pre-Funding Account. See '--The Policy' herein.
Accordingly, there may be Distribution Dates on which Class A Certificateholders
receive little or no distributions in respect of principal.
So long as an Insurer Default has not occurred and is continuing,
distributions of the Class A Principal Distribution will be applied,
sequentially, to the distribution of principal to the Sequential Certificates,
in order of their numerical designations, such that no Class of Sequential
Certificates having a higher numerical designation is entitled to distributions
of principal until the Class Principal Balance of each such Class of Sequential
Certificates having a lower numerical designation has been reduced to zero. The
Class A-5 Certificates are entitled to distributions of principal in the amounts
described above concurrently with the Class of Sequential Certificates then
entitled to distributions of principal. On any Distribution Date if an Insurer
Default has occurred and is continuing, the Class A Principal Distribution will
be applied to the distribution of principal of each Class of the Class A
Certificates outstanding on a pro rata basis in accordance with the Class
Principal Balance of each such Class immediately preceding such Distribution
Date.
'Due Period' means, (a) with respect to the first Determination Date (i)
for collections of principal the period from and including 1, 199
through and including 1, 199 and (ii) for collections of interest the
period from and including 2, 199 through and including
1, 199 and (b) with respect to each Determination Date thereafter for
collections of both interest and principal the period from and including the
second day of the month preceding the month of such Determination Date to and
including the first day of the month of such Determination Date.
A 'Liquidated Home Equity Loan', as to any Distribution Date, is a Home
Equity Loan with respect to which the Servicer has determined, in accordance
with the servicing procedures specified in the Agreement, as of the end of the
preceding Due Period, that all Liquidation Proceeds which it expects to recover
with respect to such Home Equity Loan (including the disposition of the related
REO) have been received.
'Excess Spread' means, with respect to any Distribution Date, the positive
excess, if any, of (x) the sum of the amounts deposited into the Distribution
Account as described in clauses (i) through (vi) under 'Deposits to the
Distribution Account' above with respect to such Distribution Date over (y) the
amount required to be distributed pursuant to priorities (i) through (vii) above
under 'Distributions' on such Distribution Date.
An 'Insurer Default' will occur in the event the Certificate Insurer fails
to make a payment required under the Policy or if certain events of bankruptcy
or insolvency occur with respect to the Certificate Insurer.
'Distributable Excess Spread' means, with respect to any Distribution Date,
the portion of (not greater than 100%) Excess Spread, if any, required to be
distributed on such Distribution Date to satisfy the required level of
overcollateralization for such Distribution Date. See '--Overcollateralization
Provisions.'
As to each Distribution Date the 'Class A Principal Carryover Shortfall' is
the amount by which the Class A Monthly Principal Distributable Amount for prior
Distribution Dates was less than the maximum amount that would have been
distributed if sufficient funds had been available therefor, which was not
subsequently distributed.
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<PAGE>
THE POLICY
The following information has been supplied by the Certificate Insurer for
inclusion in this Prospectus Supplement. Accordingly, neither the Seller nor the
Servicer makes any representation as to the accuracy and completeness of such
information.
The Certificate Insurer, in consideration of the payment of the premium and
subject to the terms of the Policy, thereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Insured
Payment will be received by ,
or its successor, as trustee for the Owners (the 'Trustee'), on behalf of the
Owners from the Certificate Insurer, for distribution by the Trustee to each
Owner of each Owner's proportionate share of the Insured Payment. The
Certificate Insurer's obligations under the Policy with respect to a particular
Insured Payment shall be discharged to the extent funds equal to the applicable
Insured Payment are received by the Trustee, whether or not such funds are
properly applied by the Trustee. Insured Payments shall be made only at the time
set forth in the Policy and no accelerated Insured Payments shall be made
regardless of any acceleration of the Senior Certificates, unless such
acceleration is at the sole option of the Certificate Insurer.
Notwithstanding the foregoing paragraph, the Policy does not cover
shortfalls, if any, attributable to the liability of the Trust, either REMIC or
the Trustee for withholding taxes, if any (including interest and penalties in
respect of any such liability).
The Certificate Insurer will pay any Insured Payment that is a Preference
Amount on the Business Day following receipt on a Business Day by the Fiscal
Agent (as described below) of (i) a certified copy of the order requiring the
return of a preference payment, (ii) an opinion of counsel satisfactory to the
Certificate Insurer that such order is final and not subject to appeal, (iii) an
assignment in such form as is reasonably required by the Certificate Insurer,
irrevocably assigning to the Certificate Insurer all rights and claims of the
Owner relating to or arising under the Senior Certificates against the debtor
that made such preference payment or otherwise with respect to such Preference
Amount and (iv) appropriate instruments to effect the appointment of the
Certificate Insurer as agent for such Owner in any legal proceeding related to
such Preference Amount, such instruments being in a form satisfactory to the
Certificate Insurer, provided that if such documents are received after 12:00
noon New York City time on such Business Day, they will be deemed to be received
on the following Business Day. Such payments shall be disbursed to the receiver
or trustee in bankruptcy named in the final order of the court exercising
jurisdiction on behalf of the Owners and not any Owner directly unless such
Owner has returned principal or interest paid on the Senior Certificates to such
receiver or trustee in bankruptcy, in which case such payment shall be disbursed
to such Owner.
The Certificate Insurer will pay any other amount payable under the Policy
no later than 12:00 noon New York City time on the later of the Distribution
Date on which the Deficiency Amount is due or the Business Day following receipt
in New York, New York on a Business Day by
, as Fiscal Agent for the Certificate Insurer or any
successor fiscal agent appointed by the Certificate Insurer (the 'Fiscal Agent')
of a Notice (as described below); provided that if such Notice is received after
12:00 noon New York City time on such Business Day, it will be deemed to be
received on the following Business Day. If any such Notice received by the
Fiscal Agent is not in proper form or is otherwise insufficient for the purpose
of making claim under the Policy it shall be deemed not to have been received by
the Fiscal Agent for purposes of this paragraph, and the Certificate Insurer or
the Fiscal Agent, as the case may be, shall promptly so advise the Trustee and
the Trustee may submit an amended Notice.
Insured Payments due under the Policy unless otherwise stated therein will
be disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Certificate Insurer only and the
Fiscal Agent shall in no event be liable to the Owners for any acts of the
Fiscal Agent or any failure of the Certificate Insurer to deposit or cause to be
deposited, sufficient funds to make payments due under the Policy.
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<PAGE>
As used in the Policy, the following terms shall have the following
meanings:
'Agreement' means the Pooling and Servicing Agreement, dated as of
, 199 , between Delta Funding Corporation, as Seller and
Servicer, and the Trustee, as trustee, without regard to any amendment or
supplement thereto unless such amendment or modification has been approved
in writing by the Certificate Insurer.
'Business Day' means any day other than a Saturday, a Sunday or a day
on which banking institutions in New York City or the city in which the
corporate trust office of the Trustee under the Agreement is located are
authorized or obligated by law or executive order to close.
'Deficiency Amount' means for any Distribution Date (A) the excess, if
any, of (i) Class Monthly Interest Distributable Amount (net of any Civil
Relief Act Interest Shortfalls) plus any Class Interest Carryover Shortfall
over (ii) funds on deposit in the Distribution Account (net of the
Trustee's Fee and the Insurance Premium for such Distribution Date) and (B)
the Guaranteed Principal Amount.
'Guaranteed Principal Amount' means for any Distribution Date (a) the
amount which is required to reduce the then outstanding Class A Principal
Balance after giving effect to the distributions, if any, to the Holders in
respect of principal on such Distribution Date to an amount equal to the sum of
(i) the Aggregate Principal Balance of the Home Equity Loans as of the last day
of the immediately preceding Due Period and (ii) the amount on deposit in the
Pre-Funding Account after giving effect to any withdrawals from the Pre-Funding
Account during the month in which such Distribution Date occurs and (b)
on 25, 20 after all distributions have been made including
distributions pursuant to clause (a) of this definition of 'Guaranteed Principal
Amount,' an amount equal to the then outstanding Class A Principal Balance.
'Insured Payment' means (i) as of any Distribution Date, any
Deficiency Amount and (ii) any Preference Amount.
'Notice' means the telephonic or telegraphic notice, promptly
confirmed in writing (in the case of a telephonic notice) by telecopy,
substantially in the form of Exhibit A attached to the Policy, the original
of which is subsequently delivered by registered or certified mail, from
the Trustee specifying the Insured Payment which shall be due and owing on
the applicable Distribution Date.
'Owner' means each Holder (as defined in the Agreement) who, on the
applicable Distribution Date, is entitled under the terms of the applicable
Senior Certificates to payment under the Policy.
'Preference Amount' means any amount previously distributed to an
Owner on the Senior Certificates that is recoverable and sought to be
recovered as a voidable preference by a trustee in bankruptcy pursuant to
the United States Bankruptcy Code (11 U.S.C.), as amended from time to time
in accordance with a final nonappealable order of a court having competent
jurisdiction.
Capitalized terms used in the Policy and not otherwise defined in the
Policy shall have the respective meanings set forth in the Agreement as of the
date of execution of the Policy, without giving effect to any subsequent
amendment or modification to the Agreement unless such amendment or modification
has been approved in writing by the Certificate Insurer.
Any notice under the Policy or service of process on the Fiscal Agent may
be made at the address listed below for the Fiscal Agent or such other address
as the Certificate Insurer shall specify to the Trustee in writing.
The notice address of the Fiscal Agent is
Attention:
, or such other address as the Fiscal Agent shall
specify to the Trustee in writing.
The Policy is being issued under and pursuant to, and shall be construed
under, the laws of the State of New York, without giving effect to the conflict
of laws principles thereof.
The insurance provided by the Policy is not covered by the Property/
Casualty Insurance Security Fund specified in Article 76 of the New York
Insurance Law.
The Policy is not cancelable for any reason. The premium on the Policy is
not refundable for any reason including payment, or provision being made for
payment, prior to the maturity of the Senior Certificates.
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<PAGE>
OVERCOLLATERALIZATION PROVISIONS
The Agreement requires that, on each Distribution, Date, the Distributable
Excess Spread will be applied on such Distribution Date as an accelerated
payment of principal on the Class or Classes of Class A Certificates then
entitled to a distribution of the Class A Principal Distribution. This has the
effect of accelerating the amortization of the Class A Certificates relative to
the amortization of the Home Equity Loans.
The required level of overcollateralization will be satisfied as of each
Distribution Date when the sum of the aggregate of the Principal Balances of the
Home Equity Loans at the end of the previous month together with amounts on
deposit in the Pre-Funding Account on such Distribution Date exceeds the Class A
Principal Balance by an amount specified in the Pooling and Servicing Agreement.
Thereafter, the level of overcollateralization necessary to satisfy the required
level of overcollateralization may be increased or decreased from time to time
based on the loss and delinquency experience of the Home Equity Loans in
accordance with the provisions of the Agreement. In addition the required level
of overcollateralization may be decreased, in the sole discretion of the
Certificate Insurer and with the prior consent of each Rating Agency as low as
zero, which would have the effect of reducing the amortization of the Class A
Certificates below what it otherwise would have been.
PRE-FUNDING ACCOUNT
On the Closing Date the Pre-Funded Amount will be deposited in the
Pre-Funding Account, which account will be in the name of and maintained by the
Trustee and will be part of the Trust and will be used to acquire Subsequent
Loans. The Pre-Funded Amount will be reduced during the Funding Period by the
amount thereof used to purchase Subsequent Loans in accordance with the
Agreement. Any Pre-Funded Amount remaining at the end of the Funding Period will
be distributed to the Holders of the Classes of the Offered Certificates then
entitled to distributions of principal on the Distribution Date following the
end of the Funding Period, thus resulting in a partial principal prepayment of
such Classes of Offered Certificates. See 'PREPAYMENT AND YIELD
CONSIDERATIONS--Mandatory Prepayment' herein.
Amounts on deposit in the Pre-Funding Account will be invested in Eligible
Investments. All interest and any other investment earnings on amounts on
deposit in the Pre-Funding Account will be deposited in the Capitalized Interest
Account prior to each Distribution Date during the Funding Period. The
Pre-Funding Account will not be an asset of either REMIC.
CAPITALIZED INTEREST ACCOUNT
On the Closing Date cash will be deposited in the Capitalized Interest
Account, which account will be in the name of and maintained by the Trustee and
will be part of the Trust. The amount on deposit in the Capitalized Interest
Account, including reinvestment income thereon, will be used by the Trustee to
fund the excess, if any, of (i) the sum of the amount of interest accruing at
the weighted average Certificate Rate of all Senior Certificates on the amount
by which the Class A Principal Balance as of the last day of the preceding month
exceeds the Aggregate Principal Balance of the Home Equity Loans as of such day,
over (ii) the amount of any reinvestment income on monies on deposit in the
Pre-Funding Account. Any amounts remaining in the Capitalized Interest Account
at the end of the Funding Period and not needed for such purpose will be paid to
the Class R Certificateholders and will not thereafter be available for
distribution to the Holders of the Offered Certificates.
Amounts on deposit in the Capitalized Interest Account will be invested in
Eligible Investments. The Capitalized Interest Account will not be an asset of
either REMIC.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution to the Certificateholders, the Trustee
will forward to each Certificateholder a statement setting forth among other
items:
(i) the aggregate amount of the distribution to each Class of
Certificates on the Distribution Date set forth above;
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(ii) the amount of the distribution set forth in paragraph (i) above
in respect of interest and the amount thereof in respect of any Class
Interest Carryover Shortfall, and the amount of any Class Interest
Carryover Shortfall remaining;
(iii) the amount of the distribution set forth in paragraph (i) above
in respect of principal and the amount thereof in respect of the Class A
Principal Carryover Shortfall, and any remaining Class A Principal
Carryover Shortfall;
(iv) the amount of Distributable Excess Spread paid as principal;
(v) the Guaranteed Principal Amount for such Distribution Date;
(vi) the amount paid under the Policy for such Distribution Date in
respect of the Class Interest Distribution of each Class of Senior
Certificates and the portion of the Guaranteed Principal Amount paid to the
Offered Certificates;
(vii) the Servicing Fee;
(viii) the aggregate Principal Balance of the Home Equity Loans and
the Pool Balance as of the close of business on the last day of the
preceding Due Period;
(ix) the Class A Principal Balance and the Class Principal Balance of
each Class of Class A Certificates after giving effect to payments
allocated to principal above;
(x) the required level of overcollateralization and the amount of
overcollateralization as of the close of business on the Distribution Date,
after giving effect to distributions of principal on such Distribution
Date;
(xi) the number and aggregate Principal Balances of the Home Equity
Loans as to which the minimum monthly payment is delinquent for 30-59 days,
60-89 days and 90 or more days, respectively, as of the end of the
preceding month;
(xii) the book value of any real estate which is acquired by the Trust
through foreclosure or grant of deed in lieu of foreclosure; and
(xiii) the amounts of net losses for such Due Period and the
cumulative amount of net losses to date.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed as a dollar amount per Certificate with a
$ 1,000 denomination.
Within 60 days after the end of each calendar year, the Trustee will
forward to each Person, if requested in writing by such Person, who was a
Certificateholder during the prior calendar year a statement containing the
information set forth in clauses (ii) and (iii) above aggregated for such
calendar year.
LAST SCHEDULED DISTRIBUTION DATE
The last scheduled Distribution Date for each Class of Class A Certificates
is as follows: Class A-l Certificates, 25, , Class A-2
Certificates, 25, , Class A-3 Certificates, 25, , Class
A-4 Certificates, , , and Class A-5 Certificates, 25,
. It is expected that the actual last Distribution Date for each Class of
Offered Certificates will occur significantly earlier than such scheduled
Distribution Dates. See 'PREPAYMENT AND YIELD CONSIDERATIONS.'
Such last scheduled Distribution Dates are based on a 0% Prepayment
Assumption with no Distributable Excess Spread used to make accelerated payments
of principal to the holders of the related Offered Certificates; provided that
the last scheduled Distribution Date for the Class A-5 Certificates has been
calculated assuming that a Home Equity Loan (including any Subsequent Loans)
having the latest maturity allowed by the Agreement amortizes according to its
terms, plus one year.
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SERVICING COMPENSATION, PAYMENT OF EXPENSES AND PREPAYMENT INTEREST SHORTFALLS
With respect to each Due Period, the Servicer will receive from interest
payments in respect of the Mortgage Loans a portion of such interest payments as
a monthly Servicing Fee in the amount equal to % per annum ('Servicing Fee
Rate') on the Principal Balance of each Home Equity Loan as of the first day of
each such Due Period. All assumption fees, late payment charges and other feed
and charges, to the extent collected from borrowers, will be retained by the
Servicer as additional servicing compensation.
Not later than the Determination Date, the Servicer is required to remit to
the Trustee, without any right of reimbursement, an amount equal to, with
respect to each Home Equity Loan as to which a principal prepayment in full was
received during the related Due Period, the lesser of (a) the excess, if any, of
30 days' interest on the Principal Balance of such Home Equity Loan at the Loan
Rate (or at such lower rate as may be in effect for such Mortgage Loan because
of application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the 'Civil Relief Act'), minus the Servicing Fee for such Home Equity
Loan over the amount of interest actually paid by the related Mortgagor in
connection with such principal prepayment (with respect to all such Home Equity
Loans, the 'Prepayment Interest Shortfall') and (b) the sum of the aggregate
Servicing Fee received by the Servicer in the most recently ended Due Period.
Civil Relief Act Interest Shortfalls will not be covered by the Policy,
although Prepayment Interest Shortfalls, after application of the Servicing Fee,
will be so covered. The Servicer is not obligated to offset any of the Servicing
Fee against, or to provide any other funds to cover, any shortfalls in interest
collections on the Home Equity Loans that are attributable to the application of
the Civil Relief Act ('Civil Relief Act Interest Shortfalls').
EVIDENCE AS TO COMPLIANCE
The Agreement provides for delivery on or before the last day of the fifth
month following the end of the Servicer's fiscal year, beginning in 199 , to the
Trustee, the Certificate Insurer and the Rating Agencies of an annual statement
signed by an officer of the Servicer to the effect that the Servicer has
fulfilled its material obligations under the Agreement throughout the preceding
fiscal year, except as specified in such statement.
On or before the last day of the fifth month following the end of the
Servicer's fiscal year, beginning in 199 , the Servicer will furnish a report
prepared by a firm of nationally recognized independent public accountants (who
may also render other services to the Servicer or the Depositor) to the Trustee,
the Certificate Insurer and the Rating Agencies to the effect that such firm has
examined certain documents and the records relating to servicing of the Home
Equity Loans under the Uniform Single Audit Program for Mortgage Bankers and
such firm's conclusion with respect thereto.
The Servicer's fiscal year is the calendar year.
CERTAIN MATTERS REGARDING THE SERVICER
The Agreement provides that the Servicer may not resign from its
obligations and duties thereunder, except in connection with a permitted
transfer of servicing, unless (i) such duties and obligations are no longer
permissible under applicable law as evidenced by an opinion of counsel delivered
to the Certificate Insurer or (ii) upon the satisfaction of the following
conditions: (a) the Servicer has proposed a successor servicer to the Trustee in
writing and such proposed successor servicer is reasonably acceptable to the
Trustee; (b) the Rating Agencies have confirmed to the Trustee that the
appointment of such proposed successor servicer as the Servicer will not result
in the reduction or withdrawal of the then current rating of the Certificates;
and (c) such proposed successor servicer is reasonably acceptable to the
Certificate Insurer. No such resignation will become effective until the Trustee
or a successor servicer has assumed the Servicer' s obligations and duties under
the Agreement.
The Servicer may perform any of its duties and obligations under the
Agreement through one or more subservicers or delegates, which may be affiliates
of the Servicer. Notwithstanding any such arrangement, the Servicer will remain
liable and obligated to the Trustee and the Certificateholders for the
Servicer's duties and obligations under the Agreement, without any diminution of
such duties and obligations and as if the Servicer itself were performing such
duties and obligations.
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Any corporation 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 corporation succeeding to the business of
the Servicer shall be the successor of the Servicer under the Agreement, without
the execution or filing of any paper or any further act on the part of any of
the parties to the Agreement, anything in the Agreement to the contrary
notwithstanding.
EVENTS OF DEFAULT
'Events of Default' will consist of: (i) (A) any failure by the Servicer to
make any required Monthly Advance or (B) any other failure of the Servicer to
deposit in the Collection Account any deposit required to be made under the
Agreement, which failure continues unremedied for three Business Days after
payment was required to be made; (ii) any failure by the Servicer duly to
observe or perform in any material respect any other of its covenants or
agreements in the Agreement which, in each case, materially and adversely
affects the interests of the Certificateholders or the Certificate Insurer and
continues unremedied for 30 days after knowledge or the giving of written notice
of such failure to the Servicer by the Trustee, or to the Servicer and the
Trustee by the Certificate Insurer or Certificateholders evidencing an
aggregate, undivided interest in the Trust of Percentage Interests of at least
25%; (iii) any failure by the Servicer to make any required Servicing Advance,
which failure continues unremedied for a period of 30 days after knowledge or
the giving of written notice of such failure to the Servicer by the Trustee, or
to the Servicer and the Trustee by the Certificate Insurer or Certificateholders
evidencing an aggregate, undivided interest in the Trust of Percentage Interests
of at least 25%; and (iv) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings relating to the
Servicer and certain actions by the Servicer indicating insolvency,
reorganization or inability to pay its obligations (an 'Insolvency Event').
If any Monthly Advance is not made by 12:00 Noon New York Time on the
second Business Day prior to the applicable Distribution Date, the Trustee or a
successor Servicer will immediately assume the duties of the Servicer.
Upon removal or resignation of the Servicer, the Trustee will be the
Successor Servicer (the 'Successor Servicer'). The Trustee, as Successor
Servicer, will be obligated to make Monthly Advances and Servicing Advances and
certain other advances unless it determines reasonably and in good faith that
such advances would not be recoverable. If, however, the Trustee is unwilling or
unable to act as Successor Servicer, or if the majority of Certificateholders
(with the consent of the Certificate Insurer) or the Certificate Insurer so
requests, the Trustee may appoint, or petition a court of competent jurisdiction
to appoint, subject to the approval of the Certificate Insurer, any established
mortgage loan servicing institution acceptable to the Certificate Insurer having
a net worth of not less than $25,000,000 as the Successor Servicer in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer.
In addition, the Certificate Insurer may terminate the Servicer upon the
occurrence of a Trigger Event. Trigger Events will consist of among other
things, (i) any failure by the Servicer to pay when due any amount payable by it
under the Pooling and Servicing Agreement or the Insurance Agreement which
results in a drawing under the Policy, (ii) failure of the Servicer to satisfy
certain financial tests; and (iii) the loss and delinquency performance of the
Mortgage Loans exceeding certain levels.
RIGHTS UPON AN EVENT OF DEFAULT
So long as an Event of Default remains unremedied, either the Trustee, or
Certificateholders holding Certificates evidencing at least 51% of the
Percentage Interests in the Trust, with the consent of the Certificate Insurer,
or the Certificate Insurer, may terminate all of the rights and obligations of
the Servicer under the Agreement and in and to the Mortgage Loans, whereupon the
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under the Agreement and will be entitled to similar compensation
arrangements. In the event that the Trustee would be obligated to succeed the
Servicer but is unwilling or unable so to act, it may appoint, or petition a
court of competent jurisdiction for the appointment of, a housing and home
finance institution or other mortgage loan or home equity loan servicer with all
licenses and permits required to perform its obligations under the Agreement and
having a net worth of at least $25,000,000 and acceptable to the Certificate
Insurer to act as successor to the Servicer under the Agreement. Pending such
appointment, the
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Trustee will be obligated to act in such capacity unless prohibited by law. Such
successor will be entitled to receive the same compensation that the Servicer
would otherwise have received (or such lesser compensation as the Trustee and
such successor may agree). A receiver or conservator for the Servicer may be
empowered to prevent the termination and replacement of the Servicer if the only
Event of Default that has occurred is an Insolvency Event.
VOTING RIGHTS
For purposes of determining if the required amount of Percentage Interests
have given notice, consented to or taken any action, the Class A Certificates
shall be considered to represent 98% of the Percentage Interests and the Class S
Certificates shall be deemed to represent 2% of the Percentage Interests.
TERMINATION; PURCHASE OF HOME EQUITY LOANS
The Trust will terminate on the Distribution Date following the later of
(A) payment in full of all amounts owing to the Certificate Insurer unless the
Certificate Insurer shall otherwise consent and (B) the earliest of (i) the
Distribution Date on which the Aggregate Class A Principal Balance has been
reduced to zero, (ii) the final payment or other liquidation of the last Home
Equity Loan in the Trust, (iii) the optional purchase by the Servicer of the
Home Equity Loans, as described below and (iv) the Distribution Date in
20 , on which date the Policy will be available to pay the
outstanding Aggregate Class A Principal Balance.
Subject to provisions in the Agreement concerning adopting a plan of
complete liquidation, the Servicer may, at its option terminate the Agreement on
the Distribution Date in the month following the Due Period during which the
aggregate Principal Balance of the Home Equity Loans is less than 10% of the sum
of the Principal Balances of the Initial Loans and Subsequent Loans as of the
related Cut-Off Dates by purchasing, on the next succeeding Distribution Date,
all of the outstanding Home Equity Loans and REO Properties at a price equal to
the sum of the outstanding Pool Balance (subject to reduction as provided in the
Agreement if the purchase price is based in part on the appraised value of any
REO Property included in the Trust and such appraised value is less than the
Principal Balance of the related Home Equity Loan) and accrued and unpaid
interest thereon at the weighted average of the Loan Rates through end of the
related Due Period together with all amounts due and owing to the Certificate
Insurer.
Any such purchase will be accomplished by deposit into the Collection
Account of the purchase price specified above.
OPTIONAL PURCHASE OF DEFAULTED HOME EQUITY LOANS
The Servicer has the option to purchase from the Trust any Home Equity Loan
90 days or more delinquent at a purchase price equal to the outstanding
principal balance of such Home Equity Loan as of the date of purchase, plus all
accrued and unpaid interest on such principal balance computed at the Loan Rate.
THE TRUSTEE
, a national banking
association with its principal place of business in , has been named
Trustee pursuant to the Agreement.
The commercial bank or trust company serving as Trustee may have normal
banking relationships with the Seller and the Servicer.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Seller for general corporate purposes, including repayment of
financing for the Home Equity Loans.
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FEDERAL INCOME TAX CONSIDERATIONS
An election will be made to treat the Trust (exclusive of the Pre-Funding
Account and the Capitalized Interest Account) as two 'real estate mortgage
investment conduits' (an 'Upper Tier REMIC' and a 'Lower Tier REMIC,'
respectively) for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the 'Code'). The Offered Certificates will represent
beneficial ownership of 'regular interests' in the Upper Tier REMIC and the
Class R Certificates will represent beneficial ownership of residual interests
in both REMICs. See 'FEDERAL INCOME TAX CONSIDERATIONS--Taxation of the REMIC
and its Holders' in the Prospectus.
The Offered Certificates generally will be treated as debt instruments
issued by the Upper Tier REMIC for federal income tax purposes. Income on the
Offered Certificates must be reported under an accrual method of accounting.
The Offered Certificates may, depending on their issue price, be issued
with original issue discount ('OID') for federal income tax purposes. In such
event, holders of such Certificates will be required to include OlD in income as
it accrues under a constant yield method, in advance of the receipt of cash
attributable to such income. The OlD Regulations do not contain provisions
specifically interpreting Code Section 1272(a)(6). Until the Treasury issues
guidance to the contrary, the Trustee intends to base its computation on Code
Section l272(a)(6) and the OID Regulations as described in the Prospectus.
However, because no regulatory guidance currently exists under Code Section
1272(a)(6), there can be no assurance that such methodology represents the
correct manner of calculating OID.
The yield used to calculate accruals of OID with respect to the Offered
Certificates with OID will be the original yield to maturity of such
Certificates, determined by assuming that the Home Equity Loans will prepay in
accordance with % of the Prepayment Assumption. No representation is made as
to the actual rate at which the Home Equity Loans will prepay.
BACKUP WITHHOLDING
Certain Certificate Owners may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Offered Certificates if the
Certificate Owners, upon issuance, fail to supply the Trustee or their broker
with their taxpayer identification number, furnish an incorrect taxpayer
identification number, fails to report interest, dividends, or other 'reportable
payments' (as defined in the Code) properly, or, under certain circumstances,
fails to provide the Trustee or their broker with a certified statement, under
penalty of perjury, that they are not subject to backup withholding.
The Trustee will be required to report annually to the IRS, and to each
Offered Certificateholder of record, the amount of interest paid (and OID
accrued, if any) on the Offered Certificates (and the amount of interest
withheld for federal income taxes, if any) for each calendar year, except as to
exempt holders (generally, holders that are corporations, certain tax-exempt
organizations or nonresident aliens who provide certification as to their status
as nonresidents). As long as the only 'Class A Certificateholder' of record is
Cede, as nominee for DTC, Certificate Owners and the IRS will receive tax and
other information including the amount of interest paid on such Certificates
owned from Participants and Indirect Participants rather than from the Trustee.
(The Trustee, however, will respond to requests for necessary information to
enable Participants, Indirect Participants and certain other persons to complete
their reports.) Each non-exempt Certificate Owner will be required to provide,
under penalty of perjury, a certificate on IRS Form W-9 containing his or her
name, address, correct Federal taxpayer identification number and a statement
that he or she is not subject to backup withholding. Should a nonexempt
Certificate Owner fail to provide the required certification, the Participants
or Indirect Participants (or the Paying Agent) will be required to withhold 31%
of the interest (and principal) otherwise payable to the holder, and remit the
withheld amount to the IRS as a credit against the holder's federal income tax
liability. Such amounts will be deemed distributed to the affected Certificate
Owner for all purposes of the Certificates, the Agreement and the Policy.
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FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN INVESTORS
The following information describes the United States federal income tax
treatment of holders that are not United States persons ('Foreign Investors').
The term 'Foreign Investor' means any person other than (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
organized in or under the laws of the United States or any state or political
subdivision thereof of (iii) an estate or trust the income of which is
includible in gross income for United States federal income tax purposes,
regardless of its source.
The Code and Treasury regulations generally subject interest paid to a
Foreign Investor to a withholding tax at a rate of 30% (unless such rate were
changed by an applicable treaty). The withholding tax, however, is eliminated
with respect to certain 'portfolio debt investments' issued to Foreign
Investors. Portfolio debt investments include debt instruments issued in
registered form for which the United States payor receives a statement that the
beneficial owner of the instrument is a Foreign Investor. The Offered
Certificates will be issued in registered form, therefore if the information
required by the Code is furnished (as described below) and no other exceptions
to the withholding tax exemption are applicable, no withholding tax will apply
to the Offered Certificates.
For the Offered Certificates to constitute portfolio debt investments
exempt from the United States withholding tax, the withholding agent must
receive from the Certificate Owner an executed IRS Form W-8 signed under penalty
of perjury by the Certificate Owner stating that the Certificate Owner is a
Foreign Investor and providing such Certificate Owner's name and address. The
statement must be received by the withholding agent in the calendar year in
which the interest payment is made, or in either of the two preceding calendar
years.
A Certificate Owner that is a nonresident alien or foreign corporation will
not he subject to United States federal income tax on gain realized on the sale,
exchange, or redemption of such Offered Certificate, provided that (i) such gain
is not effectively connected with a trade or business carried on by the
Certificate Owner in the United States, (ii) in the case of a Certificate Owner
that is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such sale, exchange
or redemption occurs and (iii) in the case of gain representing accrued
interest, the conditions described in the immediately preceding paragraph are
satisfied.
ERISA CONSIDERATIONS
Any Plan fiduciary which proposes to cause a Plan to acquire any of the
Offered Certificates should consult with its counsel with respect to the
potential consequences under the Employee Retirement Income Security Act of
1974, as amended ('ERISA'), and the Code, of the Plans acquisition and ownership
of such Certificates. See 'ERISA CONSIDERATIONS' in the Prospectus.
The U.S. Department of Labor has granted to
(' ') Prohibited Transaction Exemption - (the 'Exemption')
which exempts from the application of the prohibited transaction rules
transactions relating to (l) the acquisition, sale and holding by Plans of
certain certificates representing an undivided interest in certain asset-backed
pass-through trusts, with respect to which or any of its
affiliates is the sole underwriter or the manager or co-manager of the
underwriting syndicate; and (2) the servicing, operation and management of such
asset-backed pass-through trusts, provided that the general conditions and
certain other conditions set forth in the Exemption are satisfied. Upon
termination of the Funding Period, the Exemption will apply to the acquisition,
holding and resale of the Offered Certificates by a Plan provided that certain
conditions (certain of which are described below) are met.
Among the conditions which must be satisfied for the Exemption to apply are
the following:
(l) The acquisition of the Offered Certificate by a Plan is on terms
(including the price for such Certificates) that are at least as favorable
to the investing Plan as they would be in an arm's-length transaction with
an unrelated party;
(2) The rights and interests evidenced by the Offered Certificates
acquired by the Plan are not subordinated to the rights and interest
evidenced by other certificates of the Trust;
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(3) The Offered Certificates acquired by the Plan have received a
rating at the time of such acquisition that is in one of the true highest
generic rating categories from either Standard & Poor's, Moody's, or Duff &
Phelps Inc.;
(4) The sum of all payments made to and retained by the Underwriters
in connection with the distribution of the Offered Certificates represents
not more than reasonable compensation for underwriting such Certificates;
the sum of all payment made to and retained by the Seller pursuant to the
sale of the Home Equity Loans to the Trust represents not more than the
fair market value of such Home Equity Loans; the sum of all payments made
to and retained by the Servicer represent not more than reasonable
compensation for the Servicer's services under the Agreement and
reimbursement of the Servicer's reasonable expenses in connection
therewith;
(5) The Trustee is not an affiliate of the Underwriter, the Seller,
the Servicer, the Certificate Insurer, any borrower whose obligations under
one or more Home Equity Loans constitute more than 5% of the aggregate
unamortized principal balance of the assets in the Trust, or any of their
respective affiliates (the 'Restricted Group'); and
(6) The Plan investing in the Offered Certificates is an 'accredited
investor' as defined in Rule 50l(a)(l) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933, as amended.
The Underwriters believe that upon termination of the Funding Period, the
Exemption will apply to the acquisition and holding of the Offered Certificates
by Plans and that all conditions of the Exemption other than those within the
control of the investors will be met.
Any Plan fiduciary considering whether to purchase any Offered Certificates
on behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and the Code to such investment. Among other things, before purchasing any
Offered Certificates, a fiduciary of a Plan subject to the fiduciary
responsibility provisions of ERISA or an employee benefit plan subject to the
prohibited transaction provisions of the Code should make its own determination
as to the availability of the exemptive relief provided in the Exemption, and
also consider the availability of any other prohibited transaction exemptions.
LEGAL INVESTMENT CONSIDERATIONS
Although, as a condition to their issuance, the Class A Certificates will
be rated in the highest rating category of the Rating Agencies, the Class A
Certificates will not constitute 'mortgage related securities' for purposes of
the Secondary Mortgage Market Enhancement Act of 1984 ('SMMEA'), because not all
of the Mortgages securing the Home Equity Loans are first mortgages.
Accordingly, many institutions with legal authority to invest in comparably
rated securities based on first mortgage loans may not be legally authorized to
invest in the Class A Certificates, which because they evidence interests in a
pool that includes junior mortgage loans are not 'mortgage related securities'
under SMMEA. See 'LEGAL INVESTMENT' in the Prospectus.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated , 199 (the 'Underwriting Agreement'), among the
Seller and the Underwriters named below (the 'Underwriters'), the Seller has
agreed to sell to the Underwriters and each of the Underwriters has severally
agreed to purchase from the Seller the principal amount of Class A Certificates
set forth below opposite their respective names.
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
UNDERWRITER CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- ---------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total...................................
</TABLE>
Distribution of the Offered Certificates will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Proceeds to the Seller from the sale of the
Offered Certificates will be $ , before deducting expenses payable
by the Seller expected to be $ . In connection with the purchase and sale
of the Offered Certificates, the Underwriters may be deemed to have received
compensation from the Seller in the form of underwriting discounts.
The Seller has been advised by the Underwriters that they presently intend
to make a market in the Class A Certificates offered hereby; however, no
Underwriter is obligated to do so, any market-making may be discontinued at any
time, and there can be no assurance that an active public market for the Class A
Certificates will develop.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Act.
EXPERTS
The consolidated financial statements of
as of December 31, 199 and 199
and for the years ended December 31, 199 , 199 and 199 , included as Appendix A
to this Prospectus Supplement have been audited by ,
independent auditors, as set forth in their report thereon appearing in this
Prospectus Supplement and are included in reliance upon the authority of such
firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the Offered Certificates will be
passed upon for the Seller by Stroock & Stroock & Lavan, New York, New York, and
for the Underwriters, by .
RATINGS
It is a condition to issuance that the Offered Certificates receive ratings
of 'AAA' by Standard & Poor's and 'Aaa' by Moody's.
A securities rating addresses the likelihood of the receipt by Offered
Certificateholders of distributions on the Mortgage Loans to which they are
entitled. The rating takes into consideration the characteristics of the
Mortgage Loans and the structural, legal and tax aspects associated with the
Offered Certificates. The ratings on the Offered Certificates do not, however
constitute statements regarding the likelihood or frequency of prepayments on
the Home Equity Loans or the possibility that Offered Certificateholders might
realize a lower than anticipated yield.
The ratings assigned to the Offered Certificates will depend primarily upon
the creditworthiness of the Certificate Insurer. Any reduction in a rating
assigned to the claims-paying ability of the Certificate Insurer below the
ratings initially assigned to the Offered Certificates may result in a reduction
of one or more of the ratings assigned to the Offered Certificates.
A securities rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each securities rating should be evaluated independently of
similar ratings on different securities.
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Home Equity
Loan Asset-Backed Certificates, Series 199 - (the 'Global Securities') will be
available only in book-entry form. Investors in the Global Securities may hold
such Global Securities through any of The Depository Trust Company ('DTC'),
CEDEL or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior Home Equity Loan Asset-Backed
Certificates issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of CEDEL and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts ad DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior Home Equity Loan Asset-Backed
Certificates issues. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no 'lock-up' or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior Home
Equity Loan Asset-Backed Certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
amount of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear
will instruct the
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respective Depositary, as the case may be, to receive the Global Securities
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date, on the basis of the actual number of days in such accrual period and a
year assumed to consist of 360 days. For transactions settling on the 31st of
the month, payment will include interest accrued to and excluding the first day
of the following month. Payment will then be made by the respective Depositary
of the DTC Participant's account against delivery of the Global Securities.
After settlement has been completed, the Global Securities will be credited to
the respective clearing system and by the clearing system, in accordance with
its usual procedures, to the CEDEL Participant's or Euroclear Participant's
account. The securities credit will appear the next day (European time) and the
cash debt will be back-valued to, and the interest on the Global Securities will
accrue from, the value date (which would be the preceding day when settlement
occurred in New York). If settlement is not completed on the intended value date
(i.e., the trade fails), the CEDEL or Euroclear cash debt will be valued instead
as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take one credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to CEDEL or Euroclear through a CEDEL Participant or Euroclear Participant at
least one business day prior to settlement. In these cases CEDEL or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the CEDEL Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the CEDEL Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase Global
Securities from DTC Participants for delivery to CEDEL Participants or Euroclear
Participants should note that these trades would
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automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exchange for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owners
or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term 'U.S. Person' means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that amy be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
SUCH STATE.
SUBJECT TO COMPLETION DATED AUGUST 5, 1996
PROSPECTUS
ASSET-BACKED CERTIFICATES
ASSET-BACKED NOTES
(ISSUABLE IN SERIES)
------------------------
DELTA FUNDING CORPORATION
(SELLER AND SERVICER)
------------------------
The Asset-Backed Certificates (the 'Certificates') and the Asset-Backed
Notes (the 'Notes' and, collectively with the Certificates, the 'Securities')
described herein may be sold from time to time in one or more series (each, a
'Series') in amounts, at prices and on terms to be determined at the time of
sale and to be set forth in a supplement to this Prospectus (a 'Prospectus
Supplement'). Each series (each a 'Series') of Securities will include either
one or more classes of Certificates or, if Notes are issued as part of a Series,
one or more Classes of Notes and one or more Classes of Certificates, as set
forth in the related Prospectus Supplement.
As specified in the related Prospectus Supplement, the Certificates of a
Series will evidence undivided interests in certain assets deposited into a
trust (each, a 'Trust Fund') by Delta Funding Corporation (the 'Seller')
pursuant to a Pooling and Servicing Agreement or a Trust Agreement, as described
herein. As specified in the related Prospectus Supplement, the Notes of a Series
will be issued and secured pursuant to an Indenture and will represent
indebtedness of the related Trust Fund. The Trust Fund for a Series of
Securities will include (a) Primary Assets, which may include one or more pools
of (i) closed-end home equity loans (the 'Home Equity Loans'), secured by
mortgages on one- to four-family residential or mixed-use properties, and (ii)
securities ('Private Securities') backed or secured by Home Equity Loans (the
'Underlying Loans'), (b) certain monies received or due thereunder on or after
the date specified in the related Prospectus Supplement (the 'Cutoff Date') net,
if and as provided in the related Prospectus Supplement, of certain amounts
payable to Delta Funding Corporation, as servicer (the 'Servicer') of the Home
Equity Loans, (c) if specified in the related Prospectus Supplement, funds on
deposit in one or more pre-funding accounts and/or capitalized interest accounts
and (d) reserve funds, letters of credit, surety bonds, insurance policies or
other forms of credit support as described herein and in the related Prospectus
Supplement. Amounts on deposit in a pre-funding account for any Series will be
used to purchase additional Home Equity Loans during the funding period
specified in the related Prospectus Supplement in the manner specified therein.
The amount initially deposited in a pre-funding account for a Series of
Securities will not exceed fifty percent of the aggregate principal amount of
such Series of Securities.
Each Series of Securities will be issued in one or more classes (each, a
'Class'). Interest on and principal of the Securities of a Series will be
payable on the date or dates specified in the related Prospectus Supplement
(each, a 'Distribution Date'), at the times, at the rates, in the amounts and in
the order of priority set forth in the related Prospectus Supplement.
If a Series includes multiple Classes, such Classes may vary with respect to
the amount, percentage (which may be 0%) and timing of distributions of
principal, interest or both and one or more Classes may be subordinated to other
Classes with respect to distributions of principal, interest or both as
described herein and in the related Prospectus Supplement. If so specified in
the related Prospectus Supplement, the Primary Assets and other assets
comprising the Trust Fund may be divided into one or more Asset Groups and each
Class of the related Series will evidence beneficial ownership of the
corresponding Asset Group, as applicable.
The rate of reduction of the aggregate principal balance of each Class of a
Series may depend principally upon the rate of payment (including prepayments)
with respect to the Home Equity Loans or Underlying Loans relating to the
Private Securities, as applicable. A rate of prepayment lower or higher than
anticipated will affect the yield on the Securities of a Series in the manner
described herein and in the related Prospectus Supplement. Under certain limited
circumstances described herein and in the related Prospectus Supplement, a
Series of Securities may be subject to termination or redemption.
If specified in the related Prospectus Supplement, an election may be made
to treat certain assets comprising the Trust Fund for a Series as a 'real estate
mortgage investment conduit' (a 'REMIC') for federal income tax purposes. See
'FEDERAL INCOME TAX CONSIDERATIONS.'
There currently is no secondary market for the Securities. There can be no
assurance that any such market will develop or, if it does develop, that it will
continue.
------------------------
NOTES OF A GIVEN SERIES REPRESENT OBLIGATIONS OF, AND CERTIFICATES OF A SERIES
EVIDENCE BENEFICIAL INTERESTS IN, THE RELATED TRUST FUND ONLY AND ARE NOT
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR BY THE SELLER, THE TRUSTEE, THE
SERVICER OR BY ANY OF THEIR RESPECTIVE AFFILIATES OR, UNLESS OTHERWISE
SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, BY ANY OTHER PERSON OR
ENTITY. THE SELLER'S ONLY OBLIGATIONS WITH RESPECT TO ANY SERIES OF
SECURITIES WILL BE PURSUANT TO CERTAIN REPRESENTATIONS AND WARRANTIES
SET FORTH IN THE RELATED AGREEMENT AS DESCRIBED HEREIN OR IN THE
RELATED PROSPECTUS SUPPLEMENT.
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 13 FOR CERTAIN FACTORS
TO BE CONSIDERED IN PURCHASING THE SECURITIES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
Retain this Prospectus for future reference. This Prospectus may not be used
to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be offered
hereunder will, among other things, set forth with respect to such Series of
Securities: (i) the aggregate principal amount, interest rate, and authorized
denominations of each Class of such Securities; (ii) certain information
concerning the Primary Assets; (iii) the terms of any Enhancement (as defined
herein) with respect to such Series; (iv) the terms of any insurance related to
the Primary Assets; (v) information concerning any other assets in the related
Trust Fund, including any Reserve Fund; (vi) the Final Scheduled Distribution
Date (as defined herein) of each Class of such Securities; (vii) the method to
be used to calculate the amount of interest and principal required to be applied
to the Securities of each Class of such Series on each Distribution Date, the
timing of the application of interest and principal and the order of priority of
the application of such interest and principal to the respective Classes and the
allocation of interest and principal to be so applied; (viii) the Distribution
Dates and any Assumed Reinvestment Rate (as defined herein); (ix) the amount, if
any, deposited in the Pre-Funding Account (as defined herein) available to
purchase additional Home Equity Loans, the length of the Pre-Funding Period (as
defined herein) or the Revolving Period (as defined herein) and the criteria for
determining which additional Home Equity Loans (or balances thereof) may become
part of the Trust Fund; (x) additional information with respect to the plan of
distribution of such Securities; and (xi) whether a REMIC election will be made
with respect to some or all of the Trust Fund for such Series.
REPORTS TO HOLDERS
Periodic and annual reports concerning the related Trust Fund for a Series
of Securities are required under the related Agreements to be forwarded to
Holders. Unless otherwise specified in the related Prospectus Supplement, such
reports will not be examined and reported on by an independent public
accountant. If so specified in the Prospectus Supplement for a Series of
Securities, such Series or one or more Classes of such Series will be issued in
book-entry form. In such event, (i) owners of beneficial interests in such
Securities will not be considered 'Holders' under the Agreements and will not
receive such reports directly from the related Trust Fund; rather, such reports
will be furnished to such owners through the participants and indirect
participants of the applicable book-entry system and (ii) references herein to
the rights of 'Holders' shall refer to the rights of such owners as they may be
exercised indirectly through such participants. See 'THE AGREEMENTS-- Reports to
Holders.'
AVAILABLE INFORMATION
The Seller has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities. This Prospectus, which forms a part of
the Registration Statement, and the Prospectus Supplement relating to each
Series of Securities contain summaries of the material terms of the documents
referred to herein and therein, but do not contain all of the information set
forth in the Registration Statement pursuant to the Rules and Regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits can
be inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its Regional Office located as follows,
Midwest Regional Office, 500 West Madison Street, Chicago, Illinois 60661; and
Northeast Regional Office, Seven World Trade Center, New York, New York 10048.
The Commission maintains an Internet Web site that contains reports, information
statements and other information regarding the registrants that file
electronically with the Commission, including the Seller. The address of such
Internet Web site is (http://www.sec.gov).
Each Trust Fund will be required to file certain reports with the
Commission pursuant to the requirements of the Securities Exchange Act of 1934,
as amended (the 'Exchange Act'). The Seller intends to cause each Trust Fund to
suspend filing such reports if and when such reports are no longer required
under the Exchange Act.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with
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<PAGE>
respect hereto do not constitute an offer to sell or a solicitation of an offer
to buy any securities other than the Securities offered hereby and thereby nor
an offer of the Securities to any person in any state or other jurisdiction in
which such offer would be unlawful. The delivery of this Prospectus at any time
does not imply that information herein is correct as of any time subsequent to
its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by or on behalf of the Trust Fund referred
to in the accompanying Prospectus Supplement with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of any offering of the Securities issued
by such Trust Fund shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for all purposes of this Prospectus to the extent that a statement contained
herein (or in the accompanying Prospectus Supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Seller on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Such requests should be directed to the Seller at
1000 Woodbury Road, Woodbury, New York 11797.
3
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to each Series of Securities contained in the
Prospectus Supplement to be prepared and delivered in connection with the
offering of Securities of such Series. Capitalized terms used and not otherwise
defined herein or in the related Prospectus Supplement shall have the meanings
set forth in the 'GLOSSARY OF TERMS.'
<TABLE>
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SECURITIES OFFERED....... Asset-Backed Certificates (the 'Certificates') and
Asset-Backed Notes (the 'Notes'). Certificates are
issuable from time to time in Series pursuant to a
Pooling and Servicing Agreement or Trust Agreement.
Each Certificate of a Series will evidence an interest
in the Trust Fund for such Series, or in an Asset
Group specified in the related Prospectus Supplement.
Notes are issuable from time to time in a Series
pursuant to an Indenture. Each Series of Securities
will consist of one or more Classes, one or more of
which may be Classes of Compound Interest Securities,
Planned Amortization Class ('PAC') Securities,
Variable Interest Securities, Zero Coupon Securities,
Principal Only Securities, Interest Only Securities,
Participating Securities, Senior Securities or
Subordinate Securities. Each Class may differ in,
among other things, the amounts allocated to and the
priority of principal and interest payments, Final
Scheduled Distribution Dates, Distribution Dates and
interest rates. The Securities of each Class will be
issued in fully registered form in the denominations
specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, the
Securities or certain Classes of such Securities
offered thereby may be available in book-entry form
only.
SELLER AND SERVICER...... Delta Funding Corporation, a New York corporation,
with its principal executive offices located at 1000
Woodbury Road, Woodbury, New York 11797, and a
telephone number of (516) 364-8500. See 'THE SELLER
AND THE SERVICER.'
INTEREST PAYMENTS........ Interest payments on the Securities of a Series
entitled by their terms to receive interest will be
made on each Distribution Date, to the extent set
forth in, and at the applicable rate specified in (or
determined in the manner set forth in), the related
Prospectus Supplement. The interest rate on Securities
of a Series may be variable or change with changes in
the rates of interest on the related Home Equity Loans
or Underlying Loans relating to the Private
Securities, as applicable and/or as prepayments occur
with respect to such Home Equity Loans or Underlying
Loans, as applicable. Interest Only Securities may be
assigned a 'Notional Amount' set forth in the related
Prospectus Supplement which is used solely for
convenience in expressing the calculation of interest
and for certain other purposes and does not represent
the right to receive any distributions allocable to
principal. Principal Only Securities may not be
entitled to receive any interest payments or may be
entitled to receive only nominal interest payments.
Interest payable on the Securities of a Series on a
Distribution Date will include all interest accrued
during the period specified in the related Prospectus
Supplement. See 'DESCRIPTION OF THE SECURITIES--
Payments of Interest.'
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
PRINCIPAL PAYMENTS....... All payments of principal of a Series of Securities
will be made in an aggregate amount determined as set
forth in the related Prospectus Supplement and will be
paid at the times and will be allocated among the
Classes of such Series in the order and amounts, and
will be applied either on a pro rata or a random lot
basis among all Securities of any such Class, all as
specified in the related Prospectus Supplement.
FINAL SCHEDULED
DISTRIBUTION DATE
OF THE SECURITIES...... The Final Scheduled Distribution Date with respect to
each Class of Notes is the date no later than the date
on which principal thereof will be fully paid and with
respect to each Class of Certificates is the date
after which no Certificates of such Class are expected
to remain outstanding, in each case calculated on the
basis of the assumptions applicable to such Series
described in the related Prospectus Supplement. The
Final Scheduled Distribution Date of a Class may equal
the maturity date of the Primary Asset in the related
Trust Fund which has the latest stated maturity or
will be determined as described herein and in the
related Prospectus Supplement.
The actual final Distribution Date of the Securities
of a Series will depend primarily upon the rate of
payment (including prepayments, liquidations due to
default, the receipt of proceeds from casualty
insurance policies and repurchases) of the Home Equity
Loans or Underlying Loans relating to the Private
Securities, as applicable, in the related Trust Fund.
Unless otherwise specified in the related Prospectus
Supplement, the actual final Distribution Date of any
Security is likely to occur earlier and may occur
substantially earlier or, with respect to a Class of
Certificates, may occur later than its Final Scheduled
Distribution Date as a result of the application of
prepayments to the reduction of the principal balances
of the Securities and as a result of defaults on the
Primary Assets. The rate of payments on the Home
Equity Loans or Underlying Loans relating to the
Private Securities, as applicable, in the Trust Fund
for a Series will depend on a variety of factors,
including certain characteristics of such Home Equity
Loans or Underlying Loans, as applicable, and the
prevailing level of interest rates from time to time,
as well as on a variety of economic, demographic, tax,
legal, social and other factors. No assurance can be
given as to the actual prepayment experience with
respect to a Series. See 'RISK FACTORS--Yield May
Vary' and 'DESCRIPTION OF THE SECURITIES--Weighted
Average Life of the Securities.'
OPTIONAL TERMINATION..... One or more Classes of Securities of any Series may be
redeemed or repurchased in whole or in part, at the
Seller's or the Servicer's option, at such time and
under the circumstances specified in the related
Prospectus Supplement, at the price set forth therein.
If so specified in the related Prospectus Supplement
for a Series of Securities, the Seller, the Servicer,
or such other entity that is specified in the related
Prospectus Supplement, may, at its option, cause an
early termination of the related Trust Fund by
repurchasing all of the Primary Assets remaining in
the Trust Fund on or after a specified date, or on or
after such time as the aggregate principal balance of
the Securities of the Series or the Primary Assets
relating
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
to such Series, as specified in the related Prospectus
Supplement, is less than the amount or percentage
specified in the related Prospectus Supplement. See
'DESCRIPTION OF THE SECURITIES--Optional Redemption,
Purchase or Termination.'
In addition, the Prospectus Supplement may provide
other circumstances under which Holders of Securities
of a Series could be fully paid significantly earlier
than would otherwise be the case if payments or
distributions were solely based on the payments of the
related Primary Assets.
THE TRUST FUND........... The Trust Fund for a Series of Securities will consist
of one or more of the assets described below, as
described in the related Prospectus Supplement.
A. PRIMARY ASSETS...... The Primary Assets for a Series may consist of any
combination of the following assets, to the extent and
as specified in the related Prospectus Supplement.
(1) HOME EQUITY
LOANS........... Primary Assets for a Series will consist, in whole or
in part, of 'closed-end' home equity loans (the 'Home
Equity Loans'). The Home Equity Loans may, as
specified in the related Prospectus Supplement, have
various payment characteristics, including balloon or
other irregular payment features, and may accrue
interest at a fixed rate or an adjustable rate. Some
Home Equity Loans may be delinquent or non-performing
as specified in the related Prospectus Supplement. The
Home Equity Loans will be originated or acquired by
the Seller in the ordinary course of its business. The
Home Equity Loans will be conventional loans. To the
extent provided in the related Prospectus Supplement,
additional Home Equity Loans may be periodically added
to the Trust Fund, or may be removed from time to time
if certain asset tests are met, all as described in
the related Prospectus Supplement.
As specified in the related Prospectus Supplement, the
Home Equity Loans will be secured by mortgages and
deeds of trust or other similar security instruments
creating a lien on a Mortgaged Property, which may be
subordinated to one or more senior liens on such
Mortgaged Property, as described in the related
Prospectus Supplement.
The related Prospectus Supplement will describe
certain characteristics of the Home Equity Loans for a
Series, including, without limitation, and to the
extent relevant: (a) the aggregate unpaid principal
balance of the Home Equity Loans; (b) the range and
weighted average Home Equity Loan Rate on the Home
Equity Loans and in the case of adjustable rate Home
Equity Loans, the range and weighted average of the
Current Home Equity Loan Rates and the Lifetime Rate
Caps, if any; (c) the range and the average
outstanding principal balance of the Home Equity
Loans; (d) the weighted average original and remaining
term-to-stated maturity of the Home Equity Loans and
the range of original and remaining terms-to-stated
maturity, if applicable; (e) the range of Combined
Loan-to-Value Ratios or Loan-to-Value Ratios, as
applicable, of the Home Equity Loans, computed in the
manner described in the related Prospectus Supplement;
(f) the percentage (by principal balance as of the
Cut-off Date) of Home Equity Loans that accrue
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interest at adjustable or fixed interest rates; (g)
any enhancement relating to the Home Equity Loans; (h)
the geographic distribution of the Mortgaged
Properties securing the Home Equity Loans; (i) the use
and type of each Mortgaged Property securing a Home
Equity Loan; (j) the lien priority of the Home Equity
Loans; and (k) the delinquency status and year of
origination of the Home Equity Loans.
(2) PRIVATE
SECURITIES...... Primary Assets for a Series may consist, in whole or
in part, of Private Securities which include (a)
pass-through certificates representing beneficial
interests in loans of the type that would otherwise be
eligible to be Home Equity Loans (the 'Underlying
Loans') or (b) collateralized obligations secured by
Underlying Loans issued by a trust with either of the
following characteristics: (i) the trust will have
been formed by the Seller or an unaffiliated person
and the Servicer is acting as servicer for such trust
(a 'Seller/Servicer Trust'); or (ii) the trust will
have been formed by, and the person acting as servicer
for the trust will be, a person that is unaffiliated
with the Seller or the Servicer (an 'Unaffiliated
Trust'). The Private Securities may have been offered
and sold to the public pursuant to an effective
registration statement or privately placed in a
transaction not involving a public offering. In either
case, no underwriter for a Series of Securities the
Primary Assets for which include Private Securities
will have been involved in the public distribution or
private placement of such Private Securities. If the
Private Securities were issued by an Unaffiliated
Trust and privately placed in a transaction not
involving a public offering, such securities will have
been purchased from a person who is not an affiliate
of the issuer of such securities at the time of sale
(nor an affiliate thereof at any time during the three
preceding months); provided a period of three years
has elapsed since the date the securities were
acquired from the issuer or an affiliate thereof.
Although individual Underlying Loans may be insured or
guaranteed by the United States or an agency or
instrumentality thereof, they need not be, and the
Private Securities themselves will not be so insured
or guaranteed. See 'THE TRUST FUNDS-- Private
Securities.' Unless otherwise specified in the
Prospectus Supplement relating to a Series of
Securities, payments on the Private Securities will be
distributed directly to the Trustee as registered
owner of such Private Securities.
The related Prospectus Supplement for a Series will
specify (such disclosure may be on an approximate
basis, as described above and will be as of the date
specified in the related Prospectus Supplement) to the
extent relevant and to the extent such information is
reasonably available to the Seller and the Seller
reasonably believes such information to be reliable:
(i) the aggregate approximate principal amount and
type of any Private Securities to be included in the
Trust Fund for such Series; (ii) certain
characteristics of the Underlying Loans including (A)
the payment features of such Underlying Loans (i.e.,
whether they are fixed rate or adjustable rate and
whether they provide for fixed level payments,
negative amortization or other payment features), (B)
the approximate aggregate principal amount of such
Underlying Loans which are insured or guaranteed by a
governmental entity, (C) the servicing fee
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or range of servicing fees with respect to such
Underlying Loans, (D) the minimum and maximum stated
maturities of such Underlying Loans at origination,
(E) the lien priority of such Underlying Loans, and
(F) the delinquency status and year of origination of
such Underlying Loans; (iii) the maximum original
term-to-stated maturity of the Private Securities;
(iv) the weighted average term-to-stated maturity of
the Private Securities; (v) the pass-through or
certificate rate or ranges thereof for the Private
Securities; (vi) the sponsor or depositor of the
Private Securities (the 'PS Sponsor'), the servicer of
the Private Securities (the 'PS Servicer') and the
trustee of the Private Securities (the 'PS Trustee');
(vii) certain characteristics of Enhancement, if any,
such as reserve funds, insurance policies, letters of
credit or guarantees, relating to the Underlying
Loans, or to such Private Securities themselves;
(viii) the terms on which the Underlying Loans may, or
are required to, be repurchased prior to stated
maturity; and (ix) the terms on which substitute
Underlying Loans may be delivered to replace those
initially deposited with the PS Trustee. See 'THE
TRUST FUNDS--Private Securities--Additional
Information.'
B. COLLECTION,
CERTIFICATE
AND DISTRIBUTION
ACCOUNTS........... Unless otherwise provided in the related Prospectus
Supplement, all payments on or with respect to the
Primary Assets for a Series will be remitted by the
Servicer within the period specified in the related
Prospectus Supplement directly to an account (the
'Collection Account' or the 'Certificate Account') to
be established for such Series. Unless otherwise
provided in the related Prospectus Supplement, the
Trustee shall be required to apply a portion of the
amount in the Collection Account or the Certificate
Account, together with reinvestment earnings from
Eligible Investments specified in the related
Prospectus Supplement, to the payment of certain
amounts payable to the Servicer under the related
Agreement and any other person specified in the
Prospectus Supplement, and to deposit a portion of the
amount in the Collection Account into one or more
separate accounts (each, a 'Distribution Account') to
be established for such Series, each in the manner and
at the times established in the related Prospectus
Supplement. All amounts deposited in such Distribution
Account (or, if there is no Distribution Account,
amounts remaining in the Certificate Account) will be
available, unless otherwise specified in the related
Prospectus Supplement, for (i) application to the
payment of principal of and interest on such Series of
Securities (or such Class or Classes specified in the
related Prospectus Supplement) on the next
Distribution Date, (ii) the making of adequate
provision for future payments on certain Classes of
Securities and (iii) any other purpose specified in
the related Prospectus Supplement. After applying the
funds in the Collection Account or the Certificate
Account as described above, any funds remaining in
such Accounts may be paid over to the Servicer, the
Seller, any provider of Enhancement with respect to
such Series (an 'Enhancer') or any other person
entitled thereto in the manner and at the times
established in the related Prospectus Supplement.
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C. PRE-FUNDING AND
CAPITALIZED
INTEREST
ACCOUNTS........... If specified in the related Prospectus Supplement, a
Trust Fund will include one or more segregated trust
accounts (each, a 'Pre-Funding Account') for the
related Series. If so specified, on the closing date
for such Series, a portion of the proceeds of the sale
of the Securities of such Series (such amount, the
'Pre-Funded Amount') will be deposited in the
Pre-Funding Account and may be used to purchase
additional Primary Assets during the period of time,
not to exceed six months, specified in the related
Prospectus Supplement (the 'Pre-Funding Period'). The
Primary Assets to be so purchased will be required to
have certain characteristics specified in the related
Prospectus Supplement. If any Pre-Funded Amount
remains on deposit in the Pre-Funding Account at the
end of the Pre-Funding Period, such amount will be
applied in the manner specified in the related
Prospectus Supplement to prepay the Classes of Notes
and/or the Certificates of the applicable Series
specified in the related Prospectus Supplement. The
amount initially deposited in a Pre-Funding Account
for a Series of Securities will not exceed fifty
percent of the aggregate principal amount of such
Series of Securities.
If a Pre-Funding Account is established, one or more
segregated trust accounts (each, a 'Capitalized
Interest Account') may be established for the related
Series. On the closing date for such Series, a portion
of the proceeds of the sale of the Securities of such
Series may be deposited in the Capitalized Interest
Account and used to fund the excess, if any, of (x)
the sum of (i) the amount of interest accrued on the
Classes of Securities of such Series specified in the
related Prospectus Supplement and (ii) if specified in
the related Prospectus Supplement, certain fees or
expenses during the Pre-Funding Period such as Trustee
fees and credit enhancement fees, over (y) the amount
of interest available therefor from the Primary Assets
in the Trust Fund. If so specified in the related
Prospectus Supplement, amounts on deposit in the
Capitalized Interest Account may be released to the
Seller prior to the end of the Pre-Funding Period
subject to the satisfaction of certain tests specified
in the related Prospectus Supplement. Any amounts on
deposit in the Capitalized Interest Account at the end
of the Pre-Funding Period that are not necessary for
such purposes will be distributed to the person
specified in the related Prospectus Supplement.
ENHANCEMENT.............. If and to the extent specified in the related
Prospectus Supplement, enhancement with respect to a
Series or any Class of Securities may include any one
or more of the following: a financial guaranty
insurance policy, overcollateralization, a letter of
credit, a cash reserve fund, insurance policies, one
or more Classes of Subordinate Securities, derivative
products or other forms of credit enhancement, or any
combination thereof (collectively, 'Enhancement'). The
Enhancement with respect to any Series or any Class of
Securities may be structured to provide protection
against delinquencies and/or losses on the Primary
Assets, against changes in interest rates, or other
risks, to the extent and under the conditions
specified in the related Prospectus Supplement. Unless
otherwise specified in the
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related Prospectus Supplement, any form of Enhancement
will have certain limitations and exclusions from
coverage thereunder, which will be described in the
related Prospectus Supplement. Further information
regarding any Enhancer, including financial
information when material, will be included in the
related Prospectus Supplement. See 'ENHANCEMENT.'
With respect to any Series of Securities including one
or more Classes of Notes, distributions in respect of
the Certificates may be subordinated in priority of
payment to payments on the Notes, to the extent
specified in the related Prospectus Supplement.
SERVICING................ The Servicer will be responsible for servicing,
managing and making collections on the Home Equity
Loans for a Series. In addition, the Servicer, if so
specified in the related Prospectus Supplement, will
act as custodian and will be responsible for
maintaining custody of the Home Equity Loans and
related documentation on behalf of the Trustee.
Advances with respect to delinquent payments of
principal and/or interest on a Home Equity Loan
('Delinquency Advances') will be made by the Servicer
if and only to the extent described in the related
Prospectus Supplement. Such advances will be intended
to provide liquidity only and will be reimbursable to
the Servicer to the extent specified in the related
Prospectus Supplement, from scheduled payments of
principal and/or interest, late collections, or from
the proceeds of liquidation of the related Home Equity
Loans or from other recoveries relating to such Home
Equity Loans (including any insurance proceeds or
payments from other credit support) or, to the extent
specified in the related Prospectus Supplement, from
payments or proceeds from other Home Equity Loans. If
and to the extent specified in the related Prospectus
Supplement, the Servicer will be entitled to advance
its own funds to pay for any related expenses of
foreclosure and disposition of any liquidated Home
Equity Loan or related Mortgaged Property (the
'Servicer Advances'). See 'SERVICING OF LOANS--
Advances and Limitations Thereon.' The Servicer will
be entitled to be reimbursed for any such Servicer
Advances as specified in the related Prospectus
Supplement. In performing these functions, the
Servicer will exercise the same degree of skill and
care that it customarily exercises with respect to
similar Home Equity Loans owned or serviced by it.
Under certain limited circumstances, the Servicer may
resign or be removed, in which event either the
Trustee or a third-party servicer will be appointed as
successor servicer. The Servicer will receive a
periodic fee as servicing compensation (the 'Servicing
Fee') and may, as specified herein and in the related
Prospectus Supplement, receive certain additional
compensation. See 'SERVICING OF LOANS--Servicing
Compensation and Payment of Expenses.'
FEDERAL INCOME TAX
CONSIDERATIONS
A. DEBT SECURITIES AND
REMIC RESIDUAL
SECURITIES......... If (i) an election is made to treat all or a portion
of a Trust Fund for a Series as a 'real estate
mortgage investment conduit' (a 'REMIC') or (ii) so
provided in the related Prospectus Supplement, a
Series of Securities will include one or more Classes
of taxable debt obligations under the Internal Revenue
Code of
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1986, as amended (the 'Code'). Stated interest with
respect to such Classes of Securities will be reported
by a Holder in accordance with the Holder's method of
accounting except that, in the case of Securities
constituting 'regular interests' in a REMIC ('Regular
Interests'), such interest will be required to be
reported on the accrual method regardless of a
Holder's usual method of accounting. Securities that
are Compound Interest Securities, Zero Coupon
Securities or Interest Only Securities will, and
certain other Classes of Securities may, be issued
with original issue discount that is not de minimis.
In such cases, the Holder will be required to include
original issue discount in gross income as it accrues,
which may be prior to the receipt of cash attributable
to such income. If a Security is issued at a premium,
the Holder may be entitled to make an election to
amortize such premium on a constant yield method.
In the case of a REMIC election, a Class of Securities
may be treated as REMIC 'residual interests'
('Residual Interest'). A Holder of a Residual Interest
will be required to include in its income its pro rata
share of the taxable income of the REMIC. In certain
circumstances, the Holder of a Residual Interest may
have REMIC taxable income or tax liability
attributable to REMIC taxable income for a particular
period in excess of cash distributions for such period
or have an after-tax return that is less than the
after-tax return on comparable debt instruments. In
addition, a portion (or, in some cases, all) of the
income from a Residual Interest (i) except in certain
circumstances with respect to a Holder classified as a
thrift institution under the Code, may not be subject
to offset by losses from other activities or
investments, (ii) for a Holder that is subject to tax
under the Code on unrelated business taxable income,
may be treated as unrelated business taxable income
and (iii) for a foreign holder, may not qualify for
exemption from or reduction of withholding. In
addition, (i) Residual Interests are subject to
transfer restrictions and (ii) certain transfers of
Residual Interests will not be recognized for federal
income tax purposes. Further, individual holders are
subject to limitations on the deductibility of
expenses of the REMIC. See 'FEDERAL INCOME TAX
CONSIDERATIONS.'
B. NON-REMIC
PASS-THROUGH
SECURITIES......... If so specified in the related Prospectus Supplement,
the Trust Fund for a Series will be treated as a
grantor trust and will not be classified as an
association taxable as a corporation for federal
income tax purposes and Holders of Securities of such
Series ('Pass-Through Securities') will be treated as
owning directly rights to receive certain payments of
interest or principal, or both, on the Primary Assets
held in the Trust Fund for such Series. All income
with respect to a Stripped Security (as defined
herein) will be accounted for as original issue
discount and, unless otherwise specified in the
related Prospectus Supplement, will be reported by the
Trustee on an accrual basis, which may be prior to the
receipt of cash associated with such income.
C. OWNER TRUST
SECURITIES......... If so specified in the Prospectus Supplement, the
Trust Fund will be treated as a partnership for
purposes of federal and state income tax. Each
Noteholder, by the acceptance of a Note of a given
Series, will
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agree to treat such Note as indebtedness, and each
Certificateholder, by the acceptance of a Certificate
of a given Series, will agree to treat the related
Trust Fund as a partnership in which such
Certificateholder is a partner for federal income and
state tax purposes. Alternative characterizations of
such Trust Fund and such Certificates are possible,
but would not result in materially adverse tax
consequences to Certificateholders. See 'FEDERAL
INCOME TAX CONSIDERATIONS.'
ERISA CONSIDERATIONS..... Subject to the considerations discussed under 'ERISA
CONSIDERATIONS' herein and in the related Prospectus
Supplement, and unless otherwise specified in the
related Prospectus Supplement, the Notes will be
eligible for purchase by employee benefit plans. The
related Prospectus Supplement will provide further
information with respect to the eligibility of a Class
of Certificates for purchase by employee benefit
plans.
A fiduciary of any employee benefit plan subject to
the Employee Retirement Income Security Act of 1974,
as amended ('ERISA'), or the Code should carefully
review with its own legal advisors whether the
purchase or holding of Securities could give rise to a
transaction prohibited or otherwise impermissible
under ERISA or the Code. See 'ERISA CONSIDERATIONS'
herein and in the related Prospectus Supplement.
LEGAL INVESTMENT......... Unless otherwise specified in the related Prospectus
Supplement, Securities of each Series offered by this
Prospectus and the related Prospectus Supplement will
not constitute 'mortgage related securities' under the
Secondary Mortgage Market Enhancement Act of 1984
('SMMEA'). Investors whose investment authority is
subject to legal restrictions should consult their own
legal advisors to determine whether and to what extent
the Securities constitute legal investments for them.
See 'LEGAL INVESTMENT.'
RATINGS.................. It will be a requirement for issuance of any Series
that each Class of Securities offered by this
Prospectus and the related Prospectus Supplement be
rated by at least one Rating Agency in one of its four
highest applicable rating categories. The rating or
ratings applicable to Securities of each Series
offered hereby and by the related Prospectus
Supplement will be as set forth in the related
Prospectus Supplement. There is no assurance that the
rating initially assigned to such Securities will not
be subsequently lowered or withdrawn by the Rating
Agency. In the event the rating initially assigned to
any Securities is subsequently lowered for any reason,
no person or entity will be obligated to provide any
credit enhancement in addition to the Enhancement, if
any, specified in the related Prospectus Supplement.
A securities rating should be evaluated independently
of similar ratings on different types of securities. A
securities rating is not a recommendation to buy, hold
or sell securities and does not address the effect
that the rate of prepayments on the Home Equity Loans
or Underlying Loans relating to Private Securities, as
applicable, for a Series may have on the yield to
investors in the Securities of such Series. See 'RISK
FACTORS--Ratings Are Not Recommendations.'
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RISK FACTORS
Investors should consider, among other things, the following risk factors
in connection with the purchase of the Securities.
No Secondary Market. There will be no market for the Securities of any
Series prior to the issuance thereof, and there can be no assurance that a
secondary market will develop or, if it does develop, that it will provide
Holders with liquidity of investment or will continue for the life of the
Securities of such Series. See 'PLAN OF DISTRIBUTION.'
Primary Assets Are Only Source of Repayment. The Securities of a Series
will be payable solely from the assets of the Trust Fund for such Securities and
any related Enhancement. There will be no recourse to the Seller or any other
person for any default on the Notes or any failure to receive distributions on
the Certificates. Further, unless otherwise stated in the related Prospectus
Supplement, at the times set forth in the related Prospectus Supplement, certain
Primary Assets and/or any balance remaining in the Collection Account,
Certificate Account or Distribution Account immediately after making all
payments due on the Securities of such Series and other payments specified in
the related Prospectus Supplement, may be promptly released or remitted to the
Seller, the Servicer, the Enhancer or any other person entitled thereto and will
no longer be available for making payments to Holders. Consequently, Holders of
Securities of each Series must rely solely upon payments with respect to the
Primary Assets and the other assets constituting the Trust Fund for a Series of
Securities, including, if applicable, any amounts available pursuant to any
Enhancement for such Series, for the payment of principal of and interest on the
Securities of such Series.
Holders of Notes will be required under the Indenture to proceed only
against the Primary Assets and other assets constituting the related Trust Fund
in the case of a default with respect to such Notes and may not proceed against
any assets of the Seller. There is no assurance that the market value of the
Primary Assets or any other assets for a Series will at any time be equal to or
greater than the aggregate principal amount of the Securities of such Series
then outstanding, plus accrued interest thereon. Moreover, upon an event of
default under the Indenture for a Series of Notes and a sale of the assets in
the Trust Fund or upon a sale of the assets of a Trust Fund for a Series of
Certificates, the Trustee, the Servicer, if any, the Enhancer and any other
service provider specified in the related Prospectus Supplement generally will
be entitled to receive the proceeds of any such sale to the extent of unpaid
fees and other amounts owing to such persons under the related Agreement prior
to distributions to Holders of Securities. Upon any such sale, the proceeds
thereof may be insufficient to pay in full the principal of and interest on the
Securities of such Series.
Limited Protection Against Losses. Although any Enhancement is intended to
reduce the risk of delinquent payments or losses to Holders entitled to the
benefit thereof, the amount of such Enhancement will be limited, as set forth in
the related Prospectus Supplement, and will decline and could be depleted under
certain circumstances prior to the payment in full of the related Series of
Securities. As a result Holders may suffer losses. See 'ENHANCEMENT.'
Yield May Vary. The yield to maturity experienced by a Holder of
Securities may be affected by the rate of payment of principal of the Home
Equity Loans or Underlying Loans relating to the Private Securities, as
applicable. The timing of principal payments of the Securities of a Series will
be affected by a number of factors, including the following: (i) the extent of
prepayments of the Home Equity Loans or Underlying Loans relating to the Private
Securities, as applicable, which prepayments may be influenced by a variety of
factors; (ii) the manner of allocating principal payments among the Classes of
Securities of a Series as specified in the related Prospectus Supplement; and
(iii) the exercise by the party entitled thereto of any right of optional
termination. See 'DESCRIPTION OF THE SECURITIES--Weighted Average Life of the
Securities.' Prepayments may also result from repurchases of Home Equity Loans
or Underlying Loans relating to the Private Securities, as applicable, due to
material breaches of the Seller's representations and warranties.
Interest payable on the Securities of a Series on a Distribution Date will
include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues during the calendar month
prior to a Distribution Date, the effective yield to Holders will be reduced
from the yield that would otherwise be obtainable if interest payable on the
Security were to accrue through the day immediately preceding each
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Distribution Date, and the effective yield (at par) to Holders will be less than
the indicated coupon rate. See 'DESCRIPTION OF THE SECURITIES--Payments of
Interest.'
Property Values May Be Insufficient. If the Home Equity Loans in a Trust
Fund are secured primarily by junior liens subordinate to the rights of the
mortgagee under the related senior mortgage(s) or deed(s) of trust, the proceeds
from any liquidation, insurance or condemnation proceedings will be available to
satisfy the outstanding balance of such Home Equity Loans only to the extent
that the claims of such senior mortgagees or beneficiaries have been satisfied
in full, including any related foreclosure costs. In addition, a junior
mortgagee may not foreclose on the Mortgaged Property securing a junior mortgage
unless it forecloses subject to the senior mortgages, in which case it must
either pay the entire amount due on the senior mortgages to the senior
mortgagees at or prior to the foreclosure sale or undertake the obligation to
make payments on the senior mortgages in the event the mortgagor is in default
thereunder. The Trust Fund will not have any source of funds to satisfy the
senior mortgages or deeds of trust or make payments due to the senior mortgagees
or beneficiaries.
There are several factors that could adversely affect the value of the
Mortgaged Properties such that the outstanding balance of the related Home
Equity Loan, together with any senior financing on the Mortgaged Properties,
would equal or exceed the value of the Mortgaged Properties. Among the factors
that could adversely affect the value of the Mortgaged Properties are an overall
decline in the residential real estate market in the areas in which the
Mortgaged Properties are located or a decline in the general condition of the
Mortgaged Properties as a result of failure of borrowers to maintain adequately
the Mortgaged Properties or of natural disasters that are not necessarily
covered by insurance, such as earthquakes and floods. Any such decline could
extinguish the value of a junior interest in a Property before having any effect
on the related senior interest therein. If such a decline occurs, the actual
rates of delinquencies, foreclosure and losses on the junior Loans could be
higher than those currently experienced in the mortgage and home improvement
lending industry in general.
Pre-Funding and Additional Loans May Adversely Affect Investment. If a
Trust Fund includes a Pre-Funding Account and the principal balance of
additional Primary Assets delivered to the Trust Fund during the Pre-Funding
Period is less than the Pre-Funded Amount, the Holders of the Securities of the
related Series will receive a prepayment of principal as and to the extent
described in the related Prospectus Supplement. Any such principal prepayment
may adversely affect the yield to maturity of the applicable Securities. Since
prevailing interest rates are subject to fluctuation, there can be no assurance
that investors will be able to reinvest such a prepayment at yields equaling or
exceeding the yields on the related Securities. It is possible that the yield on
any such reinvestment will be lower, and may be significantly lower, than the
yield on the related Securities.
Each additional Primary Asset must satisfy the eligibility criteria
specified in the related Prospectus Supplement and related Agreements. Such
eligibility criteria will be determined in consultation with each Rating Agency
(and/or any Enhancer) prior to the issuance of the related Series and are
designed to ensure that if such additional Primary Assets were included as part
of the initial Primary Assets, the credit quality of such assets would be
consistent with the initial rating of each Class of Securities of such Series.
The Seller will certify to the Trustee that all conditions precedent to the
transfer of the additional Primary Assets, including the satisfaction of the
eligibility criteria to the Trust Fund, have been satisfied. It is a condition
to the transfer of any additional Primary Assets to the Trust Fund that each
Rating Agency, after receiving prior notice of the proposed transfer of the
additional Primary Assets to the Trust Fund, shall not have advised the Seller
or the Trustee or any Enhancer that the conveyance of such additional Primary
Assets will result in a qualification, modification or withdrawal of its then
current rating of any Class of Notes or Certificates of such Series. Following
the transfer of additional Primary Assets to the Trust Fund, the aggregate
characteristics of the Primary Assets then held in the Trust Fund may vary from
those of the initial Primary Assets of such Trust Fund. As a result, the
additional Primary Assets may adversely affect the performance of the related
Securities.
The ability of a Trust Fund to invest in additional Home Equity Loans
during the related Pre-Funding Period will be dependant on the ability of the
Seller to originate or acquire Home Equity Loans that satisfy the requirements
for transfer to the Trust Fund specified in the related Prospectus Supplement.
The ability of the Seller to originate or acquire such Loans will be affected by
a variety of social and economic factors, including the prevailing level of
market interest rates, unemployment levels and consumer perceptions of general
economic conditions.
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Potential Liability for Environmental Conditions. Real property pledged as
security to a lender may be subject to certain environmental risks. Under the
laws of certain states, contamination of a property may give rise to a lien on
the property to assure the costs of clean-up. In several states, such a lien has
priority over the lien of an existing mortgage or owner's interest against such
property. In addition, under the laws of some states and under the federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
('CERCLA'), a lender may be liable, as an 'owner' or 'operator,' for costs of
addressing releases or threatened releases of hazardous substances that require
remedy at a property, if agents or employees of the lender have become
sufficiently involved in the operations of the borrower, regardless of whether
or not the environmental damage or threat was caused by a prior owner. A lender
also risks such liability on foreclosure of the Mortgaged Property.
Consumer Protection Laws May Affect Loans. Applicable state laws generally
regulate interest rates and other charges and require certain disclosures. In
addition, other state laws, public policy and general principles of equity
relating to the protection of consumers, unfair and deceptive practices and debt
collection practices may apply to the origination, servicing and collection of
the Loans. Depending on the provisions of the applicable law and the specific
facts and circumstances involved, violations of these laws, policies and
principles may limit the ability of the Servicer to collect all or part of the
principal of or interest on the Loans, may entitle the borrower to a refund of
amounts previously paid and, in addition, could subject the owner of the Home
Equity Loan to damages and administrative enforcement.
The Loans are also subject to federal laws, including:
(i) the federal Truth in Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding
the terms of the Loans;
(ii) the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit discrimination on the basis of age, race, color,
sex, religion, marital status, national origin, receipt of public
assistance or the exercise of any right under the Consumer Credit
Protection Act, in the extension of credit;
(iii) the Americans with Disabilities Act, which, among other things,
prohibits discrimination on the basis of disability in the full and equal
enjoyment of the goods, services, facilities, privileges, advantages or
accommodations of any place of public accommodation; and
(iv) the Fair Credit Reporting Act, which regulates the use and
reporting of information related to the borrower's credit experience.
Violations of certain provisions of these federal laws may limit the
ability of the Servicer to collect all or part of the principal of or interest
on the Loans and in addition could subject the Trust Fund to damages and
administrative enforcement. The Loans may be subject to the Home Ownership and
Equity Protection Act of 1994 (the 'Act') which amended the Truth in Lending Act
as it applies to mortgages subject to the Act. The Act requires certain
additional disclosures, specifies the timing of such disclosures and limits or
prohibits inclusion of certain provisions in mortgages subject to the Act. The
Act also provides that any purchaser or assignee of a mortgage covered by the
Act is subject to all of the claims and defenses which the borrower could assert
against the original lender. The maximum damages that may be recovered under the
Act from an assignee is the remaining amount of indebtedness plus the total
amount paid by the borrower in connection with the Loan. If the Trust Fund
includes Loans subject to the Act, it will be subject to all of the claims and
defenses which the borrower could assert against the Seller. Any violation of
the Act which would result in such liability would be a breach of the Seller's
representations and warranties, and the Seller would be obligated to cure,
repurchase or, if permitted by the Agreement, substitute for the Home Equity
Loan in question. In addition, numerous other federal and state statutory
provisions, including the federal bankruptcy laws, the Soldiers' and Sailors'
Civil Relief Act of 1940 and state debtor relief laws, may also adversely affect
the Servicer's ability to collect the principal of or interest on the Loans and
also would affect the interests of the Securityholders in such Loans if such
laws result in the Loans being uncollectible. See 'CERTAIN LEGAL ASPECTS OF THE
LOANS.'
Ratings Are not Recommendations. It will be a condition to the issuance of
a Series of Securities that each Class be rated in one of the four highest
rating categories by the Rating Agency identified in the related Prospectus
Supplement. Any such rating would be based on, among other things, the adequacy
of the value of the Primary Assets and any Enhancement with respect to such
Series. Such rating should not be deemed a
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recommendation to purchase, hold or sell Securities, inasmuch as it does not
address market price or suitability for a particular investor. There is also no
assurance that any such rating will remain in effect for any given period of
time or may not be lowered or withdrawn entirely by the Rating Agency if in its
judgment circumstances in the future so warrant. In addition to being lowered or
withdrawn due to any erosion in the adequacy of the value of the Primary Assets,
such rating might also be lowered or withdrawn, among other reasons, because of
an adverse change in the financial or other condition of an Enhancer or a change
in the rating of such Enhancer's long term debt.
THE SELLER AND THE SERVICER
Delta Funding Corporation, a New York corporation ('Delta'), was organized
in 1982. Delta is a privately held mortgage banking company engaged in the
business of originating, acquiring, servicing and selling first and second
mortgage loans secured primarily by one- to four-family residential properties.
Delta's principal strategy is to originate or acquire loans to owners of
moderately priced housing who have substantial equity in their homes, but whose
credit histories do not meet the requirements of more traditional sources of
mortgage credit which underwrite loans to conventional guidelines established by
FNMA and FHLMC. These nonconventional loans are commonly referred to by market
participants as 'B' and 'C' loans. As a result, both the rates of interest and
origination fees or 'points' charged by Delta are typically higher than those
charged by lenders making conforming mortgage loans. Home Equity Loan proceeds
are generally used to consolidate indebtedness or to finance other consumer
needs rather than to purchase homes.
Delta originates loans through a network of mortgage brokers, attorneys,
accountants and other real estate professionals who submit applications for
nonconforming mortgage loans to Delta ('Brokered Loans'). During 1995, Brokered
Loans accounted for approximately 61% of newly originated loans. Delta also
purchases newly originated loans on a wholesale basis from approved mortgage
bankers and financial institutions ('Correspondent Loans'). All Correspondent
Loans are underwritten by employees of Delta in accordance with its underwriting
standards. Correspondents are qualified to do business with Delta only after a
review of their reputation, mortgage lending experience and financial condition,
including a review of references and financial statements. During 1995,
Correspondent Loans accounted for approximately 39% of newly originated loans
with no loan broker or correspondent accounting for more than 7.75% of Delta's
origination volume.
Delta normally charges origination fees ranging from 0% to 4% of the loan
amount on Brokered Loans. Delta does not compensate the loan broker, who
negotiates his or her compensation directly with the borrower over and above
origination fees paid to Delta. In the case of Correspondent Loans, mortgage
loans are closed and funded in the name of the correspondent and are immediately
purchased by Delta.
Prior to 1991, Delta combined mortgage loans into pools and sold those
pools as well as individual mortgage loans directly to a network of commercial
banks, thrifts, insurance companies, pension funds and accredited investors.
Delta generally sold these pools or individual loans for 100% of the principal
balance and negotiated the pass-through rate of interest to be paid to the
investors. Delta retained a normal servicing fee as well as the portion of the
note rate paid by the borrower in excess of the pass-through rate. Delta sold
loans to investors with recourse whereby Delta would repurchase any loan which
became REO property. This obligation is subject to various terms and conditions,
including. in some Instances, a time limit. At December 31, 1995, there were
approximately $64 million of loans which Delta could be required to repurchase
in the future should such loans become an REO property.
Since February 1991, Delta has raised capital by selling its mortgage loans
in nine securitizations. Proceeds from the securitizations have enabled Delta to
replenish its capital, paydown lines of credit and originate or acquire new
loans. Delta continues to service all of the loans which have been securitized.
Securitizations have completely replaced Delta's former practice of assigning
its loans to a variety of pension plans, banks, insurance companies and
individual investors.
As of December 31, 1995, Delta had 240 employees. Delta's headquarters are
located in approximately 40,000 square feet in a 230,000 square foot building
located at 1000 Woodbury Road, Woodbury, New York 11797. Its telephone number is
(516) 364-8500. Delta also has offices located in Maplewood, New Jersey, St.
Louis, Missouri and Virginia Beach, Virginia.
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DESCRIPTION OF THE SECURITIES
GENERAL
Each Series of Notes will be issued pursuant to an indenture (the
'Indenture') between the related Trust Fund and the entity named in the related
Prospectus Supplement as trustee (the 'Trustee') with respect to such Series. A
form of Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The Certificates will also be issued in
Series pursuant to separate agreements (each, a 'Pooling and Servicing
Agreement' or a 'Trust Agreement') among the Seller, the Servicer, if the Series
relates to Loans, and the Trustee. A form of Pooling and Servicing Agreement has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. A Series may consist of both Notes and Certificates.
The following summaries describe the material provisions in the Agreements
common to each Series of Securities. The summaries do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, the
provisions of the Agreements and the Prospectus Supplement relating to each
Series of Securities. Where particular provisions or terms used in the
Agreements are referred to, the actual provisions (including definitions of
terms) are incorporated herein by reference as part of such summaries.
Each Series of Securities will consist of one or more Classes of
Securities, one or more of which may be Compound Interest Securities, Variable
Interest Securities, PAC Securities, Zero Coupon Securities, Principal Only
Securities, Interest Only Securities or Participating Securities. A Series may
also include one or more Classes of Subordinate Securities. The Securities of
each Series will be issued only in fully registered form, without coupons, in
the authorized denominations for each Class specified in the related Prospectus
Supplement. Upon satisfaction of the conditions, if any, applicable to a Class
of a Series, as described in the related Prospectus Supplement, the transfer of
the Securities may be registered and the Securities may be exchanged at the
office of the Trustee specified in the Prospectus Supplement without the payment
of any service charge other than any tax or governmental charge payable in
connection with such registration of transfer or exchange. If specified in the
related Prospectus Supplement, one or more Classes of a Series may be available
in book-entry form only.
Unless otherwise provided in the related Prospectus Supplement, payments of
principal of and interest on a Series of Securities will be made on the
Distribution Dates specified in the related Prospectus Supplement (which may be
different for each Class or for the payment of principal and interest) by check
mailed to Holders of such Series, registered as such at the close of business on
the record date specified in the related Prospectus Supplement applicable to
such Distribution Dates at their addresses appearing on the security register,
except that (a) payments may be made by wire transfer (which, unless otherwise
specified in the related Prospectus Supplement, shall be at the expense of the
Holder requesting payment by wire transfer) in certain circumstances described
in the related Prospectus Supplement and (b) final payments of principal in
retirement of each Security will be made only upon presentation and surrender of
such Security at the office of the Trustee specified in the Prospectus
Supplement. Notice of the final payment on a Security will be mailed to the
Holder of such Security before the Distribution Date on which the final
principal payment on any Security is expected to be made to the holder of such
Security.
Payments of principal of and interest on the Securities will be made by the
Trustee, or a paying agent on behalf of the Trustee, as specified in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, all payments with respect to the Primary Assets for a Series,
together with reinvestment income thereon, amounts withdrawn from any Reserve
Fund, and amounts available pursuant to any other Enhancement will be deposited
directly into the Collection Account or the Certificate Account. If provided in
the related Prospectus Supplement, such amounts may be net of certain amounts
payable to the Servicer and any other person specified in the Prospectus
Supplement. Such amounts thereafter may be deposited into the Distribution
Account and will be available to make payments on the Securities of such Series
on the next applicable Distribution Date. See 'THE TRUST FUNDS--Accounts.'
VALUATION OF THE PRIMARY ASSETS
If specified in the related Prospectus Supplement for a Series of Notes,
each Primary Asset included in the related Trust Fund for a Series will be
assigned an initial 'Asset Value.' Unless otherwise specified in the related
Prospectus Supplement, at any time the Asset Value of the Primary Assets will be
equal to the product of
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the Asset Value Percentage as set forth in the Indenture and the lesser of (a)
the stream of remaining regularly scheduled payments on the Primary Assets, net,
unless otherwise provided in the related Prospectus Supplement, of certain
amounts payable as expenses, together with income earned on each such scheduled
payment received through the day preceding the next Distribution Date at the
Assumed Reinvestment Rate, if any, discounted to present value at the highest
interest rate on the Notes of such Series over periods equal to the interval
between payments on the Notes, and (b) the then principal balance of the Primary
Assets. Unless otherwise specified in the related Prospectus Supplement, the
initial Asset Value of the Primary Assets will be at least equal to the
principal amount of the Notes of the related Series at the date of issuance
thereof.
The 'Assumed Reinvestment Rate,' if any, for a Series will be the highest
rate permitted by the Rating Agency or a rate insured by means of a surety bond,
guaranteed investment contract, or other arrangement satisfactory to the Rating
Agency. If the Assumed Reinvestment Rate is so insured, the related Prospectus
Supplement will set forth the terms of such arrangement.
PAYMENTS OF INTEREST
The Securities of each Class by their terms entitled to receive interest
will bear interest (calculated, unless otherwise specified in the related
Prospectus Supplement, on the basis of a 360 day year of twelve 30-day months)
from the date and at the rate per annum specified, or calculated in the method
described, in the related Prospectus Supplement. Interest on such Securities of
a Series will be payable on the Distribution Date specified in the related
Prospectus Supplement. If so specified in the related Prospectus Supplement, the
Distribution Date for the payment of interest of a Class may be different from,
or occur more or less frequently than, the Distribution Date for the payment of
principal of such Class. The rate of interest on Securities of a Series may be
variable or may change with changes in the annual percentage rates of the Loans
or Underlying Loans relating to the Private Securities, as applicable, included
in the related Trust Fund and/or as prepayments occur with respect to such Loans
or Underlying Loans, as applicable. Principal Only Securities may not be
entitled to receive any interest distributions or may be entitled to receive
only nominal interest distributions. Any interest on Zero Coupon Securities that
is not paid on the related Distribution Date will accrue and be added to the
principal thereof on such Distribution Date.
Interest payable on the Securities on a Distribution Date will include all
interest accrued during the period specified in the related Prospectus
Supplement. In the event interest accrues during the calendar month preceding a
Distribution Date, the effective yield to Holders will be reduced from the yield
that would otherwise be obtainable if interest payable on the Securities were to
accrue through the day immediately preceding such Distribution Date.
PAYMENTS OF PRINCIPAL
On each Distribution Date for a Series, principal payments will be made to
the Holders of the Securities of such Series on which principal is then payable,
to the extent set forth in the related Prospectus Supplement. Such payments will
be made in an aggregate amount determined as specified in the related Prospectus
Supplement and will be allocated among the respective Classes of a Series in the
manner, at the times and in the priority (which may, in certain cases, include
allocation by random lot) set forth in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, the Distribution Date for the
payment of principal of a Class may be different from, or occur more or less
frequently than, the Distribution Date for the payment of interest for such
Class.
FINAL SCHEDULED DISTRIBUTION DATE
The Final Scheduled Distribution Date with respect to each Class of Notes
is the date no later than the date on which the principal thereof will be fully
paid and with respect to each Class of Certificates will be the date on which
the entire aggregate principal balance of such Class is expected to be reduced
to zero, in each case calculated on the basis of the assumptions applicable to
such Series described in the related Prospectus Supplement. The Final Scheduled
Distribution Date for each Class of a Series will be specified in the related
Prospectus Supplement. Since payments on the Primary Assets will be used to make
distributions in reduction of the outstanding principal amount of the
Securities, it is likely that the actual final Distribution Date of any such
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Class will occur earlier, and may occur substantially earlier, than its Final
Scheduled Distribution Date. Furthermore, with respect to a Series of
Certificates, unless otherwise specified in the related Prospectus Supplement,
as a result of delinquencies, defaults and liquidations of the Primary Assets in
the Trust Fund, the actual final Distribution Date of any Certificate may occur
later than its Final Scheduled Distribution Date. No assurance can be given as
to the actual prepayment experience with respect to a Series. See '--Weighted
Average Life of the Securities' below.
SPECIAL REDEMPTION
If so specified in the Prospectus Supplement relating to a Series of
Securities having other than monthly Distribution Dates, one or more Classes of
Securities of such Series may be subject to special redemption, in whole or in
part, on the day specified in the related Prospectus Supplement (a 'Special
Redemption Date') if, as a consequence of prepayments on the Loans or Underlying
Loans, as applicable, relating to such Securities or low yields then available
for reinvestment the entity specified in the related Prospectus Supplement
determines, based on assumptions specified in the applicable Agreement, that the
amount available for the payment of interest that will have accrued on such
Securities (the 'Available Interest Amount') through the designated interest
accrual date specified in the related Prospectus Supplement is less than the
amount of interest that will have accrued on such Securities to such date. In
such event and as further described in the related Prospectus Supplement, the
Trustee will redeem a principal amount of outstanding Securities of such Series
as will cause the Available Interest Amount to equal the amount of interest that
will have accrued through such designated interest accrual date for such Series
of Securities outstanding immediately after such redemption.
OPTIONAL REDEMPTION, PURCHASE OR TERMINATION
The Seller or the Servicer may, at its option, redeem, in whole or in part,
one or more Classes of Notes or purchase one or more Classes of Certificates of
any Series, on any Distribution Date under the circumstances, if any, specified
in the Prospectus Supplement relating to such Series. Alternatively, if so
specified in the related Prospectus Supplement for a Series of Securities, the
Seller, the Servicer, or another entity designated in the related Prospectus
Supplement may, at its option, cause an early termination of a Trust Fund by
repurchasing all of the Primary Assets from such Trust Fund on or after a date
specified in the related Prospectus Supplement, or on or after such time as the
aggregate outstanding principal amount of the Securities or Primary Assets, as
specified in the related Prospectus Supplement is less than the amount or
percentage specified in the related Prospectus Supplement. In addition, if so
specified in the related Prospectus Supplement upon certain events of insolvency
or receivership of the Seller or another affiliated entity specified in the
related Prospectus Supplement, the related Primary Assets of the Trust Fund will
be liquidated and the Trust Fund will be terminated, subject to the conditions
set forth in the related Prospectus Supplement. In each such event, the
Securities of the related Series will experience a prepayment. The redemption,
purchase or repurchase price will be set forth in the related Prospectus
Supplement. If specified in the related Prospectus Supplement, in the event that
a REMIC election has been made, the Trustee will receive a satisfactory opinion
of counsel that the optional redemption, purchase or termination will be
conducted so as to constitute a 'qualified liquidation' under Section 860F of
the Code.
In addition, the Prospectus Supplement may provide other circumstances
under which Holders of Securities of a Series could be fully paid significantly
earlier than would otherwise be the case if payments or distributions were
solely based on the activity of the related Primary Assets.
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Weighted average life refers to the average amount of time that will elapse
from the date of issue of a security until each dollar of principal of such
security will be repaid to the investor. Unless otherwise specified in the
related Prospectus Supplement, the weighted average life of a Class of the
Securities will be influenced by the rate at which the amount financed under the
Loans or Underlying Loans relating to the Private Securities, as applicable,
included in the Trust Fund for a Series is paid, which may be in the form of
scheduled amortization or prepayments.
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Prepayments on loans and other receivables can be measured relative to a
prepayment standard or model. The Prospectus Supplement for a Series of
Securities will describe the prepayment standard or model, if any, used and may
contain tables setting forth the weighted average life of each Class of
Securities of such Series, and the percentage of the original principal amount
of each Class of Securities of such Series that would be outstanding on
specified Distribution Dates for such Series, in each case based on the
assumptions stated in such Prospectus Supplement, including assumptions that
prepayments on the Loans or Underlying Loans relating to the Private Securities,
as applicable, included in the related Trust Fund are made at rates
corresponding to various percentages of the prepayment standard or model
specified in such Prospectus Supplement.
There is, however, no assurance that prepayment of the Loans or Underlying
Loans relating to the Private Securities, as applicable, included in the related
Trust Fund will conform to any level of any prepayment standard or model
specified in the related Prospectus Supplement. The rate of principal
prepayments on pools of loans may be influenced by a variety of factors,
including job related factors such as transfers, layoffs or promotions and
personal factors such as divorce, disability or prolonged illness. Economic
conditions, either generally or within a particular geographic area or industry,
also may affect the rate of principal prepayments. Demographic and social
factors may influence the rate of principal prepayments in that some borrowers
have greater financial flexibility to move or refinance than do other borrowers.
The deductibility of mortgage interest payments, servicing decisions and other
factors also affect the rate of principal prepayments. As a result, there can be
no assurance as to the rate or timing of principal prepayments of the Loans or
Underlying Loans either from time to time or over the lives of such Loans or
Underlying Loans.
The rate of prepayments of conventional housing loans and other receivables
has fluctuated significantly in recent years. In general, however, if prevailing
interest rates fall significantly below the interest rates on the Loans or
Underlying Loans relating to the Private Securities, as applicable, for a
Series, such loans are likely to prepay at rates higher than if prevailing
interest rates remain at or above the interest rates borne by such loans. In
this regard, it should be noted that the Loans or Underlying Loans, as
applicable, for a Series may have different interest rates. In addition, the
weighted average life of the Securities may be affected by the varying
maturities of the Loans or Underlying Loans relating to the Private Securities,
as applicable. If any Loans or Underlying Loans relating to the Private
Securities, as applicable, for a Series have actual terms-to-stated maturity of
less than those assumed in calculating the Final Scheduled Distribution Date of
the related Securities, one or more Classes of the Series may be fully paid
prior to their respective Final Scheduled Distribution Date, even in the absence
of prepayments and a reinvestment return higher than the Assumed Reinvestment
Rate.
THE TRUST FUNDS
GENERAL
The Notes of each Series will be secured by the pledge of the assets of the
related Trust Fund, and the Certificates of each Series will represent interests
in the assets of the related Trust Fund. The Trust Fund of each Series will
include (i) the Primary Assets, (ii) amounts available from the reinvestment of
payments on such Primary Assets at the Assumed Reinvestment Rate, if any,
specified in the related Prospectus Supplement, (iii) any Enhancement or the
rights thereto, (iv) any Mortgaged Property that secured a Home Equity Loan but
which is acquired by foreclosure or deed in lieu of foreclosure or repossession
and (v) the amount, if any, initially deposited in the Pre-Funding Account,
Capitalized Interest Account, Collection Account, Certificate Account or
Distribution Account for a Series as specified in the related Prospectus
Supplement.
The Securities will be non-recourse obligations of the related Trust Fund.
The assets of the Trust Fund specified in the related Prospectus Supplement for
a Series of Securities, unless otherwise specified in the related Prospectus
Supplement, will serve as collateral only for that Series of Securities. Holders
of a Series of Notes may only proceed against such collateral securing such
Series of Notes in the case of a default with respect to such Series of Notes
and may not proceed against any assets of the Seller or the related Trust Fund
not pledged to secure such Notes.
The Primary Assets for a Series will be transferred by the Seller to the
Trust Fund. Loans relating to a Series will be serviced by the Servicer pursuant
to a Pooling and Servicing Agreement, with respect to a Series
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consisting of only Certificates or a Sale and Servicing Agreement (each, a 'Sale
and Servicing Agreement') between the Seller, the Trust Fund and the Servicer,
with respect to a Series that includes Notes.
As used herein, 'Agreement' means, with respect to a Series of
Certificates, the Pooling and Servicing Agreement or Trust Agreement, and with
respect to a Series that includes Notes, the Indenture and the Sale and
Servicing Agreement, as the context requires.
If so specified in the related Prospectus Supplement, a Trust Fund relating
to a Series of Securities may be a business trust formed under the laws of the
state specified in the related Prospectus Supplement pursuant to a trust
agreement (each, a 'Trust Agreement') between the Seller and the Trustee of such
Trust Fund specified in the related Prospectus Supplement.
With respect to each Trust Fund, prior to the initial offering of the
related Series of Securities, the Trust Fund will have no assets or liabilities.
No Trust Fund is expected to engage in any activities other than acquiring,
managing and holding the related Primary Assets and other assets contemplated
herein and in the related Prospectus Supplement and the proceeds thereof,
issuing Securities and making payments and distributions thereon and certain
related activities. No Trust Fund is expected to have any source of capital
other than its assets and any related Enhancement.
Primary Assets included in the Trust Fund for a Series may consist of any
combination of Loans and Private Securities, to the extent and as specified in
the related Prospectus Supplement.
THE LOANS
The Primary Assets for a Series may consist, in whole or in part, of
closed-end home equity loans (the 'Home Equity Loans') secured by mortgages
primarily on Single Family Mortgaged Properties which may be subordinated to
other mortgages on the same Mortgaged Property. The Home Equity Loans may have
fixed interest rates or adjustable interest rates and may provide for other
payment characteristics as described below and in the related Prospectus
Supplement.
Unless otherwise described in the related Prospectus Supplement, the full
principal amount of a Home Equity Loan is advanced at origination of the loan
and generally is repayable in equal (or substantially equal) installments of an
amount sufficient to fully amortize such loan at its stated maturity. As more
fully described in the related Prospectus Supplement, interest on each Home
Equity Loan is calculated on the basis of the outstanding principal balance of
such loan multiplied by the Home Equity Loan Rate thereon and, in the case of
simple interest loans, further multiplied by a fraction, the numerator of which
is the number of days in the period elapsed since the preceding payment of
interest was made and the denominator is the number of days in the annual period
for which interest accrues on such loan. Interest on Home Equity Loans also may
be calculated on the actuarial basis, in which case each monthly payment
consists of a decreasing amount of interest and an increasing amount of
principal, and the payment either earlier or later then the due date therefor
will not affect the relative applications of principal and interest. Unless
otherwise described in the related Prospectus Supplement, the original terms to
stated maturity of Home Equity Loans will not exceed 360 months.
The Mortgaged Properties will include Single Family Property (i.e., one- to
four-family residential housing, including Condominium Units and Cooperative
Dwellings) and mixed-use property. Mixed-use properties will consist of
structures of no more than three stories, which include one to four residential
dwelling units and space used for retail, professional or other commercial uses.
Such uses, which will not involve more than 50% of the space in the structure,
may include doctor, dentist or law offices, real estate agencies, boutiques,
newsstands, convenience stores or other similar types of uses intended to cater
to individual customers as specified in the related Prospectus Supplement. The
properties may be located in suburban or metropolitan districts. Any such
non-residential use will be in compliance with local zoning laws and
regulations. The Mortgaged Properties may consist of detached individual
dwellings, individual condominiums, townhouses, duplexes, row houses, individual
units in planned unit developments and other attached dwelling units. The
Mortgaged Properties also may include module or manufactured homes which are
treated as real estate under local law. Each Single Family Property will be
located on land owned in fee simple by the borrower or on land leased by the
borrower for a term at least ten years (unless otherwise provided in the related
Prospectus Supplement) greater than the term of the related Loan. Attached
dwellings may include owner-occupied structures where each borrower owns the
land
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upon which the unit is built, with the remaining adjacent land owned in common
or dwelling units subject to a proprietary lease or occupancy agreement in a
cooperatively owned apartment building.
Unless otherwise specified in the related Prospectus Supplement, Mortgages
on Cooperative Dwellings consist of a lien on the shares issued by such
Cooperative Dwelling and the proprietary lease or occupancy agreement relating
to such Cooperative Dwelling.
The aggregate principal balance of Loans secured by Mortgaged Properties
that are owner-occupied will be disclosed in the related Prospectus Supplement.
Unless otherwise specified in the Prospectus Supplement, the sole basis for
determining that a given percentage of the Loans are secured by Single Family
Property that is owner-occupied will be either (i) the making of a
representation by the Mortgagor at origination of the Home Equity Loan either
that the underlying Mortgaged Property will be used by the Mortgagor for a
period of at least six months every year or that the Mortgagor intends to use
the Mortgaged Property as a primary residence, or (ii) a finding that the
address of the underlying Mortgaged Property is the Mortgagor's mailing address
as reflected in the Servicer's records. To the extent specified in the related
Prospectus Supplement, the Mortgaged Properties may include non-owner occupied
investment properties and vacation and second homes.
Unless otherwise specified in the related Prospectus Supplement, the
initial Combined Loan-to-Value Ratio of a Home Equity Loan is computed in the
manner described in the related Prospectus Supplement, taking into account the
amounts of any related senior mortgage loans.
Additional Information. The selection criteria which will apply with
respect to the Loans, including, but not limited to, the Combined Loan-to-Value
Ratios or Loan-to-Value Ratios, as applicable, original terms to maturity and
delinquency information, will be specified in the related Prospectus Supplement.
The Loans for a Series may include Loans that do not amortize their entire
principal balance by their stated maturity in accordance with their terms and
require a balloon payment of the remaining principal balance at maturity, as
specified in the related Prospectus Supplement. As further described in the
related Prospectus Supplement, the Loans for a Series may include Loans that do
not have a specified stated maturity.
The related Prospectus Supplement for each Series will provide information
with respect to the Loans that are Primary Assets as of the Cut-off Date,
including, among other things, and to the extent relevant: (a) the aggregate
unpaid principal balance of the Loans (b) the range and weighted average Home
Equity Loan Rate on the Loans, and, in the case of adjustable rate Loans, the
range and weighted average of the current Home Equity Loan Rates and the
Lifetime Rate Caps, if any; (c) the range and average outstanding principal
balance of the Loans; (d) the weighted average original and remaining
term-to-stated maturity of the Loans and the range of original and remaining
terms-to-stated maturity, if applicable; (e) the range and weighted average of
Combined Loan-to-Value Ratios or Loan-to-Value Ratios for the Loans, as
applicable; (f) the percentage (by outstanding principal balance as of the
Cut-off Date) of Loans that accrue interest at adjustable or fixed interest
rates; (g) any special hazard insurance policy or bankruptcy bond or other
enhancement relating to the Loans; (h) the geographic distribution of the
Mortgaged Properties securing the Loans; (i) the percentage of Loans (by
principal balance as of the Cut-off Date) that are secured by Single Family
Mortgaged Properties, shares relating to Cooperative Dwellings, Condominium
Units, investment property and vacation or second homes; (j) the lien priority
of the Home Equity Loans; and (k) the delinquency status and year of origination
of the Loans. The related Prospectus Supplement will also specify any other
limitations on the types or characteristics of Loans for a Series.
If information of the nature described above respecting the Loans is not
known to the Seller at the time the Securities are initially offered,
approximate or more general information of the nature described above will be
provided in the Prospectus Supplement and additional information will be set
forth in a Current Report on Form 8-K to be available to investors on the date
of issuance of the related Series and to be filed with the Commission within 15
days after the initial issuance of such Securities.
PRIVATE SECURITIES
General. Primary Assets for a Series may consist, in whole or in part, of
Private Securities which include pass-through certificates representing
beneficial interests in loans of the type that would otherwise be eligible to be
Loans (the 'Underlying Loans') or (b) collateralized obligations secured by
Underlying Loans issued by a
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trust with either of the following characteristics: (i) the trust will have been
formed by the Seller or an unaffiliated person and the Servicer is acting as
servicer for such trust (a 'Seller/Servicer Trust'); or (ii) the trust will have
been formed by, and the person acting as servicer for the trust will be, a
person that is unaffiliated with the Seller or the Servicer (an 'Unaffiliated
Trust'). The Private Securities may have been offered and sold to the public
pursuant to an effective registration statement or privately placed in a
transaction not involving a public offering. In either case, no underwriter for
a Series of Securities the Primary Assets for which include Private Securities
will have been involved in the public distribution or private placement of such
Private Securities. If the Private Securities were issued by an Unaffiliated
Trust and privately placed in a transaction not involving a public offering,
such securities will have been purchased from a person who is not an affiliate
of the issuer of such securities at the time of sale (nor an affiliate thereof
at any time during the three preceding months); provided a period of three years
elapsed since the date the securities were acquired from the issuer or an
affiliate thereof. Although individual Underlying Loans may be insured or
guaranteed by the United States or an agency or instrumentality thereof, they
need not be, and Private Securities themselves will not be so insured or
guaranteed.
Private Securities will have been issued pursuant to a pooling and
servicing agreement, a trust agreement or similar agreement (a 'PS Agreement').
The seller/servicer of the Underlying Loans will have entered into the PS
Agreement with the trustee under such PS Agreement (the 'PS Trustee'). The PS
Trustee or its agent, or a custodian, will possess the Underlying Loans.
Underlying Loans will be serviced by a servicer (the 'PS Servicer') directly or
by one or more sub-servicers who may be subject to the supervision of the PS
Servicer.
The sponsor of the Private Securities (the 'PS Sponsor') will be a
financial institution or other entity engaged generally in the business of
lending; a public agency or instrumentality of a state, local or federal
government; or a limited purpose corporation organized for the purpose of, among
other things, establishing trusts and acquiring and selling loans to such
trusts, and selling beneficial interests in such trusts. If so specified in the
Prospectus Supplement, the PS Sponsor may be an affiliate of the Seller. The
obligations of the PS Sponsor will generally be limited to certain
representations and warranties with respect to the assets conveyed by it to the
related trust. Unless otherwise specified in the related Prospectus Supplement,
the PS Sponsor will not have guaranteed any of the assets conveyed to the
related trust or any of the Private Securities issued under the PS Agreement.
Additionally, although the Underlying Loans may be guaranteed by an agency or
instrumentality of the United States, the Private Securities themselves will not
be so guaranteed.
Distributions of principal and interest will be made on the Private
Securities on the dates specified in the related Prospectus Supplement. The
Private Securities may be entitled to receive nominal or no principal
distributions or nominal or no interest distributions. Principal and interest
distributions will be made on the Private Securities by the PS Trustee or the PS
Servicer. The PS Sponsor or the PS Servicer may have the right to repurchase the
Underlying Loans after a certain date or under other circumstances specified in
the related Prospectus Supplement. The Underlying Loans may be fixed rate, level
payment, fully amortizing loans or adjustable rate loans or loans having balloon
or other irregular payment features.
Credit Support Relating to Private Securities. Credit support in the form
of Reserve Funds, subordination of other private securities issued under the PS
Agreement, guarantees, letters of credit, cash collateral accounts, insurance
policies or other types of credit support may be provided with respect to the
Underlying Loans or with respect to the Private Securities themselves. The type,
characteristics and amount of credit support will be a function of certain
characteristics of the Underlying Loans and other factors and will have been
established for the Private Securities on the basis of requirements of the
nationally recognized statistical rating organization that rated the Private
Securities.
Additional Information. The Prospectus Supplement for a Series for which
the Primary Assets include Private Securities will specify (such disclosure may
be on an approximate basis and will be as of the date specified in the related
Prospectus Supplement), to the extent relevant and to the extent such
information is reasonably available to the Seller and the Seller reasonably
believes such information to be reliable: (i) the aggregate approximate
principal amount and type of the Private Securities to be included in the Trust
Fund for such Series; (ii) certain characteristics of the Underlying Loans
including (A) the payment features of such Underlying Loans (i.e., whether they
are fixed rate or adjustable rate and whether they provide for fixed level
payments or other payment features), (B) the approximate aggregate principal
balance, if known, of such Underlying Loans insured or guaranteed by a
governmental entity, (C) the servicing fee or range of servicing fees
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with respect to the Underlying Loans, (D) the minimum and maximum stated
maturities of such Underlying Loans at origination, (E) the lien priority of
such Underlying Loans, and (F) the delinquency status and year of origination of
such Underlying Loans; (iii) the maximum original term-to-stated maturity of the
Private Securities; (iv) the weighted average term-to-stated maturity of the
Private Securities; (v) the pass-through or certificate rate or ranges thereof
for the Private Securities; (vi) the PS Sponsor, the PS Servicer (if other than
the PS Sponsor) and the PS Trustee for such Private Securities; (vii) certain
characteristics of credit support if any, such as Reserve Funds, insurance
policies, letters of credit or guarantees relating to such Loans underlying the
Private Securities or to such Private Securities themselves; (viii) the terms on
which Underlying Loans may, or are required to, be purchased prior to their
stated maturity or the stated maturity of the Private Securities; and (ix) the
terms on which Underlying Loans may be substituted for those originally
underlying the Private Securities.
If information of the nature described above representing the Private
Securities is not known to the Seller at the time the Securities are initially
offered, approximate or more general information of the nature described above
will be provided in the Prospectus Supplement and the additional information, if
available, will be set forth in a Current Report on Form 8-K to be available to
investors on the date of issuance of the related Series and to be filed with the
Commission within 15 days of the initial issuance of such Securities.
ACCOUNTS
A separate Collection Account or Certificate Account will be established
for each Series of Securities for receipt of the amount of cash, if any,
specified in the related Prospectus Supplement to be initially deposited therein
by the Seller and/or the Servicer, all amounts received on or with respect to
the Primary Assets and, unless otherwise specified in the related Prospectus
Supplement, income earned thereon. Certain amounts on deposit in such Collection
Account and certain amounts available pursuant to any Enhancement, as provided
in the related Prospectus Supplement, may be deposited in one or more
Distribution Accounts. Unless otherwise specified in the related Prospectus
Supplement, the Trustee will invest the funds in the Collection, Certificate and
Distribution Accounts in Eligible Investments maturing, with certain exceptions,
not later, in the case of funds in the Collection Account, than the day
preceding the date such funds are due to be deposited in the Distribution
Account or otherwise distributed and, in the case of funds in the Distribution
Account and the Certificate Account, than the day preceding the next
Distribution Date for the related Series of Securities. 'Eligible Investments'
include, among other investments, obligations of the United States and certain
agencies thereof, federal funds, certificates of deposit, commercial paper,
demand and time deposits and banker's acceptances, certain repurchase agreements
of United States government securities and certain guaranteed investment
contracts, in each case, acceptable to the Rating Agency.
If specified in the related Prospectus Supplement, a Trust Fund will
include one or more segregated trust accounts (each, a 'Pre-Funding Account')
established and maintained with the Trustee for the related Series. If so
specified, on the closing date for such Series, a portion of the proceeds of the
sale of the Securities of such Series not to exceed fifty percent of the
aggregate principal amount of such Series (such amount, the 'Pre-Funded Amount')
may be deposited in the Pre-Funding Account and may be used to purchase
additional Primary Assets during the period of time not to exceed six months
specified in the related Prospectus Supplement (the 'Pre-Funding Period'). If
any Pre-Funded Amount remains on deposit in the Pre-Funding Account at the end
of the Pre-Funding Period, such amount will be applied in the manner specified
in the related Prospectus Supplement to prepay the Notes and/or the Certificates
of the applicable Series.
Each additional Primary Asset must satisfy the eligibility criteria
specified in the related Prospectus Supplement and related Agreements. Such
eligibility criteria will be determined in consultation with each Rating Agency
(and/or any Enhancer) prior to the issuance of the related Series and are
designed to ensure that if such additional Primary Assets were included as part
of the initial Primary Assets, the credit quality of such assets would be
consistent with the initial rating of the Securities of such Series. The Seller
will certify to the Trustee that all conditions precedent to the transfer of the
additional Primary Assets, including the satisfaction of the eligibility
criteria to the Trust Fund, have been satisfied. It is a condition to the
transfer of any additional Primary Assets to the Trust Fund that each Rating
Agency, after receiving prior notice of the proposed transfer of the additional
Primary Assets to the Trust Fund, shall not have advised the Seller or the
Trustee or any Enhancer that the conveyance of such additional Primary Assets
will result in a qualification, modification or withdrawal of its
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then current rating of any Class of Notes or Certificates of such Series.
Following the transfer of additional Primary Assets to the Trust Fund, the
aggregate characteristics of the Primary Assets then held in the Trust Fund may
vary from those of the initial Primary Assets of such Trust Fund. As a result,
the additional Primary Assets may adversely affect the performance of the
related Securities.
If a Pre-Funding Account is established, one or more segregated trust
accounts (each, a 'Capitalized Interest Account') may be established and
maintained with the Trustee for the related Series. On the closing date for such
Series, a portion of the proceeds of the sale of the Securities of such Series
will be deposited in the Capitalized Interest Account and used to fund the
excess, if any, of the sum of (i) the amount of interest accrued on the
Securities of such Series and (ii) if specified in the related Prospectus
Supplement, certain fees or expenses during the Pre-Funding Period such as
Trustee fees and credit enhancement fees, over the amount of interest available
therefor from the Primary Assets in the Trust Fund. If so specified in the
related Prospectus Supplement, amounts on deposit in the Capitalized Interest
Account may be released to the Seller prior to the end of the Pre-Funding Period
subject to the satisfaction of certain tests specified in the related Prospectus
Supplement. Any amounts on deposit in the Capitalized Interest Account at the
end of the Pre-Funding Period that are not necessary for such purposes will be
distributed to the person specified in the related Prospectus Supplement.
ENHANCEMENT
The amounts and types of enhancement arrangements and the provider thereof,
if applicable, with respect to a Series or any Class of Securities will be set
forth in the related Prospectus Supplement. If and to the extent provided in the
related Prospectus Supplement, enhancement may be in the form of a financial
guaranty insurance policy, overcollateralization, a letter of credit, cash
reserve fund, insurance policies, one or more Classes of Subordinate Securities,
derivative products, or other form of enhancement, or any combination thereof,
as may be described in the related Prospectus Supplement (collectively,
'Enhancement'). If specified in the applicable Prospectus Supplement,
Enhancement for any Series of Securities may cover one or more Classes of Notes
or Certificates, and accordingly may be exhausted for the benefit of a
particular Class of Notes or Certificates and thereafter be unavailable to such
other Classes of Notes or Certificates. Further information regarding any
provider of credit enhancement, including financial information when material,
will be included in the related Prospectus Supplement.
The presence of Enhancement is intended to increase the likelihood of
receipt by the Certificateholders and the Noteholders of the full amount of
principal and interest due thereon and to decrease the likelihood that the
Certificateholders and the Noteholders will experience losses, or may be
structured to provide protection against changes in interest rates or against
other risks, to the extent and under the conditions specified in the related
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, the Enhancement for a Class of Securities will not provide
protection against all risks of loss and will not guarantee repayment of the
entire principal and interest thereon. If losses occur which exceed the amount
covered by any Enhancement or which are not covered by any Enhancement,
Securityholders will bear their allocable share of deficiencies. In addition, if
a form of Enhancement covers more than one Class of Securities of a Series,
Securityholders of any such Class will be subject to the risk that such
Enhancement will be exhausted by the claims of Securityholders of other Classes.
SERVICING OF LOANS
GENERAL
Customary servicing functions with respect to Loans comprising the Primary
Assets in the Trust Fund will be provided by the Servicer directly pursuant to
the related Sale and Servicing Agreement or Pooling and Servicing Agreement, as
the case may be, with respect to a Series of Securities.
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COLLECTION PROCEDURES; ESCROW ACCOUNTS
The Servicer will make reasonable efforts to collect all payments required
to be made under the Loans and will, consistent with the terms of the related
Agreement for a Series and any applicable Enhancement, follow such collection
procedures as it follows with respect to comparable loans held in its own
portfolio. Consistent with the above, the Servicer may, in its discretion, (i)
waive any assumption fee, late payment charge, or other charge in connection
with a Home Equity Loan and (ii) to the extent provided in the related Agreement
arrange with an obligor a schedule for the liquidation of delinquencies by
extending the Due Dates for Scheduled Payments on such Loan.
If specified in the related Prospectus Supplement, the Servicer, to the
extent permitted by law, will establish and maintain escrow or impound accounts
('Escrow Accounts') with respect to Loans in which payments by obligors with
respect to taxes, assessments, mortgage and hazard insurance premiums, and other
comparable items will be deposited. Loans may not require such payments under
the related loan documents, in which case the Servicer would not be required to
establish any Escrow Account with respect to such Loans. Withdrawals from the
Escrow Accounts are to be made to effect timely payment of taxes, assessments
and mortgage and hazard insurance, to refund to obligors amounts determined to
be overages, to pay interest to obligors on balances in the Escrow Account to
the extent required by law, to repair or otherwise protect the property securing
the related Home Equity Loan and to clear and terminate such Escrow Account. The
Servicer will be responsible for the administration of the Escrow Accounts and
generally will make advances to such accounts when a deficiency exists therein.
DEPOSITS TO AND WITHDRAWALS FROM THE COLLECTION ACCOUNT OR THE CERTIFICATE
ACCOUNT
Unless otherwise specified in the related Prospectus Supplement, the
Trustee or the Servicer will establish a separate account (the 'Collection
Account' or the 'Certificate Account') in the name of the Trustee. The
Collection Account and/or Certificate Account will be an account maintained (i)
at a depository institution, the long-term unsecured debt obligations of which
at the time of any deposit therein are rated by each Rating Agency rating the
Securities of such Series at levels satisfactory to each Rating Agency or (ii)
in an account or accounts the deposits in which are insured to the maximum
extent available by the Federal Deposit Insurance Corporation (the 'FDIC') or
which are secured in a manner meeting requirements established by each Rating
Agency.
Unless otherwise specified in the related Prospectus Supplement, the funds
held in the Collection Account or the Certificate Account may be invested,
pending remittance to the Trustee, in Eligible Investments. If so specified in
the related Prospectus Supplement, the Servicer will be entitled to receive as
additional compensation any interest or other income earned on funds in the
Collection Account or Certificate Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer, the Seller or the Trustee will deposit into the Collection Account for
each Series on the Business Day following the Closing Date any amounts
representing payments received on or after the related Cut-off Date and received
by the Servicer on or before the Closing Date, and thereafter, within the period
specified in the related Prospectus Supplement, the following payments and
collections received or made by it (other than, unless otherwise provided in the
related Prospectus Supplement, in respect of principal of and interest on the
related Primary Assets due or, in the case of simple interest Loans, received,
on or before such Cut-off Date):
(i) all payments on account of principal, including prepayments, on
such Primary Assets;
(ii) all payments on account of interest on such Primary Assets after
deducting therefrom, at the discretion of the Servicer but only to the
extent of the amount permitted to be withdrawn or withheld from the
Collection Account in accordance with the related Agreement, the Servicing
Fee in respect of such Primary Assets;
(iii) all amounts received by the Servicer in connection with the
liquidation of Primary Assets or property acquired in respect thereof,
whether through foreclosure sale, repossession or otherwise, including
payments in connection with such Primary Assets received from the obligor,
other than amounts required to be paid or refunded to the obligor pursuant
to the terms of the applicable loan documents or otherwise pursuant to law
('Liquidation Proceeds'), exclusive of, in the discretion of the Servicer,
but only to the extent of the amount permitted to be withdrawn from the
Collection Account or the Certificate Account in
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accordance with the related Agreement, the Servicing Fee, if any, in
respect of the related Primary Asset and, to the extent specified in the
related Prospectus Supplement, net of reimbursements for related
Delinquency Advances and Servicer Advances;
(iv) all proceeds under any title insurance, hazard insurance or other
insurance policy covering any such Primary Asset, other than proceeds to be
applied to the restoration or repair of the related Property or released to
the obligor in accordance with the related Agreement;
(v) all amounts required to be deposited therein from any applicable
Reserve Fund for such Series pursuant to the related Agreement;
(vi) all Delinquency Advances made by the Servicer required pursuant
to the related Agreement; and
(vii) all repurchase prices of any such Primary Assets repurchased by
the Servicer or the Seller pursuant to the related Agreement.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer is permitted, from time to time, to make withdrawals from the
Collection Account or the Certificate Account for each Series for the following
purposes:
(i) to reimburse itself for Advances for such Series made by it
pursuant to the related Agreement; the Servicer's right to reimburse itself
for Delinquency Advances is limited to amounts received on or in respect of
particular Loans (including, for this purpose, Liquidation Proceeds and
amounts representing proceeds of insurance policies covering the related
Property) which represent late recoveries of Scheduled Payments respecting
which any such Delinquency Advance was made;
(ii) to the extent provided in the related Agreement, to reimburse
itself for any Advances for such Series that the Servicer determines in
good faith it will be unable to recover from amounts representing late
recoveries of Scheduled Payments respecting which such Advance was made or
from Liquidation Proceeds or the proceeds of insurance policies;
(iii) in the event it has elected not to pay itself the Servicing Fee
out of the interest component of any Scheduled Payment, late payment or
other recovery with respect to a particular Home Equity Loan prior to the
deposit of such Scheduled Payment, late payment or recovery into the
Collection Account, to pay to itself the Servicing Fee, as adjusted
pursuant to the related Agreement, from any such Scheduled Payment, late
payment or such other recovery, to the extent permitted by the related
Agreement;
(iv) to reimburse itself or the Seller for expenses incurred by and
recoverable by or reimbursable to it pursuant to the related Agreement;
(v) to pay to the applicable person with respect to each Primary Asset
or REO Property acquired in respect thereof that has been repurchased or
removed from the Trust Fund by the Seller or the Servicer pursuant to the
related Agreement, all amounts received thereon and not distributed as of
the date on which the related repurchase price was determined;
(vi) to make payments to the Trustee of such Series for deposit into
the Distribution Account, if any, or for remittance to the Holders of such
Series in the amounts and in the manner provided for in the related
Agreement; and
(vii) to clear and terminate the Collection Account pursuant to the
related Agreement.
In addition, if the Servicer deposits in the Collection Account for a
Series any amount not required to be deposited therein, it may, at any time,
withdraw such amount from such Collection Account.
ADVANCES AND LIMITATIONS THEREON
The related Prospectus Supplement will describe the circumstances, if any,
under which the Servicer will make advances with respect to delinquent payments
of principal and/or interest on Loans ('Delinquency Advances'). If specified in
the related Prospectus Supplement, the Servicer will be obligated to make
Delinquency Advances, and such obligation may be limited in amount, or may not
be activated until a certain portion of a specified Reserve Fund is depleted.
Such advances are intended to provide liquidity and, except to
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the extent specified in the related Prospectus Supplement, not to guarantee or
insure against losses. Accordingly, to the extent specified in the related
Prospectus Supplement, any funds advanced are recoverable by the Servicer out of
amounts received on particular Loans which represent late recoveries of
principal or interest, proceeds of insurance policies or Liquidation Proceeds
respecting which any such Delinquency Advance was made or, to the extent
provided in the Prospectus Supplement, from payments or proceeds from other
Loans. If and to the extent specified in the related Prospectus Supplement, the
Servicer will advance its own funds to pay for any related expenses of
foreclosure and disposition of any liquidated Mortgage Home Equity Loan or
related Property (the 'Servicer Advances'). The Servicer will be entitled to be
reimbursed for any such Servicer Advances to the extent provided in the
Prospectus Supplement. If a Servicer Advance is made and subsequently determined
to be nonrecoverable from late collections, proceeds of insurance policies, or
Liquidation Proceeds from the related Loan, the Servicer may be entitled to
reimbursement from other funds in the Collection Account, Certificate Account or
Distribution Account, as the case may be, or from a specified Reserve Fund as
applicable, to the extent specified in the related Prospectus Supplement.
MAINTENANCE OF INSURANCE POLICIES AND OTHER SERVICING PROCEDURES
Standard Hazard Insurance; Flood Insurance. Except as otherwise specified
in the related Prospectus Supplement, the Servicer will be required to maintain
or to cause the obligor on each Home Equity Home Equity Loan to maintain a
hazard insurance policy naming the Servicer as loss payee thereunder and
providing for extended coverage of the standard form of fire insurance with
extended coverage for certain other hazards as its customary in the state in
which the related Property is located. The standard hazard insurance policies
will provide for coverage at least equal to the applicable state standard form
of fire insurance policy with extended coverage for property of the type
securing the related Loans.
In general, the standard form of fire and extended coverage insurance
policy covers physical damage to or destruction of the improvements on the
property by fire, lightning, explosion, smoke, windstorm and hail, and riot,
strike and civil commotion, subject to the conditions and exclusions specified
in each policy. Although the policies relating to the Home Equity Loans will be
underwritten by different insurers under different state laws in accordance with
different applicable state forms and therefore will not contain identical terms
and conditions, the basic terms thereof are dictated by respective state laws,
and most such policies typically do not cover any physical damage resulting from
any of the following: war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), nuclear reactions, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive. When a Mortgaged Property is located in a federally designated
special flood hazard area at the time of origination of the related Home Equity
Loan, the Agreement requires the Servicer to cause to be maintained, for each
such Home Equity Loan serviced, flood insurance (to the extent available) in an
amount equal in general to the lesser of the maximum insurance available under
the federal flood insurance program and the sum of the Home Equity Loan Balance
of the applicable Home Equity Home Equity Loan the principal balance of any
mortgage loan senior to such Home Equity Home Equity Loan from time to time.
The hazard insurance policies covering the Mortgaged Properties typically
contain a co-insurance clause that in effect requires the insured at all times
to carry insurance of a specified percentage (generally 80% to 90% of the full
replacement value of the improvements on the property in order to recover the
full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clause generally provides that the insurer's
liability in the event of partial loss does not exceed the greater of (i) the
replacement cost of the improvements less physical depreciation or (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
Unless otherwise specified in the related Prospectus Supplement, coverage
will be in an amount at least equal to the greater of (i) the amount necessary
to avoid the enforcement of any co-insurance clause contained in the policy or
(ii) the outstanding principal balance of the related loan plus the balance of
any senior mortgage. Unless otherwise specified in the related Prospectus
Supplement, the Servicer will also maintain on REO Property that secured a
defaulted Home Equity Loan and that has been acquired upon foreclosure, deed in
lieu of foreclosure, or repossession, a standard hazard insurance policy in an
amount that is equal to the maximum insurable value of such REO Property. No
earthquake or other additional insurance will be required of any
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obligor or will be maintained on REO Property acquired in respect of a default
Loan, other than pursuant to such applicable laws and regulations as shall at
any time be in force and shall require such additional insurance.
The ability of the Servicer to assure that hazard insurance proceeds are
appropriately applied may depend on its being named as an additional insured
under any hazard insurance policy and under any flood insurance policy, or upon
the extent to which information in this regard is furnished to the Servicer by a
borrower. Except as described below, all amounts collected by the Servicer under
any hazard policy (except for amounts applied or expected to be applied to the
restoration or repair of the Property or released to the borrower in accordance
with the Servicer's normal servicing procedures), will be deposited in the
Collection Account. The Agreement provides that the Servicer may satisfy its
obligation to cause hazard policies to be maintained by maintaining a blanket
policy issued by an insurer acceptable to the Rating Agencies insuring against
hazard losses to the collateral securing the Home Equity Loans. If such blanket
policy contains a deductible clause, the Servicer will deposit into the
Collection Account the amount not otherwise payable under the blanket policy
because of such deductible clause.
REALIZATION UPON DEFAULTED LOANS
The Servicer will use its reasonable best efforts to foreclose upon,
repossess or otherwise comparably convert the ownership of the Mortgaged
Properties securing the related Loans as come into and continue in default and
as to which no satisfactory arrangements can be made for collection of
delinquent payments. In connection with such foreclosure or other conversion,
the Servicer will follow such practices and procedures as it deems necessary or
advisable and as are normal and usual in its servicing activities with respect
to comparable loans serviced by it. However, the Servicer will not be required
to expend its own funds in connection with any foreclosure or towards the
restoration of the Property unless it determines that (i) such restoration or
foreclosure will increase the Liquidation Proceeds in respect of the related
Home Equity Loan available to the Holders after reimbursement to itself for such
expenses and (ii) such expenses will be recoverable by it either through
Liquidation Proceeds or the proceeds of insurance. Notwithstanding anything to
the contrary herein, in the case of a Trust Fund for which a REMIC election has
been made, the Servicer will be required to liquidate any Mortgaged Property
acquired through foreclosure within two years after the acquisition of the
beneficial ownership of such Mortgaged Property. While the holder of a Mortgaged
Property acquired through foreclosure can often maximize its recovery by
providing financing to a new purchaser, the Trust Fund, if applicable, will have
no ability to do so and neither the Servicer nor the Seller will be required to
do so.
The Servicer may arrange with the obligor on a defaulted Home Equity Loan a
modification of such Home Equity Loan (a 'Modification') to the extent provided
in the related Prospectus Supplement. Such Modifications may only be entered
into if they meet the underwriting policies and procedures employed by the
Servicer in servicing receivables for its own account and meet the other
conditions set forth in the related Prospectus Supplement.
ENFORCEMENT OF DUE-ON-SALE CLAUSES
Unless otherwise specified in the related Prospectus Supplement for a
Series, when any Mortgaged Property is being conveyed by the obligor, the
Servicer will be obligated to exercise its rights to accelerate the maturity of
the related Home Equity Loan under the applicable 'due-on-sale' clause, if any,
unless such exercise is not permitted under applicable law or if the enforcement
of such clause would result in loss of coverage under any primary mortgage
insurance policy. In such event, the Servicer is authorized to accept from or
enter into an assumption agreement with the person to whom such property has
been or is about to be conveyed, pursuant to which such person becomes liable
under the Loan. To the extent permitted by applicable law, such assumption will
not release the original borrower from its obligation under the Loan. Any fee
collected in connection with an assumption will be retained by the Servicer as
additional servicing compensation. The terms of a Home Equity Loan may not be
changed in connection with an assumption except to the extent specified in the
related Prospectus Supplement.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Except as otherwise provided in the related Prospectus Supplement, the
Servicer will be entitled to a periodic fee as servicing compensation (the
'Servicing Fee') in an amount to be determined as specified in the related
Prospectus Supplement. The Servicing Fee may be fixed or variable, as specified
in the related Prospectus Supplement. In addition, unless otherwise specified in
the related Prospectus Supplement, the Servicer will be entitled to servicing
compensation in the form of assumption fees, late payment charges and similar
items, or excess proceeds following disposition of Property in connection with
defaulted Loans.
Except to the extent otherwise specified in the related Prospectus
Supplement, the Servicer will pay certain expenses incurred in connection with
the servicing of the Loans, including, without limitation, the payment of the
fees and expenses of the Trustee and independent accountants, payment of
insurance policy premiums and the cost of credit support, if any, and payment of
expenses incurred in preparation of reports to Holders.
When an obligor makes a principal prepayment in full between Due Dates on
the related Loan, the obligor will generally be required to pay interest on the
amount prepaid only to the date of prepayment. If and to the extent provided in
the related Prospectus Supplement in order that one or more Classes of the
Holders of a Series will not be adversely affected by any resulting shortfall in
interest, the amount of the Servicing Fee may be reduced to the extent necessary
to include in the Servicer's remittance to the Trustee for distribution to
Securityholders an amount equal to one month's interest on the related Home
Equity Loan (less the Servicing Fee). If the aggregate amount of such shortfalls
in a month exceeds the Servicing Fee for such month, a shortfall to Holders may
occur.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will be entitled to reimbursement for Servicer Advances. The related
Holders will suffer no loss by reason of such Servicer Advances to the extent
expenses are covered under related insurance policies or from excess Liquidation
Proceeds. If claims are either not made or paid under the applicable insurance
policies or if coverage thereunder has been exhausted, the related Holders will
suffer a loss to the extent that Liquidation Proceeds, after reimbursement of
the Servicer Advances, are less than the outstanding principal balance of and
unpaid interest on the related Home Equity Loan which would be distributable to
Holders. The Servicer is generally also entitled to reimbursement from the
Collection Account for Servicer Advances. In addition, the Servicer will be
entitled to reimbursement for Delinquency Advances as described above under
'--Advances and Limitations Thereon.'
Unless otherwise specified in the related Prospectus Supplement, the rights
of the Servicer to receive funds from the Collection Account for a Series,
whether as the Servicing Fee or other compensation, or for the reimbursement of
Advances, expenses or otherwise, are not subordinate to the rights of Holders of
such Series.
EVIDENCE AS TO COMPLIANCE
The applicable Agreement for each Series will provide that each year, a
firm of independent public accountants will furnish a statement to the Trustee
to the effect that such firm has examined certain documents and records relating
to the servicing of the Loans by the Servicer and that such examination, which
has been conducted substantially in compliance with either (i) the audit guide
for audits of non-supervised mortgagees approved by the Department of Housing
and Urban Development or (ii) the requirements of the Uniform Single Attestation
Program for Mortgage Bankers, has disclosed no items of non-compliance with the
provisions of the applicable Agreement that, in the opinion of the firm, are
material, except for such items of non-compliance as shall be referred in the
report.
The applicable Agreement for each Series will also provide for delivery to
the Trustee for such Series of an annual statement signed by an officer of the
Servicer to the effect that the Servicer has fulfilled its material obligations
under such Agreement throughout the preceding calendar year.
CERTAIN MATTERS REGARDING THE SERVICER
If an Event of Default occurs under either a Sale and Servicing Agreement
or a Pooling and Servicing Agreement, the Servicer may be replaced by the
Trustee or a successor Servicer. Unless otherwise specified in the related
Prospectus Supplement, such Events of Default and the rights of the Trustee upon
such a default under the Agreement for the related Series will be substantially
similar to those described under 'THE
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AGREEMENTS--Events of Default; Rights Upon Event of Default--Pooling and
Servicing Agreement; Sale and Servicing Agreement.'
Unless otherwise specified in the related Prospectus Supplement, the
Servicer may assign its rights and delegate its duties and obligations under the
related Agreement for each Series if the successor Servicer accepting such
assignment or delegation (i) services similar loans in the ordinary course of
its business, (ii) is reasonably satisfactory to the Trustee for the related
Series, (iii) would not cause any Rating Agency's rating of the Securities for
such Series in effect immediately prior to such assignment, sale or transfer to
be qualified, downgraded or withdrawn as a result of such assignment, sale or
transfer and (iv) executes and delivers to the Trustee and the Enhancer, if any,
an agreement, in form and substance reasonably satisfactory to the Trustee, and
the Enhancer, if any, which contains an assumption by such Servicer of the due
and punctual performance and observance of each covenant and condition to be
performed or observed by the Servicer under the related Agreement from and after
the date of such agreement. No such assignment will become effective until the
Trustee or a successor Servicer has assumed the servicer's obligations and
duties under the related Agreement. To the extent that the Servicer transfers
its obligations to a wholly-owned subsidiary or affiliate, such subsidiary or
affiliate need not satisfy the criteria set forth above; however, in such
instance, the assigning Servicer will remain liable for the servicing
obligations under the related Agreement. Any entity into which the Servicer is
merged or consolidated or any successor corporation resulting from any merger,
conversion or consolidation will succeed to the Servicer's obligations under the
related Agreement provided that such successor or surviving entity meets the
requirements for a successor Servicer set forth above.
The Servicer will not be under any liability to the Trust Fund or the
Securityholders for taking any action or for refraining from taking any action
in good faith pursuant to the Agreement, or for errors in judgment; provided,
however, that the Servicer will not be protected against any liability that
otherwise would be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of its reckless disregard
of its obligations and duties thereunder. Except to the extent otherwise
provided therein, each Agreement further will provide that the Servicer and any
director, officer, employee or agent of the Servicer will be entitled to
indemnification by the Trust Fund and will be held harmless to the extent
provided in the Agreement against any loss, liability or expense incurred in
connection with any legal action relating to the Agreement or the Securities,
other than any loss, liability or expense related to any specific Home Equity
Loan or Loans (except any such loss, liability or expense otherwise reimbursable
pursuant to the Agreement) and any loss, liability or expense incurred by the
Servicer by reason of its willful misfeasance, bad faith or gross negligence in
the performance of its duties thereunder or by reason of the Servicer's reckless
disregard of its obligations and duties thereunder.
Each Agreement will provide that the Servicer will not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties under the Agreement and that in its opinion may involve
it in any expense or liability. The Servicer, however, in its discretion, may
undertake any such action that it may deem necessary or desirable with respect
to the Agreement and the rights and duties of the parties thereto and the
interest of the Securityholders and the Enhancer, if any, thereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom will be expenses, costs and liabilities of the Trust Fund and the
Servicer will be entitled to be reimbursed therefor to the extent provided in
the Agreement. The Servicer's right to such indemnity or reimbursement will
survive any resignation or termination of the Servicer with respect to any
losses, expenses, costs or liabilities arising prior to such resignation or
termination (or arising from events that occurred prior to such resignation or
termination). Any claims by or on behalf of the Securityholders or the Trust
Fund will be made only against the Servicer, who will be liable with respect to
its own acts and omissions as well as the acts and omissions of its directors,
officer, employees and agents.
THE AGREEMENTS
The following summaries describe the material provisions of the Agreements
common to each Series of Securities. The summaries do not purport to be complete
and are subject to, and qualified in their entirety by reference to, the
provisions of the Agreements. Where particular provisions or terms used in the
Agreements are referred to, such provisions or terms are as specified in the
related Agreements.
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ASSIGNMENT OF PRIMARY ASSETS
General. At the time of issuance of the Securities of a Series, the Seller
will transfer, convey and assign to the Trust Fund all right, title and interest
of the Seller in the Primary Assets and other property to be transferred to the
Trust Fund for a Series. Such assignment will include all principal and interest
due or received on or with respect to the Primary Assets after the Cut-off Date
to the extent specified in the related Prospectus Supplement (except for any
Retained Interests). The Trustee will, concurrently with such assignment,
execute and deliver the Securities.
Assignment of Loans. Unless otherwise specified in the related Prospectus
Supplement, the Seller will, as to each Loan, deliver or cause to be delivered
to the Trustee, or, as specified in the related Prospectus Supplement a
custodian on behalf of the Trustee (the 'Custodian'), the Mortgage Note endorsed
without recourse to the order of the Trustee or in blank, the original Mortgage
with evidence of recording indicated thereon (except for any Mortgage not
returned from the public recording office, in which case a copy of such Mortgage
will be delivered, together with a certificate that the original of such
Mortgage was delivered to such recording office) and an assignment of the
Mortgage in recordable form. The Trustee, or, if so specified in the related
Prospectus Supplement, the Custodian, will hold such documents in trust for the
benefit of the Holders.
Unless otherwise specified in the related Prospectus Supplement, the Seller
will, at the time of issuance of the Securities, cause assignments to the
Trustee of the Mortgages relating to the Loans for a Series to be recorded in
the appropriate public office for real property records, except in states where,
in the opinion of counsel acceptable to the Trustee, such recording is not
required to protect the Trustee's interest in the related Loans. If specified in
the related Prospectus Supplement, the Seller will cause such assignments to be
so recorded within the time after issuance of the Securities as is specified in
the related Prospectus Supplement, in which event, the Agreement may, as
specified in the related Prospectus Supplement, require the Seller to repurchase
from the Trustee any Home Equity Loan the related Mortgage of which is not
recorded within such time, at the price described below with respect to
repurchases by reason of defective documentation. Unless otherwise provided in
the related Prospectus Supplement, the enforcement of the repurchase obligation
would constitute the sole remedy available to the Holders or the Trustee for the
failure of a Mortgage to be recorded.
Each Home Equity Loan will be identified in a schedule appearing as an
exhibit to the related Agreement (the 'Home Equity Loan Schedule'). Such Home
Equity Loan Schedule will specify with respect to each Loan: the original
principal amount and unpaid principal balance as of the Cut-off Date; the
current interest rate; the current Scheduled Payment of principal and interest;
the maturity date, if any, of the related Mortgage Note; and if the Home Equity
Loan is an adjustable rate Loan, the Lifetime Rate Cap, if any, and the index.
Assignment of Private Securities. The Seller will cause Private Securities
to be registered in the name of the Trustee (or its nominee or correspondent).
The Trustee (or its nominee or correspondent) will have possession of any
certificated Private Securities. Unless otherwise specified in the related
Prospectus Supplement, the Trustee will not be in possession of or be assignee
of record of any underlying assets for a Private Security. See 'THE TRUST
FUNDS--Private Securities.' Each Private Security will be identified in a
schedule appearing as an exhibit to the related Agreement (the 'Certificate
Schedule'), which will specify the original principal amount, outstanding
principal balance as of the Cut-off Date, annual pass-through rate or interest
rate and maturity date for each Private Security conveyed to the Trust Fund. In
the Agreement, the Seller will represent and warrant to the Trustee regarding
the Private Securities: (i) that the information contained in the Certificate
Schedule is true and correct in all material respects; (ii) that, immediately
prior to the conveyance of the Private Securities, the Seller had good title
thereto, and was the sole owner thereof (subject to any Retained Interest);
(iii) that there has been no other sale by it of such Private Securities; and
(iv) that there is no existing lien, charge, security interest or other
encumbrance (other than any Retained Interest) on such Private Securities.
Repurchase and Substitution of Non-Conforming Primary Assets. Unless
otherwise provided in the related Prospectus Supplement, if any document in the
file relating to the Primary Assets delivered by the Seller to the Trustee (or
Custodian) is found by the Trustee within 90 days of the execution of the
related Agreement (or promptly after the Trustee's receipt of any document
permitted to be delivered after the Closing Date) to be defective in any
material respect and the Seller does not cure such defect within 90 days, or
within such other period specified in the related Prospectus Supplement, the
Seller will, not later than 90 days or within such other period specified in the
related Prospectus Supplement, after the Trustee's notice to the Seller of the
defect,
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repurchase the related Primary Asset or any property acquired in respect thereof
from the Trustee at a price equal to, unless otherwise specified in the related
Prospectus Supplement, (a) the outstanding principal balance of such Primary
Asset and (b) accrued and unpaid interest to the date of the
repurchase/substitution of such Primary Asset at the rate set forth in the
related Agreement.
If provided in the related Prospectus Supplement, the Seller, may, rather
than repurchase the Primary Asset as described above, remove such Primary Asset
from the Trust Fund (the 'Deleted Primary Asset') and substitute in its place
one or more other Primary Assets (each, a 'Qualifying Substitute Primary Asset')
provided, however, that (i) with respect to a Trust Fund for which no REMIC
election is made, such substitution must be effected within 120 days of the date
of initial issuance of the Securities and (ii) with respect to a Trust Fund for
which a REMIC election is made, after a specified time period, the Trustee must
have received a satisfactory opinion of counsel that such substitution will not
cause the Trust Fund to lose its status as a REMIC or otherwise subject the
Trust Fund to a prohibited transaction tax.
Unless otherwise specified in the related Prospectus Supplement, any
Qualifying Substitute Primary Asset will have, on the date of substitution, (i)
an outstanding principal balance, after deduction of all Scheduled Payments due
in the month of substitution, not in excess of the outstanding principal balance
of the Deleted Primary Asset (the amount of any shortfall to be deposited to the
Collection Account in the month of substitution for distribution to Holders),
(ii) an interest rate not less than (and not more than 2% greater than) the
interest rate or Margin of the Deleted Primary Asset, (iii) a remaining
term-to-stated maturity not greater than (and not more than two years less than)
that of the Deleted Primary Asset, and will comply with all of the
representations and warranties set forth in the applicable Agreement as of the
date of substitution.
Unless otherwise provided in the related Prospectus Supplement, the
above-described cure, repurchase or substitution obligations constitute the sole
remedies available to the Holders or the Trustee for a material defect in a
document for a Primary Asset.
The Seller will make representations and warranties with respect to Primary
Assets for a Series. If the Seller cannot cure a breach of any such
representations and warranties in all material respects within the time period
specified in the related Prospectus Supplement after notification by the Trustee
of such breach, and if such breach is of a nature that materially and adversely
affects the value of such Primary Asset, the Seller is obligated to repurchase
the affected Primary Asset or, if provided in the related Prospectus Supplement,
provide a Qualifying Substitute Primary Asset therefor, subject to the same
conditions and limitations on purchases and substitutions as described above.
REPORTS TO HOLDERS
The Trustee or other entity specified in the related Prospectus Supplement
will prepare and forward to each Holder on each Distribution Date, or as soon
thereafter as is practicable, a statement setting forth, to the extent
applicable to any Series, among other things:
(i) the amount of principal distributed to Holders of the related
Securities and the outstanding principal balance of such Securities
following such distribution;
(ii) the amount of interest distributed to Holders of the related
Securities and the current interest on such Securities;
(iii) the amounts of (a) any overdue accrued interest included in such
distribution, (b) any remaining overdue accrued interest with respect to
such Securities or (c) any current shortfall in amounts to be distributed
as accrued interest to Holders of such Securities;
(iv) the amounts of (a) any overdue payments of scheduled principal
included in such distribution, (b) any remaining overdue principal amounts
with respect to such Securities, (c) any current shortfall in receipt of
scheduled principal payments on the related Primary Assets or (d) any
realized losses or Liquidation Proceeds to be allocated as reductions in
the outstanding principal balances of such Securities;
(v) the amount received under any related Enhancement, and the
remaining amount available under such Enhancement;
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(vi) the amount of any delinquencies with respect to payments on the
related Primary Assets;
(vii) the book value of any REO Property acquired by the related Trust
Fund;
(viii) during the Pre-Funding Period, the remaining Pre-Funded Amount
and the portion of the Pre-Funding Amount used to acquire additional
Primary Assets since the preceding Distribution Date;
(ix) during the Pre-Funding Period, the amount remaining in the
Capitalized Interest Account; and
(x) such other information as specified in the related Agreement.
In addition, within a reasonable period of time after the end of each
calendar year the Trustee, unless otherwise specified in the related Prospectus
Supplement, will furnish to each Holder of record at any time during such
calendar year (a) the aggregate of amounts reported pursuant to (i), (ii), and
(iv)(d) above for such calendar year and (b) such information specified in the
related Agreement to enable Holders to prepare their tax returns including,
without limitation, the amount of original issue discount accrued on the
Securities, if applicable. Information in the Distribution Date and annual
statements provided to the Holders will not have been examined and reported upon
by an independent public accountant. However, the Servicer will provide to the
Trustee a report by independent public accountants with respect to the
Servicer's servicing of the Loans. See 'SERVICING OF LOANS--Evidence as to
Compliance.'
If so specified in the Prospectus Supplement for a Series of Securities,
such Series or one or more Classes of such Series will be issued in book-entry
form. In such event, owners of beneficial interests in such Securities will not
be considered Holders and will not receive such reports directly from the
Trustee. The Trustee will forward such reports only to the entity or its nominee
which is the registered holder of the global certificate which evidences such
book-entry securities. Beneficial owners will receive such reports from the
participants and indirect participants of the applicable book-entry system in
accordance with the practices and procedures of such entities.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
Pooling and Servicing Agreement; Sale and Servicing Agreement. Unless
otherwise specified in the related Prospectus Supplement, Events of Default
under the Pooling and Servicing Agreement or Sale and Servicing Agreement for
each Series of Securities relating to Loans include (i) any failure by the
Servicer to deposit amounts in the Collection Account and/or Certificate Account
and/or Distribution Account required to be made thereunder, which failure
continues unremedied for three business days after the giving of written notice
of such failure to the Servicer by the Trustee for such Series, or to the
Servicer and the Trustee by the Enhancer or by the Holders of such Series
evidencing not less than 51% of the aggregate voting rights of the Securities
for such Series, (ii) any failure by the Servicer duly to observe or perform in
any material respect any other of its covenants or agreements in the applicable
Agreement which continues unremedied for 30 days after the giving of written
notice of such failure to the Servicer by the Trustee, or to the Servicer and
the Trustee by the Enhancer or by the Holders of such Series evidencing not less
than 51% of the aggregate voting rights of the Securities for such Series, and
(iii) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings and certain actions by the Servicer
indicating its insolvency, reorganization or inability to pay its obligations.
So long as an Event of Default remains unremedied under the applicable
Agreement for a Series of Securities relating to the servicing of Loans, unless
otherwise specified in the related Prospectus Supplement, the Trustee for such
Series or Holders of Securities of such Series evidencing not less than 51% of
the aggregate voting rights of the Securities for such Series with, if specified
in the related Prospectus Supplement, the consent of the Enhancer, may terminate
all of the rights and obligations of the Servicer as servicer under the
applicable Agreement (other than its right to recovery of other expenses and
amounts advanced pursuant to the terms of such Agreement which rights the
Servicer will retain under all circumstances), whereupon the Trustee will
succeed to all the responsibilities, duties and liabilities of the Servicer
under such Agreement and will be entitled to reasonable servicing compensation
not to exceed the applicable servicing fee, together with other servicing
compensation in the form of assumption fees, late payment charges or otherwise
as provided in such Agreement.
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In the event that the Trustee is unwilling or unable so to act, it may
select, or petition a court of competent jurisdiction to appoint, a finance
institution, bank or loan servicing institution with a net worth of at least
$15,000,000 to act as successor Servicer under the provisions of the applicable
Agreement. The successor Servicer would be entitled to reasonable servicing
compensation in an amount not to exceed the Servicing Fee as set forth in the
related Prospectus Supplement, together with the other servicing compensation in
the form of assumption fees, late payment charges or otherwise, as provided in
such Agreement.
During the continuance of any Event of Default of a Servicer under an
Agreement for a Series of Securities, the Trustee for such Series will have the
right to take action to enforce its rights and remedies and to protect and
enforce the rights and remedies of the Holders of such Series, and, unless
otherwise specified in the related Prospectus Supplement, Holders of Securities
evidencing not less than 51% of the aggregate voting rights of the Securities
for such Series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred upon that Trustee. However, the Trustee will not be under any
obligation to pursue any such remedy or to exercise any of such trusts or powers
unless such Holders have offered the Trustee reasonable security or indemnity
against the cost, expenses and liabilities which may be incurred by the Trustee
therein or thereby. The Trustee may decline to follow any such direction if the
Trustee determines that the action or proceeding so directed may not lawfully be
taken or would involve it in personal liability or be unjustly prejudicial to
the nonassenting Holders.
Indenture. Unless otherwise specified in the related Prospectus
Supplement, Events of Default under the Indenture for each Series of Notes
include: (i) a default for 30 days or more in the payment of any principal of or
interest on any Note of such Series; (ii) failure to perform any other covenant
of the Seller or the Trust Fund in the Indenture which continues for a period of
60 days after notice thereof is given in accordance with the procedures
described in the related Prospectus Supplement; (iii) any representation or
warranty made by the Seller or the Trust Fund in the Indenture or in any
certificate or other writing delivered pursuant thereto or in connection
therewith with respect to or affecting such Series having been incorrect in a
material respect as of the time made, and such breach is not cured within 60
days after notice thereof is given in accordance with the procedures described
in the related Prospectus Supplement; (iv) certain events of bankruptcy,
insolvency, receivership or liquidation of the Seller or the Trust Fund; or (v)
any other Event of Default provided with respect to Notes of that Series.
If an Event of Default with respect to the Notes of any Series at the time
outstanding occurs and is continuing, either the Trustee or the Holders of a
majority of the then aggregate outstanding amount of the Notes of such Series
with, if specified in the related Prospectus Supplement, the consent of the
Enhancer, may declare the principal amount (or, if the Notes of that Series are
Zero Coupon Securities, such portion of the principal amount as may be specified
in the terms of that Series, as provided in the related Prospectus Supplement)
of all the Notes of such Series to be due and payable immediately. Such
declaration may, under certain circumstances, be rescinded and annulled by the
Holders of a majority in aggregate outstanding amount of the Notes of such
Series.
If, following an Event of Default with respect to any Series of Notes, the
Notes of such Series have been declared to be due and payable, the Trustee may,
in its discretion, notwithstanding such acceleration, elect to maintain
possession of the collateral securing the Notes of such Series and to continue
to apply distributions on such collateral as if there had been no declaration of
acceleration if such collateral continues to provide sufficient funds for the
payment of principal of and interest on the Notes of such Series as they would
have become due if there had not been such a declaration. In addition, unless
otherwise specified in the related Prospectus Supplement, the Trustee may not
sell or otherwise liquidate the collateral securing the Notes of a Series
following an Event of Default other than a default in the payment of any
principal or interest on any Note of such Series for 30 days or more, unless (a)
the Holders of 100% of the then aggregate outstanding amount of the Notes of
such Series consent to such sale, (b) the proceeds of such sale or liquidation
are sufficient to pay in full the principal of and accrued interest due and
unpaid on the outstanding Notes of such Series at the date of such sale or (c)
the Trustee determines that such collateral would not be sufficient on an
ongoing basis to make all payments on such Notes as such payments would have
become due if such Notes had not been declared due and payable, and the Trustee
obtains the consent of the Holders of 66 2/3% of the then aggregate outstanding
amount of the Notes of such Series.
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In the event that the Trustee liquidates the collateral in connection with
an Event of Default involving a default for 30 days or more in the payment of
principal of or interest on the Notes of a Series, the Indenture provides that
the Trustee will have a prior lien on the proceeds of any such liquidation for
unpaid fees and expenses. As a result, upon the occurrence of such an Event of
Default, the amount available for distribution to the Noteholders may be less
than would otherwise be the case. However, the Trustee may not institute a
proceeding for the enforcement of its lien except in connection with a
proceeding for the enforcement of the lien of the Indenture for the benefit of
the Noteholders after the occurrence of such an Event of Default.
Unless otherwise specified in the related Prospectus Supplement, in the
event the principal of the Notes of a Series is declared due and payable, as
described above, the Holders of any such Notes issued at a discount from par may
be entitled to receive no more than an amount equal to the unpaid principal
amount thereof less the amount of such discount which is unamortized.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing with respect
to a Series of Notes, the Trustee will be under no obligation to exercise any of
the rights or powers under the Indenture at the request or direction of any of
the Holders of Notes of such Series, unless such Holders offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with such request or
direction. Subject to such provisions for indemnification and certain
limitations contained in the Indenture, the Holders of a majority of the then
aggregate outstanding amount of the Notes of such Series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Notes of such Series, and the Holders of a majority
of the then aggregate outstanding amount of the Notes of such Series may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all the Holders of the outstanding Notes of such Series affected thereby.
THE TRUSTEE
The identity of the commercial bank, savings and loan association or trust
company named as the Trustee for each Series of Securities will be set forth in
the related Prospectus Supplement. The entity serving as Trustee may have normal
banking relationships with the Seller. In addition, for the purpose of meeting
the legal requirements of certain local jurisdictions, the Trustee will have the
power to appoint co-trustees or separate trustees of all or any part of the
Trust Fund relating to a Series of Securities. In the event of such appointment,
all rights, powers, duties and obligations conferred or imposed upon the Trustee
by the Agreement relating to such Series will be conferred or imposed upon the
Trustee and each such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee shall be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who will exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Trustee. The Trustee may also appoint agents to perform any of the
responsibilities of the Trustee, which agents will have any or all of the
rights, powers, duties and obligations of the Trustee conferred on them by such
appointment; provided that the Trustee will continue to be responsible for its
duties and obligations under the Agreement. In the event a Series includes both
Notes and Certificates, a separate Trustee identified in the related Prospectus
Supplement will serve as Trustee for the Certificateholders and for the Notes.
DUTIES OF THE TRUSTEE
The Trustee will not make any representations as to the validity or
sufficiency of the Agreement, the Securities or of any Primary Asset or related
documents. If no Event of Default (as defined in the related Agreement) has
occurred, the Trustee is required to perform only those duties specifically
required of it under the Agreement. Upon receipt of the various certificates,
statements, reports or other instruments required to be furnished to it, the
Trustee is required to examine them to determine whether they are in the form
required by the related Agreement. However, the Trustee will not be responsible
for the accuracy or content of any such documents furnished to it by the Holders
or the Servicer under the Agreement.
The Trustee may be held liable for its own negligent action or failure to
act, or for its own misconduct; provided, however, that the Trustee will 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 Holders in an
Event of Default. The
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Trustee is not required to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties under the Agreement,
or in the exercise of any of its rights or powers, if it has reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
RESIGNATION OF TRUSTEE
The Trustee may, upon written notice to the Seller, and if specified in the
related Prospectus Supplement, the Enhancer, if any, resign at any time, in
which event the Seller will be obligated to use its best efforts to appoint a
successor Trustee. If no successor Trustee has been appointed and has accepted
the appointment within the period specified in the Agreement after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for appointment of a successor Trustee. The Trustee may
also be removed at any time (i) if the Trustee ceases to be eligible to continue
as such under the Agreement, (ii) if the Trustee becomes insolvent or (iii) by
the Holders of Securities evidencing over 50% of the aggregate voting rights of
the Securities in the Trust Fund upon written notice to the Trustee and to the
Seller. Any resignation or removal of the Trustee and appointment of a successor
Trustee will not become effective until acceptance of the appointment by the
successor Trustee.
AMENDMENT OF AGREEMENT
Unless otherwise specified in the Prospectus Supplement, the Agreement for
each Series of Securities may be amended by the Seller, the Servicer and the
Trustee with respect to such Series, without notice to or consent of the Holders
(i) to cure any ambiguity, (ii) to correct any defective provisions or to
correct or supplement any provision therein, (iii) to add to the duties of the
Seller, the Trust Fund or Servicer, (iv) to add any other provisions with
respect to matters or questions arising under such Agreement or related
Enhancement, (v) to add or amend any provisions of such Agreement as required by
a Rating Agency in order to maintain or improve the rating of the Securities (it
being understood that none of the Seller, the Servicer or Trustee is obligated
to maintain or improve such rating), or (vi) to comply with any requirements
imposed by the Code; provided that any such amendment except pursuant to clause
(vi) above will not materially and adversely affect the interests of any Holders
of such Series or, if specified in the related Prospectus Supplement, the
Enhancer, as evidenced by an opinion of counsel. Any such amendment except
pursuant to clause (vi) of the preceding sentence shall be deemed not to
adversely affect in any material respect the interests of any Holder if the
Trustee receives written confirmation from each Rating Agency rating such
Securities that such amendment will not cause such Rating Agency to withdraw or
reduce the then current rating thereof. Unless otherwise specified in the
Prospectus Supplement, the Agreement for each Series may also be amended by the
Trustee, the Servicer, if applicable, and the Seller with respect to such Series
with the consent of the Enhancer, if specified in the related Prospectus
Supplement or the Holders possessing not less than 51% of the aggregate
outstanding principal amount of the Securities of such Series or, if only
certain Classes of such Series are affected by such amendment, 51% of the
aggregate outstanding principal amount of the Securities of each Class of such
Series affected thereby, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of such Agreement or
modifying in any manner the rights of Holders of such Series; provided, however,
that no such amendment may (a) reduce the amount or delay the timing of payments
on any Security without the consent of the Holder of such Security; or (b)
reduce the aforesaid percentage of the aggregate outstanding principal amount of
Securities of each Class, the Holders of which are required to consent to any
such amendment or (c) if specified in the related Prospectus Supplement,
adversely affect the interests of the Enhancer, without, in the case of clauses
(a) or (b), the consent of the Holders of 100% of the aggregate outstanding
principal amount of each Class of Securities affected thereby.
VOTING RIGHTS
The related Prospectus Supplement will set forth the method of determining
allocation of voting rights with respect to a Series. Unless otherwise provided
in the related Prospectus Supplement, no Holder of Securities of a Series,
solely by virtue of such Holder's status as a Holder, will have any right under
the applicable Agreement for such Series to institute any proceeding with
respect to such Agreement, unless such Holder previously has given to the
Trustee for such Series written notice of default and unless the Holders of
Securities evidencing not less than 51% of the aggregate voting rights of the
Securities for such Series have made written request upon the
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Trustee to institute such proceeding in its own name as Trustee thereunder and
have offered to the Trustee reasonable indemnity, and the Trustee for 60 days
has neglected or refused to institute any such proceeding.
LIST OF HOLDERS
Upon written request of three or more Holders of record of a Series for
purposes of communicating with other Holders with respect to their rights under
the Agreement, which request is accompanied by a copy of the communication which
such Holders propose to transmit, the Trustee will afford such Holders access
during business hours to the most recent list of Holders of that Series held by
the Trustee.
No Agreement will provide for the holding of any annual or other meeting of
Holders.
BOOK-ENTRY SECURITIES
If specified in the Prospectus Supplement for a Series of Securities, such
Series or one or more Classes of such Series may be issued in book-entry form.
In such event, beneficial owners of such Securities will not be considered
'Holders' under the Agreements and may exercise the rights of Holders only
indirectly through the participants in the applicable book-entry system.
REMIC ADMINISTRATOR
For any Series with respect to which a REMIC election is made, preparation
of certain reports and certain other administrative duties with respect to the
Trust Fund may be performed by a REMIC administrator, who may be the Seller or
an affiliate of the Seller.
TERMINATION
Pooling and Servicing Agreement; Trust Agreement. The obligations created
by the Pooling and Servicing Agreement or Trust Agreement for a Series will
terminate upon the distribution to Holders of all amounts distributable to them
pursuant to such Agreement after the earlier of (i) the later of (a) the final
payment or other liquidation of the last Primary Asset remaining in the Trust
Fund for such Series and (b) the disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure or repossession in respect of any
Primary Asset or (ii) the repurchase, as described below, by the Servicer or
other entity specified in the related Prospectus Supplement from the Trustee for
such Series of all Primary Assets and other property at that time subject to
such Agreement. The Agreement for each Series permits, but does not require, the
Servicer or other entity specified in the related Prospectus Supplement to
purchase from the Trust Fund for such Series all remaining Primary Assets at a
price equal to, unless otherwise specified in the related Prospectus Supplement,
100% of the aggregate Principal Balance of such Primary Assets plus, with
respect to any property acquired in respect of a Primary Asset, if any, the
outstanding Principal Balance of the related Primary Asset at the time of
foreclosure, less, in either case, related unreimbursed Advances (in the case of
the Primary Assets, only to the extent not already reflected in the computation
of the aggregate Principal Balance of such Primary Assets) and unreimbursed
expenses (that are reimbursable pursuant to the terms of the Pooling and
Servicing Agreement) plus, in either case, accrued interest thereon at the
weighted average rate on the related Primary Assets through the last day of the
Due Period in which such repurchase occurs; provided, however, that if an
election is made for treatment as a REMIC under the Code, the repurchase price
may equal the greater of (a) 100% of the aggregate Principal Balance of such
Primary Assets, plus accrued interest thereon at the applicable net rates on the
Primary Assets through the last day of the month of such repurchase and (b) the
aggregate fair market value of such Primary Assets plus the fair market value of
any property acquired in respect of a Primary Asset and remaining in the Trust
Fund. The exercise of such right will effect early retirement of the Securities
of such Series, but such entity's right to so purchase is subject to the
aggregate Principal Balance of the Primary Assets at the time of repurchase
being less than a fixed percentage, to be set forth in the related Prospectus
Supplement, of the aggregate Principal Balance of the Primary Assets as of the
Cut-off Date. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last survivor
of certain persons identified therein. For each Series, the Servicer or the
Trustee, as applicable, will give written notice of termination of the Agreement
to each Holder, and the final distribution will be made only upon surrender and
cancellation of the Securities at an office or agency specified in the notice of
termination. If so provided in the related Prospectus Supplement for a Series,
the Seller or another entity may effect an optional termination of the Trust
Fund under the circumstances described in such Prospectus Supplement. See
'DESCRIPTION OF THE SECURITIES--Optional Redemption, Purchase or Termination.'
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Indenture. The Indenture will be discharged with respect to a Series of
Notes (except with respect to certain continuing rights specified in the
Indenture) upon the delivery to the Trustee for cancellation of all the Notes of
such Series or, with certain limitations, upon deposit with the Trustee of funds
sufficient for the payment in full of all of the Notes of such Series.
In addition to such discharge with certain limitations, the Indenture will
provide that, if so specified with respect to the Notes of any Series, the
related Trust Fund will be discharged from any and all obligations in respect of
the Notes of such Series (except for certain obligations relating to temporary
Notes and exchange of Notes, to register the transfer of or exchange Notes of
such Series, to replace stolen, lost or mutilated Notes of such Series, to
maintain paying agencies and to hold monies for payment in trust) upon the
deposit with the Trustee, in trust, of money and/or direct obligations of or
obligations guaranteed by the United States of America which, through the
payment of interest and principal in respect thereof in accordance with their
terms, will provide money in an amount sufficient to pay the principal of and
each installment of interest on the Notes of such Series on the Final Scheduled
Distribution Date for such Notes and any installment of interest on such Notes
in accordance with the terms of the Indenture and the Notes of such Series. In
the event of any such defeasance and discharge of Notes of such Series, holders
of Notes of such Series would be able to look only to such money and/or direct
obligations for payment of principal and interest, if any, on their Notes until
maturity.
CERTAIN LEGAL ASPECTS OF THE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because certain of such legal
aspects are governed by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor reflect the laws
of any particular state (other than the state of New York where it is
anticipated that a material percentage of the Mortgaged Properties will be
located), nor encompass the laws of all states in which the properties securing
the Loans are situated.
MORTGAGES
The Home Equity Loans for a Series will be secured by either mortgages or
deeds of trust or deeds to secure debt (such Home Equity Loans are hereinafter
referred to in this section as 'mortgage loans'), depending upon the prevailing
practice in the state in which the property subject to a mortgage loan is
located. In New York, the prevailing practice is a mortgage. The filing of a
mortgage, deed of trust or deed to secure debt creates a lien or title interest
upon the real property covered by such instrument and represents the security
for the repayment of an obligation that is customarily evidenced by a promissory
note. The priority of the liens is important because, among other things, the
foreclosure of a senior lien will extinguish a junior lien, and because the
holder of a senior lien generally will have a right to receive insurance,
condemnation or other proceeds before the holder of a junior lien.
Priority between mortgages and deeds of trust (or other instruments of
record) generally depends in the first instance on the order of filing with the
appropriate government records office. Priority also may be affected by the
express terms of the mortgage or the deed of trust and any subordination
agreement among the lenders.
Although priority among liens on the same property generally depends in the
first instance on the order of filing, there are a number of ways in which a
lien that is a senior lien when it is filed can become subordinate to a lien
filed at a later date. A deed of trust or mortgage generally is not prior to any
liens for real estate taxes and assessments, certain federal liens (including
certain federal criminal liens, environmental liens and tax liens), certain
mechanics and materialmen's liens, and other liens given priority by applicable
law.
There are two parties to a mortgage, the mortgagor, who is the
borrower/property owner or the land trustee (as described below), and the
mortgagee, who is the lender. Under the mortgage instrument, the mortgagor
delivers to the mortgagee a note or bond and the mortgage. In the case of a land
trust, there are three parties because title to the property is held by a land
trustee under a land trust agreement of which the borrower/property owner is the
beneficiary; at origination of a mortgage loan, the borrower executes a separate
undertaking to make payments on the mortgage note. Under a deed of trust, the
homeowner or borrower, called the 'grantor,' grants the security property to a
third-party grantee, called the 'trustee,' for the benefit of the lender, called
the 'beneficiary.' The deed of trust, upon the instructions of the beneficiary,
gives the trustee the authority, if the borrower defaults, to sell the security
property in a 'foreclosure' or 'trustee's sale' and to apply the sale proceeds
to the secured debt. The mortgagee's authority under a mortgage and the
trustee's authority under a
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deed of trust are governed by the law of the state in which the real property is
located, the express provisions of the mortgage or deed of trust, and, in some
cases, in deed of trust transactions, the directions of the beneficiary.
FORECLOSURE
Foreclosure of a mortgage is generally accomplished by judicial action, and
foreclosure of a deed of trust may be accomplished by judicial action.
Generally, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in completion
of the foreclosure occasionally may result from difficulties in locating
necessary parties defendant. When the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be
time-consuming and expensive. After the completion of a judicial foreclosure
proceeding, the court may issue a judgment of foreclosure and appoint a receiver
or other officer to conduct the sale of the property. In some states, mortgages
may also be foreclosed by advertisement or pursuant to a power of sale provided
in the mortgage. Foreclosure of a mortgage by advertisement is essentially
similar to foreclosure of a deed of trust by nonjudicial power of sale.
If a borrower defaults under a loan secured by a deed of trust, the lender
generally may bring suit against the borrower. The lender generally also may
attempt to collect the loan by causing the deed of trust to be enforced against
the property it encumbers. Enforcement of a deed of trust is accomplished in
most cases by a trustee's sale in which the trustee, upon default of the
grantor, and subject to the expiration of applicable cure periods, sells the
security property at a public sale under the terms of the loan documents and
subject to the applicable procedural provisions of state law. In certain states,
the lender must exhaust the security through foreclosure (either judicially or
non-judicially) prior to collecting on the loan. Whether a lender may thereafter
collect on the unpaid balance of the loan is governed by the anti-deficiency
statute in the applicable state.
The trustee's sale generally must be conducted by public auction in the
county or city in which all or some part of the security property is located. At
the sale, the trustee generally requires a bidder to deposit with the trustee a
set amount or a percentage of the full amount of the bidder's final bid in cash
(or an equivalent thereto satisfactory to the trustee) prior to and as a
condition to recognizing such bid, and may conditionally accept and hold these
amounts for the duration of the sale. The beneficiary of the deed of trust
generally need not bid cash at the sale, but may instead make a 'credit bid' up
to the extent of the total amount due under the deed of trust, including costs
and expenses actually incurred in enforcing the deed of trust, as well as the
trustee's fees and expenses. The trustee will sell the security property to the
highest proper bidder at the sale.
A sale conducted in accordance with the terms of the power of sale
contained in the deed of trust generally is presumed to be conducted regularly
and fairly, and, on a conveyance of the property by trustee's deed, confers
absolute legal title to the property to the purchaser, free of all junior deeds
of trust and free of all other liens and claims subordinate to the deed of trust
under which the sale is made. The purchaser's title, however, is subject to all
senior liens and other senior claims. Thus, if the deed of trust being enforced
is a junior deed of trust, the trustee will convey title to the property to the
purchaser subject to the first deed of trust and any other prior liens and
claims. A trustee's sale or judicial foreclosure under a junior deed of trust
generally has no effect on the first deed of trust, with the possible exception
of the right of a senior beneficiary to accelerate its indebtedness under a
default clause or a 'due-on-sale' clause contained in the senior deed of trust.
See '--Due-on-Sale Clauses in Home Equity Loans' below.
Because a potential buyer at the sale may find it difficult to determine
the exact status of title and other facts about the security property, and
because the physical condition of the security property may have deteriorated,
it generally is more common for the lender, rather than an unrelated third
party, to purchase the security property at a trustee's sale or judicial
foreclosure sale. The lender (or other purchaser at the trustee's sale) will be
subject to the burdens of ownership, including the obligations to service any
senior deed of trust, to obtain hazard insurance and to make such repairs at its
own expense as are necessary to render the security property suitable for
resale. The lender commonly will attempt to resell the security property and
obtain the services of a real estate broker and agree to pay the broker a
commission in connection with the resale. Depending upon market conditions, the
ultimate proceeds of the resale of the security property may not be high enough
to equal the lender's investment.
The proceeds received by the trustee from the sale generally are applied
first to the costs, fees and expenses of sale and then in satisfaction of the
indebtedness secured by the deed of trust under which the sale was conducted.
Any remaining proceeds generally are payable to the holders of junior deeds of
trust and other liens and claims in order of their priority. Any balance
remaining generally is payable to the grantor. Following the
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sale, if there are insufficient proceeds to repay the secured debt, the
beneficiary under the foreclosed lien generally may obtain a deficiency judgment
against the grantor. See '--Deficiency Judgments' below.
Some courts have been faced with the issue of whether federal or state
constitutional due process requires that borrowers under deeds of trust receive
notices in addition to the statutorily prescribed minimum. For the most part,
the courts in these cases have upheld the notice provisions and procedures
described above.
An action to foreclose a mortgage is an action to recover the mortgage debt
by enforcing the mortgagee's rights under the mortgage. It is regulated by
statutes and rules and subject throughout to the court's equitable powers.
Generally, a mortgagor is bound by the terms of the related mortgage note and
the mortgage as made and cannot be relieved from his default if the mortgagee
has exercised his rights in a commercially reasonable manner. However, since a
foreclosure action historically was equitable in nature, the court may exercise
equitable powers to relieve a mortgagor of a default and deny the mortgagee
foreclosure on proof that either the mortgagor's default was neither willful nor
in bad faith or the mortgagee's action established a waiver, fraud, bad faith,
or oppressive or unconscionable conduct such as to warrant a court of equity to
refuse affirmative relief to the mortgagee. Under certain circumstances a court
of equity may relieve the mortgagor from an entirely technical default where
such default was not willful.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses or counterclaims are interposed, sometimes requiring up to
several years to complete. Moreover, a non-collusive, regularly conducted
foreclosure sale may be challenged as a fraudulent conveyance, regardless of the
parties' intent, if a court determines that the sale was for less than fair
consideration and such sale occurred while the mortgagor was insolvent and
within one year (or within the state statute of limitations if the trustee in
bankruptcy elects to proceed under state fraudulent conveyance law) of the
filing of bankruptcy. Similarly, a suit against the debtor on the related
mortgage note may take several years and, generally, is a remedy alternative to
foreclosure, the mortgagee being precluded from pursuing both at the same time.
In the case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee is a public
sale. However, because of the difficulty potential third party purchasers at the
sale have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is uncommon for a third party to purchase the property at a
foreclosure sale. Rather, it is common for the lender to purchase the property
from the trustee or referee for an amount which may be equal to the unpaid
principal amount of the mortgage note secured by the mortgage or deed of trust
plus accrued and unpaid interest and the expenses of foreclosure, in which event
the mortgagor's debt will be extinguished or the lender may purchase for a
lesser amount in order to preserve its right against a borrower to seek a
deficiency judgment in states where such a judgment is available. Thereafter,
subject to the right of the borrower in some states to remain in possession
during the redemption period, the lender will assume the burdens of ownership,
including obtaining hazard insurance, paying taxes and making such repairs at
its own expense as are necessary to render the property suitable for sale. The
lender will commonly obtain the services of a real estate broker and pay the
broker's commission in connection with the sale of the property. Depending upon
market conditions, the ultimate proceeds of the sale of the property may not
equal the lender's investment in the property. Any loss may be reduced by the
receipt of any mortgage guaranty insurance proceeds.
RIGHTS OF REDEMPTION
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the trustor or mortgagor and foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. The
right of redemption should be distinguished from the equity of redemption, which
is a non-statutory right that must be exercised prior to the foreclosure sale.
In some states, redemption may occur only upon payment of the entire principal
balance of the loan, accrued interest and expenses of foreclosure. In other
states, redemption may be authorized if the former borrower pays only a portion
of the sums due. The effect of a statutory right of redemption is to diminish
the ability of the lender to sell the foreclosed property. The exercise of a
right of redemption would defeat the title of any purchaser at a foreclosure
sale, or of any purchaser from the lender subsequent to foreclosure or sale
under a deed of trust. Consequently the practical effect of a right of
redemption is to force the lender to retain the property and pay the expenses of
ownership until the redemption period has run. In some states, there is no right
to redeem property after a trustee's sale under a deed of trust.
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In New York, the debtor (or anyone on the debtor's behalf) may cure a
default by paying the entire amount of the debt then due, plus costs and
expenses actually incurred in enforcing the obligation and statutorily limited
attorneys' fees. In addition, the borrower (or its successor) or any other
persons having a subordinate lien or encumbrance may discharge the mortgage or
deed of trust on the security property by paying the entire principal due as a
result of the acceleration, together with interest and costs, expenses and fees.
In New York, with few exceptions, the right of redemption is forever barred by a
valid foreclosure.
When the lender under a junior mortgage or deed of trust cures the default
and reinstates or redeems the senior mortgage or deed of trust, the amount paid
by the lender for such cure generally becomes a part of the indebtedness secured
by the junior deed of trust.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGES
The mortgage loans comprising or underlying the Primary Assets included in
the Trust Fund for a Series will be secured by mortgages or deeds of trust which
may be second or more junior mortgages to other mortgages held by other lenders
or institutional investors. The rights of the Trust Fund (and therefore the
Holders), as mortgagee under a junior mortgage, are subordinate to those of the
mortgagee under the senior mortgage, including the prior rights of the senior
mortgagee to receive hazard insurance and condemnation proceeds and to cause the
property securing the mortgage loan to be sold upon default of the mortgagor,
thereby extinguishing the junior mortgagee's lien unless the junior mortgagee
asserts its subordinate interest in the property in foreclosure litigation and,
possibly, satisfies the defaulted senior mortgage. A junior mortgagee may
satisfy a defaulted senior loan in full and, in some states, may cure such
default and bring the senior loan current, in either event adding the amounts
expended to the balance due on the junior loan. In some states, absent a
provision in the mortgage or deed of trust, no notice of default is required to
be given to a junior mortgagee. In addition, as described above, the rights of
the Trust Fund may be or become subject to liens for real estate taxes and other
obligations. Although the Seller generally does not cure defaults under a senior
deed of trust or other lien, it is the Seller's standard practice to protect its
interest by monitoring any such sale of which it is aware and bidding for
property if it determines that it is in the Seller's best interests to do so.
The standard form of the mortgage used by most institutional lenders, like
that used by the Seller, confers on the mortgagee the right both to receive all
proceeds collected under any hazard insurance policy required to be maintained
by the borrower and all awards made in connection with condemnation proceedings.
The lender generally has the right, subject to the specific provisions of the
deed of trust securing its loan, to apply such proceeds and awards to repair of
any damage to the security property or to payment of any indebtedness secured by
the deed of trust, in such order as the beneficiary may determine. Thus, in the
event improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the mortgagee
or beneficiary under underlying senior mortgages will have the prior right to
collect any insurance proceeds payable under a hazard insurance policy and any
award of damages in connection with the condemnation and to apply the same to
the indebtedness secured by the senior mortgages or deeds of trust. If
available, proceeds in excess of the amount of senior mortgage indebtedness, in
most cases, will be applied to the indebtedness of a junior mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay before
delinquency all taxes and assessments on the property and, when due, all
encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee under the mortgage. Upon a
failure of the grantor or mortgagor to perform any of these obligations, the
mortgagee or beneficiary is given the right under certain mortgages to perform
the obligation itself, at its election, with the mortgagor agreeing to reimburse
the mortgagee or beneficiary for any sums expended by the mortgagee or
beneficiary on behalf of the mortgagor or grantor. The mortgage or deed of trust
typically provide that all sums so expended by the mortgagee become part of the
indebtedness secured by the mortgage.
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ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS
Certain states have imposed statutory prohibitions which limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the borrower following foreclosure or sale under a
deed of trust. A deficiency judgment is a personal judgment against the former
borrower equal in most cases to the difference between the net amount realized
upon the public sale of the real property and the amount due to the lender.
However, some states calculate the deficiency as the difference between the
outstanding indebtedness and the greater of the fair market value of the
property and the sales price of the property. Other statutes require the
beneficiary or mortgagee to exhaust the security afforded under a deed of trust
or mortgage by foreclosure in an attempt to satisfy the full debt before
bringing a personal action against the borrower. In certain other states, the
lender has the option of bringing a personal action against the borrower on the
debt without first exhausting such security; however, in some of these states,
the lender, following judgment on such personal action, may be deemed to have
elected a remedy and may be precluded from exercising remedies with respect to
the security. Consequently, the practical effect of the election requirement,
when applicable, is that lenders will usually proceed first against the security
rather than bringing a personal action against the borrower. Finally, other
statutory provisions limit any deficiency judgment against the former borrower
following a foreclosure sale to the excess of the outstanding debt over the fair
market value of the property at the time of the public sale. The purpose of
these statutes is generally to prevent a beneficiary or a mortgagee from
obtaining a large deficiency judgment against the former borrower as a result of
low or no bids at the foreclosure sale. In New York there is no statutory
prohibition limiting remedies to the lender, and the liability for deficiency in
a mortgage foreclosure action depends upon the contract. However, by statute,
where no express covenant (or other separate instrument, such as a guarantee)
provides for the liability of a deficiency, the remedies of a lender are
confined to the mortgaged property.
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including the federal bankruptcy laws, the Federal
Soldiers' and Sailors' Relief Act and state laws affording relief to debtors,
may interfere with or affect the ability of the secured lender to realize upon
collateral and/or enforce a deficiency judgment. For example, with respect to
federal bankruptcy law, the filing of a petition acts as a stay against the
enforcement of remedies for collection of a debt. Moreover, a court with federal
bankruptcy jurisdiction may permit a debtor through a Chapter 13 Bankruptcy Code
rehabilitative plan to cure a monetary default with respect to a loan on a
debtor's residence by paying arrearages within a reasonable time period and
reinstating the original loan payment schedule even though the lender
accelerated the loan and the lender has taken all steps to realize upon his
security (provided no sale of the property has yet occurred) prior to the filing
of the debtor's Chapter 13 petition. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a loan default by permitting
the obligor to pay arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan may be modified if the borrower has filed a petition
under Chapter 13. These courts have suggested that such modifications may
include reducing the amount of each monthly payment, changing the rate of
interest, altering the repayment schedule and reducing the lender's security
interest to the value of the residence, thus leaving the lender a general
unsecured creditor for the difference between the value of the residence and the
outstanding balance of the loan. Federal bankruptcy law and limited case law
indicate that the foregoing modifications could not be applied to the terms of a
loan secured by property that is the principal residence of the debtor. In all
cases, the secured creditor is entitled to the value of its security plus
post-petition interest, attorney's fees and costs to the extent the value of the
security exceeds the debt.
In a Chapter 11 case under the Bankruptcy Code, the lender is precluded
from foreclosing without authorization from the bankruptcy court. The lender's
lien may be transferred to other collateral and/or be limited in amount to the
value of the lender's interest in the collateral as of the date of the
bankruptcy. The loan term may be extended, the interest rate may be adjusted to
market rates and the priority of the loan may be subordinated to bankruptcy
court-approved financing. The bankruptcy court can, in effect, invalidate
due-on-sale clauses through confirmed Chapter 11 plans of reorganization.
The Bankruptcy Code provides priority to certain tax liens over the
lender's security. This may delay or interfere with the enforcement of rights in
respect of a defaulted Loan. In addition, substantive requirements are
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imposed upon lenders in connection with the origination and the servicing of
mortgage loans by numerous federal and some state consumer protection laws. The
laws include the federal Truth-in-Lending Act, Real Estate Settlement Procedures
Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit
Reporting Act and related statutes and regulations. These federal laws impose
specific statutory liabilities upon lenders who originate loans and who fail to
comply with the provisions of the law. In some cases, this liability may affect
assignees of the loans.
DUE-ON-SALE CLAUSES IN MORTGAGE LOANS
Due-on-sale clauses permit the lender to accelerate the maturity of the
loan if the borrower sells or transfers, whether voluntarily or involuntarily,
all or part of the real property securing the loan without the lender's prior
written consent. The enforceability of these clauses has been the subject of
legislation or litigation in many states, and in some cases, typically involving
single family residential mortgage transactions, their enforceability has been
limited or denied. In any event, the Garn-St Germain Depository Institutions Act
of 1982 (the 'Garn-St Germain Act') preempts state constitutional, statutory and
case law that prohibits the enforcement of due-on-sale clauses and permits
lenders to enforce these clauses in accordance with their terms, subject to
certain exceptions. As a result, due-on-sale clauses have become generally
enforceable except in those states whose legislatures exercised their authority
to regulate the enforceability of such clauses with respect to mortgage loans
that were (i) originated or assumed during the 'window period' under the Garn-St
Germain Act which ended in all cases not later than October 15, 1982, and (ii)
originated by lenders other than national banks, federal savings institutions
and federal credit unions. FHLMC has taken the position in its published
mortgage servicing standards that, out of a total of eleven 'window period
states,' five states (Arizona, Michigan, Minnesota, New Mexico and Utah) have
enacted statutes extending, on various terms and for varying periods, the
prohibition on enforcement of due-on-sale clauses with respect to certain
categories of window period loans. Also, the Garn-St Germain Act does
'encourage' lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
ENFORCEABILITY OF PREPAYMENT AND LATE PAYMENT FEES
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations, upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if the
loan is prepaid. Late charges and prepayment fees are typically retained by
servicers as additional servicing compensation.
EQUITABLE LIMITATIONS ON REMEDIES
In connection with lenders' attempts to realize upon their security, courts
have invoked general equitable principles. The equitable principles are
generally designed to relieve the borrower from the legal effect of his defaults
under the loan documents. Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake affirmative and
expensive actions to determine the causes of the borrower's default and the
likelihood that the borrower will be able to reinstate the loan. In some cases,
courts have substituted their judgment for the lender's judgment and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from temporary financial disability. In
other cases, courts have limited the right of a lender to realize upon his
security if the default under the security agreement is not monetary, such as
the borrower's failure to adequately maintain the property or the borrower's
execution of secondary financing affecting the property. Finally, some courts
have been faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers under security agreements receive notices in addition to the
statutorily-prescribed minimums. For the most part, these cases have upheld the
notice provisions as being reasonable or have found that, in cases involving the
sale by a trustee under a deed of trust or by a mortgagee under a mortgage
having a power of sale, there is insufficient state action to afford
constitutional protections to the borrower.
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Most conventional single-family mortgage loans may be prepaid in full or in
part without penalty. A mortgagee to whom a prepayment in full has been tendered
may be compelled to give either a release of the mortgage or an instrument
assigning the existing mortgage. The absence of a restraint on prepayment,
particularly with respect to mortgage loans having higher mortgage rates, may
increase the likelihood of refinancing or other early retirements of such
mortgage loans.
APPLICABILITY OF USURY LAWS
New York has usury laws which limit the interest and other amounts that may
be charged under certain loans. Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980, enacted in March 1980 ('Title
V'), provides that state usury limitations shall not apply to certain types of
residential first mortgage loans originated by certain lenders after March 31,
1980. Similar federal statutes were in effect with respect to mortgage loans
made during the first three months of 1980. Title V authorizes any state to
reimpose interest rate limits by adopting, before April 1, 1983, a state law, or
by certifying that the voters of such state have voted in favor of any
provision, constitutional or otherwise, which expressly rejects an application
of the federal law. Fifteen states adopted such a law prior to the April 1, 1983
deadline. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V.
ENVIRONMENTAL LEGISLATION
A federal statute, the Comprehensive Environmental Response, Compensation,
and Liability Act, and a growing number of state laws impose a statutory lien
for associated costs on property that is the subject of a cleanup action on
account of hazardous wastes or hazardous substances released or disposed of on
the property. Such a lien generally will have priority over all subsequent liens
on the property and, in certain of these states, will have priority over prior
recorded liens, including the lien of a deed of trust. The priority of the
environmental lien under federal law depends on the time of perfection of the
federal lien compared to the time of perfection of any competing liens under
applicable state law. In addition, under federal environmental legislation and
possibly under state law in a number of states, a secured party that takes a
deed in lieu of foreclosure or acquires a property at a foreclosure sale may be
liable for the costs of cleaning up a contaminated site. Although such costs
could be substantial, they would probably not be imposed on a secured lender
(such as the applicable Trust Fund) if it promptly marketed the foreclosed
property for resale. In the event that a Trust Fund acquired title to a property
securing a Mortgage Home Equity Loan and cleanup costs were incurred in respect
of the property, the holders of the Securities might incur a delay in the
payment if such costs were required to be paid by such Trust Fund.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the Soldiers' and Sailors' Civil Relief Act of 1940, members of all
branches of the military on active duty, including draftees and reservists in
military service, (i) are entitled to have interest rates reduced and capped at
6% per annum, on obligations (including Loans) incurred prior to the
commencement of military service for the duration of military service, (ii) may
be entitled to a stay of proceedings on any kind of foreclosure or repossession
action in the case of defaults on such obligations entered into prior to
military service for the duration of military service and (iii) may have the
maturity of such obligations incurred prior to military service extended, the
payments lowered and the payment schedule readjusted for a period of time after
the completion of military service. However, the benefits of (i), (ii), or (iii)
above are subject to challenge by creditors and if, in the opinion of the court,
the ability of a person to comply with such obligations is not materially
impaired by military service, the court may apply equitable principles
accordingly. If a borrower's obligation to repay amounts otherwise due on a Home
Equity Loan included in a Trust Fund for a Series is relieved pursuant to the
Soldiers' and Sailors' Civil Relief Act of 1940, none of the Trust Fund, the
Servicer, the Seller nor the Trustee will be required to advance such amounts,
and any loss in respect thereof may reduce the amounts available to be paid to
the Holders of the Securities of such Series. Unless otherwise specified in the
related Prospectus Supplement, any shortfalls in interest collections on Loans
or Underlying Loans relating to the Private Securities, as applicable, included
in a Trust Fund for a Series resulting from application of the Soldiers' and
Sailors' Civil Relief Act of 1940 will be allocated to each Class of Securities
of such Series that is entitled to receive interest in respect of such Loans or
Underlying Loans in proportion to the interest that each such Class of
Securities would have otherwise been entitled to receive in respect of such
Loans or Underlying Loans had such interest shortfall not occurred.
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USE OF PROCEEDS
The Seller will apply all or substantially all of the net proceeds from the
sale of each Series of Securities for one or more of the following purposes: (i)
to establish any Reserve Fund, Pre-Funding Account or Capitalized Interest
Account, (ii) to pay costs of structuring and issuing such Securities, including
the costs of obtaining Enhancement and (iii) for its general corporate purposes.
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary is based on the opinion of Stroock & Stroock & Lavan,
special counsel to the Seller ('Federal Tax Counsel'), as to the material
federal income tax consequences of the purchase, ownership and disposition of
Securities. The summary does not purport to deal with all aspects of federal
income taxation that may affect particular investors in light of their
individual circumstances, nor with certain types of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily upon
investors who will hold Securities as 'capital assets' (generally, property held
for investment) within the meaning of Section 1221 of the of the Internal
Revenue Code of 1986, as amended (the 'Code'), but much of the discussion is
applicable to other investors as well. Because tax consequences may vary based
on the status or tax attributes of the owner of a Security, prospective
investors are advised to consult their own tax advisers concerning the federal,
state, local and any other tax consequences to them of the purchase, ownership
and disposition of the Securities. For purposes of this tax discussion (except
with respect to information reporting, or where the context indicates
otherwise), any reference to the 'Holder' means the beneficial owner of a
Security.
The summary is based upon the provisions of the Code, the regulations
promulgated thereunder, including, where applicable, proposed regulations, and
the judicial and administrative rulings and decisions now in effect, all of
which are subject to change or possible differing interpretations. The statutory
provisions, regulations, and interpretations on which this interpretation is
based are subject to change, and such a change could apply retroactively.
The federal income tax consequences to Holders will vary depending on
whether (i) the Securities of a Series are classified as indebtedness for
federal income tax purposes; (ii) an election is made to treat the Trust Fund
(or certain assets of the Trust Fund) relating to a particular Series of
Securities as a real estate mortgage investment conduit ('REMIC') under the
Code; (iii) the Securities represent an ownership interest for federal income
tax purposes in some or all of the assets included in the Trust Fund for a
Series; or (iv) for federal income tax purposes the Trust Fund relating to a
particular Series of Certificates is classified as a partnership. The Prospectus
Supplement for each Series of Securities will specify how the Securities will be
treated for federal income tax purposes and will discuss whether a REMIC
election, if any, will be made with respect to such Series.
TAXATION OF DEBT SECURITIES (INCLUDING REGULAR INTEREST SECURITIES)
Interest and Acquisition Discount. Securities representing regular
interest in a REMIC ('Regular Interest Securities') are generally taxable to
Holders in the same manner as evidences of indebtedness issued by the REMIC.
Stated interest on the Regular Interest Securities will be taxable as ordinary
income and taken into account using the accrual method of accounting, regardless
of the Holder's normal accounting method. Interest (other than original issue
discount) on Securities (other than Regular Interest Securities) that are
characterized as indebtedness for federal income tax purposes will be includible
in income by Holders thereof in accordance with their usual methods of
accounting. Securities characterized as debt for federal income tax purposes and
Regular Interest Securities will be referred to hereinafter collectively as
'Debt Securities.' For Certificates treated as debt for federal income tax
purposes, see 'Certain Certificates Treated as Indebtedness.'
Debt Securities that are Compound Interest Securities will, and certain of
the other Debt Securities may, be issued with 'original issue discount' ('OID').
The following discussion is based in part on the rules governing OID which are
set forth in Sections 1271-1275 of the Code and the Treasury regulations issued
thereunder on February 2, 1994 (the 'OID Regulations'). A Holder should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the Debt Securities.
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In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Debt Security and its issue price. A Holder of
a Debt Security must include such OID in gross income as ordinary interest
income as it accrues under a prescribed method which takes into account an
economic accrual of the discount. In general, OID must be included in income in
advance of the receipt of the cash representing that income. The amount of OID
on a Debt Security will be considered to be zero if it is less than a de minimis
amount determined under the Code.
The issue price of a Debt Security is the first price at which a
substantial amount of Debt Securities of that class are sold to the public
(excluding bond houses, brokers, underwriters or wholesalers). If less than a
substantial amount of a particular class of Debt Securities is sold for cash on
or prior to the Closing Date, the issue price for such class will be treated as
the fair market value of such class on the Closing Date. The stated redemption
price at maturity of a Debt Security includes the original principal amount of
the Debt Security, but generally will not include distributions of interest if
such distributions constitute 'qualified stated interest.'
Under the OID Regulations, interest payments will not be qualified stated
interest unless the interest payments are 'unconditionally payable.' The OID
Regulations state that interest is unconditionally payable if late payment of
interest (other than late payment that occurs within a reasonable grace period)
or nonpayment of interest is expected to be penalized or reasonable remedies
exist to compel payment. The meaning of 'penalized' under the OID regulations is
unclear particularly in the case of obligations based on other debt obligations.
Interest payments on Debt Securities which do not have reasonable remedies to
compel timely payment of interest may not be qualified stated interest, and such
Debt Securities may have original issue discount.
Certain Debt Securities will provide for distributions of interest based on
a period that is the same length as the interval between Distribution Dates but
ends prior to each Distribution Date. Any interest that accrues prior to the
Closing Date may be treated under the OID Regulations either (i) as part of the
issue price and the stated redemption price at maturity of the Debt Securities
or (ii) as not included in the issue price or stated redemption price. The OID
Regulations provide a special application of the de minimis rule for debt
instruments with long first accrual periods where the interest payable for the
first period is at a rate which is effectively less than that which applies in
all other periods. In such cases, for the sole purpose of determining whether
original issue discount is de minimis, the OID Regulations provide that the
stated redemption price is equal to the instrument's issue price plus the
greater of the amount of foregone interest or the excess (if any) of the
instrument's stated principal amount over its issue price.
Under the de minimis rule, OID on a Debt Security will be considered to be
zero if such OID is less than 0.25% of the stated redemption price at maturity
of the Debt Security multiplied by the weighted average maturity of the Debt
Security. For this purpose, the weighted average maturity of the Debt Security
is computed as the sum of the amounts determined by multiplying the number of
full years (i.e., rounding down partial years) from the issue date until each
distribution in reduction of stated redemption price at maturity is scheduled to
be made by a fraction, the numerator of which is the amount of each distribution
included in the stated redemption price at maturity of the Debt Security and the
denominator of which is the stated redemption price at maturity of the Debt
Security. Holders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the Debt Security
is held as a capital asset. However, accrual method Holders may elect to accrue
all de minimis OID as well as market discount under a constant interest method.
See '--Election to Treat All Interest as Original Issue Discount.'
The Holder of a Debt Security issued with OID must include in gross income,
for all days during its taxable year on which it holds such Debt Security, the
sum of the 'daily portions' of such original issue discount. The amount of OID
includible in income by a Holder will be computed by allocating to each day
during a taxable year a pro rata portion of the original issue discount that
accrued during the relevant accrual period. In the case of a Debt Security that
is not a Regular Interest Security and the principal payments on which are not
subject to acceleration resulting from prepayments on the Loans, the amount of
OID includible in income of a Holder for an accrual period (generally the period
over which interest accrues on the debt instrument) will equal the product of
the yield to maturity of the Debt Security and the adjusted issue price of the
Debt Security, reduced by any payments of qualified stated interest. The
adjusted issue price is the sum of its issue price plus prior accruals of
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OID, reduced by the total payments made with respect to such Debt Security in
all prior periods, other than qualified stated interest payments.
The amount of OID to be included in income by a Holder of a debt
instrument, such as certain Classes of the Debt Securities, that is subject to
acceleration due to prepayments on other debt obligations securing such
instruments (a 'Pay-Through Security'), is computed by taking into account the
anticipated rate of prepayments assumed in pricing the debt instrument (the
'Prepayment Assumption'). The amount of OID that will accrue during an accrual
period on a Pay-Through Security is the excess (if any) of the sum of (a) the
present value of all payments remaining to be made on the Pay-Through Security
as of the close of the accrual period and (b) the payments during the accrual
period of amounts included in the stated redemption price of the Pay-Through
Security, over the adjusted issue price of the Pay-Through Security at the
beginning of the accrual period. The present value of the remaining payments is
to be determined on the basis of three factors: (i) the original yield to
maturity of the Pay-Through Security (determined on the basis of compounding at
the end of each accrual period and properly adjusted for the length of the
accrual period), (ii) events which have occurred before the end of the accrual
period and (iii) the assumption that the remaining payments will be made in
accordance with the original Prepayment Assumption. The effect of this method is
to increase the portions of OID required to be included in income by a Holder to
take into account prepayments with respect to the Loans at a rate that exceeds
the Prepayment Assumption, and to decrease (but not below zero for any period)
the portions of OID required to be included in income by a Holder of a
Pay-Through Security to take into account prepayments with respect to the Loans
at a rate that is slower than the Prepayment Assumption. Although OID will be
reported to Holders of Pay-Through Securities based on the Prepayment
Assumption, no representation is made to Holders that Loans will be prepaid at
that rate or at any other rate.
The Seller may adjust the accrual of OID on a Class of Regular Interest
Securities (or other regular interests in a REMIC) in a manner that it believes
to be appropriate, to take account of realized losses on the Loans, although the
OID Regulations do not provide for such adjustments. If the Internal Revenue
Service were to require that OID be accrued without such adjustments, the rate
of accrual of OID for a Class of Regular Interest Securities could increase.
Certain classes of Regular Interest Securities may represent more than one
class of REMIC regular interests. Unless the applicable Prospectus Supplement
specifies otherwise, the Trustee intends, based on the OID Regulations, to
calculate OID on such Securities as if, solely for the purposes of computing
OID, the separate regular interests were a single debt instrument.
A subsequent Holder of a Debt Security will also be required to include OID
in gross income, but such a Holder who purchases such Debt Security for an
amount that exceeds its adjusted issue price will be entitled (as will an
initial Holder who pays more than a Debt Security's issue price) to offset such
OID by comparable economic accruals of portions of such excess.
Effects of Defaults and Delinquencies. Holders will be required to report
income with respect to the related Securities under an accrual method without
giving effect to delays and reductions in distributions attributable to a
default or delinquency on the Loans, except possibly to the extent that it can
be established that such amounts are uncollectible. As a result, the amount of
income (including OID) reported by a Holder of such a Security in any period
could significantly exceed the amount of cash distributed to such Holder in that
period. The Holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Securities is reduced as a result of a Home Equity Loan
default. However, the timing and character of such losses or reductions in
income are uncertain and, accordingly, Holders of Securities should consult
their own tax advisors on this point.
Interest-Only Debt Securities. The Trust Fund intends to report income
from interest-only classes of Debt Securities to the Internal Revenue Service
and to Holders of interest-only Debt Securities based on the assumption that the
stated redemption price at maturity is equal to the sum of all payments
determined under the applicable prepayment assumption. As a result, such
interest-only Debt Securities Certificates will be treated as having original
issue discount.
Variable Rate Debt Securities. Under the OID Regulations, Debt Securities
paying interest at a variable rate (a 'Variable Rate Debt Security') are subject
to special rules. A Variable Rate Debt Security will qualify as
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a 'variable rate debt instrument' if (i) its issue price does not exceed the
total noncontingent principal payments due under the Variable Rate Debt Security
by more than a specified de minimis amount and (ii) it provides for stated
interest, paid or compounded at least annually, at (a) one or more qualified
floating rates, (b) a single fixed rate and one or more qualified floating
rates, (c) a single objective rate or (d) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A 'qualified floating rate' is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Rate Debt Security is denominated. A multiple of a qualified floating
rate will generally not itself constitute a qualified floating rate for purposes
of the OID Regulations. However, a variable rate equal to (i) the product of a
qualified floating rate and a fixed multiple that is greater than zero but not
more than 1.35 or (ii) the product of a qualified floating rate and a fixed
multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate will constitute a qualified floating rate for purposes
of the OID Regulations. In addition, under the OID Regulations, two or more
qualified floating rates that can reasonably be expected to have approximately
the same values throughout the term of the Variable Rate Debt Security will be
treated as a single qualified floating rate (a 'Presumed Single Qualified
Floating Rate'). Two or more qualified floating rates with values within 25
basis points of each other as determined on the Variable Rate Debt Security's
issue date will be conclusively presumed to be a Presumed Single Qualified
Floating Rate. Notwithstanding the foregoing, a variable rate that would
otherwise constitute a qualified floating rate but which is subject to one or
more restrictions such as a cap or floor, will not be a qualified floating rate
for purposes of the OID Regulations unless the restriction is fixed throughout
the term of the Variable Rate Debt Security or the restriction will not
significantly affect the yield of the Variable Rate Debt Security.
An 'objective rate' is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and which is based upon (i)
one or more qualified floating rates, (ii) one or more rates where each rate
would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the Variable Rate Debt Security is
denominated, (iii) either the yield or changes in the price of one or more items
of actively traded personal property or (iv) a combination of rates described in
(i), (ii) and (iii). The OID Regulations also provide that other variable rates
may be treated as objective rates if so designated by the Internal Revenue
Service in the future. Despite the foregoing, a variable rate of interest on a
Variable Rate Debt Security will not constitute an objective rate if it is
reasonably expected that the average value of such rate during the first half of
the Variable Rate Debt Security's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Variable Rate Debt Security's term. An objective rate will qualify as a
'qualified inverse floating rate' if such rate is equal to a fixed rate minus a
qualified floating rate and variations in the rate can reasonably be expected to
inversely reflect contemporaneous variations in the cost of newly borrowed
funds. The OID Regulations also provide that if a Variable Rate Debt Security
provides for stated interest at a fixed rate for an initial period of less than
one year followed by a variable rate that is either a qualified floating rate or
an objective rate and if the variable rate on the Variable Rate Debt Security's
issue date is intended to approximate the fixed rate, then the fixed rate and
the variable rate together will constitute either a single qualified floating
rate or objective rate, as the case may be (a 'Presumed Single Variable Rate').
If the value of the variable rate and the initial fixed rate are within 25 basis
points of each other as determined on the Variable Rate Debt Security's issue
date, the variable rate will be conclusively presumed to approximate the fixed
rate.
For Variable Rate Debt Securities that qualify as a 'variable rate debt
instrument' under the OID Regulations and provide for interest at either a
single qualified floating rate, a single objective rate, a Presumed Single
Qualified Floating Rate or a Presumed Single Variable Rate throughout the term
(a 'Single Variable Rate Debt Security'), original issue discount is computed as
described above based on the following: (i) stated interest on the Single
Variable Rate Debt Security which is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually will constitute
qualified stated interest and (ii) by assuming that the variable rate on the
Single Variable Debt Security is a fixed rate equal to: (a) in the case of a
Single Variable Rate Debt Security with a qualified floating rate or a qualified
inverse floating rate, the value of, as of the issue date, of the qualified
floating rate or the qualified inverse floating rate or (b) in the case of a
Single Variable Rate Debt Security with an objective rate (other than a
qualified inverse floating rate), a fixed rate which reflects the reasonably
expected yield for such Single Variable Debt Security.
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In general, any Variable Rate Debt Security other than a Single Variable
Rate Debt Security (a 'Multiple Variable Rate Debt Security') that qualifies as
a 'variable rate debt instrument' will be converted into an 'equivalent' fixed
rate debt instrument for purposes of determining the amount and accrual of
original issue discount and qualified stated interest on the Multiple Variable
Rate Debt Security. The OID Regulations generally require that such a Multiple
Variable Rate Debt Security be converted into an 'equivalent' fixed rate debt
instrument by substituting any qualified floating rate or qualified inverse
floating rate provided for under the terms of the Multiple Variable Rate Debt
Security with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Multiple Variable
Rate Debt Security's issue date. Any objective rate (other than a qualified
inverse floating rate) provided for under the terms of the Multiple Variable
Rate Debt Security is converted into a fixed rate that reflects the yield that
is reasonably expected for the Multiple Variable Rate Debt Security. In the case
of a Multiple Variable Rate Debt Security that qualifies as a 'variable rate
debt instrument' and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or a
qualified inverse floating rate, if the Multiple Variable Rate Debt Security
provides for a qualified inverse floating rate). Under such circumstances, the
qualified floating rate or qualified inverse floating rate that replaces the
fixed rate must be such that the fair market value of the Multiple Variable Rate
Debt Security as of the Multiple Variable Rate Debt Security's issue date is
approximately the same as the fair market value of an otherwise identical debt
instrument that provides for either the qualified floating rate or qualified
inverse floating rate rather than the fixed rate. Subsequent to converting the
fixed rate into either a qualified floating rate or a qualified inverse floating
rate, the Multiple Variable Rate Debt Security is then converted into an
'equivalent' fixed rate debt instrument in the manner described above.
Once the Multiple Variable Rate Debt Security is converted into an
'equivalent' fixed rate debt instrument pursuant to the foregoing rules, the
amount of original issue discount and qualified stated interest, if any, are
determined for the 'equivalent' fixed rate debt instrument by applying the
original issue discount rules to the 'equivalent' fixed rate debt instrument in
the manner described above. A Holder of the Multiple Variable Rate Debt Security
will account for such original issue discount and qualified stated interest as
if the Holder held the 'equivalent' fixed rate debt instrument. Each accrual
period appropriate adjustments will be made to the amount of qualified stated
interest or original issue discount assumed to have been accrued or paid with
respect to the 'equivalent' fixed rate debt instrument in the event that such
amounts differ from the accrual amount of interest accrued or paid on the
Multiple Variable Rate Debt Security during the accrual period.
The OID Regulations do not clearly address the treatment of a Variable Rate
Debt Security that is based on a weighted average of the interest rates on
underlying Loans. Under the OID Regulations, interest payments on such a
Variable Rate Debt Security may be characterized as qualified stated interest
which is includible in income in a manner similar to that described in the
previous paragraph. However, it is also possible that interest payments on such
a Variable Rate Debt Security would be treated as contingent interest (possibly
includible in income when the payments become fixed) or in some other manner.
If a Variable Rate Debt Security does not qualify as a 'variable rate debt
instrument' under the OID Regulations, then the Variable Rate Debt Security
would be treated as a contingent payment debt obligation. It is not clear under
current law how a Variable Rate Debt Security would be taxed if such Debt
Security were treated as a contingent payment debt obligation.
Market Discount. A purchaser of a Security may be subject to the market
discount rules of Sections 1276-1278 of the Code. A Holder that acquires a Debt
Security with more than a prescribed de minimis amount of 'market discount'
(generally, the excess of the principal amount of the Debt Security over the
purchaser's purchase price) will be required to include accrued market discount
in income as ordinary income in each month, but limited to an amount not
exceeding the principal payments on the Debt Security received in that month
and, if the Securities are sold, the gain realized. Such market discount would
accrue in a manner to be provided in Treasury regulations but, until such
regulations are issued, such market discount would in general accrue either (i)
on the basis of a constant yield (in the case of a Pay-Through Security, taking
into account a prepayment assumption) or (ii) in the ratio of (a) in the case of
Securities (or in the case of a Pass-Through Security, as set forth below, the
Loans underlying such Security) not originally issued with original issue
discount, stated interest payable in the relevant period to total stated
interest remaining to be paid at the beginning of the period or (b) in the case
of Securities (or, in the case of a Pass-Through Security, as described below,
the
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Loans underlying such Security) originally issued at a discount, OID in the
relevant period to total OID remaining to be paid.
Section 1277 of the Code provides that, regardless of the origination date
of the Debt Security (or, in the case of a Pass-Through Security, the Loans),
the excess of interest paid or accrued to purchase or carry a Security (or, in
the case of a Pass-Through Security, as described below, the underlying Loans)
with market discount over interest received on such Security is allowed as a
current deduction only to the extent such excess is greater than the market
discount that accrued during the taxable year in which such interest expense was
incurred. In general, the deferred portion of any interest expense will be
deductible when such market discount is included in income, including upon the
sale, disposition, or repayment of the Security (or in the case of a
Pass-Through Security, an underlying Loan). A Holder may elect to include market
discount in income currently as it accrues, on all market discount obligations
acquired by such Holder during the taxable year such election is made and
thereafter, in which case the interest deferral rule will not apply.
Premium. A Holder who purchases a Debt Security (other than an Interest
Weighted Security to the extent described above) at a cost greater than its
stated redemption price at maturity, generally will be considered to have
purchased the Security at a premium, which it may elect to amortize as an offset
to interest income on such Security (and not as a separate deduction item) on a
constant yield method. Although no regulations addressing the computation of
premium accrual on securities similar to the Securities have been issued, the
legislative history of the 1986 Act indicates that premium is to be accrued in
the same manner as market discount. Accordingly, it appears that the accrual of
premium on a Class of Pay-Through Securities will be calculated using the
prepayment assumption used in pricing such Class. If a Holder makes an election
to amortize premium on a Debt Security, such election will apply to all taxable
debt instruments (including all REMIC regular interests and all pass-through
certificates representing ownership interests in a trust holding debt
obligations) held by the Holder at the beginning of the taxable year in which
the election is made, and to all taxable debt instruments acquired thereafter by
such Holder, and will be irrevocable without the consent of the Internal Revenue
Service. Purchasers who pay a premium for the Securities should consult their
tax advisers regarding the election to amortize premium and the method to be
employed.
Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a Holder Debt Security to elect to accrue all interest,
discount (including de minimis market or original issue discount) and premium in
income as interest, based on a constant yield method for Debt Securities
acquired on or after April 4, 1994. If such an election were to be made with
respect to a Debt Security with market discount, the Holder of the Debt Security
would be deemed to have made an election to include in income currently market
discount with respect to all other debt instruments having market discount that
such Holder of the Debt Security acquires during the year of the election or
thereafter. Similarly, a Holder of a Debt Security that makes this election for
a Debt Security that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Holder owns or acquires. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Debt Security is irrevocable.
Sale or Exchange. A Holder's tax basis in its Debt Security is the price
such Holder pays for a Debt Security, plus amounts of OID or market discount
included in income and reduced by any payments received (other than qualified
stated interest payments) and any amortized premium. Gain or loss recognized on
a sale, exchange, or redemption of a Debt Security, measured by the difference
between the amount realized and the Debt Security's basis as so adjusted, will
generally be capital gain or loss, assuming that the Debt Security is held as a
capital asset. In the case of a Debt Security held by a bank, thrift, or similar
institution described in Section 582 of the Code, however, gain or loss realized
on the sale or exchange of a Debt Security will be taxable as ordinary income or
loss. In addition, gain from the disposition of a Regular Interest Security that
might otherwise be capital gain will be treated as ordinary income to the extent
of the excess, if any, of (i) the amount that would have been includible in the
Holder's income if the yield on such Regular Interest Security had equaled 110%
of the applicable federal rate as of the beginning of such Holder' s holding
period, over the amount of ordinary income actually recognized by the Holder
with respect to such Regular Interest Security. Currently, the maximum tax rate
on ordinary income for individual taxpayers is 39.6% and the maximum tax rate on
long-term capital gains for such taxpayers is 28%. The maximum tax rate on both
ordinary income and long-term capital gains of corporate taxpayers is 35%.
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TAXATION OF THE REMIC AND ITS HOLDERS
General. In the opinion of Federal Tax Counsel, if a REMIC election is
made with respect to a Series of Securities, then the arrangement by which the
Securities of that Series are issued will be treated as a REMIC as long as all
of the provisions of the applicable Agreement are complied with and the
statutory and regulatory requirements are satisfied. Securities will be
designated as 'Regular Interests' or 'Residual Interests' in a REMIC, as
specified in the related Prospectus Supplement.
Status of Regular Interest Securities as Real Property Loans. Regular
Interest Securities and Securities representing a residual interest in a REMIC
(both types of securities collectively referred to as 'REMIC Securities') will
be 'qualifying real property loans' within the meaning of Section 593(d) of the
Code, 'real estate assets' for purposes of Section 856(c)(5)(A) of the Code and
assets described in Section 7701(a)(19)(C) of the Code (assets qualifying under
one or more of those sections, applying each section separately, 'qualifying
assets') to the extent that the REMIC's assets are qualifying assets. However,
if at least 95 percent of the REMIC's assets are qualifying assets, then 100
percent of the REMIC Securities will be qualifying assets. Similarly, income on
the REMIC Securities will be treated as 'interest on obligations secured by
mortgages on real property' within the meaning of Section 856(c)(3)(B) of the
Code, subject to the limitations of the preceding two sentences. In addition to
Loans, the REMIC's assets will include payments on Loans held pending
distribution to Holders of REMIC Securities, amounts in reserve accounts (if
any), other credit enhancements (if any) and possibly buydown funds ('Buydown
Funds'). The Loans generally will be qualifying assets under all three of the
foregoing sections of the Code. However, Loans that are not secured by
residential real property or real property used primarily for church purposes
may not constitute qualifying assets under Section 7701(a)(19)(C)(v) of the
Code, and Loans that are not secured by improved real property or real property
which is to be improved using Home Equity Loan proceeds will not constitute
qualifying assets under Section 593(d) of the Code. In addition, to the extent
that the principal amount of a Home Equity Loan exceeds the value of the
property securing the Loan, it is unclear and Federal Tax Counsel is unable to
opine whether the Loans will be qualifying assets. The regulations under
Sections 860A through 860G of the Code (the 'REMIC Regulations') treat credit
enhancements as part of the mortgage or pool of mortgages to which they relate,
and therefore credit enhancements generally should be qualifying assets.
Regulations issued in conjunction with the REMIC Regulations provide that
amounts paid on Loans and held pending distribution to Holders of Regular
Interest Securities ('cash flow investments') will be treated as qualifying
assets. It is unclear whether reserve funds or Buydown Funds would also
constitute qualifying assets under any of those provisions.
REMIC EXPENSES; SINGLE CLASS REMICS
As a general rule, all of the expenses of a REMIC will be taken into
account by Holders of the Residual Interest Securities. In the case of a 'single
class REMIC,' however, the expenses will be allocated, under Treasury
regulations, among the Holders of the Regular Interest Securities and the
Holders of the Residual Interest Securities on a daily basis in proportion to
the relative amounts of income accruing to each Holder on that day. In the case
of a Holder of a Regular Interest Security who is an individual or a
'pass-through interest Holder' (including certain pass-through entities but not
including real estate investment trusts), such expenses will be deductible only
to the extern that such expenses, plus other 'miscellaneous itemized deductions'
of the Holder, exceed 2% of such Holder's adjusted gross income and such Holder
may not be able to deduct such fees and expenses to any extent in computing such
Holder's alternative minimum tax liability. In addition, the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross income exceeds the applicable amount (for 1996, such amount is
$117,950 for all taxpayers except married taxpayers filling separately, for whom
such amount is $58,975) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the applicable amount, or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year. The reduction or
disallowance of this deduction may have a significant impact on the yield of the
Regular Interest Security to such a Holder. In general terms, a single class
REMIC is one that either (i) would qualify, under existing Treasury regulations,
as a grantor trust if it were not a REMIC (treating all interests as ownership
interests, even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and which is structured with the
principal purpose of avoiding the single class REMIC rules. Unless otherwise
stated in the applicable Prospectus Supplement, the expenses of the REMIC will
be allocated to Holders of the related Residual Interest Securities.
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TAXATION OF THE REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC is taken into account by the Holders of
residual interests. As described above, the regular interests are generally
taxable as debt of the REMIC.
Tiered REMIC Structures. For certain Series of Securities, two or more
separate elections may be made to treat designated portions of the related Trust
Fund as REMICs ('Tiered REMICs') for federal income tax purposes. Upon the
issuance of any such Series of Securities, Federal Tax Counsel will deliver its
opinion generally to the effect that, assuming compliance with all provisions of
the related Pooling and Servicing Agreement, the Tiered REMICs will each qualify
as a REMIC and the REMIC Certificates issued by the Tiered REMICs, respectively,
will be considered to evidence ownership of Regular Certificates or Residual
Certificates in the related REMIC within the meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
'qualifying real property loans' under Section 593(d) of the Code, 'real estate
assets' within the meaning of Section 856(c)(5)(A) of the Code, and 'loans
secured by an interest in real property' under Section 7701(a)(19)(C) of the
Code, and whether the income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
Calculation of REMIC Income. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual, with certain adjustments. In general, the taxable
income or net loss will be the difference between (i) the gross income produced
by the REMIC's assets, including stated interest and any original issue discount
or market discount on loans and other assets, and (ii) deductions, including
stated interest and original issue discount accrued on Regular Interest
Securities, amortization of any premium with respect to Loans, and servicing
fees and other expenses of the REMIC. A Holder of a Residual Interest Security
that is an individual or a 'pass-through interest Holder' (including certain
pass-through entities, but not including real estate investment trusts) will be
unable to deduct servicing fees payable on the Loans or other administrative
expenses of the REMIC for a given taxable year, to the extent that such
expenses, when aggregated with such Holder's other miscellaneous itemized
deductions for that year, do not exceed two percent of such Holder's adjusted
gross income and such Holder may not be able to deduct such fees and expenses to
any extent in computing such holders alternative minimum tax liability.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the regular interests and the residual interests on the Startup
Day (generally, the day that the interests are issued). Such aggregate basis
will be allocated among the assets of the REMIC in proportion to their
respective fair market values.
The OID provisions of the Code apply to loans of individuals originated on
or after March 2, 1984, and the market discount provisions apply to loans.
Subject to possible application of the de minimis rules, the method of accrual
by the REMIC of OID income on such loans will be equivalent to the method under
which Holders of Pay-Through Securities accrue original issue discount (i.e.,
under the constant yield method taking into account the Prepayment Assumption).
The REMIC will deduct OID on the Regular Interest Securities in the same manner
that the Holders of the Regular Interest Securities include such discount in
income, but without regard to the de minimis rules. See 'Taxation of Debt
Securities (Including Regular Interest Securities)' above. However, a REMIC that
acquires loans at a market discount must include such market discount in income
currently, as it accrues, on a constant interest basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the life
of the loans (presumably taking into account the Prepayment Assumption) on a
constant yield method. Although the law is somewhat unclear regarding recovery
of premium attributable to loans originated on or before such date, it is
possible that such premium may be recovered in proportion to payments of loan
principal.
Prohibited Transactions and Contributions Tax. The REMIC will be subject
to a 100% tax on any net income derived from a 'prohibited transaction.' For
this purpose, net income will be calculated without taking into account any
losses from prohibited transactions or any deductions attributable to any
prohibited transaction
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that resulted in a loss. In general, prohibited transactions include: (i)
subject to limited exceptions, the sale or other disposition of any qualified
mortgage transferred to the REMIC; (ii) subject to a limited exception, the sale
or other disposition of a cash flow investment; (iii) the receipt of any income
from assets not permitted to be held by the REMIC pursuant to the Code; or (iv)
the receipt of any fees or other compensation for services rendered by the
REMIC. It is anticipated that a REMIC will not engage in any prohibited
transactions in which it would recognize a material amount of net income. In
addition, subject to a number of exceptions, a tax is imposed at the rate of
100% on amounts contributed to a REMIC after the Startup Day. The Holders of
Residual Interest Securities will generally be responsible for the payment of
any such taxes imposed on the REMIC. To the extent not paid by such Holders or
otherwise, however, such taxes will be paid out of the Trust Fund and will be
allocated pro rata to all outstanding Classes of Securities of such REMIC.
TAXATION OF HOLDERS OF RESIDUAL INTEREST SECURITIES
The Holder of a Security representing a residual interest (a 'Residual
Interest Security') will take into account the 'daily portion' of the taxable
income or net loss of the REMIC for each day during the taxable year on which
such Holder held the Residual Interest Security. The daily portion is determined
by allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the REMIC for such quarter, and by allocating that
amount among the Holders (on such day) of the Residual Interest Securities in
proportion to their respective holdings on such day.
The Holder of a Residual Interest Security must report its proportionate
share of the taxable income of the REMIC whether or not it receives cash
distributions from the REMIC attributable to such income or loss. The reporting
of taxable income without corresponding distributions could occur, for example,
in certain REMIC issues in which the Loans held by the REMIC were issued or
acquired at a discount, since mortgage prepayments cause recognition of discount
income, while the corresponding portion of the prepayment could be used in whole
or in part to make principal payments on REMIC Regular Interests issued without
any discount or at an insubstantial discount. (If this occurs, it is likely that
cash distributions will exceed taxable income in later years.) Taxable income
may also be greater in earlier years of certain REMIC issues as a result of the
fact that interest expense deductions, as a percentage of outstanding principal
on REMIC Regular Interest Securities, will typically increase over time as lower
yielding Securities are paid, whereas interest income with respect to loans will
generally remain constant over time as a percentage of loan principal.
In any event, because the Holder of a residual interest is taxed on the net
income of the REMIC, the taxable income derived from a Residual Interest
Security in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pretax yield. Therefore, the after-tax
yield on the Residual Interest Security may be less than that of such a bond or
instrument.
Limitation on Losses. The amount of the REMIC's net loss that a Holder may
take into account currently is limited to the Holder's adjusted basis at the end
of the calendar quarter in which such loss arises. A Holder's basis in a
Residual Interest Security will initially equal such Holder's purchase price,
and will subsequently be increased by the amount of the REMIC's taxable income
allocated to the Holder, and decreased (but not below zero) by the amount of
distributions made and the amount of the REMIC's net loss allocated to the
Holder. Any disallowed loss may be carried forward indefinitely, but may be used
only to offset income of the REMIC generated by the same REMIC. The ability of
Holders of Residual Interest Securities to deduct net losses may be subject to
additional limitations under the Code, as to which such Holders should consult
their tax advisers.
Distributions. Distributions on a Residual Interest Security (whether at
their scheduled times or as a result of prepayments) will generally not result
in any additional taxable income or loss to a Holder of a Residual Interest
Security. If the amount of such payment exceeds a Holder's adjusted basis in the
Residual Interest Security, however, the Holder will recognize gain (treated as
gain from the sale of the Residual Interest Security) to the extent of such
excess.
Sale or Exchange. A Holder of a Residual Interest Security will recognize
gain or loss on the sale or exchange of a Residual Interest Security equal to
the difference, if any, between the amount realized and such Holder's adjusted
basis in the Residual Interest Security at the time of such sale or exchange.
Except to the extent provided in regulations, which have not yet been issued,
any loss upon disposition of a Residual Interest Security
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will be disallowed if the selling Holder acquires any residual interest in a
REMIC or similar mortgage pool within six months before or after such
disposition.
Excess Inclusions. The portion of the REMIC taxable income of a Holder of
a Residual Interest Security consisting of 'excess inclusion' income may not be
offset by other deductions or losses, including net operating losses, on such
Holder's federal income tax return. An exception applies to organizations to
which Code Section 593 applies (generally, certain thrift institutions);
however, such exception will not apply if the aggregate value of the Residual
Interest Securities is not considered to be 'significant,' as described below.
Further, if the Holder of a Residual Interest Security is an organization
subject to the tax on unrelated business income imposed by Code Section 511,
such Holder's excess inclusion income will be treated as unrelated business
taxable income of such Holder. In addition, under Treasury regulations yet to be
issued, if a real estate investment trust, a regulated investment company, a
common trust fund, or certain cooperatives were to own a Residual Interest
Security, a portion of dividends (or other distributions) paid by the real
estate investment trust (or other entity) would be treated as excess inclusion
income. If a Residual Security is owned by a foreign person, excess inclusion
income is subject to tax at a rate of 30% which may not be reduced by treaty, is
not eligible for treatment as 'portfolio interest' and is subject to certain
additional limitations. See 'Tax Treatment of Foreign Investors.' Regulations
provide that a Residual Interest Security has significant value only if (i) the
aggregate issue price of the Residual Interest Security is at least 2% of the
aggregate of the issue prices of all Regular Interest Securities and Residual
Interest Securities in the REMIC and (ii) the anticipated weighted average life
(determined as specified in the Proposed Regulations) of the Residual Interest
Securities is at least 20% of the weighted average life of the REMIC.
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to a
Residual Interest Security, over the daily accruals for such quarterly period of
(i) 120% of the long term applicable federal rate on the Startup Date multiplied
by (ii) the adjusted issue price of such Residual Interest Security at the
beginning of such quarterly period. The adjusted issue price of a Residual
Interest Security at the beginning of each calendar quarter will equal its issue
price (calculated in a manner analogous to the determination of the issue price
of a Regular Interest Security), increased by the aggregate of the daily
accruals for prior calendar quarters, and decreased (but not below zero) by the
amount of loss allocated to a Holder and the amount of distributions made on the
Residual Interest Security before the beginning of the quarter. The long-term
federal rate, which is announced monthly by the Treasury Department, is an
interest rate that is based on the average market yield of outstanding
marketable obligations of the United States government having remaining
maturities in excess of nine years.
Under the REMIC Regulations, in certain circumstances, transfers of
Residual Interest Securities may be disregarded. See '--Restrictions on
Ownership and Transfer of Residual Interest Securities' and 'Tax Treatment of
Foreign Investors' below.
Restrictions on Ownership and Transfer of Residual Interest Securities. As
a condition to qualification as a REMIC, reasonable arrangements must be made to
prevent the ownership of a REMIC residual interest by any 'Disqualified
Organization.' Disqualified Organizations include the United States, any State
or political subdivision thereof, any foreign government, any international
organization, or any agency or instrumentality of any of the foregoing, a rural
electric or telephone cooperative described in Section 1381(a)(2)(C) of the
Code, or any entity exempt from the tax imposed by Sections 1-1399 of the Code,
if such entity is not subject to tax on its unrelated business income.
Accordingly, the applicable Agreement will prohibit Disqualified Organizations
from owning a Residual Interest Security. In addition, no transfer of a Residual
Interest Security will be permitted unless the proposed transferee shall have
furnished to the Trustee an affidavit representing and warranting that it is
neither a Disqualified Organization nor an agent or nominee acing on behalf of a
Disqualified Organization.
If a Residual Interest Security is transferred to a Disqualified
Organization (in violation of the restrictions set forth above), a substantial
tax will be imposed on the transferor of such Residual Interest Security at the
time of the transfer. In addition, if a Disqualified Organization holds an
interest in a pass-through entity (including, among others, a partnership,
trust, real estate investment trust, regulated investment company, or any person
holding as nominee an interest in a pass-through entity), that owns a Residual
Interest Security, the pass-through entity will be required to pay an annual tax
on its allocable share of the excess inclusion income of the REMIC.
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The REMIC Regulations provide that a transfer of a 'noneconomic residual
interest' will be disregarded for all federal income tax purposes unless
impeding the assessment or collection of tax was not a significant purpose of
the transfer. A residual interest will be treated as a 'noneconomic residual
interest' unless, at the time of the transfer (1) the present value of the
expected future distributions on the residual interest at least equals the
product of (x) the present value of all anticipated excess inclusions with
respect to the residual interest and (y) the highest corporate tax rate,
currently 35 percent, and (2) the transferor reasonably expects that for each
anticipated excess inclusion, the transferee will receive distributions from the
REMIC, at or after the time at which taxes on such excess inclusion accrue,
sufficient to pay the taxes thereon. A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known (had 'improper knowledge') that the
transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC. A transferor will be presumed not to have improper
knowledge if (i) the transferor conducts, at the time of the transfer, a
reasonable investigation of the financial condition of the transferee and, as a
result of the investigation, the transferor finds that the transferee has
historically paid its debts as they came due and finds no significant evidence
to indicate that the transferee will not continue to pay its debts as they come
due in the future, and (ii) the transferee represents to the transferor that (A)
the transferee understands that it might incur tax liabilities in excess of any
cash received with respect to the residual interest and (B) the transferee
intends to pay the taxes associated with owning the residual interest as they
come due. A different formulation of this rule applies to transfers of Residual
Interest Security by or to foreign transferees. See 'Tax Treatment to Foreign
Investors'.
Mark to Market Rules. Prospective purchasers of a Residual Interest
Security should be aware that on December 28, 1993, the Internal Revenue Service
released temporary regulations (the 'Temporary Mark to Market Regulations')
relating to the requirement that a securities dealer mark-to-market securities
held for sale to customers. This mark-to-market requirement applies to all
securities of a dealer, except to the extent that the dealer has specifically
identified a security as held for investment. The Temporary Mark to Market
Regulations provide that for purposes of this mark-to-market requirement, a
'negative value' Residual Interest Security is not treated as a security and
thus may not be marked to market. In addition, a dealer is not required to
identify such Residual Interest Security as held for investment. In general, a
Residual Interest Security has negative value if, as of the date a taxpayer
acquires the Residual Interest Security, the present value of the tax
liabilities associated with holding the Residual Interest Security exceeds the
sum of (i) the present value of the expected future distributions on the
Residual Interest Security, and (ii) the present value of the anticipated tax
savings associated with holding the Residual Interest Security as the REMIC
generates losses. The amounts and present values of the anticipated tax
liabilities, expected future distributions and anticipated tax savings are all
to be determined using (i) the prepayment and reinvestment assumptions adopted
under Section 1272(a)(6), or that would have been adopted had the REMIC's
regular interests been issued with OID, (ii) any required or permitted clean up
calls, or required qualified liquidation provided for in the REMIC's
organizational documents and (iii) a discount rate equal to the 'applicable
Federal rate' (as specified in Section 1274(d)(1) that would apply to a debt
instrument issued on the date of acquisition of the Residual Interest Security.
Furthermore, the Temporary Mark to Market Regulations provide the IRS with the
authority to treat any Residual Interest Security having substantially the same
economic effect as a 'negative value' residual interest as a 'negative value'
residual interest.
On January 3, 1995, the IRS released proposed regulations under Section 475
(the 'Proposed Mark-to-Market Regulations'). The Proposed Mark-to-Market
Regulations provide that any REMIC Residual Interest acquired after January 3,
1995 cannot be marked to market, regardless of the value of such REMIC residual
interest. The Temporary Mark-to-Market Regulations described above still apply
to any REMIC Residual Interest acquired on or prior to January 3, 1995.
ADMINISTRATIVE MATTERS
The REMIC's books must be maintained on a calendar year basis and the REMIC
must file an annual federal income tax return. The REMIC will also be subject to
the procedural and administrative rules of the Code applicable to partnerships,
including the determination of any adjustments to, among other things, items of
REMIC income, gain, loss, deduction, or credit, by the IRS in a unified
administrative proceeding.
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TAX STATUS AS A GRANTOR TRUST
General. As specified in the related Prospectus Supplement if a REMIC or
partnership election is not made and the Certificates are not treated as debt
for federal income tax purposes, in the opinion of Federal Tax Counsel, the
Trust Fund relating to a Series of Securities will be classified for federal
income tax purposes as a grantor trust under Subpart E, Part 1 of Subchapter J
of the Code and not as an association taxable as a corporation (the Securities
of such Series, 'Pass-Through Securities'). Accordingly, each Holder of a Pass-
Through Security is treated for federal income tax purposes as the owner of an
undivided interest in the Mortgages included in the Trust Fund. As further
described below, each Holder of a Pass-Through Security therefore must report on
its federal income tax return the gross income from the portion of the Mortgages
that is allocable to such Pass-Through Security and may deduct the portion of
the expenses incurred or accrued by the Trust Fund that is allocable to such
Pass-Through Security, at the same time and to the same extent as such items
would be reported by such Holder if it had purchased and held directly such
interest in the Mortgages and received or accrued directly its share of the
payments on the Mortgages and incurred or accrued directly its share of expenses
incurred or accrued by the Trust Fund when those amounts are received, incurred
or accrued by the Trust Fund.
A Holder of a Pass-Through Security that is an individual, estate, or trust
will be allowed deductions for such expenses only to the extent that the sum of
those expenses and the Holder's other miscellaneous itemized deductions exceeds
two percent of such Holder's adjusted gross income. Moreover, a Holder of a
Pass-Through Security that is not a corporation cannot deduct such expenses for
purposes of the alternative minimum tax (if applicable). Such deductions will
include servicing, guarantee and administrative fees paid to the servicer of the
Mortgage Loans. As a result, the Trust Fund will report additional taxable
income to Holders of Pass-Through Securities in an amount equal to their
allocable share of such deductions, and individuals, estates, or trusts holding
Pass-Through Securities may have taxable income in excess of the cash received.
Status of the Pass-Through Securities as Real Property Loans. The
Pass-Through Securities will be 'qualifying real property loans' within the
meaning of Section 593(d) of the Code, 'real estate assets' for purposes of
Section 856(c)(5)(A) of the Code and 'loans.......secured by an interest in real
property' within the meaning of Section 7701(a)(19)(C)(v) of the Code (assets
qualifying under one or more of those sections, applying each section
separately, 'qualifying assets') to the extent that the Trust Fund's assets are
qualifying assets. The Pass-Through Securities may not be qualifying assets
under any of the foregoing sections of the Code to the extent that the Trust
Fund's assets include Buydown Funds, reserve funds, or payments on mortgages
held pending distribution to CertificateHolders. Further, the Pass-Through
Securities may not be 'qualifying real property loans' to the extent loans held
by the Trust Fund are not secured by improved real property or real property
which is to be improved using the loan proceeds, may not be 'real estate assets'
to the extent loans held by the trust are not secured by real property, and may
not be 'loanssecured by an interest in real property' to the extent loans held
by the trust are not secured by residential real property or real property used
primarily for church purposes. In addition, to the extent that the principal
amount of a loan exceeds
the value of the property securing the loan, it is unclear and Federal Tax
Counsel is unable to opine whether the loans will be qualifying assets.
Taxation of Pass-Through Securities Under Stripped Bond Rules. The federal
income tax treatment of the Pass-Through Securities will depend on whether they
are subject to the rules of section 1286 of the Code (the 'stripped bond
rules'). The Pass-Through Securities will be subject to those rules if stripped
interest-only Certificates are issued. In addition, whether or not stripped
interest-only Certificates are issued, the Internal Revenue Service may contend
that the stripped bond rules apply on the ground that the Servicer's servicing
fee, or other amounts, if any, paid to (or retained by) the Servicer or its
affiliates, as specified in the applicable Prospectus Supplement, represent
greater than an arm's length consideration for servicing the Loans and should be
characterized for federal income tax purposes as an ownership interest in the
Loans. The Internal Revenue Service has taken the position in Revenue Ruling
91-46 that a retained interest in excess of reasonable compensation for
servicing is treated as a 'stripped coupon' under the rules of Code Section
1286.
If interest retained for the Servicer's servicing fee or other interest is
treated as a 'stripped coupon,' the Pass-Through Securities will either be
subject to the OID rules or the market discount rules. A Holder of a Pass-
Through Security will account for any discount on the Pass-Through Security as
market discount rather than OID
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if either (i) the amount of OID with respect to the Pass-Through Security was
treated as zero under the OID de minimis rule when the Pass-Through Security was
stripped or (ii) no more than 100 basis points (including any amount of
servicing in excess of reasonable servicing) is stripped off from the Loans. If
neither of the above exceptions applies, the OID rules will apply to the
Pass-Through Securities.
If the OID rules apply, the Holder of a Pass-Through Security (whether a
cash or accrual method taxpayer) will be required to report interest income from
the Pass-Through Security in each taxable year equal to the income that accrues
on the Pass-Through Security in that year calculated under a constant yield
method based on the yield of the Pass-Through Security (or, possibly, the yield
of each Mortgage underlying such Pass-Through Security) to such Holder. Such
yield would be computed at the rate (assuming monthly compounding) that, if used
in discounting the Holder's share of the payments on the Mortgages, would cause
the present value of those payments to equal the price at which the Holder
purchased the Pass-Through Security. With respect to certain categories of debt
instruments, Section 1272(a)(6) of the Code requires that OID be accrued based
on a prepayment assumption determined in a manner prescribed by forthcoming
regulations. It is unclear whether such regulations would apply this rule to the
Pass-Through Securities, whether Section 1272(a)(6) might apply to the
Pass-Through Securities in the absence of such regulations, or whether the
Internal Revenue Service could require use of a reasonable prepayment assumption
based on other tax law principles and Federal Tax Counsel is unable to opine
with respect to this issue. If required to report interest income on the
Pass-Through Securities to the Internal Revenue Service under the stripped bond
rules, it is anticipated that the Trustee will calculate the yield of the
Pass-Through Securities based on a representative initial offering price of the
Pass-Through Securities and a reasonable assumed rate of prepayment of the
Mortgages (although such yield may differ from the yield to any particular
Holder that would be used in calculating the interest income of such Holder).
The Prospectus Supplement for each series of Pass-Through Securities will
describe the prepayment assumption that will be used for this purpose, but no
representation is made that the Mortgages will prepay at that rate or at any
other rate.
Assume that Holders are not taxed as directly owning the Loans, in the case
of a Pass-Through Security acquired at a price equal to the principal amount of
the Mortgages allocable to the Pass-Through Security, the use of a reasonable
prepayment assumption would not have any significant effect on the yield used in
calculating accruals of interest income. In the case, however, of a Pass-Through
Security acquired at a discount or premium (that is, at a price less than or
greater than such principal amount, respectively), the use of a reasonable
prepayment assumption would increase or decrease such yield, and thus accelerate
or decelerate the reporting of interest income, respectively.
If a Mortgage Home Equity Loan is prepaid in full, the Holder of a
Pass-Through Security acquired at a discount or premium generally will recognize
ordinary income or loss equal to the difference between the portion of the
prepaid principal amount of the Home Equity Loan that is allocable to the
Pass-Through Security and the portion of the adjusted basis of the Pass-Through
Security (see 'Sales of Pass-Through Securities' below) that is allocable to the
Loan. The method of allocating such basis among the Loans may differ depending
on whether a reasonable prepayment assumption is used in calculating the yield
of the Pass-Through Securities for purposes of accruing OID. It is not clear
whether any other adjustments would be required to reflect differences between
the prepayment rate that was assumed in calculating yield and the actual rate of
prepayments.
Pass-Through Securities of certain series ('Variable Rate Pass-Through
Securities') may provide for a Pass-Through Rate based on the weighted average
of the interest rates of the Mortgages held by the Trust Fund, which interest
rates may be fixed or variable. In the case of a Variable Rate Pass-Through
Security that is subject to the OID rules, the daily portions of OID generally
will be calculated under the principles discussed in '--Taxation of Debt
Securities (Including Regular Interest Securities)-Variable Rate Debt
Securities.'
Taxation of Pass-Through Securities If Stripped Bond Rules Do Not
Apply. If the stripped bond rules do not apply to a Pass-Through Security, then
the Holder will be required to include in income its share of the interest
payments on the Mortgages in accordance with its tax accounting method. In
addition, if the Holder purchased the Pass-Through Security at a discount or
premium, the Holder will be required to account for such discount or premium in
the manner described below. The treatment of any discount will depend on whether
the discount is OID as defined in the Code and, in the case of discount other
than OID, whether such other discount exceeds a de minimis amount. In the case
of OID, the Holder (whether a cash or accrual method taxpayer) will be
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required to report as additional interest income in each month the portion of
such discount that accrues in that month, calculated based on a constant yield
method. In general it is not anticipated that the amount of OID to be accrued in
each month, if any, will be significant relative to the interest paid currently
on the Mortgages. However, OID could arise with respect to a Home Equity Loan
('ARM') that provides for interest at a rate equal to the sum of an index of
market interest rates and a fixed number. The OID for ARMs generally will be
determined under the principles discussed in 'Taxation of Debt Securities
(Including Regular Interest Securities)--Variable Rate Debt Securities.'
If discount other than OID exceeds a de minimis amount (described below),
the Holder will also generally be required to include in income in each month
the amount of such discount accrued through such month and not previously
included in income, but limited, with respect to the portion of such discount
allocable to any Mortgage, to the amount of principal on such Mortgage received
by the Trust Fund in that month. Because the Mortgages will provide for monthly
principal payments, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount
accrues (and therefore at a rate not significantly slower than the rate at which
such discount would be included in income if it were OID). The Holder may elect
to accrue such discount under a constant yield method based on the yield of the
Pass-Through Security to such Holder (or possibly based on the yields of each
Loan). In the absence of such an election, it may be necessary to accrue such
discount under a more rapid straight-line method. Under the de minimis rule,
market discount with respect to a Pass-Through Security will be considered to be
zero if it is less than the product of (i) 0.25% of the principal amount of the
Mortgages allocable to the Pass-Through Security and (ii) the weighted average
life (in complete years) of the Mortgages remaining at the time of purchase of
the Pass-Through Security.
If a Holder purchases a Pass-Through Security at a premium, such Holder may
elect under Section 171 of the Code to amortize the portion of such premium that
is allocable to a Home Equity Loan under a constant yield method based on the
yield of the Mortgage Home Equity Loan to such Holder, provided that such Home
Equity Loan was originated after September 27, 1985. Premium allocable to a Home
Equity Loan originated on or before that date should be allocated among the
principal payments on the Home Equity Loan and allowed as an ordinary deduction
as principal payments are made or, perhaps, upon termination.
It is not clear whether the foregoing adjustments for discount or premium
would be made based on the scheduled payments on the Loans or taking account of
a reasonable prepayment assumption, and Federal Tax Counsel is unable to opine
on this issue.
If a Home Equity Loan is prepaid in full, the Holder of a Pass-Through
Security acquired at a discount or premium will recognize ordinary income or
loss equal to the difference between the portion of the prepaid principal amount
of the Home Equity Loan that is allocable to the Pass-Through Security and the
portion of the adjusted basis of the Pass-Through Security (see 'Sales of
Pass-Through Securities' below) that is allocable to the Loan. The method of
allocating such basis among the Mortgage Loans may differ depending on whether a
reasonable prepayment assumption is used in calculating the yield of the
Pass-Through Securities for purposes of accruing OID. Other adjustments might be
required to reflect differences between the prepayment rate that was assumed in
accounting for discount or premium and the actual rate of prepayments.
MISCELLANEOUS TAX ASPECTS
Backup Withholding A Holder, other than a Holder of a Residual Interest
Security, may, under certain circumstances, be subject to 'backup withholding'
at a rate of 31% with respect to distributions or the proceeds of a sale of
certificates to or through brokers that represent interest or original issue
discount on the Securities. This withholding generally applies if the Holder of
a Security (i) fails to furnish the Trustee with its taxpayer identification
number ('TIN'); (ii) furnishes the Trustee an incorrect TIN; (iii) fails to
report properly interest, dividends or other 'reportable payments' as defined in
the Code; or (iv) under certain circumstances, fails to provide the Trustee or
such Holder's securities broker with a certified statement, signed under penalty
of perjury, that the TIN provided is its correct number and that the Holder is
not subject to backup withholding. Backup withholding will not apply, however,
with respect to certain payments made to Holders, including payments to certain
exempt recipients (such as exempt organizations) and to certain Nonresidents (as
defined below). Holders should consult their tax advisers as to their
qualification for exemption from backup withholding and the procedure for
obtaining the exemption.
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The Trustee will report to the Holders and to the Servicer for each
calendar year the amount of any 'reportable payments' during such year and the
amount of tax withheld, if any, with respect to payments on the Securities.
TAX TREATMENT OF FOREIGN INVESTORS
Subject to the discussion below with respect to Trust Funds which are
treated as partnerships for federal income tax purposes and with respect to
Certificates treated as debt for federal income tax purposes, unless interest
(including OID) paid on a Security (other than a Residual Interest Security) is
considered to be 'effectively connected' with a trade or business conducted in
the United States by a nonresident alien individual, foreign partnership or
foreign corporation ('foreign investors'), such interest will normally qualify
as portfolio interest (except where (i) the recipient is a Holder, directly or
by attribution, of 10% or more of the capital or profits interest in the issuer,
or (ii) the recipient is a controlled foreign corporation to which the issuer is
a related person) and will be exempt from federal income tax. See '--Tax
Consequences to Holders of the Certificates Issued by a Partnership--Tax
Consequences to Foreign Certificateholders' and '--Certain Certificates Treated
as Indebtedness--Foreign Investors'. Upon receipt of appropriate ownership
statements, the issuer normally will be relieved of obligations to withhold tax
from such interest payments. These provisions supersede the generally applicable
provisions of United States law that would otherwise require the issuer to
withhold at a 30% rate (unless such rate were reduced or eliminated by an
applicable tax treaty) on, among other things, interest and other fixed or
determinable, annual or periodic income paid to Nonresidents. Holders of Pass-
Through Securities however, may be subject to withholding to the extent that the
Loans were originated on or before July 18, 1984.
Interest and OID of Holders who are foreign persons are not subject to
withholding if they are effectively connected with a United States business
conducted by the Holder and timely provide an IRS Form 4224. They will, however,
generally be subject to the regular United States income tax.
Payments to Holders of Residual Interest Securities who are foreign persons
will generally be treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Holders should assume that such income does
not qualify for exemption from United States withholding tax as 'portfolio
interest.' It is clear that, to the extent that a payment represents a portion
of REMIC taxable income that constitutes excess inclusion income, a Holder of a
Residual Interest Security will not be entitled to an exemption from or
reduction of the 30% (or lower treaty rate) withholding tax rule. If the
payments are subject to United States withholding tax, they generally will be
taken into account for withholding tax purposes only when paid or distributed
(or when the Residual Interest Security is disposed of). The Treasury has
statutory authority, however, to promulgate regulations which would require such
amounts to be taken into account at an earlier time in order to prevent the
avoidance of tax. Such regulations could, for example, require withholding prior
to the distribution of cash in the case of Residual Interest Securities that do
not have significant value. Under the REMIC Regulations, if a Residual Interest
Security has tax avoidance potential, a transfer of a Residual Interest Security
to a Nonresident will be disregarded for all federal tax purposes. A Residual
Interest Security has tax avoidance potential unless, at the time of the
transfer the transferor reasonably expects that the REMIC will distribute to the
transferee residual interest Holder amounts that will equal at least 30% of each
excess inclusion, and that such amounts will be distributed at or after the time
at which the excess inclusions accrue and not later than the calendar year
following the calendar year of accrual. If a Nonresident transfers a Residual
Interest Security to a United States person, and if the transfer has the effect
of allowing the transferor to avoid tax on accrued excess inclusions, then the
transfer is disregarded and the transferor continues to be treated as the owner
of the Residual Interest Security for purposes of the withholding tax provisions
of the Code. See 'Taxation of Holders of Residual Interest Securities--Excess
Inclusions.'
Subject to the discussion in the previous paragraph, any capital gain
realized on the sale, redemption, retirement or other taxable disposition of a
Security by a foreign person will be exempt from United States federal income
and withholding tax, provided that (i) such gain is not effectively connected
with the conduct of a trade or business in the United States by the foreign
person and (ii) in the case of an individual foreign person, the foreign person
is not present in the United States for 183 days or more in the taxable year.
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TAX CHARACTERIZATION OF THE TRUST AS A PARTNERSHIP
Federal Tax Counsel will deliver its opinion that a Trust Fund which is
intended to be a partnership for federal income tax purposes will not be an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the Trust Agreement and related documents will be complied with,
and on counsel's conclusions that (1) the Trust Fund will not have certain
characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust Fund will exempt it from the rule that certain publicly traded
partnerships are taxable as corporations or the issuance of the Certificates has
been structured as a private placement under an IRS safe harbor, so that the
Trust Fund will not be characterized as a publicly traded partnership taxable as
a corporation.
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its taxable
income. The Trust Fund's taxable income would include all its income, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust Fund. In additions, all distributions
to the Certificateholders would be taxable as dividends.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES ISSUED BY A PARTNERSHIP
Treatment of the Notes as Indebtedness. The Trust Fund will agree, and the
NoteHolders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Except as otherwise provided in the related
Prospectus Supplement, Federal Tax Counsel will advise the Seller that the Notes
will be classified as debt for federal income tax purposes. Consequently,
Holders of Notes will be subject to taxation as described in 'Taxation of Debt
Securities (Including Regular Interest Securities)' above for Debt Securities
which are not Regular Interest Securities.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Federal Tax Counsel, the IRS successfully asserted that one or more of the
Notes did not represent debt for federal income tax purposes, the Notes might be
treated as equity interests in the Trust Fund. If so treated, the Trust Fund
might be taxable as a corporation with the adverse consequences described above
(and the taxable corporation would not be able to reduce its taxable income by
deductions for interest expense on Notes recharacterized as equity).
Alternatively, and most likely in the view of Federal Tax Counsel, the Trust
Fund might be treated as a publicly traded partnership that would not be taxable
as a corporation because it would meet certain qualifying income tests.
Nonetheless, treatment of the Notes as equity interests in such a publicly
traded partnership could have adverse tax consequences to certain Holders. For
example, income to foreign Holders generally would be subject to U.S. federal
income tax and U.S. federal income tax return filing and withholding
requirements, and individual Holders might be subject to certain limitations on
their ability to deduct their share of the Trust Fund's expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES ISSUED BY A PARTNERSHIP
Treatment of the Trust Fund as a Partnership. In the case of a Trust Fund
intended to qualify as a partnership for federal income tax purposes, the Trust
Fund and the Seller will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust Fund as a partnership for purposes
of federal and state income tax, franchise tax and any other tax measured in
whole or in part by income, with the assets of the partnership being the assets
held by the Trust Fund, the partners of the partnership being the
Certificateholders, and the Notes, if any, being debt of the partnership.
However, the proper characterization of the arrangement involving the Trust
Fund, the Certificates, the Notes, the Trust Fund and the Servicer is not clear
because there is no authority on transactions closely comparable to that
contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Fund. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
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Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates have interest rates which would qualify as contingent interest
under the OID regulations, and that a Series of Securities includes a single
Class of Certificates. If these conditions are not satisfied with respect to any
given Series of Certificates, additional tax considerations with respect to such
Certificates will be disclosed in the applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be subject
to federal income tax. Rather, each CertificateHolder will be required to
separately take into account such Holder's allocated share of income, gains,
losses, deductions and credits of the Trust Fund. The Trust Fund's income will
consist primarily of interest and finance charges earned on the Loans (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Loans. The Trust Fund's deductions will
consist primarily of interest and OID accruing with respect to the Notes,
servicing and other fees, and losses or deductions upon collection or
disposition of Loans.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust Fund for each month equal to the sum of (i) the interest that accrues on
the Certificates in accordance with their terms for such month, including
interest accruing at the Pass-Through Rate for such month and interest on
amounts previously due on the Certificates but not yet distributed; (ii) any
Trust Fund income attributable to discount on the Loans that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any amortization by the Trust
Fund of premium on Loans that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust Fund will be allocated to the Seller. Based on the economic arrangement of
the parties, this approach for allocating Trust Fund income should be
permissible under applicable Treasury regulations, although no assurance can be
given that the IRS would not require a greater amount of income to be allocated
to Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through Rate
plus the other items described above even though the Trust Fund might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis Holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
Fund income even if they have not received cash from the Trust Fund to pay such
taxes. In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable income
that is greater or less than the amount reported to them by the Trust Fund.
If Notes are also issued, all of the taxable income allocated to a
Certificateholder that is a pension, profit sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute 'unrelated business taxable income' generally taxable to such a
Holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such Holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such Holder over the life of
the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Loan, the Trust Fund
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Loans will not have been
issued with OID and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust Fund for the Loans may be greater or less
than the remaining principal balance of the Loans at the time of purchase. If
so, the Home Equity Loan will have been acquired at a premium or discount, as
the case may be. (As indicated above, the Trust Fund will make this calculation
on an aggregate basis, but might be required to recompute it on a Home Equity
Loan by Home Equity Loan basis.)
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If the Trust Fund acquires the Loans at a market discount or premium, the
Trust Fund will elect to include any such discount in income currently as it
accrues over the life of the Loans or to offset any such premium against
interest income on the Loans. As indicated above, a portion of such market
discount income or premium deduction may be allocated to CertificateHolders.
Section 708 Termination. Under Section 708 of the Code, the Trust Fund
will be deemed to terminate for federal income tax purposes if 50% or more of
the capital and profits interests in the Trust Fund are sold or exchanged within
a 12-month period. If such a termination occurs, the Trust Fund will be
considered to distribute its assets to the partners, who would then be treated
as recontributing those assets to the Trust Fund as a new partnership. The Trust
Fund will not comply with certain technical requirements that might apply when
such a constructive termination occurs. As a result, the Trust Fund may be
subject to certain tax penalties and may incur additional expenses if it is
required to comply with those requirements. Furthermore, the Trust Fund might
not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
Holder's cost increased by the Holder's share of Trust Fund income (includible
in income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the Holder's share of the
Notes and other liabilities of the Trust Fund. A Holder acquiring Certificates
at different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the Holder's share of
unrecognized accrued market discount on the Loans would generally be treated as
ordinary income to the Holder and would give rise to special tax reporting
requirements. The Trust Fund does not expect to have any other assets that would
give rise to such special reporting requirements. Thus, to avoid those special
reporting requirements, the Trust Fund will elect to include market discount in
income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Sellers and Transferees. In general, the Trust Fund's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the close
of the last day of such month. As a result, a Holder purchasing Certificates may
be allocated tax items (which will affect its tax liability and tax basis)
attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust Fund might be reallocated among the Certificateholders. The Trust
Fund's method of allocation between transferors and transferees may be revised
to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust Fund' s assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust Fund were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust Fund currently does not
intend to make such election. As a result, Certificateholders might be allocated
a greater or lesser amount of Trust Fund income than would be appropriate based
on their own purchase price for Certificates.
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Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust Fund. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust Fund will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust Fund and will report each Certificateholder's allocable share of items of
Trust Fund income and expense to Holders and the IRS on Schedule K-1. The Trust
Fund will provide the Schedule K-1 information to nominees that fail to provide
the Trust Fund with the information statement described below and such nominees
will be required to forward such information to the beneficial owners of the
Certificates. Generally, Holders must file tax returns that are consistent with
the information return filed by the Trust Fund or be subject to penalties unless
the Holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust Fund
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust Fund information
as to themselves and their ownership of Certificates. A clearing agency
registered under Section 17A of the Exchange Act is not required to furnish any
such information statement to the Trust Fund. The information referred to above
for any calendar year must be furnished to the Trust Fund on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust Fund with the information described above may be subject to
penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust Fund by the appropriate taxing authorities
could result in an adjustment of the returns of the Certificateholders, and,
under certain circumstances, a Certificateholder may be precluded from
separately litigating a proposed adjustment to the items of the Trust Fund. An
adjustment could also result in an audit of a Certificateholder's returns and
adjustments of items not related to the income and losses of the Trust Fund.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust Fund would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust Fund would be engaged in a trade or business in the United States
for such purposes, the Trust Fund will withhold as if it were so engaged in
order to protect the Trust Fund from possible adverse consequences of a failure
to withhold. The Trust Fund expects to withhold on the portion of its taxable
income that is allocable to foreign Certificateholders pursuant to Section 1446
of the Code, as if such income were effectively connected to a U.S. trade or
business, at a rate of 35% for foreign Holders that are taxable as corporations
and 39.6% for all other foreign Holders. Subsequent adoption of Treasury
regulations or the issuance of other administrative pronouncements may require
the Trust Fund to change its withholding procedures.
Each foreign Holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust Fund's income. Each foreign Holder must
obtain a taxpayer identification number from the IRS and submit that number to
the Trust Fund on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign Holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust Fund taking the
position that no taxes were due because the Trust Fund was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust Fund. If these interest payments are properly
characterized as guaranteed payments, then the interest probably will not be
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considered 'portfolio interest.' As a result, Certificateholders will be subject
to United States federal income tax and withholding tax at a rate of 30%, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a foreign
Holder would only be entitled to claim a refund for that portion of the taxes,
if any, in excess of the taxes that should be withheld with respect to the
guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a 'backup' withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the Holder is an exempt recipient under
applicable provisions of the Code.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in 'Federal
Income Tax Considerations,' potential investors should consider the state and
local income tax consequences of the acquisition, ownership, and disposition of
the Securities. State and local income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state or locality. Therefore, potential
investors should consult their own tax advisors with respect to the various
state and local tax consequences of an investment in the Securities.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ('ERISA'), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan (each, a 'Benefit Plan') from engaging in
certain transactions involving 'plan assets' with persons that are 'parties in
interest' under ERISA or 'disqualified persons' under the Code with respect to
the plan. ERISA also imposes certain duties and certain prohibitions on persons
who are fiduciaries of plans subject to ERISA. Under ERISA, generally any person
who exercises any authority or control with respect to the management or
disposition of the assets of a plan is considered to be a fiduciary of such
plan. A violation of these 'prohibited transaction' rules may generate excise
tax and other liabilities under ERISA and the Code for such persons.
Certain transactions involving the related Trust Fund might be deemed to
constitute prohibited transactions under ERISA and the Code with respect to a
Benefit Plan that purchased Securities if assets of the related Trust Fund were
deemed to be assets of the Benefit Plan. Under a regulation issued by the United
States Department of Labor (the 'Plan Assets Regulation'), the assets of a Trust
Fund would be treated as plan assets of a Benefit Plan for the purposes of ERISA
and the Code only if the Benefit Plan acquired an 'equity interest' in the Trust
Fund and none of the exceptions contained in the Plan Assets Regulation was
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The likely
treatment of Notes and Certificates will be discussed in the related Prospectus
Supplement.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements.
A plan fiduciary considering the purchase of Securities should consult its
tax and/or legal advisors regarding whether the assets of the Trust Fund would
be considered plan assets, the possibility of exemptive relief from the
prohibited transaction rules and other issues and their potential consequences.
LEGAL INVESTMENT
Unless otherwise specified in the related Prospectus Supplement, the
Securities will not constitute 'mortgage-related securities' within the meaning
of SMMEA. Accordingly, investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether and
the extent to which the Securities constitute legal investments for them.
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PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
'Underwriting Agreement') with respect to each Trust Fund, the Seller will agree
to sell to each of the underwriters named therein and in the related Prospectus
Supplement, and each of such underwriters will severally agree to purchase from
the Seller, the principal amount of each Class of Securities of the related
Series set forth therein and in the related Prospectus Supplement.
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all of the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of a
default by any such underwriter, each Underwriting Agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting underwriters
may be increased, or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
each Class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities or (ii) specify that the related Securities are to
be resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify
underwriters against certain liabilities, including liabilities under the
Securities Act.
Under each Underwriting Agreement, the closing of the sale of any Class of
Securities subject thereto will be conditioned on the closing of the sale of all
other such Classes.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, certain
legal matters in connection with the Securities will be passed upon for the
Seller by Stroock & Stroock & Lavan, New York, New York.
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GLOSSARY OF TERMS
The following are abbreviated definitions of certain capitalized terms used
in this Prospectus. Unless otherwise provided in a 'Supplemental Glossary' in
the Prospectus Supplement for a Series, such definitions will apply to
capitalized terms used in such Prospectus Supplement. The definitions may vary
from those in the related Agreement for a Series and the related Agreement for a
Series generally provides a more complete definition of certain of the terms.
Reference should be made to the related Agreement for a Series for a more
complete definition of such terms.
'Accrual Termination Date' means, with respect to a Class of Compound
Interest Securities, the Distribution Date specified in the related Prospectus
Supplement.
'Agreement' means, with respect to a Series of Certificates, the Pooling
and Servicing Agreement or Trust Agreement, and, with respect to a Series of
Notes, the Indenture and the Sale and Servicing Agreement, as the context
requires.
'Appraised Value' means, with respect to property securing a Loan, the
lesser of the appraised value determined in an appraisal obtained at origination
of the Home Equity Loan or sales price of such property at such time.
'Asset Group' means, with respect to the Primary Assets and other assets
comprising the Trust Fund of a Series, a group of such Primary Assets and other
assets having the characteristics described in the related Prospectus
Supplement.
'Assumed Reinvestment Rate' means, with respect to a Series, the per annum
rate or rates specified in the related Prospectus Supplement for a particular
period or periods as the 'Assumed Reinvestment Rate' for funds held in any fund
or account for the Series.
'Available Distribution Amount' means the amount in the Distribution
Account (including amounts deposited therein from any reserve fund or other fund
or account) eligible for distribution to Holders on a Distribution Date.
'Bankruptcy Code' means the federal bankruptcy code, 11 United States Code
101 et seq., and related rules and regulations promulgated thereunder.
'Business Day' means a day that, in the City of New York or in the city or
cities in which the corporate trust office of the Trustee are located, is
neither a legal holiday nor a day on which banking institutions are authorized
or obligated by law, regulations or executive order to be closed.
'Certificates' means the Asset-Backed Certificates.
'Certificate Account' or 'Collection Account' means, with respect to a
Series, the account established for the deposit by the Servicer of payments
received from the Primary Assets.
'Class' means a Class of Securities of a Series.
'Closing Date' means, with respect to a Series, the date specified in the
related Prospectus Supplement as the date on which Securities of such Series are
first issued.
'Code' means the Internal Revenue Code of 1986, as amended, and regulations
(including proposed regulations) or other pronouncements of the Internal Revenue
Service promulgated thereunder.
'Combined Loan-to-Value Ratio' means, with respect to a Loan, the ratio
determined as set forth in the related Prospectus Supplement taking into account
the amounts of any related senior mortgage loans on the related Mortgaged
Property.
'Commission' means the Securities and Exchange Commission.
'Compound Interest Security' means any Security of a Series on which all or
a portion of the interest accrued thereon is added to the principal balance of
such Security on each Distribution Date, through the Accrual Termination Date,
and with respect to which no interest shall be payable until such Accrual
Termination Date, after which interest payments will be made on the Compound
Value thereof.
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'Compound Value' means, with respect to a Class of Compound Interest
Securities, the original principal balance of such Class, plus all accrued and
unpaid interest, if any, previously added to the principal balance thereof and
reduced by any payments of principal previously made on such Class of Compound
Interest Securities.
'Condominium' means a form of ownership of real property wherein each owner
is entitled to the exclusive ownership and possession of his or her individual
Condominium Unit and also owns a proportionate undivided interest in all parts
of the Condominium Building (other than the individual Condominium Units) and
all areas or facilities, if any, for the common use of the Condominium Units.
'Condominium Association' means the person(s) appointed or elected by the
Condominium Unit owners to govern the affairs of the Condominium.
'Condominium Building' means a multi-unit building or buildings, or a group
of buildings whether or not attached to each other, located on property subject
to Condominium ownership.
'Condominium Loan' means a Home Equity Loan secured by a Mortgage on a
Condominium Unit (together with its appurtenant interest in the common
elements).
'Condominium Unit' means an individual housing unit in a Condominium
Building.
'Cooperative' means a corporation owned by tenant-stockholders who, through
the ownership of stock, shares or membership securities in the corporation,
receive proprietary leases or occupancy agreements which confer exclusive rights
to occupy specific units and which is described in Section 216 of the Code.
'Cooperative Dwelling' means an individual housing unit in a building owned
by a Cooperative.
'Cooperative Loan' means a housing loan made with respect to a Cooperative
Dwelling and secured by an assignment by the borrower (tenant-stockholder) or
security interest in shares issued by the applicable Cooperative.
'Cut-off Date' means the date designated as such in the related Prospectus
Supplement for a Series.
'Debt Securities' means Securities characterized as indebtedness for
federal income tax purposes, and Regular Interest Securities.
'Deferred Interest' means the excess of the interest accrued on the
outstanding principal balance of a Home Equity Loan during a specified period
over the amount of interest required to be paid by an obligor on such Home
Equity Loan on the related Due Date.
'Delinquency Advance' means cash advanced by the Servicer in respect of
delinquent payments of principal of and/or interest on a Home Equity Loan to the
extent specified in the related Prospectus Supplement.
'Disqualified Organization' means the United States, any State or political
subdivision thereof, any possession of the United States, any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, a rural electric or telephone cooperative described in
section 1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income.
'Distribution Account' means, with respect to a Series, the account or
accounts established for the deposit of remittances from the Collection Account
for distribution to Securityholders.
'Distribution Date' means, with respect to a Series or Class of Securities,
each date specified as a distribution date for such Series or Class in the
related Prospectus Supplement.
'Due Date' means each date, as specified in the related Prospectus
Supplement for a Series, on which any payment of principal or interest is due
and payable by the obligor on any Primary Asset pursuant to the terms thereof.
'Eligible Investments' means any one or more of the obligations or
securities described as such in the related Agreement.
'Enhancement' means the enhancement for a Series, if any, specified in the
related Prospectus Supplement.
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'Enhancer' means the provider of the Enhancement for a Series specified in
the related Prospectus Supplement.
'ERISA' means the Employee Retirement Income Security Act of 1974, as
amended.
'Escrow Account' means an account, established and maintained by the
Servicer for a Loan, into which payments by borrowers to pay taxes, assessments,
mortgage and hazard insurance premiums and other comparable items required to be
paid to the mortgagee are deposited.
'FDIC' means the Federal Deposit Insurance Corporation.
'FHLMC' means the Federal Home Loan Mortgage Corporation.
'Final Scheduled Distribution Date' means, with respect to a Class of Notes
of a Series, the date no later than which principal thereof will be fully paid
and with respect to a Class of Certificates of a Series, the date after which no
Certificates of such Class will remain outstanding, in each case based on the
assumptions set forth in the related Prospectus Supplement.
'FNMA' means the Federal National Mortgage Association.
'Holder' or 'Securityholder' means the person or entity in whose name a
Security is registered.
'Home Equity Loan' means a closed-end home equity loan secured by a
Mortgaged Property.
'Home Equity Loan Rate' means, unless otherwise indicated herein or in the
Prospectus Supplement, the interest rate borne by a Loan.
'HUD' means the United States Department of Housing and Urban Development.
'Indenture' means the indenture relating to a Series of Notes between the
Trust Fund and the Trustee.
'Insurance Policies' means certain mortgage insurance, hazard insurance and
other insurance policies required to be maintained with respect to Loans.
'Insurance Proceeds' means amount paid by the insurer under any of the
Insurance Policies covering any Home Equity Loan or Mortgaged Property.
'Interest Only Securities' means a Class of Securities entitled solely or
primarily to distributions of interest and which is identified as such in the
related Prospectus Supplement.
'IRS' means the Internal Revenue Service.
'Lifetime Rate Cap' means the lifetime limit if any, on the Home Equity
Loan Rate during the life of each adjustable rate Loan.
'Liquidation Proceeds' means amounts received by the Servicer in connection
with the liquidation of a Loan, net of liquidation expenses.
'Loan-to-Value Ratio' means, with respect to a Loan, the ratio determined
as set forth in the related Prospectus Supplement.
'Minimum Rate' means the lifetime minimum Home Equity Loan Rate during the
life of each adjustable rate Loan.
'Modification' means a change in any term of a Loan.
'Mortgage' means the mortgage, deed of trust or other similar security
instrument securing a Mortgage Note.
'Mortgaged Property' means the real property and improvements thereon
securing a Home Equity Loan.
'Mortgage Note' means the note or other evidence of indebtedness of a
Mortgagor under the Loan.
'Mortgagor' means the obligor on a Mortgage Note.
'1986 Act' means the Tax Reform Act of 1986.
'Notes' means the Asset-Backed Notes.
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'Notional Amount' means the amount set forth in the related Prospectus
Supplement for a Class of Interest Only Securities.
'OTS' means the Office of Thrift Supervision.
'PAC' ('Planned Amortization Class Securities') means a Class of Securities
of a Series on which payments of principal are made in accordance with a
schedule specified in the related Prospectus Supplement, based on certain
assumptions stated therein.
'Participating Securities' means Securities entitled to receive payments of
principal and interest and an additional return on investment as described in
the related Prospectus Supplement. 'Pass-Through Security' means a security
representing an undivided beneficial interest in a pool of assets, including the
right to receive a portion of all principal and interest payments relating to
those assets.
'Pay Through Security' means Regular Interest Securities and certain Debt
Securities that are subject to acceleration due to prepayment on the underlying
Primary Assets.
'Person' means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization, or government or any agency or political
subdivision thereof.
'Pooling and Servicing Agreement' means the pooling and servicing agreement
relating to a Series of Certificates among the Seller, the Servicer (if such
Series relates to Loans) and the Trustee.
'Primary Assets' means the Private Securities and/or Loans, as the case may
be, which are included in the Trust Fund for such Series. A Primary Asset refers
to a specific Private Security or Loan, as the case may be.
'Principal Balance' means, with respect to a Primary Asset and as of a Due
Date, the original principal amount of the Primary Asset, plus the amount of any
Deferred Interest added to such principal amount, reduced by all payments, both
scheduled or otherwise, received on such Primary Asset prior to such Due Date
and applied to principal in accordance with the terms of the Primary Asset.
'Principal Only Securities' means a Class of Securities entitled solely or
primarily to distributions of principal and identified as such in the Prospectus
Supplement.
'Private Security' means a participation or pass-through certificate
representing a fractional, undivided interest in Underlying Loans or
collateralized obligations secured by Underlying Loans.
'PS Agreement' means the pooling and servicing agreement, indenture, trust
agreement or similar agreement pursuant to which a Private Security is issued.
'PS Servicer' means the servicer of the Underlying Loans.
'PS Sponsor' means, with respect to Private Securities, the sponsor or
depositor under a PS Agreement.
'PS Trustee' means the trustee designated under a PS Agreement.
'Qualified Insurer' means a mortgage guarantee or insurance company duly
qualified as such under the laws of the states in which the Mortgaged Properties
are located duly authorized and licensed in such states to transact the
applicable insurance business and to write the insurance provided.
'Rating Agency' means the nationally recognized statistical rating
organization (or organizations) which was (or were) requested by the Seller to
rate the Securities upon the original issuance thereof.
'Regular Interest' means a regular interest in a REMIC.
'REMIC' means a real estate mortgage investment conduit.
'REMIC Administrator' means the Person, if any, specified in the related
Prospectus Supplement for a Series for which a REMIC election is made, to serve
as administrator of the Series.
'REMIC Provisions' means the provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at sections
860A through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations, including proposed regulations and rulings, and
administrative pronouncements promulgated thereunder, as the foregoing may be in
effect from time to time.
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'REO Property' means real property which secured a defaulted Loan,
beneficial ownership of which has been acquired upon foreclosure, deed in lieu
of foreclosure, repossession or otherwise.
'Reserve Fund' means, with respect to a Series, any Reserve Fund
established pursuant to the related Agreement.
'Residual Interest' means a residual interest in a REMIC.
'Retained Interest' means, with respect to a Primary Asset, the amount or
percentage specified in the related Prospectus Supplement which is not included
in the Trust Fund for the related Series.
'Scheduled Payments' means the scheduled payments of principal and interest
to be made by the borrower on a Primary Asset.
'Securities' means the Notes or the Certificates.
'Seller' means Delta Funding Corporation, or its successors.
'Senior Securityholder' means a holder of a Senior Security.
'Senior Securities' means a Class of Securities as to which the holders'
rights to receive distributions of principal and interest are senior to the
rights of holders of Subordinate Securities, to the extent specified in the
related Prospectus Supplement.
'Series' means a separate series of Securities sold pursuant to this
Prospectus and the related Prospectus Supplement.
'Servicer' means Delta Funding Corporation, or its successors or assigns.
'Single Family Property' means property securing a Home Equity Loan
consisting of one- to four-family attached or detached residential housing,
including Cooperative Dwellings.
'Stripped Securities' means Pass-Through Securities representing interests
in Primary Assets with respect to which all or a portion of the principal
payments have been separated from all or a portion of the interest payments.
'Subordinated Securities' means a Class of Securities as to which the
rights of holders to receive distributions of principal, interest or both is
subordinated to the rights of holders of Senior Securities, and may be allocated
losses and shortfalls prior to the allocation thereof to other Classes of
Securities, to the extent and under the circumstances specified in the related
Prospectus Supplement.
'Trustee' means the trustee under the applicable Agreement and its
successors.
'Trust Fund' means, with respect to any Series of Securities, the trust
holding all money, instruments, securities and other property, including all
proceeds thereof, which are, with respect to a Series of Certificates, held for
the benefit of the Holders by the Trustee under the Pooling and Servicing
Agreement or Trust Agreement or, with respect to a Series of Notes, pledged to
the Trustee under the Indenture as a security for such Notes, including, without
limitation, the Primary Assets (except any Retained Interests), rights to all
amounts in the Distribution Account Collection Account, Certificate Account,
Pre-Funding Account, Capitalized Interest Account or Reserve Funds, if any,
distributions on the Primary Assets (net of servicing fees), and reinvestment
earnings on such net distributions and rights to any Enhancement and all other
property and interest held by or pledged to the Trustee pursuant to the related
Agreement for such Series.
'UCC' means the Uniform Commercial Code.
'Underlying Loans' means loans of the type eligible to be Loans underlying
or securing Private Securities. 'Variable Interest Security' means a Security on
which interest accrues at a rate that is adjusted, based upon a predetermined
index, at fixed periodic intervals, all as set forth in the related Prospectus
Supplement.
'Zero Coupon Security' means a Security entitled to receive payments of
principal only.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY, NOR AN OFFER OF SUCH SECURITIES IN ANY STATE OR JURISDICTION IN
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Page Summary............................ S- 3
Risk Factors............................ S-14
The Certificate Issuer.................. S-16
The Seller's Home Equity Loan Program... S-18
Description of the Home Equity Loans.... S-22
Prepayment and Yield Considerations..... S-28
Description of the Certificates......... S-33
Use of Proceeds......................... S-49
Federal Income Tax Considerations....... S-50
ERISA Considerations.................... S-51
Legal Investment Considerations......... S-52
Underwriting............................ S-53
Experts................................. S-53
Legal Matters........................... S-53
Ratings................................. S-53
<CAPTION>
PROSPECTUS
<S> <C>
Prospectus Supplement................... 2
Reports to Holders...................... 2
Available Information................... 2
Incorporation of Certain Documents by
Reference............................. 3
Summary of Terms........................ 4
Risk Factors............................ 13
The Seller and the Servicer............. 16
Description of the Securities........... 17
The Trust Funds......................... 20
Enhancement............................. 25
Servicing of Loans...................... 25
The Agreements.......................... 31
Certain Legal Aspects of the Loans...... 39
Use of Proceeds......................... 46
Federal Income Tax Consequences......... 46
State Tax Considerations................ 65
ERISA Considerations.................... 65
Legal Investment........................ 65
Plan of Distribution.................... 66
Legal Matters........................... 66
Glossary of Terms....................... 67
</TABLE>
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$
DELTA FUNDING CORPORATION
SELLER AND SERVICER
ASSET BACKED CERTIFICATES,
SERIES 199 -
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
----------------------------------
, 199
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee............... $517,241.38
Printing and Engraving............. $ 25,000.00
Trustee's Fees..................... $ 20,000.00
Legal Fees and Expenses............ $ 75,000.00
Accountant's Fees and Expenses..... $ 35,000.00
Rating Agency Fees................. $100,000.00
Miscellaneous Fees and Expenses.... $ 5,000.00
-----------
Total Expenses................ $777,241.38
-----------
-----------
</TABLE>
- ------------------
* All amounts, other than the SEC Registration Fee, are estimates of expenses to
be incurred in connection with the issuance and distribution of a Series of
Securities in an aggregate principal amount assumed for these purposes to be
$200,000,000 of Securities registered hereby.
Item 15. Indemnification of Directors and Officers
The New York Business Corporation Law (the 'NYBCL') authorizes a New York
corporation to indemnify any person who is, or is threatened to be made, a party
in any civil or criminal proceeding (other than an action by or in the right of
the corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another entity, against
judgments, fines, amounts paid in settlement and reasonable expenses (including
attorneys' fees), actually and reasonably incurred by such person as a result of
such action or proceeding or any appeal therein. With respect to actions by or
in the right of the corporation, the NYBCL authorizes indemnification of such
person against reasonable expenses, including attorneys' fees and amounts paid
in settlement. To be entitled to indemnification, a person must have acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Court approval is required as a prerequisite to indemnification of expenses in
respect of any claim as to which a person has been adjudged liable to the
corporation. The NYBCL requires indemnification against expenses actually and
reasonably incurred by any director, officer, employee or agent in connection
with a proceeding against such person for action in such capacity to the extent
that the person has been successful on the merits or otherwise. Advancement of
expenses (i.e., payment prior to a determination on the merits) is permitted,
but not required, by the NYBCL, which further requires that any director or
officer must undertake to repay such expenses if it is ultimately determined
that he is not entitled to indemnification. The disinterested members of the
board of directors (or independent legal counsel or the shareholders) must
determine, in each instance where indemnification is not required by the NYBCL,
that such director, officer, employee or agent is entitled to indemnification.
The NYBCL provides that the indemnification provided by statute is not
exclusive.
The form of the Underwriting Agreement, filed as Exhibit 1.1 to this
Registration Statement, provides that the Seller will indemnify and reimburse
the Underwriter(s) and each controlling person of the Underwriter(s) with
respect to certain expenses and liabilities, including liabilities under the
Securities Act of 1933 or other federal or state regulations or under the common
law, which arise out of or are based on certain material misstatements or
omissions in the Registration Statement. In addition, the Underwriting Agreement
provides that the Underwriter(s) will similarly indemnify and reimburse the
Seller and each director, each officer who signed the Registration Statement and
each controlling person of the Seller with respect to certain material
II-1
<PAGE>
misstatements or omissions in the Registration Statement which are based on
certain written information furnished by the Underwriter(s) for use in
connection with the preparation of the Registration Statement.
Item 16. Exhibits
(a) Financial Statements:
None.
(b) Exhibits:
<TABLE>
<S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Certificate of Incorporation of Delta Funding Corporation.
3.2 -- By-Laws of Delta Funding Corporation.
4.1 -- Form of Indenture.
4.2 -- Form of Pooling and Servicing Agreement.
4.3 -- Form of Trust Agreement.
5.1 -- Opinion of Stroock & Stroock & Lavan with respect to the
securities being registered.
8.1 -- Opinion of Stroock & Stroock & Lavan with respect to tax
matters (included as part of Exhibit 5.1).
10.1 -- Form of Sale and Servicing Agreement.
23.1 -- Consent of Stroock & Stroock & Lavan (included as part of
Exhibit 5.1).
*24.1 -- Powers of Attorney of Directors and Officers of Delta Funding
Corporation (included on signature page).
25.1 -- Statement of Eligibility and Qualification of Trustee (Form
T-1) (Bound Separately).
</TABLE>
- ------------------
* Previously filed.
Item 17. Undertakings
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended (the 'Securities Act'), the information omitted from
the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(4) For purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934, as amended
(the 'Exchange Act') that is incorporated by reference in the registration
statement shall be deemed to be a
II-2
<PAGE>
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(6) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(7) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(8) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Woodbury,
State of New York, on August 5, 1996.
DELTA FUNDING CORPORATION
By: /s/ HUGH MILLER
-------------------------------------
Hugh Miller
President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed on August 5, 1996
by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------- ----------------------------------------------------
<S> <C>
/s/ HUGH MILLER President (Principal Executive Officer) and Director
- -------------------------
Hugh Miller
/s/ SIDNEY A. MILLER* Director
- -------------------------
Sidney A. Miller
/s/ IRWIN FEIN* Treasurer (Principal Accounting Officer and
- ------------------------- Principal Financial Officer) and Director
Irwin Fein
*By: /s/ HUGH MILLER
--------------------
(Attorney-in-fact)
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
- ------- ------------------------------------------------------------------ ----
<S> <C>
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of Delta Funding Corporation.
3.2 By-Laws of Delta Funding Corporation.
4.1 Form of Indenture.
4.2 Form of Pooling and Servicing Agreement.
4.3 Form of Trust Agreement.
5.1 Opinion of Stroock & Stroock & Lavan with respect to the
securities being registered.
8.1 Opinion of Stroock & Stroock & Lavan with respect to tax matters
(included as part of Exhibit 5.1).
10.1 Form of Sale and Servicing Agreement.
23.1 Consent of Stroock & Stroock & Lavan (included as part of Exhibit
5.1).
24.1 Powers of Attorney of Directors and Officers of Delta Funding
Corporation (included on signature page).*
25.1 Statement of Eligibility and Qualification of Trustee (Form T-1)
(Bound Separately).
</TABLE>
- ------------------
* Previously filed.
II-5
<PAGE>
Exhibit 1.1
$ _____________________
Delta Funding Corporation Home Equity
Loan Asset-Backed Certificates,
Series 199 -
UNDERWRITING AGREEMENT
______________________, 199__
[Names and Addresses
of the Underwriter(s)]
Dear Sirs:
Delta Funding Corporation, a New York corporation, has authorized the
issuance and sale of Delta Funding Corporation Home Equity Loan Asset-Backed
Certificates, Series 199_-_, Class A-1, Class A-2, Class A-3, Class A-4 and
Class A-5 Certificates (the "Offered Certificates") and the Class R Certificates
(the "Other Certificates," and collectively with the Offered Certificates, the
"Certificates"), evidencing interests in the Trust (as defined in the Pooling
and Servicing Agreement referred to below) consisting primarily of two pools
("Loan Group One" and "Loan Group Two") of non-conforming closed-end home equity
loans (the "Mortgage Loans"). Loan Group One consists of fixed rate, simple
interest Mortgage Loans and Loan Group Two consists of adjustable rate actuarial
Mortgage Loans. (the "Underwriter") is purchasing all of the
Offered Certificates at the prices set forth on Schedule A hereto.
The Certificates will be issued under a pooling and servicing agreement
(the "Pooling and Servicing Agreement"), dated as of , 199 among
Delta Funding Corporation, as seller (the "Seller") and servicer (the
"Servicer"), and , as trustee (the "Trustee"). The Certificates
will evidence fractional undivided interests in the Trust. The assets of the
Trust will initially include, among other things, Mortgage Loans to be
transferred on the Closing Date (as defined herein) (the "Initial Mortgage
Loans") and such amounts as may be held by the Trustee in the Pre-Funding
Account (the "Pre-Funding Account"), the Capitalized Interest Account (the
"Capitalized Interest Account") and any other accounts held by the Trustee for
the Trust. On the Closing Date, approximately $ will be deposited in
the name of the Trustee in the Pre-Funding Account. It is intended that
additional Mortgage Loans satisfying the criteria specified in the Pooling and
Servicing Agreement (the "Subsequent Mortgage Loans") will be purchased by
<PAGE>
the Trust for inclusion in the Trust from the Seller from time to time on or
before _______________ from funds on deposit in the Pre-Funding Account at the
time of execution and delivery of each Subsequent Transfer Agreement
("Subsequent Transfer Agreement"). Funds in the Capitalized Interest Account
will be applied by the Trustee to cover shortfalls in interest during the
Funding Period. The Offered Certificates will initially represent an undivided
ownership interest in the sum of (i) Initial Mortgage Loans in an amount of
$______________ as of the close of business on , 199 (the "Cut-
Off Date") and (ii) approximately $________________ on deposit in the Pre-
Funding Account. The Offered Certificates will also have the benefit of an
insurance policy (the "Policy") issued by (the "Certificate Insurer"). The
Policy will be issued pursuant to the insurance agreement (the "Insurance
Agreement") among the Certificate Insurer, the Seller and the Trustee. A form
of the Pooling and Servicing Agreement has been filed as an exhibit to the
Registration Statement (hereinafter defined).
The Certificates are more fully described in a Registration Statement
which the Seller has furnished to the Underwriter. Capitalized terms used but
not defined herein shall have the meanings given to them in the Pooling and
Servicing Agreement.
Pursuant to the Pooling and Servicing Agreement, the Seller will
transfer to the Trust all such right, title and interest in and to the unpaid
principal balances of the Initial Mortgage Loans as of the Cut-Off Date and the
collateral securing each Initial Mortgage Loan.
SECTION 1. Representations and Warranties of the Seller. The Seller
represents and warrants to, and agrees with the Underwriter that:
(a) A Registration Statement on Form S-3 (No. 333-3418) has (i) been
prepared by the Seller in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules
and regulations (the "Rules and Regulations") of the United States
Securities and Exchange Commission (the "Commission") thereunder, (ii)
been filed with the Commission under the Securities Act and (iii) become
effective under the Securities Act. Copies of such Registration
Statement have been delivered by the Seller to the Underwriter. As used
in this Agreement, "Effective Time" means the date and the time as of
which such Registration Statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission;
"Effective Date" means the date of the Effective Time; "Registration
Statement" means such registration statement, at the Effective Time,
including any
2
<PAGE>
documents incorporated by reference therein at such time;
and "Basic Prospectus" means such final prospectus dated __________
___________; and "Prospectus Supplement" means the final prospectus
supplement relating to the Offered Certificates, to be filed with the
Commission pursuant to paragraphs (2), (3) or (5) of Rule 424(b) of the
Rules and Regulations. Prospectus means the Basic Prospectus together
with the Prospectus Supplement. Reference made herein to the Prospectus
shall be deemed to refer to and include any documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities
Act, as of the date of the Prospectus and any reference to any amendment
or supplement to the Prospectus shall be deemed to refer to and include
any document filed under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), after the date of the Prospectus, and incorporated
by reference in the Prospectus and any reference to any amendment to the
Registration Statement shall be deemed to include any report of the
Seller filed with the Commission pursuant to Section 13(a) or 15(d) of
the Exchange Act after the Effective Time that is incorporated by
reference in the Registration Statement. The Commission has not issued
any order preventing or suspending the use of the Prospectus. There are
no contracts or documents of the Seller which are required to be filed
as exhibits to the Registration Statement pursuant to the Securities Act
or the Rules and Regulations which have not been so filed or
incorporated by reference therein on or prior to the Effective Date of
the Registration Statement other than such documents or materials, if
any, as the Underwriter delivers to the Seller pursuant to Section 8(d)
hereof for filing on an Additional Materials 8-K (as defined below). The
conditions for use of Form S-3, as set forth in the General Instructions
thereto, have been satisfied.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Securities Act and the Rules and Regulations. The
Registration Statement, as of the Effective Date thereof and of any
amendment thereto, did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus
as of its date, and as amended or supplemented as of the Closing Date
does not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the
3
<PAGE>
circumstances under which they were made, not misleading; provided that
no representation or warranty is made as to information contained in or
omitted from the Registration Statement or the Prospectus in reliance
upon and in conformity with written information furnished to the Seller
in writing by the Underwriter expressly for use therein. The only
information furnished by the Underwriter or on behalf of the Underwriter
for use in connection with the preparation of the Registration Statement
or the Prospectus is described in Section 8(i) hereof.
(c) The documents incorporated by reference to the Prospectus, when they
became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that no representation is made as to Computational
Materials, Structural Term Sheets and Collateral Term Sheets (each as
defined herein) deemed to be incorporated by reference in the Prospectus
as the result of filing an Additional Materials 8-K (as defined below)
pursuant to the terms hereof except to the extent such Computational
Materials, Structural Term Sheets and Collateral Term Sheets reflect
information furnished by the Seller to the Underwriter.
(d) Since the respective dates as of which information is given in the
Prospectus, there has not been any material adverse change in the
general affairs, management, financial condition, or results of
operations of the Seller, otherwise than as set forth or contemplated in
the Prospectus as supplemented or amended as of the Closing Date.
(e) The Seller has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New York, is
duly qualified to do business and is in good standing as a foreign
corporation in each
4
<PAGE>
jurisdiction in which its ownership or lease of property or the conduct
of its business requires such qualification, and has all power and
authority necessary to own or hold its properties, to conduct the
business in which it is engaged and to enter into and perform its
obligations under this Agreement, the Sale and Servicing Agreement, the
Pooling and Servicing Agreement and the Insurance Agreement or any
Subsequent Transfer Agreement and to cause the Certificates to be
issued.
(f) There are no actions, proceedings or investigations pending with
respect to which the Seller has received service of process before or
threatened by any court, administrative agency or other tribunal to
which the Seller is a party or of which any of its properties is the
subject (a) which if determined adversely to the Seller would have a
material adverse effect on the business or financial condition of the
Seller, (b) asserting the invalidity of this Agreement, the Sale and
Servicing Agreement, the Pooling and Servicing Agreement, the Insurance
Agreement, the Certificates, or any Subsequent Transfer Agreement, (c)
seeking to prevent the issuance of the Certificates or the consummation
by the Seller of any of the transactions contemplated by the Pooling and
Servicing Agreement, the Sale and Servicing Agreement, the Insurance
Agreement, this Agreement or any Subsequent Transfer Agreement, as the
case may be, or (d) which might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, the Pooling and Servicing Agreement, the Sale and
Servicing Agreement, this Agreement, and the Insurance Agreement, the
Certificates, or any Subsequent Transfer Agreement.
(g) This Agreement has been, and the Pooling and Servicing Agreement,
the Sale and Servicing Agreement, each Subsequent Transfer Agreement and
the Insurance Agreement when executed and delivered as contemplated
hereby and thereby will have been, duly authorized, executed and
delivered by the Seller, and this Agreement constitutes, and the Pooling
and Servicing Agreement, the Sale and Servicing Agreement and the
Insurance Agreement when executed and delivered as contemplated herein,
will constitute, legal, valid and binding instruments enforceable
against the Seller in accordance with their respective terms, subject as
to enforceability to (x) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (y) general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law), and (z) with
respect to rights of indemnity under this Agreement and the Insurance
5
<PAGE>
Agreement, limitations of public policy under applicable securities
laws.
(h) The execution, delivery and performance of this Agreement, the
Pooling and Servicing Agreement, the Sale and Servicing Agreement, any
Subsequent Transfer Agreement and the Insurance Agreement by the Seller
and the consummation of the transactions contemplated hereby and
thereby, and the issuance and delivery of the Certificates do not and
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
to which the Seller is a party, by which the Seller is bound or to which
any of the properties or assets of the Seller or any of its subsidiaries
is subject, which breach or violation would have a material adverse
effect on the business, operations or financial condition of the Seller,
nor will such actions result in any violation of the provisions of the
articles of incorporation or by-laws of the Seller or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Seller or any of its properties or assets,
which breach or violation would have a material adverse effect on the
business, operations or financial condition of the Seller.
(i) The Seller has no reason to believe that and
are not independent public accountants with respect
to the Seller as required by the Securities Act and the Rules and
Regulations.
(j) The direction by the Seller to the Trustee to execute, authenticate,
issue and deliver the Certificates has been duly authorized by the
Seller, and assuming the Trustee has been duly authorized to do so, when
executed, authenticated, issued and delivered by the Trustee in
accordance with the Pooling and Servicing Agreement, the Certificates
will be validly issued and outstanding and will be entitled to the
benefits provided by the Pooling and Servicing Agreement.
(k) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States is required for the issuance of the Certificates and the
sale of the Offered Certificates to the Underwriter, or the consummation
by the Seller or of the other transactions contemplated by this
Agreement, the Pooling and Servicing Agreement, the Sale and Servicing
Agreement, any Subsequent Transfer Agreement and the Insurance
Agreement, except such consents, approvals, authorizations,
registrations or qualifications
6
<PAGE>
as may be required under state securities or blue sky laws in connection
with the purchase and distribution of the Offered Certificates by the
Underwriter or as have been obtained.
(l) The Seller possesses all material licenses, certificates,
authorities or permits issued by the appropriate State, Federal or
foreign regulatory agencies or bodies necessary to conduct the business
now conducted by it and as described in the Prospectus, and the Seller
has not received notice of any proceedings relating to the revocation or
modification of any such license, certificate, authority or permit which
if decided adversely to the Seller would, singly or in the aggregate,
materially and adversely affect the conduct of its business, operations
or financial condition.
(m) At the time of execution and delivery of the Pooling
and Servicing Agreement, the Seller will: (i) be the sole
beneficial owner of the Initial Mortgage Loans conveyed by
, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest (collectively,
"Liens"); (ii) not have assigned to any person any of its right or title
in the Initial Mortgage Loans, in the Pooling and Servicing Agreement or
in the Certificates being issued pursuant thereto; and (iii) have the
power and authority to sell its interest in the Initial Mortgage Loans
to the Trustee and to sell the Offered Certificates to the Underwriter.
Upon execution and delivery of the Pooling and Servicing Agreement by
the Trustee, the Trustee will have acquired beneficial ownership of all
of the Seller's right, title and interest in and to the Mortgage Loans.
Upon delivery to the Underwriter of the Offered Certificates, the
Underwriter will have good title to the Offered Certificates, free and
clear of any Liens.
(n) At the time of execution and delivery of any Subsequent Transfer
Agreement, the Seller will: (i) be the sole beneficial owner of the
Subsequent Mortgage Loans conveyed by , free and clear of any Liens;
(ii) not have assigned to any person any of its right or title in the
Subsequent Mortgage Loans, in the Pooling and Servicing Agreement or in
the Subsequent Transfer Agreement; and (iii) have the power and
authority to sell the Subsequent Mortgage Loans to the Trustee. Upon
execution and delivery of the Subsequent Transfer Agreement by the
Trustee, the Trustee will have acquired beneficial ownership of all of
the Seller's right, title and interest in and to the Subsequent Mortgage
Loans.
7
<PAGE>
(o) As of the Cut-Off Date, each of the Initial Mortgage Loans will meet
the eligibility criteria described in the Prospectus and will conform in
all material respects to the descriptions thereof contained in the
Prospectus.
(p) As of any Subsequent Transfer Date, each of the Subsequent Mortgage
Loans will meet the eligibility criteria described in the Prospectus and
will conform in all material respects to the descriptions thereof
contained in the Prospectus.
(q) Neither the Seller nor the Trust created by the Pooling and
Servicing Agreement is an "investment company" within the meaning of
such term under the Investment Company Act of 1940 (the "1940 Act") and
the rules and regulations of the Commission thereunder.
(r) At the Closing Date, the Offered Certificates and the Pooling and
Servicing Agreement will conform in all material respects to the
descriptions thereof contained in the Prospectus.
(s) At the Closing Date, the Offered Certificates shall have been rated
in the highest rating category by at least two nationally recognized
statistical rating organizations.
(t) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Agreement, the Pooling and
Servicing Agreement, the Sale and Servicing Agreement, the Insurance
Agreement and the Certificates have been paid or will be paid at or
prior to the Closing Date.
(u) At the Closing Date, each of the representations and warranties of
the Seller set forth in the Pooling and Servicing Agreement, the Sale
and Servicing Agreement and the Insurance Agreement will be true and
correct in all material respects.
Any certificate signed by an officer of the Seller and delivered to the
Underwriter or counsel for the Underwriter in connection with an offering of the
Offered Certificates shall be deemed to be a representation and warranty as to
the matters covered thereby to each person to whom the representations and
warranties in this Section 1 are made.
SECTION 2. Purchase and Sale. The commitment of the
Underwriter to purchase the Offered Certificates pursuant to this
Agreement shall be deemed to have been made on the basis of the
representations and warranties herein contained and shall be
8
<PAGE>
subject to the terms and conditions herein set forth. The Seller agrees to
instruct the Trustee to issue the Offered Certificates and agrees to sell to the
Underwriter, and the Underwriter agrees (except as provided in Section 10) to
purchase from the Seller the aggregate principal amount of the Class A-1, Class
A-2, Class A-3, Class A-4 and Class A-5 Certificates at the purchase price or
prices set forth in Schedule A. The Underwriter may offer the Class A-1, Class
A-2, Class A-3, Class A-4 and Class A-5 Certificates to certain dealers at such
prices less a concession not in excess of the respective amounts set forth in
Schedule A. The Underwriter may allow and such dealers may reallow a discount to
certain dealers not in excess of the respective amounts set forth in Schedule A.
SECTION 3. Delivery and Payment. Delivery of and payment for the Class
A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates to be purchased
by the Underwriter shall be made at the offices of Stroock & Stroock & Lavan,
Seven Hanover Square, New York, New York 10004, or at such other place as shall
be agreed upon by the Underwriter and the Seller at 10:00 A.M. New York City
time on or at such other time or date as shall be agreed upon
in writing by the Underwriter and the Seller (such date being referred to as
the "Closing Date"). Payment shall be made to the Seller by wire transfer of
same day funds payable to the account of the Seller. Delivery of the Offered
Certificates shall be made to the Underwriter for the accounts of the
Underwriter against payment of the purchase price thereof. The Certificates
shall be in such authorized denominations and registered in such names as the
Underwriter may request in writing at least two business days prior to the
Closing Date. The Offered Certificates will be made available for examination
by the Underwriter no later than 2:00 P.M. New York City time on the first
business day prior to the Closing Date.
SECTION 4. Offering by the Underwriter. It is understood that, subject
to the terms and conditions hereof, the Underwriter proposes to offer the
Offered Certificates for sale to the public as set forth in the Prospectus.
SECTION 5. Covenants of the Seller. The Seller agrees as
follows:
(a) To prepare the Prospectus in a form approved by the Underwriter and
to file such Prospectus pursuant to Rule 424(b) under the Securities Act
not later than the Commission's close of business on the second business
day following the availability of the Prospectus to the Underwriter and
to make no further amendment or any supplement to the Registration
Statement or to the Prospectus prior to the Closing Date except as
permitted
9
<PAGE>
herein; to advise the Underwriter, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement
has been filed or becomes effective prior to the Closing Date or any
supplement to the Prospectus or any amended Prospectus has been filed
prior to the Closing Date and to furnish the Underwriter with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Seller with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of the Prospectus and, for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Offered Certificates, to promptly advise the Underwriter of
its receipt of notice of the issuance by the Commission of any stop
order or of: (i) any order preventing or suspending the use of the
Prospectus; (ii) the suspension of the qualification of the Offered
Certificates for offering or sale in any jurisdiction; (iii) the
initiation of or threat of any proceeding for any such purpose; (iv) any
request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information.
In the event of the issuance of any stop order or of any order
preventing or suspending the use of the Prospectus or suspending any
such qualification, the Seller promptly shall use its best efforts to
obtain the withdrawal of such order by the Commission.
(b) To furnish promptly to the Underwriter and to counsel for the
Underwriter a signed copy of the Registration Statement as originally
filed with the Commission, and of each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith.
(c) To deliver promptly to the Underwriter such number of the following
documents as the Underwriter shall reasonably request: (i) conformed
copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case including exhibits);
(ii) the Prospectus and any amended or supplemented Prospectus; and
(iii) any document incorporated by reference in the Prospectus
(including exhibits thereto). If the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Offered Certificates, and if at such time any events shall have occurred
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 necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such
Prospectus is delivered, not misleading,
10
<PAGE>
or, if for any other reason it shall be necessary during such same
period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus in
order to comply with the Securities Act or the Exchange Act, the Seller
shall notify the Underwriter and, upon the Underwriter's request, shall
file such document and prepare and furnish without charge to the
Underwriter and to any dealer in securities as many copies as the
Underwriter may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Seller or the Underwriter,
be required by the Securities Act or requested by the Commission.
(e) The Seller will (i) cause any Computational Materials or any
Structural Term Sheet (each as defined below in this subsection) with
respect to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5
Certificates which are delivered by the Underwriter to the Seller to be
filed with the Commission on Additional Materials 8-K (as defined below)
at or before the time of filing of the Prospectus pursuant to Rule
424(b) under the Securities Act and (ii) cause any Collateral Term Sheet
(as defined below in this subsection) with respect to the Class A-1,
Class A-2, Class A-3, Class A-4 and Class A-5 Certificates which are
delivered by the Underwriter to the Seller to be filed with the
Commission on an Additional Materials 8-K within two business days of
the date on which the Underwriter advises the Seller that such
Collateral Term Sheet was first used; provided, however, that the Seller
shall have no obligation to file any materials which, in the reasonable
determination of the Seller after consultation with the Underwriter, (x)
are not required to be filed pursuant to the Kidder Letters and/or the
PSA Letter (each as defined below) or (y) contain any erroneous
information or untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; it being understood, however, that
the Seller shall have no obligation to review or pass upon the accuracy
or adequacy of, or to correct, any Computational Materials, Structural
Term Sheets or Collateral Term Sheets provided by the Underwriter to the
Seller as aforesaid. For purposes of this subsection (e), (1) the term
"Computational Materials" shall mean those materials delivered by the
Underwriter to the Seller within the meaning of the no-action letter
dated
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May 20, 1994 issued by the Division of Corporation Finance of the
Commission to Kidder, Peabody Acceptance Corporation I and certain
affiliates and the no-action letter dated May 27, 1994 issued by the
Division of Corporation Finance of the Commission to the Public
Securities Association (together, the "Kidder Letters") for which the
filing of such material is a condition of the relief granted in such
letters, (2) the terms "Structural Term Sheet" and "Collateral Term
Sheet" shall mean those materials delivered by the Underwriter to the
Seller within the meaning of the no-action letter dated February 13,
1995 issued by the Division of Corporation Finance of the Commission to
the Public Securities Association (the "PSA Letter") for which the
filing of such material on an Additional Materials 8-K is a condition of
the relief granted in such letter and (3) the term "Additional Materials
8-K" shall mean a Current Report on Form 8-K used to file Computational
Materials, Structural Term Sheets and/or Collateral Term Sheets.
(f) To furnish the Underwriter and counsel for the Underwriter, prior to
filing with the Commission, and to obtain the consent of the Underwriter
for the filing of the following documents relating to the Certificates:
(i) amendment to the Registration Statement or supplement to the
Prospectus, or document incorporated by reference in the Prospectus, or
(ii) Prospectus pursuant to Rule 424 of the Rules and Regulations.
(g) To make generally available to holders of the Offered Certificates
as soon as practicable, but in any event not later than ninety (90) days
after the close of the period covered thereby, a statement of earnings
of the Trust (which need not be audited) complying with Section 11(a) of
the Securities Act and the Rules and Regulations (including, at the
option of the Seller, Rule 158) and covering a period of at least twelve
consecutive months beginning not later than the first day of the first
fiscal quarter following the Closing Date.
(h) To use its best efforts, in cooperation with the Underwriter, to
qualify the Offered Certificates for offering and sale under the
applicable securities laws of such states and other jurisdictions of the
United States or elsewhere as the Underwriter may designate, and
maintain or cause to be maintained such qualifications in effect for as
long as may be required for the distribution of the Offered
Certificates; provided, however, that in connection therewith, the
Seller shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction. The
Seller will file or
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cause the filing of such statements and reports as may be required by
the laws of each jurisdiction in which the Offered Certificates have
been so qualified.
(i) Unless the Underwriter shall otherwise have given their written
consent, no pass-through certificates backed by home equity loans or
other similar securities representing interest in or secured by other
mortgage-related assets originated or owned by the Seller shall be
publicly offered or sold nor shall the Seller enter into any contractual
arrangements that contemplate the public offering or sale of such
securities for a period of seven (7) business days following the
commencement of the offering of the Offered Certificates to the public.
(j) So long as the Offered Certificates shall be outstanding the Seller
shall cause the Trustee, pursuant to the Pooling and Servicing
Agreement, to deliver to the Underwriter as soon as such statements are
furnished to the Owners: (i) the annual statement as to compliance
delivered to the Trustee pursuant to Section of the Pooling and
Servicing Agreement; (ii) the annual statement of a firm of independent
public accountants furnished to the Trustee pursuant to Section of the
Pooling and Servicing Agreement; (iii) the monthly servicing report
furnished to the Trustee pursuant to Section of the Pooling and
Servicing Agreement; and (iv) the monthly reports furnished to the
Certificateholders pursuant to Section of the Pooling and Servicing
Agreement.
(k) To apply the net proceeds from the sale of the Offered Certificates
in the manner set forth in the Prospectus.
SECTION 6. Conditions to the Underwriter's Obligations. The obligations
of the Underwriter to purchase the Offered Certificates pursuant to this
Agreement are subject to: (i) the accuracy on and as of the Closing Date of the
representations and warranties on the part of the Seller herein contained; (ii)
the performance by the Seller of all of its obligations hereunder; and (iii) the
following conditions as of the Closing Date:
(a) The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission. Any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus shall have been complied with.
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(b) The Underwriter shall not have discovered and disclosed to the
Seller on or prior to the Closing Date that the Registration Statement
or the Prospectus or any amendment or supplement thereto contains an
untrue statement of a fact or omits to state a fact which, in the
opinion of the Underwriter and its counsel, is material and is required
to be stated therein or is necessary to make the statements therein not
misleading.
(c) All corporate proceedings and other legal matters relating to the
authorization, form and validity of this Agreement, the Pooling and
Servicing Agreement, the Sale and Servicing Agreement, the Insurance
Agreement, the Certificates, the Registration Statement and the
Prospectus, and all other legal matters relating to this Agreement and
the transactions contemplated hereby shall be satisfactory in all
respects to the Underwriter and its counsel, and the Seller shall have
furnished to the Underwriter and its counsel all documents and
information that they may reasonably request to enable them to pass upon
such matters.
(d) Stroock & Stroock & Lavan shall have furnished to the Underwriter
their written opinion, as special counsel to the Seller, addressed to
the Underwriter and dated the Closing Date, in form and substance
satisfactory to the Underwriter, to the effect that:
(i) The Seller has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
New York and has all corporate power and authority necessary to
own or hold its properties and to conduct the business in which it
is engaged and to enter into and perform its obligations under
this Agreement, the Sale and Servicing Agreement, the Pooling and
Servicing Agreement and the Insurance Agreement, and to cause the
Certificates to be issued.
(ii) The Seller is not in violation of its certificate of
incorporation or by-laws or to such counsel's knowledge in default
in the performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which the Seller is a party or by which it or its
properties may be bound, which default might result in any
material adverse changes in the financial condition, earnings,
affairs or business of the Seller or which might materially and
adversely affect the properties or assets, taken as a whole, of
the Seller.
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(iii) This Agreement, the Pooling and Servicing Agreement, the
Sale and Servicing Agreement and the Insurance Agreement have been
duly authorized, executed and delivered by the Seller and the
Subsequent Transfer Agreements have been duly authorized, and when
duly executed and delivered by the Seller and, assuming the due
authorization, execution and delivery of such agreements by the
other parties thereto, such agreements constitute and in the case
of any Subsequent Transfer Agreement will constitute valid and
binding obligations, enforceable against the Seller in accordance
with their respective terms, subject as to enforceability to (x)
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally, (y) general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law)
and (z) with respect to rights of indemnity under this Agreement
and the Insurance Agreement, limitations of public policy under
applicable securities laws.
(iv) The execution, delivery and performance of this Agreement,
the Sale and Servicing Agreement, the Pooling and Servicing
Agreement, the Insurance Agreement and each Subsequent Transfer
Agreement by the Seller, the consummation of the transactions
contemplated hereby and thereby, and the issuance and delivery of
the Certificates to such counsel's knowledge do not and will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Seller is a party or by which
the Seller is bound or to which any of the property or assets of
the Seller or any of its subsidiaries is subject, which breach or
violation would have a material adverse effect on the business,
operations or financial condition of the Seller, nor will such
actions result in a violation of the provisions of the articles of
incorporation or by-laws of the Seller or to such counsel's
knowledge any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Seller or any of its properties or assets, which breach or
violation would have a material adverse effect on the business,
operations or financial condition of the Seller.
(v) The direction by the Seller to the Trustee to issue,
authenticate and deliver the Certificates has been duly authorized
by the Seller and, assuming that the Trustee
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has been duly authorized to do so, when executed, authenticated
and delivered by the Trustee in accordance with the Pooling and
Servicing Agreement, the Certificates will be validly issued and
outstanding and will be entitled to the benefits of the Pooling
and Servicing Agreement.
(vi) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body
of the United States is required for the issuance of the
Certificates, and the sale of the Offered Certificates to the
Underwriter, or the consummation by the Seller of the other
transactions contemplated by this Agreement, the Sale and
Servicing Agreement, the Pooling and Servicing Agreement and the
Insurance Agreement, except such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Securities Act or State securities or Blue Sky laws in
connection with the purchase and distribution of the Offered
Certificates by the Underwriter or as have been previously
obtained.
(vii) There are not, to such counsel's knowledge, any actions,
proceedings or investigations pending with respect to which the
Seller has received service of process before or, threatened by
any court, administrative agency or other tribunal to which the
Seller is a party or of which any of its properties is the
subject: (a) which if determined adversely to the Seller would
have a material adverse effect on the business, results of
operations or financial condition of the Seller; (b) asserting the
invalidity of the Pooling and Servicing Agreement, the Sale and
Servicing Agreement, the Insurance Agreement or the Certificates;
(c) seeking to prevent the issuance of the Certificates or the
consummation by the Seller of any of the transactions contemplated
by the Pooling and Servicing Agreement, the Sale and Servicing
Agreement, the Insurance Agreement or this Agreement, as the case
may be; or (d) which might materially and adversely affect the
performance by the Seller of its obligations under, or the
validity or enforceability of, the Pooling and Servicing
Agreement, the Sale and Servicing Agreement, the Insurance
Agreement, this Agreement or the Certificates.
(viii) The Certificates have been duly and validly authorized and
issued and, immediately prior to the sale of the Offered
Certificates to the Underwriter, such
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Certificates are owned by the Seller, free and clear of all Liens.
(ix) The conditions to the use by the Seller of a registration
statement on Form S-3 under the Securities Act, as set forth in
the General Instructions to Form S-3, have been satisfied with
respect to the Registration Statement and the Prospectus.
(x) The Registration Statement and any amendments thereto have
become effective under the Securities Act; to the best of such
counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and not withdrawn and
no proceedings for that purpose have been instituted or threatened
and not terminated; and the Registration Statement, the Prospectus
and each amendment or supplement thereto, as of their respective
effective or issue dates (other than the financial and statistical
information contained therein, as to which such counsel need
express no opinion), complied as to form in all material respects
with the applicable requirements of the Securities Act and the
rules and regulations thereunder.
(xi) To the best of such counsel's knowledge, there are no
material contracts, indentures or other documents of a character
required to be described or referred to in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement other than those described or referred to
therein or filed or incorporated by reference as exhibits thereto.
(xii) The statements set forth in the Basic Prospectus under the
captions "Description of the Securities" and "The Agreements" and
in the Prospectus Supplement under the captions "Description of
the Certificates" to the extent such statements purport to
summarize certain provisions of the Certificates or of the Pooling
and Servicing Agreement, are fair and accurate in all material
respects.
(xiii) The statements set forth in the Prospectus and the
Prospectus Supplement under the captions "ERISA Considerations"
and "Certain Federal Income Tax Consequences" to the extent that
they constitute matters of federal law, provide a fair and
accurate summary of such law or conclusions.
(xiv) The Pooling and Servicing Agreement conforms in all
material respects to the description thereof
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contained in the Prospectus and is not required to be qualified
under the Trust Indenture Act of 1939, as amended, and the Trust
is not required to be registered under the Investment Company Act
of 1940, as amended.
(xv) Neither the Seller nor the Trust is an "investment company"
or under the "control" of an "investment company" as such terms
are defined in the 1940 Act.
(xvi) Assuming that (a) the Trustee causes the assets of the Trust
Estate (exclusive of the Pre-Funding Account and the Capitalized
Interest Account), as the Trustee has covenanted to do in the
Pooling and Servicing Agreement, to be treated as a "real estate
mortgage investment conduit" (the "REMIC"), as such term is
defined in the Internal Revenue Code of 1986, as amended (the
"Code") and (b) the parties to the Pooling and Servicing Agreement
comply with the terms thereof, (i) the REMIC Certificates will be
treated as "regular interests" in the REMIC and (ii) the Class R
Certificate will constitute the sole class of "residual interest"
therein. The Trust is not subject to tax upon its income or assets
by any taxing authority of the State of New York.
(xvii) To the best of such counsel's knowledge, there are no
actions, proceedings or investigations pending that would
adversely affect the status of the REMIC as a REMIC.
(xviii) The Certificates will, when issued, conform to the
description thereof contained in the Prospectus.
Such counsel shall also have furnished to the Underwriter a written
statement, addressed to the Underwriter and dated the Closing Date, in
form and substance satisfactory to the Underwriter to the effect that no
facts have come to the attention of such counsel which lead them to
believe that: (a) the Registration Statement, at the time such
Registration Statement became effective, contained an untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading (except as to financial or statistical data contained in the
Registration Statement); or (b) the Prospectus, as of its date and as of
the Closing Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to
be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading (except as to
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statements set forth in the Prospectus Supplement under the caption "The
Policy and the Certificate Insurer").
(e) The Underwriter shall have received the favorable opinion, dated the
Closing Date, of Stroock, Stroock & Lavan, special counsel to the
Seller, addressed to the Seller and satisfactory to the Certificate
Insurer, [Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies ("Standard & Poor's"), Moody's Investors Service,
Inc. ("Moody's")] and the Underwriter, with respect to certain matters
relating to the transfer of the Initial Mortgage Loans to the Seller and
from the Seller to the Trust, and such counsel shall have consented to
the reliance on such opinion by the Certificate Insurer, [Standard &
Poor's, Moody's] and the Underwriter as though such opinion had been
addressed to each such party.
(f) Stroock & Stroock & Lavan, special counsel to the Seller/Servicer,
shall have furnished to the Underwriter their written opinion, addressed
to the Underwriter and the Seller and dated the Closing Date, in form
and substance satisfactory to the Underwriter, to the effect that:
(i) The Seller/Servicer has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of
the State of New York and has duly authorized all actions
contemplated hereby to be taken by it.
(ii) The Seller has full power and authority to serve in the
capacity of seller of the Mortgage Loans.
(iii) The Servicer has full power and authority to service in its
capacity as servicer of the Mortgage Loans as contemplated in the
Pooling and Servicing Agreement.
(iv) The Pooling and Servicing Agreement, the Sale and Servicing
Agreement and the Insurance Agreement have been duly authorized,
executed and delivered by the Seller and, assuming the due
authorization, execution and delivery of such agreements by the
other parties thereto, constitute the legal, valid and binding
agreements of the Seller enforceable against the Seller in
accordance with their terms, subject as to enforceability to (x)
bankruptcy, insolvency, reorganization, moratorium, receivership
or other similar laws now or hereafter in effect relating to
creditors' rights generally and (y) the qualification that the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
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discretion, with respect to such remedies, of the court before
which any proceedings with respect thereto may be brought.
(v) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body
having jurisdiction over the Seller is required for the
consummation by the Seller of the transactions contemplated by the
Pooling and Servicing Agreement, the Sale and Servicing Agreement
and the Insurance Agreement, except such consents, approvals,
authorizations, registrations and qualifications as have been
obtained.
(vi) The execution, delivery or performance by the Seller/Servicer
of the Pooling and Servicing Agreement, the Sale and Servicing
Agreement or the Insurance Agreement and the transactions
contemplated thereby does not (A) conflict with or result in a
breach of, or constitute a default under, (i) any term or
provision of the formation documents of the Seller; (ii) any term
or provision of any material agreement, deed of trust, mortgage
loan agreement, contract, instrument or indenture, or other
agreement to which the Seller is a party or is bound or to which
any of the property or assets of the Seller or the Servicer, as
applicable, or any of its subsidiaries is subject; (iii) to the
best of such firm's knowledge without independent investigation
any order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Seller; or
(iv) any law, rule or regulations applicable to the Seller; or (B)
to the best of such firm's knowledge without independent
investigation, results in the creation or imposition of any lien,
charge or encumbrance upon the Trust Estate or upon the
Certificates.
(vii) Each Subsequent Transfer Agreement at the time of its
execution and delivery will be sufficient to convey all of the
Seller's right, title and interest in the Subsequent Mortgage
Loans to the Trustee and following the consummation of the
transaction contemplated by each Subsequent Transfer Agreement,
the transfer of the Subsequent Mortgage Loans by the Seller to the
Trustee will be a sale thereof.
(viii) There are, to the best of such counsel's knowledge without
independent investigation, no actions, proceedings or
investigations pending with respect to which the Seller has
received service of process or
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threatened against the Seller before any court, administrative
agency or other tribunal (a) contesting the validity of the
Pooling and Servicing Agreement, the Sale and Servicing Agreement,
the Underwriting Agreement, the Insurance Agreement or the
Certificates, (b) seeking to prevent the consummation of any of
the transactions contemplated by the Pooling and Servicing
Agreement or (c) which would materially and adversely affect the
performance by the Seller/Servicer, as applicable, of its
obligations under, or the validity or enforceability of, the
Pooling and Servicing Agreement, the Sale and Servicing Agreement,
the Underwriting Agreement, or the Insurance Agreement.
(g) The Underwriter shall have received the favorable opinion of counsel
to the Trustee, dated the Closing Date, addressed to the Underwriter and
in form and scope satisfactory to counsel to the Underwriter, to the
effect that:
(i) The Trustee is a banking association and validly existing
under the laws of the State of ____________ and has the power and
authority to enter into, and to take all action required of it
under, the Pooling and Servicing Agreement.
(ii) The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee and, assuming due
authorization, execution and delivery thereof by the Seller,
constitutes a valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms,
subject, as to enforceability, to limitations of bankruptcy,
insolvency, moratorium, fraudulent conveyance and other laws
relating to or affecting creditors' rights generally and court
decisions with respect thereto, and to general principles of
equity.
(iii) The Certificates have been duly executed by the Trustee and
authenticated and delivered by the Trustee in accordance with the
terms of the Pooling and Servicing Agreement.
(iv) The execution and delivery by the Trustee of the Pooling and
Servicing Agreement and the performance by the Trustee of its
terms do not conflict with or result in a violation of (A) any law
or regulation of the United States of America or the State of
____________ governing the banking or trust powers of the Trustee
or (B) the charter or by-laws of the Trustee.
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(v) No approval, authorization, or other action by, or filing
with, any governmental authority of the United States of America
or the State of ____________ having jurisdiction over the banking
or trust powers of the Trustee is required in connection with the
execution and delivery by the Trustee of the transactions
contemplated by the Pooling and Servicing Agreement, or the
performance by the Trustee of the terms of the Pooling and
Servicing Agreement.
(h) The Underwriter shall have received the favorable opinion or
opinions, dated the date of the Closing Date, of counsel for the
Underwriter, with respect to the issue and sale of the Offered
Certificates, the Registration Statement, this Agreement, the Prospectus
and such other related matters as the Underwriter may reasonably
require.
(i) The Underwriter shall have received the favorable opinion dated the
Closing Date, from counsel to the Certificate Insurer in form and scope
satisfactory to counsel for the Underwriter, substantially to the effect
that:
(i) The Certificate Insurer is a corporation validly existing, in
good standing and licensed to transact the business of surety and
financial guaranty insurance under the laws of the State of
____________.
(ii) The Certificate Insurer has the corporate power to execute
and deliver, and to take all action required of it, under the
Policy and the Insurance Agreement.
(iii) Except as have already been obtained, no authorization,
consent, approval, license, formal exemption, or declaration from,
nor any registration or filing with, any court or governmental
agency or body of the United States of America or the State of
______________, which if not obtained would affect or impair the
validity or enforceability of the Policy or the Insurance
Agreement against the Certificate Insurer, is required in
connection with the execution and delivery by the Certificate
Insurer of the Policy or the Insurance Agreement, or in connection
with the Certificate Insurer's performance of its obligations
thereunder.
(iv) The Policy and the Insurance Agreement been duly authorized,
executed and delivered by the Certificate Insurer, and the Policy
and, assuming due authorization, execution and delivery of the
Insurance Agreement by the parties thereto (other than the
Certificate Insurer), the
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Insurance Agreement constitute the legally valid and binding
obligations of the Certificate Insurer, enforceable in accordance
with their respective terms, subject, as to enforcement, to (a)
bankruptcy, reorganization, insolvency, moratorium and other
similar laws relating to or affecting the enforcement of
creditors' rights generally, including, without limitation, laws
relating to fraudulent transfers or conveyances, preferential
transfers and equitable subordination, presently or from time to
time in effect and general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity
or at law), as such laws may be applied in any such proceeding
with respect to the Certificate Insurer, (b) the qualification
that the remedy of specific performance may be subject to
equitable defenses and the discretion of the court before which
any proceedings with respect thereto may be brought, and (c) the
enforceability of rights to indemnification may be subject to
limitations of public policy under applicable securities laws.
(v) To the extent the Policy constitutes a security within the
meaning of Section 2(1) of the Securities Act, it is a security
that is exempt from the registration requirements of the Act.
(j) The Seller shall have furnished to the Underwriter a certificate,
dated the Closing Date and signed by the Chairman of the Board, the
President or a Vice President of the Seller, stating as it relates to
each such entity:
(i) The representations and warranties made by such entity in this
Agreement, the Pooling and Servicing Agreement (excluding the
representations and warranties relating to the Mortgage Loans) and
the Sale and Servicing Agreement, as applicable, are true and
correct as of the Closing Date; and such entity has complied with
all agreements contained herein which are to have been complied
with on or prior to the Closing Date.
(ii) Nothing has come to his or her attention that would lead such
officer to believe that the Registration Statement or the
Prospectus includes any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein not misleading.
(iii) There has been no amendment or other document filed
affecting the Certificate of Incorporation or by-laws of the
Seller since and no such amendment has been
authorized. No event has occurred
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since which has affected the good standing of
the Seller under the laws of the State of New York.
(iv) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings,
business or operations of such entity from .
(k) The Trustee shall have furnished to the Underwriter a certificate of
the Trustee, signed by one or more duly authorized officers of the
Trustee, dated the Closing Date, as to the due authorization, execution
and delivery of the Pooling and Servicing Agreement by the Trustee and
the acceptance by the Trustee of the trusts created thereby and the due
execution, authentication and delivery of the Certificates by the
Trustee thereunder and such other matters as the Underwriter shall
reasonably request.
(l) The Policy and the Insurance Agreement shall have been issued by the
Certificate Insurer and shall have been duly authenticated by an
authorized agent of the Certificate Insurer, if so required under
applicable state law or regulations.
(m) The Offered Certificates shall have been rated "AAA" by [Standard &
Poor's and "Aaa" by Moody's].
(n) The Seller shall have furnished to the Underwriter such further
information, certificates and documents as the Underwriter may
reasonably have requested not less than three full business days prior
to the Closing Date.
(o) Prior to the Closing Date, counsel for the Underwriter shall have
been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and
sale of the Certificates as herein contemplated and related proceedings
or in order to evidence the accuracy and completeness of any of the
representations and warranties, or the fulfillment of any of the
conditions, herein contained, and all proceedings taken by the Seller in
connection with the issuance and sale of the Certificates as herein
contemplated shall be satisfactory in form and substance to the
Underwriter and counsel for the Underwriter.
(p) Subsequent to the execution and delivery of this Agreement none
of the following shall have occurred: (i) trading in securities
generally on the New York Stock
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Exchange, the American Stock Exchange or the over-the-counter market
shall have been suspended or minimum prices shall have been
established on either of such exchanges or such market by the
Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction; (ii) a banking moratorium
shall have been declared by federal or state authorities; (iii) the
United States shall have become engaged in hostilities, there shall
have been an escalation of hostilities involving the United States or
there shall have been a declaration of a national emergency or war by
the United States; or (iv) there shall have occurred such a material
adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets of
the United States shall be such) as to make it in each of the
instances set forth in clauses (i), (ii), (iii) and (iv) herein, in
the reasonable judgment of the Underwriter, impractical or inadvisable
to proceed with the public offering or delivery of the Certificates on
the terms and in the manner contemplated in the Prospectus.
(q) The Underwriter shall have received from , a
letter dated the date hereof and satisfactory in form and substance to
the Underwriter and its counsel, to the effect that they have
performed certain specified procedures, all of which have been agreed
to by the Underwriter, as a result of which they determined that
certain information of an accounting, financial or statistical nature
set forth in the Prospectus Supplement agrees with the records of the
Seller excluding any questions of legal interpretation. The
Underwriter shall have received from , a letter
dated the Closing Date and satisfactory in form and substance to the
Underwriter and its counsel, confirming as of such date the information
set forth in the letter provided pursuant to this clause (q).
(r) The Underwriter shall have received from ,
certified public accountants, a letter dated the date hereof and
satisfactory in form and substance to the Underwriter and its counsel,
to the effect that they have performed certain specified procedures
and recomputations as a result of which they have confirmed the
information set forth in the Prospectus Supplement in the table
entitled "Percent of Initial Class Certificate Balances Outstanding".
If any condition specified in this Section 6 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriter by notice to the Seller at any time at or prior to the
Closing Date, and such
25
<PAGE>
termination shall be without liability of any party to any other party except as
provided in Section 7.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriter.
SECTION 7. Payment of Expenses. The Seller agrees to pay: (a) the costs
incident to the authorization, issuance, sale and delivery of the Certificates
and any taxes payable in connection therewith; (b) the costs incident to the
preparation, printing and filing under the Securities Act of the Registration
Statement and any amendments and exhibits thereto; (c) the costs of distributing
the Registration Statement as originally filed and each amendment thereto and
any post-effective amendments thereof (including, in each case, exhibits), the
Prospectus and any amendment or supplement to the Prospectus or any document
incorporated by reference therein, all as provided in this Agreement; (d) the
costs of reproducing and distributing this Agreement; (e) the fees and expenses
of qualifying the Certificates under the securities laws of the several
jurisdictions as provided in Section 5(h) hereof and of preparing, printing and
distributing a Blue Sky Memorandum and a Legal Investment Survey (including
related fees and expenses of counsel to the Underwriter); (f) any fees charged
by securities rating services for rating the Offered Certificates; and (g) all
other costs and expenses incident to the performance of the obligations of the
Seller (including costs and expenses of your counsel); provided that, except as
provided in this Section 7, the Underwriter shall pay their own costs and
expenses, including the costs and expenses of their counsel, any transfer taxes
on the Offered Certificates which they may sell and the expenses of advertising
any offering of the Offered Certificates made by the Underwriter, and the
Underwriter shall pay the cost of any accountant's comfort letters relating to
any Computational Materials, Structural Term Sheets or Collateral Term Sheets
(each as defined in Section 5(e) hereof).
If this Agreement is terminated by the Underwriter in accordance with
the provisions of Section 6 or Section 10, the Seller shall cause the
Underwriter to be reimbursed for all reasonable out-of-pocket expenses,
including fees and disbursements of ______________, counsel for the Underwriter.
SECTION 8. Indemnification and Contribution. (a) The
Seller agrees to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Securities Act from and against any
26
<PAGE>
and all loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of the Offered
Certificates), to which the Underwriter or any such controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereof or supplement thereto, (ii) 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, (iii)
any untrue statement or alleged untrue statement of a material fact contained in
the Prospectus, or any amendment thereof or supplement thereto, or (iv) the
omission or alleged omission to state therein a 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 and shall reimburse the
Underwriter and each such controlling person promptly upon demand for any legal
or other expenses reasonably incurred by the Underwriter or such controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Seller shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Prospectus, or any amendment thereof or
supplement thereto, or the Registration Statement, or any amendment thereof or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Seller by or on behalf of the Underwriter specifically for
inclusion therein. The foregoing indemnity agreement is in addition to any
liability which the Seller may otherwise have to the Underwriter or any
controlling person of the Underwriter. The only information furnished by the
Underwriter or on behalf of the Underwriter for use in connection with the
preparation of the Registration Statement or the Prospectus is described in
Section 8(i) hereof.
(b) The Underwriter agrees to indemnify and hold harmless the Seller,
each of its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Seller within the meaning
of Section 15 of the Securities Act against any and all loss, claim, damage or
liability, or any action in respect thereof, to which the Seller or any such
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement
27
<PAGE>
of a material fact contained in the Registration Statement, or any amendment
thereof or supplement thereto, (ii) 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, (iii) any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus, or any amendment
thereof or supplement thereto, or (iv) the omission or alleged omission to state
therein a 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, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Seller by or on behalf of the Underwriter specifically for inclusion therein,
and shall reimburse the Seller and any such director, officer or controlling
person for any legal or other expenses reasonably incurred by the Seller or any
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which the Underwriter may otherwise have to the Seller
or any such director, officer or controlling person. The only information
furnished by the Underwriter or on behalf of the Underwriter for use in
connection with the preparation of the Registration Statement or the Prospectus
is described in Section 8(i) hereof.
(c) Promptly after receipt by any indemnified party under this Section 8
of notice of any claim or the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
claim or the commencement of that action; provided, however, that the failure to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent it has been materially
prejudiced by such failure and, provided further, that the failure to notify any
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, except to the extent
provided in the next
28
<PAGE>
following paragraph, the indemnifying party shall not be liable to the
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions 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 (in
addition to one local counsel per jurisdiction) at any time for all such
indemnified parties, which firm shall be designated in writing by the
Underwriter, if the indemnified parties under this Section 8 consist of the
Underwriter or any of its controlling persons, or the Seller, if the indemnified
parties under this Section 8 consist of the Seller or any of the Seller's
directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(a) and (b), shall use its best efforts to cooperate with
the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
29
<PAGE>
Notwithstanding the foregoing paragraph, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than thirty (30)
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
(d) The Underwriter agrees to provide the Seller for filing with the
Commission on an Additional Materials 8-K (i) no later than two (2) Business
Days prior to the day on which the Prospectus Supplement is required to be filed
pursuant to Rule 424 with a copy of any Computational Materials and Structural
Term Sheets (each as defined in Section 5(e) hereof) distributed by the
Underwriter and (ii) no later than one (1) business day after first use with a
copy of any Collateral Term Sheets (as defined in Section 5(e) hereof)
distributed by the Underwriter.
(e) The Underwriter agrees, assuming all Seller-Provided Information (as
defined in Section 8(g)) is accurate and complete in all material respects, to
indemnify and hold harmless the Seller, each of the Seller's officers and
directors and each person who controls the Seller within the meaning of Section
15 of the Securities Act against any and all losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities 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 of a material fact contained in the Computational Materials,
Structural Term Sheets and Collateral Term Sheets provided by the Underwriter
and agrees to reimburse each such indemnified party for any legal or other
expenses reasonably incurred by him, her or it in connection with investigating
or defending or preparing to defend any such loss, claim, damage, liability or
action as such expenses are incurred. The obligations of the Underwriter under
this Section 8(e) shall be in addition to any liability which the Underwriter
may otherwise have.
The procedures set forth in Section 8(c) shall be equally applicable to
this Section 8(e).
(f) If the indemnification provided for in this Section 8 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 8(a), (b) or (e) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
30
<PAGE>
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Seller on the one hand and the Underwriter on the other from the
offering of the related Offered Certificates or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law or if the indemnified
party failed to give the notice required under Section 8(c), 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 Seller on the one hand and
the Underwriter on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations.
The relative benefits of the Underwriter and the Seller shall be deemed
to be in such proportion as the total net proceeds from the offering (before
deducting expenses) received by the Seller bear to the total underwriting
discounts and commissions received by the related Underwriter from time to time
in negotiated sales of the related Offered Certificates.
The relative fault of the Underwriter and the Seller shall be determined
by reference to whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Seller or by the Underwriter, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission and other equitable
considerations.
The Seller and the Underwriter agree that it would not be just and
equitable if contributions pursuant to this Section 8(f) were to be determined
by pro rata allocation (even if the Underwriter were treated as one entity for
such purposes) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 8(f)
shall be deemed to include, for purposes of this Section 8(f), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
For purposes of this Section 8, in no case shall the Underwriter be
responsible for any amount in excess of (x) the amount received by the
Underwriter in connection with its resale of the Offered Certificates over (y)
the amount paid by the
31
<PAGE>
Underwriter to the Seller for the Offered Certificates by the Underwriter
hereunder. 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.
(g) For purposes of this Section 8 the terms "Computational Materials",
"Structural Term Sheets" and "Collateral Term Sheets" mean such portion, if any,
of the information delivered to the Seller by the Underwriter pursuant to
Section 8(d) for filing with the Commission on an Additional Materials 8-K as:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference through an
Additional Materials 8-K; and
(ii) does not constitute Seller-Provided Information.
"Seller-Provided Information" means the information and data set forth on any
computer tape (or other electronic or printed medium) furnished to the
Underwriter by or on behalf of the Seller concerning the assets comprising the
Trust.
(h) The Underwriter confirms that the information set forth in the last
paragraph on the cover page of the Prospectus Supplement, the information
regarding the Underwriter set forth under the caption "Underwriting" in the
Prospectus Supplement and the Computational Materials, Structural Term Sheets
and Collateral Term Sheets (excluding in each case Seller-Provided Information)
are correct, and the parties hereto acknowledge that such information
constitutes the only information furnished in writing by or on behalf of the
Underwriter for use in connection with the preparation of the Registration
Statement or the Prospectus.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Seller submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of the Underwriter or controlling
persons thereof, or by or on behalf of the Seller and shall survive delivery of
any Offered Certificates to the Underwriter.
SECTION 10. Termination of Agreement. The Underwriter may terminate this
Agreement immediately upon notice to the Seller, at any time at or prior to the
Closing Date if any of the events or conditions described in Section 6(p) of
this Agreement shall occur and be continuing. In the event of any such
termination,
32
<PAGE>
the covenant set forth in Section 5(g), the provisions of Section 7, the
indemnity agreement set forth in Section 8, and the provisions of Sections 9 and
15 shall remain in effect.
SECTION 11. Notices. All statements, requests, notices and
agreements hereunder shall be in writing, and:
A. if to the Underwriter, shall be delivered or sent by
mail, telex or facsimile transmission to
Attention:
(Fax: );
B. if to the Seller, shall be delivered or sent by mail,
telex or facsimile transmission to Delta Funding
Corporation, 1000 Woodbury Road, Woodbury, New York 11797
Attention: Chief Counsel (Telephone: 515-364-8500);
SECTION 12. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriter and
the Seller, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
the representations, warranties, indemnities and agreements contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control the Underwriter within the meaning of Section 15 of the
Securities Act, and for the benefit of directors of the Seller, officers of the
Seller who have signed the Registration Statement and any person controlling the
Seller within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 12, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
SECTION 13. Survival. The respective indemnities, representations,
warranties and agreements of the Seller and the Underwriter contained in this
Agreement, or made by or on behalf of them, respectively, pursuant to the shall
survive the delivery of and payment for the Certificates and shall remain in
full force and effect, regardless of any investigation made by or on behalf of
any of them or any person controlling any of them.
SECTION 14. Definition of the Term "Business Day". For
purposes of this Agreement, "Business Day" means any day on which
the New York Stock Exchange, Inc. is open for trading.
SECTION 15. Governing Law; Submission to Jurisdiction.
This Agreement shall be governed by and construed in accordance
33
<PAGE>
with the laws of the State of [New York] without giving effect to the conflict
of law rules thereof.
The parties hereto hereby submit to the jurisdiction of the United
States District Court for the Southern District of New York and any court in the
State of New York located in the City and County of New York, and appellate
court from any thereof, in any action, suit or proceeding brought against it or
in connection with this Agreement or any of the related documents or the
transactions contemplated hereunder or for recognition or enforcement of any
judgment, and the parties hereto hereby agree that all claims in respect of any
such action or proceeding may be heard or determined in New York State court or,
to the extent permitted by law, in such federal court.
SECTION 16. Counterparts. This Agreement may be executed in counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
34
<PAGE>
SECTION 17. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of,
or to affect the meaning or interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the Seller
and the Underwriter, please indicate your acceptance in the space provided for
the purpose below.
Very truly yours,
DELTA FUNDING CORPORATION INC.
By:
_____________________________
Name:
Title:
CONFIRMED AND ACCEPTED, as
of the date first above written:
- -----------------------------------
By:
--------------------------------
Name:
Title:
- -----------------------------------
By:
--------------------------------
Name:
Title:
35
<PAGE>
EXHIBIT 3.1
Certificate of Incorporation
of
Delta Funding Corp.
under section 402 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is DELTA FUNDING CORP.
(2) The office of the corporation is to be located in the
incorporated village of GREAT NECK County of NASSAU, State of
New York.
(3) The aggregate number of shares which the corporation shall
have the authority to issue is 200 NO PAR VALUE.
(4) The Secretary of State is designated as agent of the corporation upon
whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is
c/o ROBERT SCHNEIDER, ESQ.
39 BROADWAY
SUITE 2807
NEW YORK, N.Y. 10006
<PAGE>
(5) The purposes of the corporation are as follows:
To act as agent of broker for insurers of life, health and property against loss
or damage of any kind from any and all causes; to conduct agencies for the
placing and writing of casualty, automobile liability, employers' liability and
other liability insurance of all kinds; to act as agent, broker or intermediary
in the placing of excess insurance coverage; to act as agent, broker or
intermediary in the placing of surplus insurance coverage; to act as agent,
broker or intermediary in the acceptance of excess and surplus insurance
coverage; to conduct a general insurance agency and brokerage business; to act
as agent for bonding, surety and title guaranty companies; to investigate and
report upon the cause and extent of insured losses whether presented by the
insured or by third parties; to adjust, and to act as agent in the payment of
losses whether to the insured, third parties, or other parties entitled to same;
to attend to the collection of premiums on policies issued by its principals,
and to the cancellation, alteration and extension of policies and other
contracts made by them, when and as authorized and directed; and to do any and
all things incidental to or suitable for the complete accomplishment of the
foregoing purposes.
To conduct, as principal or agent, a general business as commercial factors and
financiers, of financing, by loans and other advances of money, credit or
property, secured (with or without recourse to the borrower) or unsecured, by
purchase of accounts receivable, installment contracts, and other evidences of
debt and by any and all other means, the manufacture, sale, lease and purchase,
foreign and domestic, of merchandise of any kind and description, real and
synthetic, and of material, supplies, machinery, appliances, processes,
inventions, designs, patents, patent rights, and licenses, trademarks, trade
names, copyrights and trade secrets and other cognate items used or useful in
connection with the preparation for market and sale of any of the foregoing, and
to furnish any and all collection and remittances facilities pertinent thereto;
to conduct research and furnish advice with respect to credit, credit controls,
and other factors cognate to any of the foregoing: in furtherance of the
corporate business to guarantee or assume interest in or obligations of other
concerns, wherever and however organized, or of individuals and to do any and
all other acts and things designed to aid in any manner or to protect or to
enhance the value of any obligation or interest owned by this corporation or in
which it may have any beneficial interest, and to act as financial, commercial,
special, or general agent, or representative of bodies politic, corporations,
association, partnerships, firms, trustees, syndicates, individuals,
combinations, organizations, and other entities located in or organized under
the laws of any part of the world.
To generally purchase or acquire property, personal and real as may be useful to
the operation of this business, generally to do and perform everything necessary
to carry out the aforesaid purposes.
The corporation in furtherance of its corporate purposes above set forth, shall
have all of the powers in Section 202 of the Business Corporation Law, subject
to any limitations provided in the Business Corporation Law or any other statute
of the State of New York.
-2-
<PAGE>
The undersigned incorporation(s) are at least eighteen years of age or over.
IN WITNESS THEREOF, this certificate has been signed this 21st day of
JANUARY, 1982, by the undersigned who affirm(s) that the statements made herein
are true under the penalties of perjury.
/s/ KAROL LYNN ZDGIEBLOSKI
- -----------------------------------------
SIGNATURE OF INCORPORATOR
KAROL LYNN ZDGIEBLOSKI
- -----------------------------------------
NAME
284 STATE STREET, ALBANY, N.Y. 12210
- -----------------------------------------
ADDRESS
(please print or type)
-3-
<PAGE>
Certificate of Incorporation
of
Delta Funding Corp.
under section 402 of the Business Corporation Law
filer:
ROBERT SCHNEIDER, ESQ.
39 BROADWAY
NEW YORK, N.Y. 10006
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED: JANUARY 28, 1982
-4-
<PAGE>
Certificate of Incorporation
of
Delta Funding Corp.
under section 402 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is DELTA FUNDING CORP.
(2) The office of the corporation is to be located in the incorporated
village of GREAT NECK County of NASSAU State of New York.
(3) The aggregate number of shares which the corporation shall have the
authority to issue is 200 NO PAR VALUE.
(4) The Secretary of State is designated as agent of the corporation upon
whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is
C/O THE CORPORATION
70 MIDDLE NECK ROAD
GREAT NECK, N.Y.
(5) The purposes of the corporation are as follows:
To engage in any lawful act or activity for which corporations may be organized
under Section 402 of the Business Corporation Law.
-5-
<PAGE>
This corporation is not formed to engage in any act or activity requiring the
consent or approval of any state official, department, board or other body
without consent or approval first being obtained.
IN WITNESS WHEREOF; I have made and subscribed this certificate this 9th day
of May, 1983.
/s/ GLORIA J. AVERY
----------------------------------
Signature
GLORIA J. AVERY
----------------------------------
Name
284 STATE STREET, ALBANY, NEW YORK 12210
-------------------------------------------
Address
STATE OF NEW YORK )
SS:
COUNTY OF ALBANY )
On the 9th day of May, 1983, before me personally came GLORIA J. AVERY to me
known, and known to me to be the individual described in, and who executed the
foregoing instrument, and duly acknowledged to me that she executed the same.
/s/ Frank J. Panucci
- --------------------
Frank J. Panucci,
Notary Public, State of New York
Qualified in Albany County
No. 4721156
Commission Expires, March 30th, 1984.
-6-
<PAGE>
Certificate of Incorporation
of
Delta Funding Corp.
under section 402 of the Business Corporation Law
Filer:
GOLDBERG & SCHNEIDER, ESQS.
39 BROADWAY, SUITE 2807
NEW YORK, N.Y. 10006
State of New York
Department of State
Filed: May 10, 1983
-7-
<PAGE>
CERTIFICATE OF CHANGE
OF
DELTA FUNDING CORPORATION
under Section 805-A of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation is DELTA FUNDING CORPORATION.
2. The Certificate of Incorporation was filed by the Department of State on the
28th day of January, 1982, under the name Delta Funding Corp., it amended its
name to Delta Funding Corporation on 10/11/83.
3. The following was authorized by the board of directors.
To change the paragraph relating to the address the Secretary of State shall
mail a copy of process to read in its entirety as follows:
The Secretary of State is designated as agent of the corporation upon whom
process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served upon him is:
Delta Funding Corporation
130 Steamboat Road
Great Neck, N.Y. 11024
IN WITNESS WHEREOF, we have signed this certificate on the 17th day of
April, 1989 and we affirm that the statements made herein are true under the
penalties of perjury.
/s/ Sidney A. Miller /s/ Danial A. Ingarra
- -------------------- ---------------------
Sidney A. Miller--President Daniel A. Ingarra--Secretary
-8-
<PAGE>
CERTIFICATE OF CHANGE
OF
DELTA FUNDING CORPORATION
under Section 805-A of the Business Corporation Law
Filer
Goldberg & Schneider, Esqs.
39 Broadway, Suite 2807
New York, N.Y. 10006
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED: APRIL 23, 1989
-9-
<PAGE>
Certificate of Dissolution of
Delta Funding Corp.
under Section 1003 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is DELTA FUNDING CORP.
(2) The certificate of incorporation was filed by the department of state
on the 10th of May 1983.
(3) The name, title and address of each of its officers and directors are:
Name Title Street and Number
---- ----- -----------------
Sidney A. Miller President 85 Station Road, Great Neck, N.Y. 11023
Rona V. Miller Vice Pres. 85 Station Road, Great Neck, N.Y. 11023
Daniel A. Ingarra Sec.-Treas. 281 Schenck Blvd., Floral Park, N.Y. 11001
(4) The corporation elects to dissolve.
(5) The dissolution was authorized by unanimous written consent of the
holders of all the outstanding shares entitled to vote thereon.
-10-
<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed this 14th day of
September, 1983 by the undersigned who affirm(s) that the statements made
herein are true under the penalties of perjury.
Type name Capacity in which signed Signature
- --------- ------------------------ ---------
Daniel A. Ingarra Secretary /s/ Daniel A. Ingarra
- ----------------- --------- ---------------------
Sidney A. Miller President /s/ Sidney A. Miller
- ---------------- --------- --------------------
========================================
Certificate of Dissolution of
DELTA FUNDING CORP.
under Section 1003 of the Business Corporation Law
========================================
Filed By: Delta Funding Corporation
Address: 70 Middle Neck Road
Great Neck, New York 11021
-11-
<PAGE>
Certificate of Amendment of the Certificate of Incorporation of
DELTA FINANCIAL CORP.
under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is DELTA FINANCIAL CORP.
(2) The certificate of incorporation was filed by the department of state
as the 28th day of January, 1982 under the name Delta Funding Corp.
(3) The certificate of incorporation of this corporation is hereby amended
to effect the following change:
The name of the corporation is:
Delta Funding Corporation
(4) The amendment to the certificate of incorporation was authorized:
o by unanimous written consent of the holders of all the
outstanding shares entitled to vote thereon.
-12-
<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed this 22nd day of
September, 1983, by the undersigned who affirm(s) that the statements made
herein are true under the penalties of perjury.
Type name Capacity in which signed Signature
--------- ------------------------ ---------
Sidney A. Miller President /s/ Sidney A. Miller
---------------- --------- --------------------
Daniel A. Ingarra Secretary /s/ Daniel A. Ingarra
----------------- --------- ---------------------
========================================
Certificate of Amendment of the Certificate of Incorporation of
DELTA FINANCIAL CORP.
under Section 805 of the Business Corporation Law
========================================
Filed By: Delta Financial Corporation
Address: 70 Middle Neck Road
Great Neck, N.Y. 11021
-13-
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF
DELTA FUNDING CORPORATION
Under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
1. The name of the corporation is:
DELTA FUNDING CORPORATION
2. The certificate of incorporation was filed by the Department of State on
the 28th day of January, 1982 under the original name of Delta Funding Corp.
3. The certificate of incorporation is hereby amended to effect the following
change:
To amend Paragraph (3) which sets forth the stock structure. The
corporation is presently authorized to issue 200 shares, no par value.
The corporation shall add 5,000 new shares. Paragraph (3) shall now
read as follows:
(3) The aggregate number of shares which the corporation shall have
authority to issue is 5,200 shares, no par value.
4. The amendment to the certificate of incorporation was authorized first by
the board of directors and then by vote of a majority of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned hereby affirms that the statements made
herein are true under the penalties of perjury.
Dated: September 19, 1990
/s/ Sidney A. Miller /s/ Irwin Fein
- --------------------- ---------------------
Sidney A. Miller Irwin Fein
President Secretary
-14-
<PAGE>
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF
DELTA FUNDING CORPORATION
FILED BY: William J. Moran, Esq.
130 Steamboat Road
Great Neck, New York 11024
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED DEC. 20, 1990
-15-
<PAGE>
Certificate of Amendment of the Certificate of Incorporation of
DELTA FUNDING CORPORATION
under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is
DELTA FUNDING CORPORATION
(2) The certificate of incorporation was filed by the department of state
on the 28th day of January 1982 under the original name of Delta Funding Corp.
(3) The certificate of incorporation of this corporation is hereby amended
to effect the following change:
To amend Paragraph (3) which sets forth the stock structure. The
corporation is presently authorized to issue 5,200 shares, no par value.
The corporation shall add 4,800 new shares.
Paragraph (3) shall now read as follows:
(3) The aggregate number of shares which the corporation shall have
authority to issue is 10,000 shares, no par value.
(4) The amendment to the certificate of incorporation was authorized:
o first by vote of the board of directors.
o and then at a meeting of shareholders by vote of a majority of
all the holders of all outstanding shares entitled to vote
thereon.
-16-
<PAGE>
IN WITNESS WHEREOF, this certificate has been subscribed this ___ day of
September, September, by the undersigned who hereby affirms that the statements
made herein are true under the penalties of perjury.
Type name Capacity in which signed Signature
--------- ------------------------ ---------
Sidney A. Miller President /s/ Sidney A. Miller
- ---------------- --------- --------------------
Irwin Fein Secretary /s/ Irwin Fein
- ---------- --------- --------------
========================================
Certificate of Amendment of the Certificate of Incorporation of
DELTA FUNDING CORPORATION
under Section 805 of the Business Corporation Law
========================================
Filed By: WILLIAM J. MORAN
ATTORNEY AT LAW
Address: 130 Steamboat Road
Great Neck, NY 11024
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED: DEC. 31, 1991
-17-
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
DELTA FUNDING CORP.
Under Section 805 of the Business Corporation Law
The undersigned being the sole shareholder of Delta Funding Corp. hereby
certifies and sets forth:
1. The name of the corporation is Delta Funding Corp.
2. The certificate of incorporation of Delta Funding Corp. was filed by
the Department of State on the 28th day of January, 1982.
3. The certificate of incorporation of Delta Funding Corp. is hereby
amended to affect a change in the corporate name pursuant to section 301(b)(1)
of the Business Corporation Law.
4. Paragraph 1 of the certificate of incorporation is hereby amended as
follows:
(1.) The name of the corporation is Delta Financial Corp.
5. The certificate of incorporation of Delta Funding Corp. is hereby
amended to affect a change of the corporate purposes pursuant to section
801(b)(2) of the Business Corporation Law and Article 9 of the Banking Law.
6. Paragraph 5 of the certificate of incorporation is hereby amended by
adding the following statement, to wit:
Pursuant to Article 9 of the Banking Law of the State of New York the
corporation may act as a licensed lender to conduct the business of making loans
under the provisions of Article 9 of the Banking Law to make a loan to any
natural person upon the security of a mortgage which is not a first lien at the
rate or rates agreed to by the licensed lender and the borrower subject to such
regulations as the Banking Board may prescribe.
The corporation, in furtherance of its corporate purposes sets forth, shall
have all the
-18-
<PAGE>
powers in Article 9 of the Banking Law and Business Corporation Law subject
to any limitations provided in the Banking Law or any other statute of the
State of New York.
7. The manner in which this amendment to the certificate of incorporation
of Delta Funding Corp. was authorized was by the sole shareholder because no
directors or officers have been elected.
IN WITNESS WHEREOF, the undersigned has executed and signed this
certificate this 23rd day of June, 1982.
DELTA FUNDING CORP.
By: /s/ Sidney A. Miller
------------------------
SIDNEY A. MILLER
Sole Shareholder
STATE OF NEW YORK )
SS:
COUNTY OF NASSAU )
SIDNEY A. MILLER, being duly sworn, deposes and says:
I am the sole shareholder of DELTA FUNDING CORP. I have read the annexed
Certificate of Amendment of Incorporation of DELTA FUNDING CORP. and know the
contents thereof and the same are true to my own knowledge.
/s/ Sidney A. Miller
----------------------
SIDNEY A. MILLER
Sworn to before me this
23 day of June, 1982
/s/ Robert Schneider
- ----------------------------
Robert Schneider
Notary Public
-19-
<PAGE>
STATE OF NEW YORK )
SS:
DEPARTMENT OF STATE)
I hereby certify that I have compared the annexed copy with the original
document filed by the Department of State and that the same is a correct
transcript of said original.
Witness my hand and seal of the Department of State on MAR 19 1993
Gil S. Shaffer
Secretary of State
-20-
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
DELTA FUNDING CORPORATION
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the president and the secretary of DELTA FUNDING
CORPORATION, do hereby certify and set forth:
(1) The name of the corporation is DELTA FUNDING CORPORATION. The
name under which the corporation was formed is DELTA FUNDING CORP.
(2) The certificate of incorporation of DELTA FUNDING CORPORATION was
filed by the Department of State on the 28th day of January, 1982.
(3) Paragraph (5) of the certificate of incorporation of DELTA FUNDING
CORPORATION, which sets forth the purposes of the corporation, is hereby
amended.
Paragraph (5) shall now read:
(5) The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under
the Business Corporation Law of the State of New York. The
corporation is not formed to engage in any act or activity
requiring the consent or approval of any state official,
department, board, agency, or other body without such consent
or approval first being obtained.
(4) This amendment to the certificate of incorporation of DELTA FUNDING
CORPORATION was authorized by vote ofthe board of directors, followed by
unanimous
-21-
<PAGE>
written consent, setting forth the action taken, signed by the holders
of all outstanding shares entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned have executed and signed this
certificate this 17th day of March, 1993, by the below undersigned who affirms
that the statements are true under the penalties of perjury.
/s/ Hugh Miller
-----------------------------
HUGH MILLER, PRESIDENT
/s/ Irwin Fein
-----------------------------
IRWIN FEIN, SECRETARY
-22-
<PAGE>
========================================
Certificate of Amendment of
DELTA FUNDING CORPORATION
========================================
Filed By: William J. Moran, Esq.
130 Steamboat Road
Great Neck, N.Y. 11024
(516) 466-1980
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED MAR. 19, 1993
-23-
<PAGE>
NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE
CORPORATION TAX, ALBANY, N.Y. 12227
To: Secretary of State Date: October 7, 1983
Pursuant to provisions of Section 1004 of Article 10 of the Business
Corporation Law, the State Tax Commission hereby consents to the dissolution of
DELTA FUNDING CORPORATION
If filed on or before 11-1-83 ID# 11-2646269
Attached are dissolution papers and $20.00 fee.
Filed by: Colby
Application Received 9/20/83
---------------
-24-
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
DELTA FUNDING CORPORATION
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City,
County and State designated in the Certificate of Incorporation.
The Corporation may also maintain offices at such other places
within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the shareholders of the Corporation shall
be held within five months after the close of the fiscal year of
the Corporation, for the purpose of electing directors, and
transacting such other business as may properly come before the
meeting.
Section 2 - Special Meetings:
Special meetings of the shareholders may be called at any time
by the Board of Directors or by the President, and shall be
called by the President or the Secretary at the written request
of the holders of ten percent (10%) of the shares then
outstanding and entitled to vote thereat, or as otherwise
required under the provisions of the Business Corporation Law.
Section 3 - Place of Meetings:
All meetings of shareholders shall be held at the principal
office of the Corporation, or at such other places within or
without the State of New York as shall be designated in the
notices or waivers of notice of such meetings.
Section 4 - Notice of Meetings:
(a) Written notice of each meeting of shareholders, whether
annual or special, stating the time when and place where it is
to be held, shall be served either personally or by mail, not
less than ten or more than fifty days before the meeting, upon
each shareholder of record entitled to vote at such meeting, and
to any other shareholder to whom the giving of notice may be
required by law. Notice of a special meeting shall also state
By-Laws - 1
<PAGE>
the purpose or purposes for which the meeting is called, and
shall indicate that it is being issued by, or at the direction
of, the person or persons calling the meeting. If, at any
meeting, action is proposed to be taken that would, if taken,
entitle shareholders to receive payment for their shares
pursuant to the Business Corporation Law, the notice of such
meeting shall include a statement of that purpose and to that
effect. If mailed, such notice shall be directed to each such
shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously
filed with the Secretary of the Corporation a written request
that notices intended for him be mailed to some other address,
in which case, it shall be mailed to the address designated in
such request.
(b) Notice of any meeting need not be given to any person who
may become a shareholder of record after the mailing of such
notice and prior to the meeting, or to any shareholder who
attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver
of notice either before or after such meeting. Notice of any
adjourned meeting of shareholders need not be given, unless
otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in
the Certificate of Incorporation (such Certificate and any
amendments thereof being hereinafter collectively referred to as
the "Certificate of Incorporation"), at all meetings of
shareholders of the Corporation, the presence at the
commencement of such meetings in person or by proxy of
shareholders holding of record a majority of the total number of
shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and sufficient to
constitute a quorum for the transaction of any business. The
withdrawal of any shareholder after the commencement of a
meeting shall have no effect on the existence of a quorum, after
a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special
meeting of shareholders, the shareholders, by a majority of the
votes cast by the holders of shares entitled to vote thereon,
may adjourn the meeting. At any such adjourned meeting at which
a quorum is present, any business amy be transacted which might
have been transacted at the meeting as originally called if a
quorum had been present.
Section 6 - Voting:
(a) Except as otherwise provided by statute or by the
Certificate of Incorporation, any corporate action, other than
the election of directors to be taken by vote of the
By-Laws - 2
<PAGE>
shareholders, shall be authorized by a majority of votes cast at
a meeting of shareholders by the holders of shares entitled to
vote thereon.
(b) Except as otherwise provided by statute or by the
Certificate of Incorporation, at such meeting of shareholders,
each holder of record of stock of the Corporation entitled to
vote thereat, shall be entitled to one vote for each share of
stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or
dissent without a meeting, may do so by proxy; provided,
however, that the instrument authorizing such proxy to act shall
have been executed in writing by the shareholder himself, or by
his attorney-in-fact thereunto duly authorized in writing. No
proxy shall be valid after the expiration of eleven months from
the date of its execution, unless the persons executing it shall
have specified therein the length of time it is to continue in
force. Such instrument shall be exhibited to the Secretary at
the meeting and shall be filed with the records of the
Corporation.
(d) Any resolution in writing, signed by all of the
shareholders entitled to vote thereon, shall be and constitute
action by such shareholders to the effect therein expressed,
with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of
shareholders and such resolution so signed shall be inserted in
the Minute Book of the Corporation under its proper date.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be
( ), unless and until otherwise determined by vote
of a majority of the entire Board of Directors. The number of
Directors shall not be less than three, unless all of the
outstanding shares are owned beneficially and of record by less
than three shareholders, in which event the number of directors
shall not be less than the number of shareholders.
(b) Except as may otherwise be provided herein or in the
Certificate of Incorporation, the members of the Board of
Directors of the Corporation, who need not be shareholders,
shall be elected by a majority of the votes cast at a meeting of
shareholders, by the holders of shares entitled to vote in the
election.
(c) Each director shall hold office until the annual meeting of
the shareholders next succeeding his election, and until his
By-Laws - 3
<PAGE>
successor is elected and qualified, or until his prior death,
resignation or removal.
Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and
management of the affairs, property and interests of the
Corporation, and may exercise all powers of the Corporation,
except as are in the Certificate of Incorporation or by statute
expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings; Notice:
(a) A regular annual meeting of the Board of Directors shall be
held immediately following the annual meeting of the
shareholders, at the place of such annual meeting of
shareholders.
(b) The Board of Directors, from time to time, may provide by
resolution for the holding of other regular meetings of the
Board of Directors, and may fix the time and place thereof.
(c) Notice of any regular meetings of the Board of Directors
shall not be required to be given and, if given, need not
specify the purpose of the meeting; provided, however, that in
case the Board of Directors shall fix or change the time or
place of any regular meeting, notice of such action shall be
given to each director who shall not have been present at the
meeting at which such action was taken within the time limited,
and in the manner set forth in paragraph (b) of Section 4 of
this Article III, with respect to special meetings, unless such
notice shall be waived in the manner set forth in paragraph (c)
of such Section 4.
Section 4 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held
whenever called by the President or by one of the directors, at
such time and place as may be specified in the respective
notices or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each
director, addressed to him at his residence or usual place of
business, at least two (2) days before the day on which the
meeting is to be held, or shall be sent to him at such place by
telegram, radio or cable, or shall be delivered to him
personally or given to him orally, not later than the day before
the day on which the meeting is to be held. A notice, or waiver
of notice, except as required by Section 8 of this Article III,
need not specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be
given to any director who shall attend such meeting without
By-Laws - 4
<PAGE>
protesting prior thereto or at its commencement, the lack of
notice to him, or who submits a signed waiver of notice, whether
before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
At all meetings of the Board of Directors, the Chairman of the
Board, if any and if present, shall preside. If there shall be
no Chairman, or he shall be absent, then the President shall
preside, and in his absence, a Chairman chosen by the Directors
shall preside.
Section 6 - Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of
a majority of the entire Board shall be necessary and sufficient
to constitute a quorum for the transaction of business, except
as otherwise provided by law, by the Certificate of
Incorporation, or by these By-Laws. Participation of any one or
more members of the Board by means of a conference telephone or
similar communications equipment, allowing all persons
participating in the meeting to hear each other at the same
time, shall constitute presence in person at any such meeting.
(b) A majority of the directors present at the time and place
of any regular or special meeting, although less than a quorum,
may adjourn the same from time to time without notice, until a
quorum shall be present.
Section 7 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director
present shall have one vote, irrespective of the number of
shares of stock, if any, which he may hold.
(b) Except as otherwise provided by statute, by the Certificate
of Incorporation, or these By-Laws, the action of a majority of
the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. Any action
authorized, in writing, by all of the directors entitled to vote
thereon and filed with the minutes of the Corporation shall be
the act of the Board of Directors with the same force and effect
as if the same had been passed by unanimous vote at a duly
called meeting of the Board.
Section 8 - Vacancies:
Any vacancy in the Board of Directors occurring by reason of an
increase in the number of directors, or by reason of the death,
resignation, disqualification, removal (unless a vacancy created
by the removal of a director by the shareholders shall be filled
by the shareholders at the meeting at which the removal was
By-Laws - 5
<PAGE>
effected) or inability to act of any director, or otherwise,
shall be filled for the unexpired portion of the term by a
majority vote of the remaining directors, though less than a
quorum, at any regular meeting or special meeting of the Board
of Directors called for that purpose.
Section 9 - Resignation:
Any director may resign at any time by giving written notice to
the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice,
such resignation shall take effect upon receipt thereof by the
Board of Directors or such officer, and the acceptance of such
resignation shall not be necessary to make it effective.
Section 10 - Removal:
Any director may be removed with or without cause at any time by
the shareholders, at a special meeting of the shareholders
called for that purpose, and may be removed for cause by action
of the Board.
Section 11 - Salary:
No stated salary shall be paid to directors, as such, for their
services, but by resolution of the Board of Directors a fixed
sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board;
provided, however, that nothing herein contained shall be
construed to preclude any director from serving the Corporation
in any other capacity and receiving compensation therefor.
Section 12 - Contracts:
(a) No contract or other transaction between this Corporation
and any other Corporation shall be impaired, affected or
invalidated, nor shall any director be liable in any way by
reason of the fact that any one or more of the directors of this
Corporation is or are interested in, or is a director or
officer, or are directors or officers of such other Corporation,
provided that such facts are disclosed or made known to the
Board of Directors.
(b) Any director, personally or individually, may be a party to
or may be interested in any contract or transaction of this
Corporation, and no director shall be liable in any way by
reason of such interest, provided that the fact of such interest
be disclosed or made known to the Board of Directors, and
provided that the Board of Directors shall authorize, approve or
ratify such contract or transaction by the vote (not counting
the vote of any such director) of a majority of a quorum,
notwithstanding the presence of any such director at the meeting
at which such action is taken. Such director or directors may
By-Laws - 6
<PAGE>
be counted in determining the presence of a quorum at such
meeting. This Section shall not be construed to impair or
invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law
(common, statutory or otherwise) applicable thereto.
Section 13 - Committees:
The Board of Directors, by resolution adopted by a majority of
the entire Board, may from time to time designate from among its
members an executive committee and such other committees, and
alternate members thereof, as they deem desirable, and
consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in
such resolution. Each such committee shall serve at the
pleasure of the Board. At all meetings of a committee, the
presence of all members of the committee shall be necessary to
constitute a quorum for the transaction of business, except as
otherwise provided by said resolution or by these By-laws.
Participation of any one or more members of the committee by
means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to
hear each other at the same time, shall constitute presence in
person at any such meeting. Any action authorized in writing by
all of the members of a committee entitled to vote thereon and
filed with the minutes of the Committee shall be the act of the
committee with the same force and effect as if the same had been
passed by unanimous vote at a duly called meeting of the
committee.
ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications, Election and Term of Office:
(a) The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer, and such other officers,
including a Chairman of the Board of Directors, and one or more
Vice Presidents, as the Board of Directors may from time to time
deem advisable. Any officer other than the Chairman of the
Board of Directors may be, but is not required to be, a director
of the Corporation. Any two or more offices may be held by the
same person.
(b) The officers of the Corporation shall be elected by the
Board of Directors at the regular annual meeting of the Board
following the annual meeting of shareholders.
(c) Each officer shall hold office until the annual meeting of
the Board of Directors next succeeding his election, and until
his successor shall have been elected and qualified, or until
his death, resignation or removal.
By-Laws - 7
<PAGE>
Section 2 - Resignation:
Any officer may resign at any time by giving written notice of
such resignation to the Board of Directors, or to the President
or the Secretary of the Corporation. Unless otherwise specified
in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or by such officer,
and the acceptance of such resignation shall not be necessary to
make it effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a
successor elected by the Board at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation,
inability to act, disqualification, or any other cause, may at
any time be filled for the unexpired portion of the term by the
Board of Directors.
Section 5 - Duties of Officers:
Officers of the Corporation shall, unless otherwise provided by
the Board of Directors, each have such powers and duties as
generally pertain to their respective offices as well as such
powers and duties as may be set forth in these by-laws, or may
from time to time be specifically conferred or imposed by the
Board of Directors. The President shall be the chief executive
officer of the Corporation.
Section 6 - Sureties and Bonds:
In case the Board of Directors shall so require, any officer,
employee or agent of the Corporation shall execute to the
Corporation a bond in such sum, and with such surety or sureties
as the Board of Directors may direct, conditioned upon the
faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all
property, funds or securities of the Corporation which may come
into his hands.
Section 7 - Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other
corporation, any right or power of the Corporation as such
shareholder (including the attendance, acting and voting at
shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the
Corporation by the President, any Vice President, or such other
person as the Board of Directors may authorize.
By-Laws - 8
<PAGE>
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the Corporation
shall be in such form as shall be adopted by the Board of
Directors, and shall be numbered and registered in the order
issued. They shall bear the holder's name and the number of
shares, and shall be signed by (i) the Chairman of the Board or
the President or a Vice President, and (ii) the Secretary or
Treasurer, or any Assistant Secretary or Assistant Treasurer,
and may bear the corporation seal.
(b) No certificate representing shares shall be issued until
the full amount of consideration therefor has been paid, except
as otherwise permitted by law.
(c) The Board of Directors may authorize the issuance of
certificates for fractions of a share which shall entitle the
holder to exercise voting rights, receive dividends and
participate in liquidating distributions, in proportion to the
fractional holdings; or it may authorize the payment in cash of
the fair value of fractions of a share as of the time when those
entitled to receive such fractions are determined; or it may
authorize the issuance, subject to such conditions as may be
permitted by law, of scrip in registered or bearer form over the
signature of an officer or agent of the Corporation,
exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder,
except as therein provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the
Corporation shall immediately notify the Corporation of any loss
or destruction of the certificate representing the same. The
Corporation may issue a new certificate in the place of any
certificate theretofore issued by it, alleged to have been lost
or destroyed. On production of such evidence of loss or
destruction as the Board of Directors in its discretion may
require, the Board of Directors may, in its discretion, require
the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as
the Board may direct, and with such surety or sureties as may be
satisfactory to the Board, to indemnify the Corporation against
any claims, loss, liability or damage it may suffer on account
of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in
the judgment of the Board of Directors, it is proper so to do.
By-Laws - 9
<PAGE>
Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on the
share records of the Corporation only by the holder of record
thereof, in person or by his duly authorized attorney, upon
surrender for cancellation of the certificate or certificates
representing such shares, with an assignment or power of
transfer endorsed thereon or delivered therewith, duly executed,
with such proof of the authenticity of the signature and of
authority to transfer and of payment of transfer taxes as the
Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of
record of any share or shares as the absolute owner thereof for
all purposes and, accordingly, shall not be bound to recognize
any legal, equitable or other claim to, or interest in, such
share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as
otherwise expressly provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the
Board of Directors may fix, in advance, a date not exceeding
fifty days, nor less than ten days, as the record date for the
determination of shareholders entitled to receive notice of, or
to vote at, any meeting of shareholders, or to consent to any
proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividends, or
allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for the
determination of shareholders entitled to notice of or to vote
at a meeting of shareholders shall be at the close of business
on the day next preceding the day on which notice is given, or,
if no notice is given, the day on which the meeting is held; the
record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the
resolution of the directors relating thereto is adopted. When a
determination of shareholders of record entitled to notice of or
to vote at any meeting of shareholders has been made as provided
for herein, such determination shall apply to any adjournment
thereof, unless the directors fix a new record date for the
adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid
out of any funds available therefor, as often, in such amounts,
and at such time or times as the Board of Directors may
determine.
By-Laws - 10
<PAGE>
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board
of Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be
approved from time to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
Section 1 - By Shareholders:
All by-laws of the Corporation shall be subject to alteration or
repeal, and new by-laws may be made, by a majority vote of the
shareholders at the time entitled to vote in the election of
directors.
Section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter,
amend and repeal, from time to time, by-laws of the Corporation;
provided, however, that the shareholders entitled to vote with
respect thereto as in this Article IX above-provided may alter,
amend or repeal by-laws made by the Board of Directors, except
that the Board of Directors shall have no power to change the
quorum for meetings of shareholders or of the Board of
Directors, or to change any provisions of the by-laws with
respect to the removal of directors or the filling of vacancies
in the Board resulting from the removal by the shareholders. If
any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of
shareholders for the election of directors, the by-law so
adopted, amended or repealed, together with a concise statement
of the changes made.
The undersigned Incorporator certifies that he has adopted
the foregoing by-laws as the first by-laws of the Corporation,
in accordance with the requirements of the Business Corporation
Law.
Dated: May 9, 1983
/s/ GLORIA AVERY
Incorporator
By-Laws - 11
<PAGE>
Exhibit 4.1
=============================================================
DELTA FUNDING HOME EQUITY
LOAN TRUST 199_-_
[LIST CLASS(ES) OF NOTES]
________________________________
INDENTURE
Dated as of , 199
________________________________
________________
Trustee
================================================================
<PAGE>
CROSS REFERENCE TABLE 1
TIA Indenture
Section Section
310 (a) (1) . . . . . . . . . . . . . . . . . . . 6.11
(a) (2) . . . . . . . . . . . . . . . . . . . 6.11
(a) (3) . . . . . . . . . . . . . . . . . . . 6.10
(a) (4) . . . . . . . . . . . . . . . . . . . N.A.2
(a) (5) . . . . . . . . . . . . . . . . . . . 6.11
(b) . . . . . . . . . . . . . . . . . . . 6.8; 6.11
(c) . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . 6.12
(b) . . . . . . . . . . . . . . . . . . . 6.12
(c) . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . 7.1
(b) . . . . . . . . . . . . . . . . . . . 7.2
(c) . . . . . . . . . . . . . . . . . . . 7.2
(d) . . . . . . . . . . . . . . . . . . . 7.4
313 (a) . . . . . . . . . . . . . . . . . . . 7.4
(b) (1) . . . . . . . . . . . . . . . . . . . 7.4
(b) (2) . . . . . . . . . . . . . . . . . . . 11.5
(c) . . . . . . . . . . . . . . . . . . . 7.4
(d) . . . . . . . . . . . . . . . . . . . 7.3
314 (a) . . . . . . . . . . . . . . . . . . . 11.15
(b) . . . . . . . . . . . . . . . . . . . 11.1
(c) (1) . . . . . . . . . . . . . . . . . . . 11.1
(c) (2) . . . . . . . . . . . . . . . . . . . 11.1
(c) (3) . . . . . . . . . . . . . . . . . . . 11.1
(d) . . . . . . . . . . . . . . . . . . . 11.1
(e) . . . . . . . . . . . . . . . . . . . 11.1
(f) . . . . . . . . . . . . . . . . . . . 11.1
315 (a) . . . . . . . . . . . . . . . . . . . 6.1
(b) . . . . . . . . . . . . . . . . . . . 6.5; 11.5
(c) . . . . . . . . . . . . . . . . . . . 6.1
(d) . . . . . . . . . . . . . . . . . . . 6.1
(e) . . . . . . . . . . . . . . . . . . . 5.13
316 (a) (last sentence) . . . . . . . . . . . . . . 2.7
(a) (1) (A) . . . . . . . . . . . . . . . . . . 5.11
(a) (1) (B) . . . . . . . . . . . . . . . . . . 5.12
(a) (2) . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . 5.7
(c) . . . . . . . . . . . . . . . . . . . N.A
317 (a) (1) . . . . . . . . . . . . . . . . . . . 5.3
(a) (2) . . . . . . . . . . . . . . . . . . . 5.3
(b) . . . . . . . . . . . . . . . . . . . 3.3
318 (a) . . . . . . . . . . . . . . . . . . . 11.7
1 Note: This Cross Reference Table shall not, for any
purpose, be deemed to be part of this Indenture.
2 N.A. means Not Applicable.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1 Definitions . . . . . . . . . . . . . . . .
SECTION 1.2 Incorporation by Reference of
Trust Indenture Act . . . . . . . . . . .
SECTION 1.3 Rules of Construction . . . . . . . . . . .
ARTICLE II
The Notes
SECTION 2.1 Form . . . . . . . . . . . . . . . . . . .
SECTION 2.2 Execution, Authentication and
Delivery . . . . . . . . . . . . . . . .
SECTION 2.3 Temporary Notes . . . . . . . . . . . . . .
SECTION 2.4 Registration; Registration of
Transfer and Exchange . . . . . . . . . .
SECTION 2.5 Mutilated, Destroyed, Lost or
Stolen Notes . . . . . . . . . . . . . .
SECTION 2.6 Persons Deemed Owner . . . . . . . . . . .
SECTION 2.7 Payment of Principal and Interest;
Defaulted Interest . . . . . . . . . . .
SECTION 2.8 Cancellation . . . . . . . . . . . . . . .
SECTION 2.9 Release of Collateral . . . . . . . . . . .
SECTION 2.10 Book-Entry Notes . . . . . . . . . . . . .
SECTION 2.11 Notices to Clearing Agency . . . . . . . .
SECTION 2.12 Definitive Notes . . . . . . . . . . . . .
ARTICLE III
Covenants
SECTION 3.1 Payment of Principal and Interest . . . . .
SECTION 3.2 Maintenance of Office or Agency . . . . . .
SECTION 3.3 Money for Payments To Be Held in Trust . .
SECTION 3.4 Existence . . . . . . . . . . . . . . . . .
SECTION 3.5 Protection of Trust Estate . . . . . . . .
SECTION 3.6 Opinions as to Trust Estate . . . . . . . .
SECTION 3.7 Performance of Obligations;
Servicing of Loans . . . . . . . . . . .
SECTION 3.8 Negative Covenants . . . . . . . . . . . .
SECTION 3.9 Annual Statement as to Compliance . . . . .
SECTION 3.10 Issuer May Consolidate, Etc.
Only on Certain Terms . . . . . . . . . .
(i)
<PAGE>
Page
SECTION 3.11 Successor or Transferee . . . . . . . . . .
SECTION 3.12 No Other Business . . . . . . . . . . . . .
SECTION 3.13 No Borrowing . . . . . . . . . . . . . . .
SECTION 3.14 Servicer's Obligations . . . . . . . . . .
SECTION 3.15 Guarantees, Loans, Advances and
Other Liabilities . . . . . . . . . . . .
SECTION 3.16 Capital Expenditures . . . . . . . . . . .
SECTION 3.17 [Reserved] . . . . . . . . . . . . . . . .
SECTION 3.18 Restricted Payments . . . . . . . . . . . .
SECTION 3.19 Notice of Events of Default . . . . . . . .
SECTION 3.20 Further Instruments and Acts . . . . . . .
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture . .
SECTION 4.2 Application of Trust Money . . . . . . . .
SECTION 4.3 Repayment of Moneys Held by
Paying Agent . . . . . . . . . . . . . .
ARTICLE V
Remedies
SECTION 5.1 Events of Default . . . . . . . . . . . . .
SECTION 5.2 Acceleration of Maturity;
Rescission and Annulment . . . . . . . .
SECTION 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . . .
SECTION 5.4 Remedies; Priorities . . . . . . . . . . .
SECTION 5.5 Optional Preservation of
the Loans . . . . . . . . . . . . . . . .
SECTION 5.6 Limitation of Suits . . . . . . . . . . . .
SECTION 5.7 Unconditional Rights of Noteholders
To Receive Principal and Interest . . . .
SECTION 5.8 Restoration of Rights and Remedies . . . .
SECTION 5.9 Rights and Remedies Cumulative . . . . . .
SECTION 5.10 Delay or Omission Not a Waiver . . . . . .
SECTION 5.11 Control by Noteholders . . . . . . . . . .
SECTION 5.12 Waiver of Past Defaults . . . . . . . . . .
SECTION 5.13 Undertaking for Costs . . . . . . . . . . .
SECTION 5.14 Waiver of Stay or Extension Laws . . . . .
SECTION 5.15 Action on Notes . . . . . . . . . . . . . .
SECTION 5.16 Performance and Enforcement of
Certain Obligations . . . . . . . . . . .
(ii)
<PAGE>
Page
ARTICLE VI
The Trustee
SECTION 6.1 Duties of Trustee . . . . . . . . . . . . .
SECTION 6.2 Rights of Trustee . . . . . . . . . . . . .
SECTION 6.3 Individual Rights of Trustee . . . . . . .
SECTION 6.4 Trustee's Disclaimer . . . . . . . . . . .
SECTION 6.5 Notice of Defaults . . . . . . . . . . . .
SECTION 6.6 Reports by Trustee to Holders . . . . . . .
SECTION 6.7 Compensation and Indemnity . . . . . . . .
SECTION 6.8 Replacement of Trustee . . . . . . . . . .
SECTION 6.9 Successor Trustee by Merger . . . . . . . .
SECTION 6.10 Appointment of Co-Trustee or
Separate Trustee . . . . . . . . . . . .
SECTION 6.11 Eligibility; Disqualification . . . . . . .
SECTION 6.12 Preferential Collection of Claims
Against Issuer . . . . . . . . . . . . .
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1 Issuer To Furnish Trustee Names and
Addresses of Noteholders . . . . . . . .
SECTION 7.2 Preservation of Information;
Communications to Noteholders . . . . . .
SECTION 7.3 Reports by Issuer . . . . . . . . . . . . .
SECTION 7.4 Reports by Trustee . . . . . . . . . . . .
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1 Collection of Money . . . . . . . . . . . .
SECTION 8.2 Trust Accounts . . . . . . . . . . . . . .
SECTION 8.3 General Provisions Regarding Accounts . . .
SECTION 8.4 Release of Trust Estate . . . . . . . . . .
SECTION 8.5 Opinion of Counsel . . . . . . . . . . . .
(iii)
<PAGE>
Page
ARTICLE IX
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without
Consent of Noteholders . . . . . . . . .
SECTION 9.2 Supplemental Indentures with
Consent of Noteholders . . . . . . . . .
SECTION 9.3 Execution of Supplemental Indentures . . .
SECTION 9.4 Effect of Supplemental Indenture . . . . .
SECTION 9.5 Conformity with Trust Indenture Act . . . .
SECTION 9.6 Reference in Notes to Supplemental
Indentures . . . . . . . . . . . . . . .
ARTICLE X
Redemption of Notes
SECTION 10.1 Redemption . . . . . . . . . . . . . . . .
SECTION 10.2 Form of Redemption Notice . . . . . . . . .
SECTION 10.3 Notes Payable on Redemption Date . . . . .
ARTICLE XI
Miscellaneous
SECTION 11.1 Compliance Certificates and
Opinions, etc. . . . . . . . . . . . . .
SECTION 11.2 Form of Documents Delivered to
Trustee . . . . . . . . . . . . . . . . .
SECTION 11.3 Acts of Noteholders . . . . . . . . . . . .
SECTION 11.4 Notices, etc., to Trustee, Issuer
and Rating Agencies . . . . . . . . . . .
SECTION 11.5 Notices to Noteholders; Waiver . . . . . .
SECTION 11.6 Alternate Payment and Notice
Provisions . . . . . . . . . . . . . . .
SECTION 11.7 Conflict with Trust Indenture Act . . . . .
SECTION 11.8 Effect of Headings and Table
of Contents . . . . . . . . . . . . . . .
SECTION 11.9 Successors and Assigns . . . . . . . . . .
SECTION 11.10 Separability . . . . . . . . . . . . . . .
SECTION 11.11 Benefits of Indenture . . . . . . . . . . .
SECTION 11.12 Legal Holidays . . . . . . . . . . . . . .
SECTION 11.13 Governing Law . . . . . . . . . . . . . . .
SECTION 11.14 Counterparts . . . . . . . . . . . . . . .
SECTION 11.15 Recording of Indenture . . . . . . . . . .
SECTION 11.16 Trust Obligation . . . . . . . . . . . . .
SECTION 11.17 No Petition . . . . . . . . . . . . . . . .
(iv)
<PAGE>
Page
SECTION 11.18 Inspection . . . . . . . . . . . . . . . .
Testimonium, Signatures and Seals . . . . . . . . . . . . .
Exhibit A Schedule of Loans
Exhibit B Form of Sale and Servicing Agreement
Exhibit C Form of Note Depository Agreement
Exhibit D Form of Note
(v)
<PAGE>
INDENTURE dated as of , 199 ,
between DELTA FUNDING Home Equity Loan Trust
199__, a Delaware business trust (the "Issuer"),
and , a ,
as trustee and not in its individual capacity (the
"Trustee").
Each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders
of the Issuer's [List Class(es) of Notes]:
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee at the Closing
Date, as Trustee for the benefit of the Holders of the Notes, all
of the Issuer's right, title and interest in and to (a) the
Loans, and all moneys [due or] received thereon, on or after the
Cutoff Date; (b) the security interests in the Mortgaged
Properties granted by Obligors pursuant to the Home Equity Loans
and any other interest of the Issuer in the Mortgaged Properties;
(c) any proceeds with respect to the Home Equity Loans from
claims on any insurance policies covering Mortgaged Properties or
Obligors; (d) all funds on deposit from time to time in the Trust
Accounts [, including the Reserve Account Initial Deposit], and
in all investments and proceeds thereof (including all income
thereon); (e) the Sale and Servicing Agreement; and (f) all
present and future claims, demands, causes and choses in action
in respect of any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of
the conversion, voluntary or involuntary, into cash or other
liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks,
deposit accounts, insurance proceeds, condemnation awards, rights
to payment of any and every kind and other forms of obligations
and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any
of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the
payment of principal of and interest on, and any other amounts
owing in respect of, the Notes, equally and ratably without
prejudice, priority or distinction except as set forth herein,
and to secure compliance with the provisions of this Indenture,
all as provided in this Indenture.
The Trustee, as Trustee on behalf of the Holders of the
Notes, acknowledges such Grant, accepts the trusts under this
Indenture in accordance with the provisions of this Indenture and
agrees to perform its duties required in this Indenture to the
<PAGE>
best of its ability to the end that the interests of the Holders
of the Notes may be adequately and effectively protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1 Definitions. Except as otherwise
specified herein, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.3(a).
"Affiliate" means, with respect to any specified
Person, any other Person controlling or controlled by or under
common control with such specified Person. For the purposes of
this definition, "control" when used with respect to any
specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings
correlative to the foregoing. A Person shall not be deemed to be
an Affiliate of any person solely because such other Person has
the contractual right or obligation to manage such Person unless
such other Person controls such Person through equity ownership
or otherwise.
"Authorized Officer" means, with respect to the Issuer
and the Servicer, any officer of the Owner Trustee or the
Servicer, as applicable, who is authorized to act for the Owner
Trustee or the Servicer, as applicable, in matters relating to
the Issuer and who is identified on the list of Authorized
Officers delivered by each of the Owner Trustee and the Servicer
to the Trustee on the Closing Date (as such list may be modified
or supplemented from time to time thereafter).
"Basic Documents" means the Certificate of Trust, the
Trust Agreement, the Sale and Servicing Agreement, the Depository
Agreements and other documents and certificates delivered in
connection therewith.
"Book Entry Notes" means a beneficial interest in the
Notes, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 2.10.
"Business Day" means any day other than a Saturday, a
Sunday or a day on which banking institutions or trust companies
in The City of New York or , are authorized or
obligated by law, regulation or executive order to remain closed.
- 2 -
<PAGE>
"Certificate of Trust" means the certificate of trust
of the Issuer substantially in the form of Exhibit B to the Trust
Agreement.
[List Class(es) of Notes and their Respective Interest
Rates].
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer,
bank, other financial institution or other Person for whom from
time to time a Clearing Agency effects book-entry transfers and
pledges of securities deposited with the Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time, and Treasury Regulations promulgated
thereunder.
"Collateral" has the meaning specified in the Granting
Clause of this Indenture.
"Corporate Trust Office" means the principal office of
the Trustee at which at any particular time its corporate trust
business shall be administered which office at date of the
execution of this Agreement is located at ,
Attention: or at such
other address as the Trustee may designate from time to time by
notice to the Noteholders, the Servicer and the Issuer, or the
principal corporate trust office of any successor Trustee (the
address of which the successor Trustee will notify the
Noteholders and the Issuer).
"Default" means any occurrence that is, or with notice
or the lapse of time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section
2.10.
"Event of Default" has the meaning specified in Section
5.1.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Executive Officer" means, with respect to any
corporation, the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, President, Executive Vice
President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any
general partner thereof.
- 3 -
<PAGE>
"Grant" means mortgage, pledge, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, create,
grant a lien upon and a security interest in and right of set-off
against, deposit, set over and confirm pursuant to this
Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but
none of the obligations) of the Granting party thereunder,
including the immediate and continuing right to claim for,
collect, receive and give receipt for principal and interest
payments in respect of the Collateral and all other moneys
payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise
all rights and options, to bring proceedings in the name of the
Granting party or otherwise and generally to do and receive
anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name
a Note is registered on the Note Register.
"Indenture" means this Indenture as amended and
supplemented from time to time.
"Independent" means, when used with respect to any
specified Person, that the person (a) is in fact independent of
the Issuer, any other obligor upon the Notes, the Seller and any
Affiliate of any of the foregoing persons, (b) does not have any
direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any
Affiliate of any of the foregoing Persons and (c) is not
connected with the Issuer, any such other obligor, the Seller or
any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions.
"Independent Certificate" means a certificate or
opinion to be delivered to the Trustee under the circumstances
described in, and otherwise complying with, the applicable
requirements of Section 11.1, made by an Independent appraiser or
other expert appointed by an Issuer Order and approved by the
Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition
of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
"Interest Rate" means, with respect to the [Define the
Interest Rate for each class of Notes].
"Issuer" means the party named as such in this
Indenture until a successor replaces it and, thereafter, means
the successor and, for purposes of any provision contained herein
and required by the TIA, each other obligor on the Notes.
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"Issuer Order" and "Issuer Request" means a written
order or request signed in the name of the Issuer by any one of
its Authorized Officers and delivered to the Trustee.
[List Class(es) of Notes].
"Note Depository Agreement" means the agreement among
the Issuer, the Trustee, the Servicer and The Depository Trust
Company, as the initial Clearing Agency, dated , 199 ,
substantially in the form of Exhibit C.
"Note Owner" means, with respect to a Book-Entry Note,
the person who is the owner of such Book-Entry Note, as reflected
on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).
"Note Register" and "Note Registrar" have the
respective meanings specified in Section 2.4.
"Officer's Certificate" means a certificate signed by
any Authorized Officer of the Issuer, under the circumstances
described in, and otherwise complying with, the applicable
requirements of Section 11.1 and TIA Section 314, and delivered to the
Trustee. Unless otherwise specified, any reference in this
Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions
of counsel who may, except as otherwise expressly provided in
this Indenture, be employees of or counsel to the Issuer and who
shall be satisfactory to the Trustee, and which opinion or
opinions shall be addressed to the Trustee as Trustee, shall
comply with any applicable requirements of Section 11.1, and
shall be in form and substance satisfactory to the Trustee.
"Outstanding" means, as of the date of determination,
all Notes theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar
or delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which
money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent in trust for the
Holders of such Notes (provided, however, that if such Notes
are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor,
satisfactory to the Trustee); and
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(iii) Notes in exchange for or in lieu of other Notes
which have been authenticated and delivered pursuant to this
Indenture unless proof satisfactory to the Trustee is
presented that any such Notes are held by a bona fide
purchaser;
provided that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or
under any Basic Document, Notes owned by the Issuer, any other
obligor upon the Notes, the Seller or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes
that a Responsible Officer of the Trustee either actually knows
to be so owned or has received written notice thereof shall be so
disregarded. Notes so owned that have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, any
other obligor upon the Notes, the Seller or any Affiliate of any
of the foregoing Persons.
"Outstanding Amount" means the aggregate principal
amount of all Notes, or class of Notes, as applicable,
Outstanding at the date of determination.
"Paying Agent" means the Trustee or any other Person
that meets the eligibility standards for the Trustee specified in
Section 6.11 and is authorized by the Issuer to make the payments
to and distributions from the Collection Account and the Note
Distribution Account, including payment of principal of or
interest on the Notes on behalf of the Issuer.
"Payment Date" means a Distribution Date.
"Predecessor Note" means, with respect to any
particular Note, every previous Note evidencing all or a portion
of the same debt as that evidenced by such particular Note; and,
for the purpose of this definition, any Note authenticated and
delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or
other judicial or administrative proceeding.
"Record Date" means, with respect to a Distribution
Date or Redemption Date, the close of business on the fourteenth
day of the calendar month in which such Distribution Date or
Redemption Date occurs.
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"Redemption Date" means (a) in the case of a redemption
of the Notes pursuant to Section 10.1(a) or a payment to
Noteholders pursuant to Section 10.1(b), the Distribution Date
specified by the Servicer or the Issuer pursuant to Section
10.1(a) or (b) as applicable.
"Redemption Price" means (a) in the case of a
redemption of the Notes pursuant to Section 10.1(a), an amount
equal to the unpaid principal amount of the then outstanding
Class A- Notes plus accrued and unpaid interest thereon to but
excluding the Redemption Date, or (b) in the case of a payment
made to Noteholders pursuant to Section 10.1(b), the amount on
deposit in the Note Distribution Account, but not in excess of
the amount specified in clause (a) above.
"Responsible Officer" means, with respect to the
Trustee, any officer within the Corporate Trust Office of the
Trustee, including any Vice President, Assistant Vice President,
Assistant Treasurer, Assistant Secretary, or any other officer of
the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with
respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and
Servicing Agreement dated as of , 199 , among the
Issuer, the Seller and the Servicer, substantially in the form of
Exhibit B as the same may be amended or supplemented from time to
time.
"Schedule of Home Equity Loans" means the listing of
the Home Equity Loans set forth in Exhibit A (which Exhibit may
be in the form of microfiche).
"State" means any one of the 50 states of the United
States of America or the District of Columbia.
"Successor Servicer" has the meaning specified in
Section 3.7(e).
"Trust Estate" means all money, instruments, rights and
other property that are subject or intended to be subject to the
lien and security interest of this Indenture for the benefit of
the Noteholders (including all property and interests Granted to
the Trustee), including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust
Indenture Act of 1939 as in force on the date hereof, unless
otherwise specifically provided.
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"Trustee" means , a ,
not in its individual capacity but as trustee under this
Indenture, or any successor trustee under this Indenture.
"UCC" means, unless the context otherwise requires, the
Uniform Commercial Code, as in effect in the relevant
jurisdiction, as amended from time to time.
(a) Except as otherwise specified herein, the
following terms have the respective meanings set forth in the
Sale and Servicing Agreement as in effect on the Closing Date for
all purposes of this Indenture, and the definitions of such terms
are equally applicable both to the singular and plural forms of
such terms:
Section of Sale and
Term Servicing Agreement
Annual Percentage Rate or APR . . . . . . . Section 1.1
Certificateholders . . . . . . . . . . . . Section 1.1
Closing Date . . . . . . . . . . . . . . . Section 1.1
Collection Account . . . . . . . . . . . . Section 1.1
Collection Period . . . . . . . . . . . . . Section 1.1
Contract . . . . . . . . . . . . . . . . . Section 1.1
Depository Agreements . . . . . . . . . . . Section 1.1
Distribution Date . . . . . . . . . . . . . Section 1.1
Eligible Deposit Account . . . . . . . . . Section 1.1
Eligible Investments . . . . . . . . . . . Section 1.1
Final Scheduled Distribution Date . . . . Section 1.1
Final Scheduled Maturity Date . . . . . . Section 1.1
Home Equity Loans . . . . . . . . . . . . . Section 1.1
Mortgaged Property . . . . . . . . . . . . Section 1.1
Note Distribution Account . . . . . . . . . . . Section 1.1
Noteholders' Distributable Amount . . . . . . . Section 1.1
Noteholders' Percentage . . . . . . . . . . Section 1.1
Obligor . . . . . . . . . . . . . . . . . . Section 1.1
Original Pool Balance . . . . . . . . . . . Section 1.1
Owner Trustee . . . . . . . . . . . . . . . Section 1.1
Person . . . . . . . . . . . . . . . . . . Section 1.1
Pool Balance . . . . . . . . . . . . . . . Section 1.1
Purchased Home Equity Loans . . . . . . . . . . Section 1.1
Rating Agency . . . . . . . . . . . . . . Section 1.1
Rating Agency Condition . . . . . . . . . Section 1.1
Reserve Account . . . . . . . . . . . . . Section 1.1
Seller . . . . . . . . . . . . . . . . . . Section 1.1
Servicer . . . . . . . . . . . . . . . . . Section 1.1
Servicer Default . . . . . . . . . . . . . Section 1.1
Specified Reserve Account Balance . . . . . Section 1.1
Total Distribution Amount . . . . . . . . Section 1.1
Trust Accounts . . . . . . . . . . . . . . Section 1.1
Trust Agreement . . . . . . . . . . . . . . Section 1.1
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(b) Capitalized terms used herein and not otherwise
defined herein or in the Sale and Servicing Agreement have the
meanings assigned to them in the Trust Agreement.
SECTION 1.2 Incorporation by Reference of Trust
Indenture Act. Whenever this Indenture refers to a provision of
the TIA, the provision is incorporated by reference in and made a
part of this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the Securities and Exchange
Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Issuer
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by Commission rule have the meaning assigned to them
by such definitions.
SECTION 1.3 Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
and
(v) words in the singular include the plural and words
in the plural include the singular.
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ARTICLE II
The Notes
SECTION 2.1 Form. [List Class(es) of Notes] in each
case together with the Trustee's certificate of authentication,
shall be in substantially the form set forth in Exhibit D, with
such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may
have such letters, numbers or other marks of identification and
such legends or endorsements placed thereon as may, consistently
herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed,
lithographed or engraved or produced by any combination of these
methods (with or without steel engraved borders), all as
determined by the officers executing such Notes, as evidenced by
their execution of such Notes.
Each Note shall be dated the date of its authentica-
tion. The terms of the Notes set forth in Exhibit D is part of
the terms of this Indenture.
SECTION 2.2 Execution, Authentication and Delivery.
The Notes shall be executed on behalf of the Issuer by any of its
Authorized Officers. The signature of any such Authorized
Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of
individuals who were at any time Authorized Officers of the
Issuer shall bind the Issuer, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall upon Issuer Order authenticate and
deliver [Class A-_ Notes for original issue in an aggregate
principal amount of $ , Class A-_ Notes for original
issue in the aggregate principal amount of $ , Class
A-_ Notes for original issue in the aggregate principal amount of
$ , Class A-_ Notes for original issue in the aggregate
principal amount of $ , and Class A-_ Notes for
original issue in the aggregate principal amount of $ ].
The aggregate principal amount of [List Class(es) of Notes]
outstanding at any time may not exceed such amounts except as
provided in Section 2.5.
Each Note shall be dated the date of its authentica-
tion. The Notes shall be issuable as registered Notes in the
minimum denomination of $1,000 and in integral multiples thereof
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(except for one Note of each class which may be issued in a
denomination other than an integral multiple of $1,000).
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 substan-
tially in the form provided for herein executed by the Trustee by
the manual signature of one of its authorized signatories, and
such certificate upon any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.3 Temporary Notes. Pending the preparation
of Definitive Notes, the Issuer may execute, and upon receipt of
an Issuer Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten,
mimeographed or otherwise produced, of the tenor of the
Definitive Notes in lieu of which they are issued and with such
variations not inconsistent with the terms of this Indenture as
the officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes are issued, the Issuer will cause
Definitive Notes to be prepared without unreasonable delay. After
the preparation of Definitive Notes, the temporary Notes shall be
exchangeable for Definitive Notes upon surrender of the temporary
Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes,
the Issuer shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of
Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled
to the same benefits under this Indenture as Definitive Notes.
SECTION 2.4 Registration; Registration of Transfer and
Exchange. The Issuer shall cause to be kept a register (the
"Note Register") in which, subject to such reasonable regulations
as it may prescribe, the Issuer shall provide for the registra-
tion of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly
appoint a successor or, if it elects not to make such an
appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the
Issuer as Note Registrar, the Issuer will give the Trustee prompt
written notice of the appointment of such Note Registrar and of
the location, and any change in the location, of the Note
Register, and the Trustee shall have the right to inspect the
Note Register at all reasonable times and to obtain copies
thereof, and the Trustee shall have the right to rely upon a
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certificate executed on behalf of the Note Registrar by an
Executive Officer thereof as to the names and addresses of the
Holders of the Notes and the principal amounts and number of such
Notes.
Upon surrender for registration of transfer of any Note
at the office or agency of the Issuer to be maintained as pro-
vided in Section 3.2, if the requirements of Section 8-401(1) of
the UCC are met the Issuer shall execute and upon its request the
Trustee shall authenticate and the Noteholder shall obtain from
the Trustee, in the name of the designated transferee or
transferees, one or more new Notes, in any authorized
denominations, of the same class and a like aggregate principal
amount.
At the option of the Holder, Notes may be exchanged for
other Notes in any authorized denominations, of the same class
and a like aggregate principal amount, upon surrender of the
Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met the Issuer shall execute and
upon its request the Trustee shall authenticate and the
Noteholder shall obtain from the Trustee, the Notes which the
Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Notes surrendered upon such registration
of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be (i) duly endorsed by, or be accom-
panied by a written instrument of transfer in form satisfactory
to the Trustee duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents
Medallion Program ("Stamp") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition
to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the
Trustee may require.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Issuer may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any
transfer.
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<PAGE>
The preceding provisions of this section notwithstand-
ing, the Issuer shall not be required to make and the Note
Registrar need not register transfers or exchanges of Notes
selected for redemption or of any Note for a period of 15 days
preceding the due date for any payment with respect to the Note.
SECTION 2.5 Mutilated, Destroyed, Lost or Stolen
Notes. If (i) any mutilated Note is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, and (ii) there is
delivered to the Trustee such security or indemnity as may be
required by it to hold the Issuer and the Trustee harmless, then,
in the absence of notice to the Issuer, the Note Registrar or the
Trustee that such Note has been acquired by a bona fide pur-
chaser, and provided that the requirements of Section 8-405 of
the UCC are met, the Issuer shall execute and upon its request
the Trustee shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note; provided, however, that if any such destroyed,
lost or stolen Note, but not a mutilated Note, shall have become
or within seven days shall be due and payable, or shall have been
called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or
payable or upon the Redemption Date without surrender thereof.
If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in
lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Trustee shall be
entitled to recover such replacement Note (or such payment) from
the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note
was delivered or any assignee of such Person, except a 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 expense incurred by the Issuer or the Trustee in
connection therewith.
Upon the issuance of any replacement Note under this
Section, the Issuer may require the payment by the Holder of such
Note of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section
in replacement of any mutilated, destroyed, lost or stolen Note
shall constitute an original additional contractual obligation of
the Issuer, whether or not the mutilated, destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued
hereunder.
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The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.
SECTION 2.6 Persons Deemed Owner. Prior to due
presentment for registration of transfer of any Note, the Issuer,
the Trustee and any agent of the Issuer or the Trustee may treat
the Person in whose name any Note is registered (as of the day of
determination) as the owner of such Note for the purpose of
receiving payments of principal of and interest, if any, on such
Note and for all other purposes whatsoever, whether or not such
Note be overdue, and neither the Issuer, the Trustee nor any
agent of the Issuer or the Trustee shall be affected by notice to
the contrary.
SECTION 2.7 Payment of Principal and Interest;
Defaulted Interest. (a) The Notes shall accrue interest as
provided in the forms of the [List Class(es) of Notes], set forth
in Exhibit D, and such interest shall be payable on each
Distribution Date as specified therein. Any installment of
interest or principal, if any, payable on any Note which is
punctually paid or duly provided for by the Issuer on the
applicable Distribution Date shall be paid to the Person in whose
name such Note (or one or more Predecessor Notes) is registered
on the Record Date, by check mailed first-class, postage prepaid,
to such Person's address as it appears on the Note Register on
such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.12, 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.), payment will
be made by wire transfer in immediately available funds to the
account designated by such nominee and except for the final
installment of principal payable with respect to such Note on a
Distribution Date or on the Final Scheduled Distribution Date
(and except for the Redemption Price for any Note called for
redemption pursuant to Section 10.1(a)) which shall be payable as
provided below. The funds represented by any such checks
returned undelivered shall be held in accordance with Section
3.3.
(b) The principal of each Note shall be payable in
installments on each Distribution Date as provided in the forms
of the [List Class(es) of Notes], set forth in Exhibit D.
Notwithstanding the foregoing, the entire unpaid principal amount
of the Notes shall be due and payable, if not previously paid, on
the date on which an Event of Default shall have occurred and be
continuing, if the Trustee or the Holders of the Notes
representing not less than a majority of the Outstanding Amount
of the Notes have declared the Notes to be immediately due and
payable in the manner provided in Section 5.2. All principal
payments on each class of Notes shall be made pro rata to the
Noteholders of such class entitled thereto. The Trustee shall
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notify the Person in whose name a Note is registered at the close
of business on the Record Date preceding the Distribution Date on
which the Issuer expects that the final installment of principal
of and interest on such Note will be paid. Such notice shall be
mailed or transmitted by facsimile prior to such final
Distribution Date and shall specify that such final installment
will be payable only upon presentation and surrender of such Note
and shall specify the place where such Note may be presented and
surrendered for payment of such installment. Notices in
connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.2.
(c) If the Issuer defaults in a payment of interest on
the Notes, the Issuer shall pay defaulted interest (plus interest
on such defaulted interest to the extent lawful) at the appli-
cable Interest Rate in any lawful manner. The Issuer may pay
such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five
Business Days prior to the payment date. The Issuer shall fix or
cause to be fixed any such special record date and payment date,
and, at least 15 days before any such special record date, the
Issuer shall mail to each Noteholder and the Trustee a notice
that states the special record date, the payment date and the
amount of defaulted interest to be paid.
SECTION 2.8 Cancellation. All Notes surrendered for
payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Trustee, be delivered
to the Trustee and shall be promptly canceled by the Trustee.
The Issuer may at any time deliver to the Trustee for cancella-
tion any Notes previously authenticated and delivered hereunder
which the Issuer may have acquired in any manner whatsoever, and
all Notes so delivered shall be promptly canceled by the Trustee.
No Notes shall be authenticated in lieu of or in exchange for any
Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Notes may be held or
disposed of by the Trustee in accordance with its standard
retention or disposal policy as in effect at the time unless the
Issuer shall direct by an Issuer Order that they be destroyed or
returned to it; provided that such Issuer Order is timely and the
Notes have not been previously disposed of by the Trustee.
SECTION 2.9 Release of Collateral. Subject to Section
11.1, the Trustee shall release property from the lien of this
Indenture only upon receipt of an Issuer Request accompanied by
an Officer's Certificate, an Opinion of Counsel and Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(l) or
an Opinion of Counsel in lieu of such Independent Certificates to
the effect that the TIA does not require any such Independent
Certificates.
SECTION 2.10 Book-Entry Notes. The Notes, upon
original issuance, will be issued in the form of typewritten
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Notes representing the Book-Entry Notes, to be delivered to
________________, as agent for The Depository Trust Company, the
initial Clearing Agency, by, or on behalf of, the Issuer. Such
Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency,
and no Note Owner will receive a Definitive Note representing
such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until definitive, fully registered
Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.12:
(i) the provisions of this Section shall be in full
force and effect;
(ii) the Note Registrar and the Trustee shall be
entitled to deal with the Clearing Agency for all purposes
of this Indenture (including the payment of principal of and
interest on the Notes and the giving of instructions or
directions hereunder) as the sole Holder of the Notes, and
shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the
provisions of this Section shall control;
(iv) the rights of Note Owners shall be exercised only
through the Clearing Agency and shall be limited to those
established by law and agreements between such Note Owners
and the Clearing Agency and/or the Clearing Agency Partici-
pants. Pursuant to the Note Depository Agreement, unless
and until Definitive Notes are issued pursuant to Section
2.12, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive
and transmit payments of principal of and interest on the
Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits
actions to be taken based upon instructions or directions of
Holders of Notes evidencing a specified percentage of the
Outstanding Amount of the Notes, the Clearing Agency shall
be deemed to represent such percentage only to the extent
that it has received instructions to such effect from Note
Owners and/or Clearing Agency Participants owning or repre-
senting, respectively, such required percentage of the
beneficial interest in the Notes and has delivered such
instructions to the Trustee.
SECTION 2.11 Notices to Clearing Agency. Whenever a
notice or other communication to the Noteholders is required
under this Indenture, unless and until Definitive Notes shall
have been issued to Note Owners pursuant to Section 2.12, the
Trustee shall give all such notices and communications specified
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herein to be given to Holders of the Notes to the Clearing
Agency, and shall have no obligation to the Note Owners.
SECTION 2.12 Definitive Notes. If (i) the Servicer
advises the Trustee in writing that the Clearing Agency is no
longer willing or able to properly discharge its responsibili-
ties with respect to the Notes, and the Servicer is unable to
locate a qualified successor, (ii) the Servicer at its option
advises the Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default, Note Owners representing
beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Trustee through the
Clearing Agency in writing that the continuation of a book entry
system through the Clearing Agency is no longer in the best
interests of the Note Owners, then the Clearing Agency shall
notify all Note Owners and the Trustee of the occurrence of any
such event and of the availability of Definitive Notes to Note
Owners requesting the same. Upon surrender to the Trustee of the
typewritten Note or Notes representing the Book-Entry Notes by
the Clearing Agency, accompanied by registration instructions,
the Issuer shall execute and the Trustee shall authenticate the
Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the
Trustee shall be liable for any delay in delivery of such
instructions and may conclu-sively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of
Definitive Notes, the Trustee shall recognize the Holders of the
Definitive Notes as Note-holders.
ARTICLE III
Covenants
SECTION 3.1 Payment of Principal and Interest. The
Issuer will duly and punctually pay the principal of and interest
on the Notes in accordance with the terms of the Notes and this
Indenture. Without limiting the foregoing, subject to Section
8.2(c), the Issuer will cause to be distributed all amounts on
deposit in the Note Distribution Account on a Distribution Date
deposited therein pursuant to the Sale and Servicing Agreement
for the benefit of the [Class A-_ Notes to Class A-_ Noteholders-
List for all Classes]. Amounts properly withheld under the Code
by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
SECTION 3.2 Maintenance of Office or Agency. The
Issuer will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the Notes and this
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Indenture may be served. The Issuer hereby initially appoints
the Trustee to serve as its agent for the foregoing purposes. The
Issuer will give prompt written notice to the Trustee of the
location, and of any change in the location, of any such office
or agency. If at any time the Issuer shall fail to maintain any
such office or agency or shall fail to furnish the Trustee with
the address thereof, such surrenders, notices and demands may be
made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Trustee as its agent to receive all such
surrenders, notices and demands.
SECTION 3.3 Money for Payments To Be Held in Trust.
As provided in Sections 8.2(a) and (b), all payments of amounts
due and payable with respect to any Notes that are to be made
from amounts withdrawn from the Collection Account and the Note
Distribution Account pursuant to Section 8.2(c) shall be made on
behalf of the Issuer by the Trustee or by another Paying Agent,
and no amounts so withdrawn from the Collection Account and the
Note Distribution Account for payments of Notes shall be paid
over to the Issuer except as provided in this Section.
On or before each Distribution Date and Redemption
Date, the Issuer shall deposit or cause to be deposited in the
Note Distribution Account an aggregate sum sufficient to pay the
amounts then becoming due under the Notes, such sum to be held in
trust for the benefit of the Persons entitled thereto and (unless
the Paying Agent is the Trustee) shall promptly notify the
Trustee of its action or failure so to act.
The Issuer will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee (and if the
Trustee acts as Paying Agent, it hereby so agrees), subject to
the provisions of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of
amounts due with respect to the Notes in trust for the
benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as
herein provided and pay such sums to such Persons as herein
provided;
(ii) give the Trustee notice of any default by the
Issuer of which it has actual knowledge (or any other
obligor upon the Notes) in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith
pay to the Trustee all sums so held in trust by such Paying
Agent;
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(iv) immediately resign as a Paying Agent and forthwith
pay to the Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the
standards required to be met by a Paying Agent at the time
of its appointment; and
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting
requirements in connection therewith.
The Issuer may at any time, for the purpose of obtain-
ing the satisfaction and discharge of this Indenture or for any
other purpose, by Issuer Order direct any Paying Agent to pay to
the Trustee all sums held in trust by such Paying Agent, such
sums to be held by the Trustee upon the same trusts as those upon
which the sums were held by such Paying Agent; and upon such a
payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to such
money.
Subject to applicable laws with respect to the escheat
of funds, any money held by the Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note
and remaining unclaimed for two years after such amount has
become due and payable shall be discharged from such trust and be
paid to the Issuer on Issuer Request; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to
the Issuer for payment thereof (but only to the extent of the
amounts so paid to the Issuer), and all liability of the Trustee
or such Paying Agent with respect to such trust money shall
thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment,
shall at the expense of the Issuer cause to be published once, in
a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less
than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the
Issuer. The Trustee shall also adopt and employ, at the expense
of the Issuer, any other 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 Trustee or of any Paying Agent, at the last
address of record for each such Holder).
SECTION 3.4 Existence. Except as otherwise permitted
by the provisions of Section 3.10, the Issuer will keep in full
effect its existence, rights and franchises as a business trust
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under the laws of the State of Delaware (unless it becomes, or
any successor Issuer hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in
which case the Issuer will keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction)
and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this
Indenture, the Notes, the Collateral and each other instrument or
agreement included in the Trust Estate.
SECTION 3.5 Protection of Trust Estate. The Issuer
will from time to time prepare (or shall cause to be prepared),
execute and deliver all such supplements and amendments hereto
and all such financing statements, continuation statements,
instruments of further assurance and other instruments, and will
take such other action necessary or advisable to:
(i) maintain or preserve the lien and security
interest (and the priority thereof) of this Indenture or
carry out more effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity
of any Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and
the rights of the Trustee and the Noteholders in such Trust
Estate against the claims of all persons and parties.
The Issuer hereby designates the Trustee its agent and attorney-
in-fact to execute any financing statement, continuation
statement or other instrument required by the Trustee pursuant to
this Section.
SECTION 3.6 Opinions as to Trust Estate. (a) On the
Closing Date, the Issuer shall furnish to the Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel,
such action has been taken with respect to the recording and
filing of this Indenture, any indentures supplemental hereto, and
any other requisite documents, and with respect to the execution
and filing of any financing statements and continuation state-
ments, as are necessary to perfect and make effective the lien
and security interest of this Indenture and reciting the details
of such action, or stating that, in the opinion of such counsel,
no such action is necessary to make such lien and security
interest effective.
(b) Within ____ days after the beginning of each
calendar year, beginning with the first calendar year beginning
more than three months after the Cutoff Date, the Issuer shall
furnish to the Trustee an Opinion of Counsel either stating that,
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in the opinion of such counsel, such action has been taken with
respect to the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as are
necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action or stating
that in the opinion of such counsel no such action is necessary
to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and
filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to
maintain the lien and security interest of this Indenture until
[January 30] in the following calendar year.
SECTION 3.7 Performance of Obligations; Servicing of
Loans. (a) The Issuer will not take any action and will use its
best efforts not to permit any action to be taken by others that
would release any Person from any of such Person's material
covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any such
instrument or agreement, except as ordered by any bankruptcy or
other court or as expressly provided in this Indenture, the Basic
Documents or such other instrument or agreement.
(b) The Issuer may contract with other Persons to
assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Trustee
in an Officer's Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted
with the Servicer to assist the Issuer in performing its duties
under this Indenture.
(c) The Issuer will punctually perform and observe all
of its obligations and agreements contained in this Indenture,
the Basic Documents and in the instruments and agreements
included in the Trust Estate, including but not limited to
preparing (or causing to prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements
required to be filed by the terms of this Indenture and the Sale
and Servicing Agreement in accordance with and within the time
periods provided for herein and therein. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend,
modify, supplement or terminate any Basic Document or any
provision thereof without the consent of the Trustee or the
Holders of at least a majority of the Outstanding Amount of the
Notes.
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(d) If the Issuer shall have knowledge of the occur-
rence of a Servicer Default under the Sale and Servicing
Agreement, the Issuer shall promptly notify the Trustee and the
Rating Agencies thereof in accordance with Section 11.4, and
shall specify in such notice the action, if any, the Issuer is
taking in respect of such default. If a Servicer Default shall
arise from the failure of the Servicer to perform any of its
duties or obligations under the Sale and Servicing Agreement with
respect to the Loans, the Issuer shall take all reasonable steps
available to it to remedy such failure.
(e) As promptly as possible after the giving of notice
of termination to the Servicer of the Servicer's rights and
powers pursuant to Section 8.1 of the Sale and Servicing
Agreement, the Issuer shall appoint a successor servicer (the
"Successor Servicer"), and such Successor Servicer shall accept
its appointment by a written assumption in a form acceptable to
the Trustee. In the event that a Successor Servicer has not been
appointed and accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Trustee without further
action shall automatically be appointed the Successor Servicer.
The Trustee may resign as the Servicer by giving written notice
of such resignation to the Issuer and in such event will be
released from such duties and obligations, such release not to be
effective until the date a new servicer enters into a servicing
agreement with the Issuer as provided below. Upon delivery of
any such notice to the Issuer, the Issuer shall obtain a new
servicer as the Successor Servicer under the Sale and Servicing
Agreement. Any Successor Servicer other than the Trustee shall
(i) be an established financial institution having a net worth of
not less than $50,000,000 and whose regular business includes the
servicing of Contracts and (ii) enter into a servicing agreement
with the Issuer having substantially the same provisions as the
provisions of the Sale and Servicing Agreement applicable to the
Servicer. If within 30 days after the delivery of the notice
referred to above, the Issuer shall not have obtained such a new
servicer, the Trustee may appoint, or may petition a court of
competent jurisdiction to appoint, a Successor Servicer. In
connection with any such appointment, the Trustee may make such
arrangements for the compensation of such successor as it and
such successor shall agree, subject to the limitations set forth
below and in the Sale and Servicing Agreement, and in accordance
with Section 8.2 of the Sale and Servicing Agreement, the Issuer
shall enter into an agreement with such successor for the
servicing of the Home Equity Loans (such agreement to be in form
and substance satisfactory to the Trustee). If the Trustee shall
succeed to the Servicer's duties as servicer of the Home Equity
Loans as provided herein, it shall do so in its individual
capacity and not in its capacity as Trustee and, accordingly, the
provisions of Article VI hereof shall be inapplicable to the
Trustee in its duties as the successor to the Servicer and the
servicing of the Loans. In case the Trustee shall become
successor to the Servicer under the Sale and Servicing Agreement,
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the Trustee shall be entitled to appoint as Servicer any one of
its Affiliates, or delegate any of its responsibilities as
Servicer to agents, subject to the terms of the Sale and
Servicing Agreement, provided that such appointment or delegation
shall not affect or alter in any way the liability of the Trustee
as a successor for the performance of the duties and obligations
of the Servicer in accordance with the terms hereof.
(f) Upon any termination of the Servicer's rights and
powers pursuant to the Sale and Servicing Agreement, the Issuer
shall promptly notify the Trustee. As soon as a Successor
Servicer (other than the Trustee) is appointed, the Issuer shall
notify the Trustee of such appointment, specifying in such notice
the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the
assignment granted to the Trustee under this Indenture or the
rights of the Trustee hereunder, the Issuer agrees that, unless
such action is specifically permitted hereunder or under the
Basic Documents, it will not, without the prior written consent
of the Trustee or the Holders of at least a majority in
Outstanding Amount of the Notes, amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment,
modification, supplement, termination, waiver or surrender of,
the terms of any Collateral or the Basic Documents, or waive
timely performance or observance by the Servicer or the Seller
under the Sale and Servicing Agreement; provided, however, that
no such amendment shall (i) increase or reduce in any manner the
amount of, or accelerate or delay the timing of, distributions
that are required to be made for the benefit of the Noteholders,
or (ii) reduce the aforesaid percentage of the Notes which are
required to consent to any such amendment, without the consent of
the Holders of all the Outstanding Notes. If any such amendment,
modification, supplement or waiver shall be so consented to by
the Trustee or such Holders, the Issuer agrees, promptly
following a request by the Trustee to do so, to execute and
deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Trustee may deem
necessary or appropriate in the circumstances.
SECTION 3.8 Negative Covenants. So long as any Notes
are Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or
the Basic Documents, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer,
including those included in the Trust Estate, unless
directed to do so by the Trustee;
(ii) claim any credit on, or make any deduction from
the principal or interest payable in respect of, the Notes
(other than amounts properly withheld from such payments
under the Code) or assert any claim against any present or
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former Noteholder by reason of the payment of the taxes
levied or assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Inden-
ture to be amended, hypothecated, subordinated, terminated
or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under
this Indenture except as may be expressly permitted hereby,
(B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien
of this Indenture) to be created on or extend to or other-
wise arise upon or burden the Trust Estate or any part
thereof or any interest therein or the proceeds thereof
(other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on a Loan and
arising solely as a result of an action or omission of the
related Obligor) or (C) permit the lien of this Indenture
not to constitute a valid first priority (other than with
respect to any such tax, mechanics' or other lien) security
interest in the Trust Estate.
SECTION 3.9 Annual Statement as to Compliance. The
Issuer will deliver to the Trustee, within ___ days after the end
of each fiscal year of the Issuer (commencing with the fiscal
year 199 ), and otherwise in compliance with the requirements of
TIA Section 314(a)(4) an Officer's Certificate stating, as to the
Authorized Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during
such year and of performance under this Indenture has been
made under such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's
knowledge, based on such review, the Issuer has complied
with all conditions and covenants under this Indenture
throughout such year, or, if there has been a default in the
compliance of any such condition or covenant, specifying
each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10 Issuer May Consolidate, Etc. Only on
Certain Terms. (a) The Issuer shall not consolidate or merge
with or into any other Person, unless
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person
organized and existing under the laws of the United States
of America or any state and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and interest on all
Notes and the performance or observance of every agreement
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and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have
occurred and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the
Trustee) to the effect that such transaction will not have
any material adverse tax consequence to the Trust, any
Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien
and security interest created by this Indenture shall have
been taken; and
(vi) the Issuer shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental
indenture comply with this Article III and that all
conditions precedent herein provided for relating to such
transaction have been complied with (including any filing
required by the Exchange Act).
(b) The Issuer shall not convey or transfer all or
substantially all of its properties or assets, including those
included in the Trust Estate, to any Person, unless
(i) the Person that acquires by conveyance or transfer
the properties and assets of the Issuer the conveyance or
transfer of which is hereby restricted shall (A) be a United
States citizen or a Person organized and existing under the
laws of the United States of America or any state,
(B) expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the
principal of and interest on all Notes and the performance
or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agree by
means of such supplemental indenture that all right, title
and interest so conveyed or transferred shall be subject and
subordinate to the rights of Holders of the Notes, (D)
unless otherwise provided in such supplemental indenture,
expressly agree to indemnify, defend and hold harmless the
Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and
(E) expressly agree by means of such supplemental indenture
that such Person (or if a group of persons, then one
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specified Person) shall prepare (or cause to be prepared)
and make all filings with the Commission (and any other
appropriate Person) required by the Exchange Act in
connection with the Notes;
(ii) immediately after giving effect to such trans-
action, no Default or Event of Default shall have occurred
and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the
Trustee) to the effect that such transaction will not have
any material adverse tax consequence to the Trust, any
Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien
and security interest created by this Indenture shall have
been taken; and
(vi) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental
indenture comply with this Article III and that all
conditions precedent herein provided for relating to such
transaction have been complied with (including any filing
required by the Exchange Act).
SECTION 3.11 Successor or Transferee. (a) Upon any
consolidation or merger of the Issuer in accordance with
Section 3.10(a), the Person formed by or surviving such
consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and
power of, the Issuer under this Indenture with the same effect as
if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets
and properties of the Issuer pursuant to Section 3.10 (b),
will be released from every covenant and agreement of this
Indenture to be observed or performed on the part of the Issuer
with respect to the Notes immediately upon the delivery of
written notice to the Trustee stating that is
to be so released.
SECTION 3.12 No Other Business. The Issuer shall not
engage in any business other than financing, purchasing, owning,
selling and managing the Home Equity Loans in the manner
contemplated by this Indenture and the Basic Documents and
activities incidental thereto.
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SECTION 3.13 No Borrowing. The Issuer shall not
issue, incur, assume, guarantee or otherwise become liable,
directly or indirectly, for any indebtedness except for the
Notes.
SECTION 3.14 Servicer's Obligations. The Issuer shall
cause the Servicer to comply with Sections 4.9, 4.10, 4.11 and
5.8 of the Sale and Servicing Agreement.
SECTION 3.15 Guarantees, Loans, Advances and Other
Liabilities. Except as contemplated by the Sale and Servicing
Agreement or this Indenture, the Issuer shall not make any loan
or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable,
directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire
(or agree contingently to do so) any stock, obligations, assets
or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16 Capital Expenditures. The Issuer shall
not make any expenditure (by long-term or operating lease or
otherwise) for capital assets (either realty or personalty).
SECTION 3.17 [Reserved]
SECTION 3.18 Restricted Payments. The Issuer shall
not, directly or indirectly, (i) pay any dividend or make any
distribution (by reduction of capital or otherwise), whether in
cash, property, securities or a combination thereof, to the Owner
Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer, (ii) redeem,
purchase, retire or otherwise acquire for value any such owner-
ship or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; provided,
however, that the Issuer may make, or cause to be made,
distributions to the Servicer, the Owner Trustee, the Trustee and
the Certificateholders as permitted by, and to the extent funds
are available for such purpose under, the Sale and Servicing
Agreement or Trust Agreement. The Issuer will not, directly or
indirectly, make payments to or distributions from the Collection
Account except in accordance with this Indenture and the Basic
Documents.
SECTION 3.19 Notice of Events of Default. The Issuer
agrees to give the Trustee and the Rating Agencies prompt written
notice of each Event of Default hereunder and each default on the
part of the Servicer or the Seller of its obligations under the
Sale and Servicing Agreement.
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SECTION 3.20 Further Instruments and Acts. Upon
request of the Trustee, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of
this Indenture.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1 Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect
to the Notes except as to (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or
stolen Notes, (iii) rights of Noteholders to receive payments of
principal thereof and interest thereon, (iv) Sections 3.3, 3.4,
3.5, 3.8, 3.10, 3.12 and 3.13, (v) the rights, obligations and
immunities of the Trustee hereunder (including the rights of the
Trustee under Section 6.7 and the obligations of the Trustee
under Section 4.2) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited
with the Trustee payable to all or any of them, and the Trustee,
on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of
this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and
delivered (other than (i) Notes that have been
destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.5 and (ii) Notes for
whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Issuer and
thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.3) have been delivered
to the Trustee for cancellation; or
(2) all Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at the Final
Scheduled Distribution Date within one year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of
the Issuer,
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and the Issuer, in the case of (i), (ii) or (iii)
above, has irrevocably deposited or caused to be
irrevocably deposited with the Trustee cash or direct
obligations of or obligations guaranteed by the United
States of America (which will mature prior to the date
such amounts are payable), in trust for such purpose,
in an amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation when due to the Final
Scheduled Distribution Date or Redemption Date (if
Notes shall have been called for redemption pursuant to
Section 10.1(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all other
sums payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Trustee an
Officer's Certificate, an Opinion of Counsel and (if
required by the TIA or the Trustee) an Independent
Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.1(a)
and each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
SECTION 4.2 Application of Trust Money. All moneys
deposited with the Trustee pursuant to Section 4.1 hereof shall
be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment
or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal
and interest; but such moneys need not be segregated from other
funds except to the extent required herein or in the Sale and
Servicing Agreement or required by law.
SECTION 4.3 Repayment of Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this
Indenture with respect to the Notes, all moneys then held by any
Paying Agent other than the Trustee under the provisions of this
Indenture with respect to such Notes shall, upon demand of the
Issuer, be paid to the Trustee to be held and applied according
to Section 3.3 and thereupon such Paying Agent shall be released
from all further liability with respect to such moneys.
ARTICLE V
Remedies
SECTION 5.1 Events of Default. "Event of Default",
wherever used herein, means any one of the following events
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(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):
(i) a default for thirty days or more in the payment
of any principal of or interest on any Note; or
(ii) default in the observance or performance of any
covenant or agreement of the Issuer [or the Trust Fund] made
in this Indenture (other than a covenant or agreement, a
default in the observance or performance of which is
elsewhere in this Section specifically dealt with), which
continues for a period of 60 days after notice after thereof
shall have been given, by registered or certified mail, to
the Issuer by the Trustee or to the Issuer and the Trustee
by the Holders of at least 25% of the Outstanding Amount of
the Notes, a written notice specifying such default or
incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of
Default" hereunder; or
(iii) any representation or warranty of the Issuer [or
the Trust Fund] made in this Indenture or in any certificate
or other writing delivered pursuant hereto or in connection
herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made,
and such breach is not cured within 60 days after notice
thereof after there shall have been given, by registered or
certified mail, to the Issuer by the Trustee or to the
Issuer and the Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying
such default or incorrect representation or warranty and
requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder; or
(iv) the filing of a decree or order for relief by a
court having jurisdiction in the premises in respect of the
Issuer or any substantial part of the Trust Estate in an
involuntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or
ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case
under any applicable Federal or state bankruptcy, insolvency
or other similar law now or hereafter in effect, or the
consent by the Issuer to the entry of an order for relief in
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an involuntary case under any such law, or the consent by
the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any
substantial part of the Trust Estate, or the making by the
Issuer of any general assignment for the benefit of
creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of action by
the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee, within five
days after the occurrence thereof, written notice in the form of
an Officer's Certificate of any event which with the giving of
notice and the lapse of time would become an Event of Default
under clause (iii), its status and what action the Issuer is
taking or proposes to take with respect thereto.
SECTION 5.2 Acceleration of Maturity; Rescission and
Annulment. If an Event of Default should occur and be
continuing, then and in every such case the Trustee or the
Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes may declare the principal [or if
any Note is a Zero Coupon Security, such portion of the principal
amount as specified in the Note] to be immediately due and
payable, by a notice in writing to the Issuer (and to the Trustee
if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and
unpaid interest thereon through the date of acceleration, shall
become immediately due and payable.
At any time after such declaration of acceleration of
maturity has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as
hereinafter in this Article V provided, the Holders of Notes
representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Trustee, may rescind and
annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Trustee
a sum sufficient to pay
(A) all payments of principal of and interest on
all Notes and all other amounts that would then be due
hereunder or upon such Notes if the Event of Default
giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment
of the principal of the Notes that has become due solely by
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such acceleration, have been cured or waived as provided in
Section 5.12.
No such rescission shall affect any subsequent default
or impair any right consequent thereto.
SECTION 5.3 Collection of Indebtedness and Suits for
Enforcement by Trustee. (a) The Issuer covenants that if
(i) default is made in the payment of any interest on any Note
when the same becomes due and payable, and such default continues
for a period of five days, or (ii) default is made in the payment
of the principal of or any installment of the principal of any
Note when the same becomes due and payable, the Issuer will, upon
demand of the Trustee, pay to it, for the benefit of the Holders
of the Notes, the whole amount then due and payable on such Notes
for principal and interest, with interest upon the overdue
principal, and, to the extent payment at such rate of interest
shall be legally enforceable, upon overdue installments of
interest, at the rate borne by the Notes and in addition thereto
such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its
agents and counsel.
(b) In case the Issuer shall fail forthwith to pay
such amounts upon such demand, the Trustee, in its own name and
as trustee of an express trust, may institute a proceeding for
the collection of the sums so due and unpaid, and may prosecute
such proceeding to judgment or final decree, and may enforce the
same against the Issuer or other obligor upon such Notes and
collect in the manner provided by law out of the property of the
Issuer or other obligor upon such Notes, wherever situated, the
moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing,
the Trustee may, as more particularly provided in Section 5.4, in
its discretion, proceed to protect and enforce its rights and the
rights of the Noteholders, by such appropriate proceedings as the
Trustee shall deem most effective 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 to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture
or by law.
(d) In case there shall be pending, relative to the
Issuer or any other obligor upon the Notes or any Person having
or claiming an ownership interest in the Trust Estate,
proceedings under Title 11 of the United States Code or any other
applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the
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Issuer or its property or such other obligor or Person, or in
case of any other comparable judicial proceedings relative to the
Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor, the Trustee,
irrespective of whether the principal of any Notes shall then be
due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or
otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect
of the Notes and to file such other papers or documents as
may be necessary or advisable in order to have the claims of
the Trustee (including any claim for reasonable compensation
to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and
all advances made, by the Trustee and each predecessor
Trustee, except as a result of negligence, bad faith or
willful misconduct) and of the Noteholders allowed in such
proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of Notes in
any election of a trustee, a standby trustee or person
performing similar functions in any such proceedings;
(iii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute all amounts received with respect to the claims
of the Noteholders and of the Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have
the claims of the Trustee or the Holders of Notes allowed in
any judicial proceedings relative to the Issuer, its
creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar
official in any such proceeding is hereby authorized by each of
such Noteholders to make payments to the Trustee, and, in the
event that the Trustee shall consent to the making of payments
directly to such Noteholders, to pay to the Trustee such amounts
as shall be sufficient to cover reasonable compensation to the
Trustee, each predecessor Trustee and their respective agents,
attorneys and counsel, and all other expenses and liabilitieS
incurred, and all advances made, by the Trustee and each
predecessor Trustee except as a result of negligence or bad
faith.
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(e) Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or vote for or
accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any
such proceeding except, as aforesaid, to vote for the election of
a trustee in bankruptcy or similar person.
(f) All rights of action and of asserting claims under
this Indenture, or under any of the Notes, may be enforced by the
Trustee without the possession of any of the Notes or the
production thereof in any trial or other proceedings relative
thereto, and any such action or proceedings instituted by the
Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of
the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys,
shall be for the ratable benefit of the Holders of the Notes.
(g) In any proceedings brought by the Trustee (and
also any proceedings involving the interpretation of any
provision of this Indenture to which the Trustee shall be a
party), the Trustee shall be held to represent all the Holders of
the Notes, and it shall not be necessary to make any Noteholder a
party to any such proceedings.
SECTION 5.4 Remedies; Priorities. (a) If an Event of
Default shall have occurred and be continuing, the Trustee may do
one or more of the following (subject to Section 5.5):
(i) institute proceedings in its own name and as
trustee of an express trust for the collection of all
amounts then payable on the Notes or under this Indenture
with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer
and any other obligor upon such Notes moneys adjudged due;
(ii) institute proceedings from time to time for the
complete or partial foreclosure of this Indenture with
respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and
enforce the rights and remedies of the Trustee and the
Holders of the Notes; and
(iv) 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;
provided, however, that the Trustee may not sell or other-
wise liquidate the Trust Estate following an Event of
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Default, other than an Event of Default described in Section
5.1(i), unless (A) the Holders of 100% of the Outstanding
Amount of the Notes consent thereto, (B) the proceeds of
such sale or liquidation distributable to the Noteholders
are sufficient to discharge in full all amounts then due and
unpaid upon such Notes for principal and interest or (C) the
Trustee determines that the Trust Estate will not continue
to provide sufficient funds for the payment of principal of
and interest on the Notes as they would have become due if
the Notes had not been declared due and payable, and the
Trustee obtains the consent of Holders of 66-2/3% of the
Outstanding Amount of the Notes. In determining such
sufficiency or insufficiency with respect to clause (B) and
(C), the Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting
firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust
Estate for such purpose.
(b) If the Trustee collects any money or property
pursuant to this Article V, it shall pay out such money or
property (and other amounts including amounts held on deposit in
the Reserve Account) held as Collateral for the benefit of the
Noteholders in the following order:
FIRST: to the Trustee for amounts due under
Section 6.7;
SECOND: to Noteholders for amounts due and unpaid on
the Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Notes for interest;
THIRD: to Noteholders for amounts due and unpaid on
the Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Notes for principal; and
FOURTH: to the Issuer for distribution to the
Certificateholders.
The Trustee may fix a record date and payment date for
any payment to Noteholders pursuant to this Section. At least 15
days before such record date, the Issuer shall mail to each
Noteholder and the Trustee a notice that states the record date,
the payment date and the amount to be paid.
SECTION 5.5 Optional Preservation of the Loans. If
the Notes have been declared to be due and payable under Section
5.2 following an Event of Default and such declaration and its
consequences have not been rescinded and annulled, the Trustee
may, but need not, elect to maintain possession of the Trust
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Estate. It is the desire of the parties hereto and the
Noteholders that there be at all times sufficient funds for the
payment of principal of and interest on the Notes, and the
Trustee shall take such desire into account when determining
whether or not to maintain possession of the Trust Estate. In
determining whether to maintain possession of the Trust Estate,
the Trustee may, but need not, obtain and rely upon an opinion of
an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as
to the sufficiency of the Trust Estate for such purpose.
SECTION 5.6 Limitation of Suits. No Holder of any
Note shall have any right to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appoint-
ment of a receiver or trustee, or for any other remedy hereunder,
unless:
(i) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the
Outstanding Amount of the Notes have made written request to
the Trustee to institute such proceeding in respect of such
Event of Default in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to it against the costs,
expenses and liabilities to be incurred in complying with
such request;
(iv) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute such proceedings; and
(v) no direction inconsistent with such written
request has been given to the Trustee during such 60-day
period by the Holders of a majority of the Outstanding
Amount of the Notes;
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.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of
Holders of Notes, each representing less than a majority of the
Outstanding Amount of the Notes, the Trustee in its sole
discretion may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.
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SECTION 5.7 Unconditional Rights of Noteholders To
Receive Principal and Interest. Notwithstanding any other
provisions in this Indenture, the Holder of any Note shall have
the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on
or after the respective due dates thereof expressed in such Note
or in this Indenture (or, in the case of redemption, on or after
the Redemption Date) and to institute suit for the enforcement of
any such payment, and such right shall not be impaired without
the consent of such Holder.
SECTION 5.8 Restoration of Rights and Remedies. If
the Trustee or any Noteholder has instituted any proceeding to
enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason or
has been determined adversely to the Trustee or to such
Noteholder, then and in every such case the Issuer, the Trustee
and the Noteholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their
former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
SECTION 5.9 Rights and Remedies Cumulative. No right
or remedy herein conferred upon or reserved to the Trustee 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 5.10 Delay or Omission Not a Waiver. No delay
or omission of the Trustee or any Holder of any Note to exercise
any right or remedy accruing upon any Default or Event of Default
shall impair any such right or remedy or constitute a waiver of
any such Default or Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the
Trustee or to the Noteholders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the
Noteholders, as the case may be.
SECTION 5.11 Control by Noteholders. The Holders of a
majority of the Outstanding Amount of the Notes shall have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee with respect
to the Notes or exercising any trust or power conferred on the
Trustee; provided that
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
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(ii) subject to the express terms of Section 5.4, any
direction to the Trustee to sell or liquidate the Trust
Estate shall be by the Holders of Notes representing not
less than 100% of the Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.5 have
been satisfied and the Trustee elects to retain the Trust
Estate pursuant to such Section, then any direction to the
trustee by Holders of Notes representing less than 100% of
the Outstanding Amount of the Notes to sell or liquidate the
Trust Estate shall be of no force and effect; and
(iv) the Trustee may take any other action deemed proper
by the Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1, the Trustee need
not take any action that it determines might involve it in
liability or might materially adversely affect the rights of any
Noteholders not consenting to such action.
Section 5.12 Waiver of Past Defaults. Prior to the
declaration of the acceleration of the maturity of the Notes as
provided in Section 5.2, the Holders of Notes of not less than a
majority of the Outstanding Amount of the Notes may waive any
past Default or Event of Default and its consequences except a
Default (a) in payment of principal of or interest on any of the
Notes or (b) in respect of a covenant or provision hereof which
cannot be modified or amended without the consent of the Holder
of each Note. In the case of any such waiver, the Issuer, the
Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively; but no such
waiver shall extend to any subsequent or other Default or impair
any right consequent thereto.
Upon any such waiver, such Default shall cease to exist
and be deemed to have been cured and not to have occurred, and
any Event of Default arising therefrom shall be deemed to have
been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent
thereto.
SECTION 5.13 Undertaking for Costs. All parties to
this Indenture agree, and each Holder of any Note by such
Holder's acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken, suffered or
omitted by it as 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
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the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit
instituted by the Trustee, (b) any suit instituted by any Note-
holder, or group of Noteholders, in each case holding in the
aggregate more than 10% of the Outstanding Amount of the Notes or
(c) any suit instituted by any Noteholder for the enforcement of
the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the
Redemption Date).
SECTION 5.14 Waiver of Stay or Extension Laws. The
Issuer covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead or in any manner
whatsoever, claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of
this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee,
but will suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 5.15 Action on Notes. The Trustee's right to
seek and recover judgment on the Notes or under this Indenture
shall not be affected by the seeking, obtaining or application of
any other relief under or with respect to this Indenture.
Neither the lien of this Indenture nor any rights or remedies of
the Trustee or the Noteholders shall be impaired by the recovery
of any judgment by the Trustee against the Issuer or by the levy
of any execution under such judgment upon any portion of the
Trust Estate or upon any of the assets of the Issuer.
SECTION 5.16 Performance and Enforcement of Certain
Obligations. (a) Promptly following a request from the Trustee
to do so and at the Servicer's expense, the Issuer agrees to take
all such lawful action as the Trustee may request to compel or
secure the performance and observance by the Seller and the
Servicer, as applicable, of each of their obligations to the
Issuer under or in connection with the Sale and Servicing
Agreement in accordance with the terms thereof, and to exercise
any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Sale and
Servicing Agreement to the extent and in the manner directed by
the Trustee, including the transmission of notices of default on
the part of the Seller or the Servicer thereunder and the
institution of legal or administrative actions or proceedings to
compel or secure performance by the Seller or the Servicer of
each of their obligations under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is
continuing, the Trustee may, and, at the direction (which
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direction shall be in writing or by telephone (confirmed in
writing promptly thereafter)) of the Holders of 66-2/3% of the
Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the
Seller or the Servicer under or in connection with the Sale and
Servicing Agreement, including the right or power to take any
action to compel or secure performance or observance by the
Seller or the Servicer of each of their obligations to the Issuer
thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall
be suspended.
ARTICLE VI
The Trustee
SECTION 6.1 Duties of Trustee. (a) If an Event of
Default has occurred and is continuing, the Trustee shall
exercise 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 such person's own affairs.
(b) Except during the continuance of an Event of
Default:
(i) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture; however, the Trustee shall examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless
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it is proved that the Trustee was negligent in ascertaining
the pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 5.11.
(d) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Issuer.
(e) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law
or the terms of this Indenture or the Sale and Servicing Agree-
ment.
(f) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if
it shall have reasonable grounds to believe that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(g) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section
and to the provisions of the TIA.
SECTION 6.2 Rights of Trustee. (a) The Trustee may
rely on any document believed by it to be genuine and to have
been signed or presented by the proper person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel.
The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officer's Certificate or
Opinion of Counsel.
(c) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly
or by or through agents or attorneys or a custodian or nominee,
and the Trustee shall not be responsible for any misconduct or
negligence on the part of, or for the supervision of,
____________________, or any other such agent, attorney,
custodian or nominee appointed with due care by it hereunder.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be
authorized or within its rights or powers; provided, however,
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that the Trustee's conduct does not constitute wilful misconduct,
negligence or bad faith.
(e) The Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Notes shall be full and
complete authorization and protection from liability in respect
to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such
counsel.
SECTION 6.3 Individual Rights of Trustee. The Trustee
in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not
Trustee. Any Paying Agent, Note Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4 Trustee's Disclaimer. The Trustee shall
not be responsible for and makes no representation as to the
validity or adequacy of this Indenture or the Notes, it shall not
be accountable for the Issuer's use of the proceeds from the
Notes, and it shall not be responsible for any statement of the
Issuer in the Indenture or in any document issued in connection
with the sale of the Notes or in the Notes other than the
Trustee's certificate of authentication.
SECTION 6.5 Notice of Defaults. If a Default occurs
and is continuing and if it is either actually known or written
notice of the existence thereof has been delivered to a
Responsible Officer of the Trustee, the Trustee shall mail to
each Noteholder notice of the Default within 90 days after such
knowledge or notice occurs. Except in the case of a Default in
payment of principal of or interest on any Note (including
payments pursuant to the mandatory redemption provisions of such
Note), the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of Noteholders.
SECTION 6.6 Reports by Trustee to Holders. The
Trustee shall deliver to each Noteholder such information as may
be reasonably required to enable such Holder to prepare its
Federal and state income tax returns.
SECTION 6.7 Compensation and Indemnity. The Issuer
shall or shall cause the Servicer to pay to the Trustee from
time to time compensation for its services in accordance with a
separate agreement between the Servicer and the Trustee. The
Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall
or shall cause the Servicer to reimburse the Trustee for all
reasonable out-of-pocket expenses incurred or made by it,
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including costs of collection, in addition to the compensation
for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts. The Issuer
shall or shall cause the Servicer to indemnify the Trustee and
its officers, directors, employees and agents against any and all
loss, liability or expense (including attorneys' fees and
expenses) incurred by it in connection with the acceptance or the
administration of this trust and the performance of its duties
hereunder. The Trustee shall notify the Issuer and the Servicer
promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Issuer and the Servicer shall not
relieve the Issuer of its obligations hereunder or the Servicer
of its obligations under Article X of the Sale and Servicing
Agreement. The Issuer shall or shall cause the Servicer to
defend the claim and the Trustee may have separate counsel and
the Issuer shall or shall cause the Servicer to pay the fees and
expenses of such counsel. Neither the Issuer nor the Servicer
need reimburse any expense or indemnify against any loss,
liability or expense incurred by the Trustee through the
Trustee's own wilful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Trustee
pursuant to this Section shall survive the discharge of this
Indenture subject to a satisfaction of the Rating Agency
Condition. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 5.1(iv) or (v) with respect to
the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or
similar law.
SECTION 6.8 Replacement of Trustee. The Trustee may
resign at any time by so notifying the Issuer. The Holders of a
majority in Outstanding Amount of the Notes may remove the
Trustee by so notifying the Trustee and may appoint a successor
Trustee. The Issuer shall remove the Trustee if:
(i) the Trustee fails to comply with Section 6.11; or
(ii) the Trustee is adjudged a bankrupt or insolvent.
If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason (the Trustee in
such event being referred to herein as the retiring Trustee), the
Issuer shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Issuer.
Thereupon the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture
subject to satisfaction of the Rating Agency Condition. The
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successor Trustee shall mail a notice of its succession to
Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 30
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Issuer or the Holders of a majority in
Outstanding Amount of the Notes may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor
Trustee.
Any resignation or removal of the Trustee and
appointment of a successor Trustee pursuant to any of the
provisions of this Section shall not become effective until
acceptance of appointment by the successor Trustee pursuant to
Section 6.8 and payment of all fees and expenses owed to the
outgoing Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's and the Servicer's obligations under
Section 6.7 shall continue for the benefit of the retiring
Trustee.
SECTION 6.9 Successor Trustee by Merger. If the
Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets
to, another corporation or banking association, the resulting,
surviving or transferee corporation without any further act shall
be the successor Trustee. The Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall succeed
to the trusts created by this Indenture any of the Notes shall
have been authenticated but not delivered, any such successor to
the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and
in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the
name of the successor to the Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in
the Notes or in this Indenture provided that the certificate of
the Trustee shall have.
SECTION 6.10 Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of meeting any legal
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requirement of any jurisdiction in which any part of the Trust
may at the time be located, the Trustee shall have the power and
may execute and deliver all instruments to appoint one or more
Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust,
and to vest in such Person or Persons, in such capacity and for
the benefit of the Noteholders, such title to the Trust, or any
part hereof, and, subject to the other provisions of this
Section, such powers, duties, obligations, rights and trusts as
the Trustee may consider necessary or desirable. No co-trustee
or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to
the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in
such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee
hereunder, including acts or omissions of predecessor or
successor trustees; and
(iii) the Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to
each of them. Every instrument appointing any separate trustee
or co-trustee shall refer to this Agreement and the conditions of
this Article VI. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the
estates or property specified in its instrument of appointment,
either jointly with the Trustee or separately, as may be provided
therein, subject to all the provisions of this Indenture,
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specifically including every provision of this Indenture relating
to the conduct of, affecting the liability of, or affording
protection to, the Trustee. Every such instrument shall be filed
with the Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do
any lawful act under or in respect of this Agreement on its
behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall
invest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor
trustee.
SECTION 6.11 Eligibility; Disqualification. The
Trustee shall at all times satisfy the requirements of TIA
Section 310(a). The Trustee shall have a combined capital and surplus
of at least $50,000,000 as set forth in its most recent published
annual report of condition and it shall have a long term debt
rating of BBB- or better by the Rating Agencies. The Trustee
shall comply with TIA Section 310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA
Section 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for
such exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 6.12 Preferential Collection of Claims Against
Issuer. The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to
the extent indicated.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1 Issuer To Furnish Trustee Names and
Addresses of Noteholders. The Issuer will furnish or cause to be
furnished to the Trustee (a) not more than five days after the
earlier of (i) each Record Date and (ii) three months after the
last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as
of such Record Date, (b) at such other times as the Trustee may
request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date
not more than 10 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the Note
Registrar, no such list shall be required to be furnished.
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SECTION 7.2 Preservation of Information; Communications
to Noteholders. (a) The Trustee shall preserve, in as current a
form as is reasonably practicable, the names and addresses of the
Holders contained in the most recent list furnished to the
Trustee as provided in Section 7.1 and the names and addresses of
Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as
provided in such Section 7.1 upon receipt of a new list so
furnished.
(b) Noteholders may communicate pursuant to TIA Section
312(b) with other Noteholders with respect to their rights under
this Indenture or under the Notes.
(c) The Issuer, the Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
SECTION 7.3 Reports by Issuer. (a) The Issuer shall:
(i) file with the Trustee, within 15 days after the
Issuer is required to file the same with the Commission,
copies of the annual reports and of the information,
documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time
by rules and regulations prescribe) which the Issuer may be
required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act;
(ii) file with the Trustee and the Commission in
accordance with rules and regulations prescribed from time
to time by the Commission such additional information,
documents and reports with respect to compliance by the
Issuer with the conditions and covenants of this Indenture
as may be required from time to time by such rules and
regulations; and
(iii) supply to the Trustee (and the Trustee shall
transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to
clauses (i) and (ii) of this Section 7.3(a) as may be
required by rules and regulations prescribed from time to
time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal
year of the Issuer shall end on December 31 of each year.
SECTION 7.4 Reports by Trustee. If required by TIA
Section 313(a), within 60 days after each , beginning
with , 199 , the Trustee shall mail to each Noteholder as
required by TIA Section 313(c) a brief report dated as of such date
that complies with TIA Section 313(a). The Trustee also shall comply
with TIA Section 313(b).
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A copy of each report at the time of its mailing to
Noteholders shall be filed by the Trustee with the Commission and
each stock exchange, if any, on which the Notes are listed. The
Issuer shall notify the Trustee if and when the Notes are listed
on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1 Collection of Money. Except as otherwise
expressly provided herein, the 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 Trustee pursuant to this Indenture. The
Trustee shall apply all such money received by it as provided in
this Indenture. Except as otherwise expressly provided in this
Indenture, if any default occurs in the making of any payment or
performance under any agreement or instrument that is part of the
Trust Estate, the Trustee may 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 any right to proceed
thereafter as provided in Article V.
SECTION 8.2 Trust Accounts. (a) On or prior to the
Closing Date, the Issuer shall cause the Servicer to establish
and maintain, in the name of the Trustee, for the benefit of the
Noteholders and the Certificateholders, the Trust Accounts as
provided in Section 5.1 of the Sale and Servicing Agreement.
(b) On or before each Distribution Date, the Total
Distribution Amount with respect to the preceding Collection
Period will be deposited in the Collection Account as provided in
Section 5.2 of the Sale and Servicing Agreement. On or before
each Distribution Date, the Noteholders' Distributable Amount
with respect to the preceding Collection Period will be
transferred from the Collection Account and/or the Reserve
Account to the Note Distribution Account as provided in Sections
5.5 and 5.6 of the Sale and Servicing Agreement.
(c) On each Distribution Date and Redemption Date, the
Trustee shall distribute all amounts on deposit in the Note
Distribution Account to Noteholders in respect of the Notes to
the extent of amounts due and unpaid on the Notes for principal
and interest in the following amounts and in the following order
of priority (except as otherwise provided in Section 5.4(b)):
(i) accrued and unpaid interest on the Notes; provided
that if there are not sufficient funds in the Note
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Distribution Account to pay the entire amount of accrued and
unpaid interest then due on the Notes, the amount in the
Note Distribution Account shall be applied to the payment of
such interest on the Notes pro rata on the basis of the
total such interest due on the Notes;
(ii) to the Holders of the Class A-1 Notes until the
Outstanding Amount of the Class A-1 Notes is reduced to
zero;
[List, as appropriate].
SECTION 8.3 General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the funds in the
Trust Accounts shall be invested in Eligible Investments and
reinvested by the Trustee upon Issuer Order, subject to the
provisions of Section 5.1(b) of the Sale and Servicing Agreement.
All income or other gain from investments of moneys deposited in
the Trust Accounts shall be deposited (or caused to be deposited)
by the Trustee in the Collection Account, and any loss resulting
from such investments shall be charged to such account. The
Issuer will not direct the Trustee to make any investment of any
funds or to sell any investment held in any of the Trust Accounts
unless the security interest Granted and perfected in such
account will continue to be perfected in such investment or the
proceeds of such sale, in either case without any further action
by any Person, and, in connection with any direction to the
Trustee to make any such investment or sale, if requested by the
Trustee, the Issuer shall deliver to the Trustee an Opinion of
Counsel, acceptable to the Trustee, to such effect.
(b) [Reserved]
(c) Subject to Section 6.1(c), the Trustee shall not
in any way be held liable by reason of any insufficiency in any
of the Trust Accounts resulting from any loss on any Eligible
Investment included therein except for losses attributable to the
Trustee's failure to make payments on such Eligible Investments
issued by the Trustee, in its commercial capacity as principal
obligor and not as trustee, in accordance with their terms.
(d) If (i) the Issuer shall have failed to give
investment directions for any funds on deposit in the Trust
Accounts to the Trustee by [TIME] (or such other time as may be
agreed by the Issuer and Trustee) on any Business Day; or (ii) a
Default or Event of Default shall have occurred and be continuing
with respect to the Notes but the Notes shall not have been
declared due and payable pursuant to Section 5.2, or, if such
Notes shall have been declared due and payable following an Event
of Default, amounts collected or receivable from the Trust Estate
are being applied in accordance with Section 5.5 as if there had
not been such a declaration; then the Trustee shall, to the
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fullest extent practicable, invest and reinvest funds in the
Trust Accounts in one or more Eligible Investments.
SECTION 8.4 Release of Trust Estate. (a) Subject to
the payment of its fees and expenses pursuant to Section 6.7, the
Trustee may, and when required by the provisions of this
Indenture shall, execute instruments to release property from the
lien of this Indenture, or convey the Trustee's interest in the
same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Trustee as provided in
this Article VIII shall be bound to ascertain the Trustee's
authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Trustee shall, at such time as there are no
Notes outstanding and all sums due the Trustee pursuant to
Section 6.7 have been paid, release any remaining portion of the
Trust Estate that secured the Notes from the lien of this
Indenture and release to the Issuer or any other Person entitled
thereto any funds then on deposit in the Trust Accounts. The
Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.4(b) only upon receipt of an Issuer
Request accompanied by an Officer's Certificate, an Opinion of
Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.
SECTION 8.5 Opinion of Counsel. The Trustee shall
receive at least seven days' notice when requested by the Issuer
to take any action pursuant to Section 8.4(a), accompanied by
copies of any instruments involved, and the Trustee shall also
require as a condition to such action, an Opinion of Counsel, in
form and substance satisfactory to the 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 and such
action will not materially and adversely impair the security for
the Notes or the rights of the Noteholders in contravention of
the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as
to the fair value of the Trust Estate. Counsel rendering any
such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument
delivered to the Trustee in connection with any such action.
ARTICLE IX
Supplemental Indentures
SECTION 9.1 Supplemental Indentures Without Consent of
Noteholders. (a) Without the consent of the Holders of any
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Notes but with prior notice to the Rating Agencies by the Issuer,
as evidenced to the Trustee, the Issuer and the Trustee, when
authorized by an Issuer Order, at any time and from time to time,
may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in
force at the date of the execution thereof), in form satisfactory
to the Trustee, for any of the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of this Indenture,
or better to assure, convey and confirm unto the Trustee any
property subject or required to be subjected to the lien of
this Indenture, or to subject to the lien of this Indenture
additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the
Issuer, and the assumption by any such successor of the
covenants of the Issuer herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any
right or power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge
any property to or with the Trustee;
(v) to cure any ambiguity, to correct or supplement
any provision herein or in any supplemental indenture which
may be inconsistent with any other provision herein or in
any supplemental indenture or to make any other provisions
with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that
such action shall not adversely affect the interests of the
Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to
the Notes and to add to or change any of the provisions of
this Indenture as shall be necessary to facilitate the
administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to
effect the qualification of this Indenture under the TIA or
under any similar federal statute hereafter enacted and to
add to this Indenture such other provisions as may be
expressly required by the TIA.
The Trustee is hereby authorized to join in the
execution of any such supplemental indenture and to make any
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further appropriate agreements and stipulations that may be
therein contained.
(b) The Issuer and the Trustee, when authorized by an
Issuer Order, may, also without the consent of any of the Holders
of the Notes but with prior notice to the Rating Agencies by the
Issuer, as evidenced to the Trustee, enter into an indenture or
indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of
the provisions of, this Indenture or of modifying in any manner
the rights of the Holders of the Notes under this Indenture;
provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the
interests of any Noteholder.
SECTION 9.2 Supplemental Indentures with Consent of
Noteholders. The Issuer and the Trustee, when authorized by an
Issuer Order, also may, with prior notice to the Rating Agencies
and with the consent of the Holders of not less than a majority
of the outstanding Amount of the Notes, by Act of such Holders
delivered to the Issuer and the Trustee, enter into an indenture
or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of
the provisions of, this Indenture or of modifying in any manner
the rights of the Holders of the Notes under this Indenture;
provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Note, or reduce the
principal amount thereof, the interest rate thereon or the
Redemption Price with respect thereto, change the provision
of this Indenture relating to the application of collections
on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change
any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring
the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof (or, in
the case of redemption, on or after the Redemption Date);
(iii) reduce the percentage of the Outstanding Amount
of the 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 certain provisions of this Indenture or
certain defaults hereunder and their consequences provided
for in this Indenture;
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(iv) modify or alter the provisions of the proviso to
the definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of
the Notes required to direct the Trustee to direct the
Issuer to sell or liquidate the Trust Estate pursuant to
Section 5.4;
(vi) modify any provision of this Section except to
increase any percentage specified herein or to provide that
certain additional provisions of this Indenture or the Basic
Documents cannot be modified or waived without the consent
of the Holder of each Outstanding Note affected thereby;
(vii) modify any of the provisions of this Indenture
in such manner as to affect the calculation of the amount of
any payment of interest or principal due on any Note on any
Distribution Date (including the calculation of any of the
individual components of such calculation) or to affect the
rights of the Holders of Notes to the benefit of any
provisions for the mandatory redemption of the Notes
contained herein; or
(viii) permit the creation of any lien ranking prior
to or on a parity with the lien of this Indenture with
respect to any part of the Trust Estate or, except as
otherwise permitted or contemplated herein or in the Basic
Documents, terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of
any Note of the security provided by the lien of this
Indenture.
The Trustee may 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 Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders
under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
Promptly after the execution by the Issuer and the
Trustee of any supplemental indenture pursuant to this Section,
the Trustee shall mail to the Holders of the Notes to which such
amendment or supplemental indenture relates a notice setting
forth in general terms the substance of such supplemental
indenture. Any failure of the 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.
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SECTION 9.3 Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any
supplemental indenture permitted by this Article IX or the
modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to receive, and subject to Sections
6.1 and 6.2, 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
Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Trustee's own rights,
duties, liabilities or immunities under this Indenture or
otherwise.
SECTION 9.4 Effect of Supplemental Indenture. Upon
the execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture shall be and be deemed to be
modified and amended in accordance therewith with respect to the
Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under
this Indenture of the Trustee, the Issuer and the Holders of the
Notes shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and
amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.5 Conformity With Trust Indenture Act.
Every amendment of this Indenture and every supplemental
indenture executed pursuant to this Article IX shall conform to
the requirements of the Trust Indenture Act as then in effect so
long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.6 Reference in Notes to Supplemental
Indentures. Notes authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article
IX may, and if required by the Trustee shall, bear a notation in
form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Issuer or the Trustee shall
so determine, new Notes so modified as to conform, in the opinion
of the Trustee and the Issuer, to any such supplemental indenture
may be prepared and executed by the Issuer and authenticated and
delivered by the Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
SECTION 10.1 Redemption. (a) The Class A- Notes
are subject to redemption in whole, but not in part, at the
direction of the Seller pursuant to Section 9.1(a) of the Sale
and Servicing Agreement, on any Distribution Date on which the
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Seller exercises its option to purchase the Trust Estate pursuant
to said Section 9.1(a), for a purchase price equal to the
Redemption Price; provided, however, that the Issuer has
available funds sufficient to pay the Redemption Price. The
Servicer or the Issuer shall furnish the Rating Agencies notice
of such redemption. If the Class A- Notes are to be redeemed
pursuant to this Section 10.1(a), the Servicer or the Issuer
shall furnish notice of such election to the Trustee not later
than days prior to the Redemption Date and the Issuer shall
deposit with the Trustee in the Note Distribution Account the
Redemption Price of the Class A- Notes to be redeemed whereupon
all such Class A- Notes shall be due and payable on the
Redemption Date upon the furnishing of a notice complying with
Section 10.2 to each Holder of the Class A- Notes.
(b) In the event that the assets of the Trust are sold
pursuant to Section 9.2 of the Trust Agreement, all amounts on
deposit in the Note Distribution Account shall be paid to the
Noteholders up to the Outstanding Amount of the Notes and all
accrued and unpaid interest thereon. If amounts are to be paid
to Noteholders pursuant to this Section 10.1(b), the Servicer or
the Issuer shall, to the extent practicable, furnish notice of
such event to the Trustee not later than days prior to the
Redemption Date whereupon all such amounts shall be payable on
the Redemption Date.
SECTION 10.2 Form of Redemption Notice. (a) Notice
of redemption under Section 10.1(a) shall be given by the Trustee
by facsimile or by first-class mail, postage prepaid, transmitted
or mailed prior to the applicable Redemption Date to each Holder
of Class A- Notes, as of the close of business on the Record
Date preceding the applicable Redemption Date, at such Holder's
address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such
Redemption Date is not applicable and that payments shall be
made only upon presentation and surrender of such Class A-
Notes and the place where such Class A- Notes are to be
surrendered for payment of the Redemption Price (which shall
be the office or agency of the Issuer to be maintained as
provided in Section 3.2); and
(iv) that interest on the Class A- Notes shall cease
to accrue on the Redemption Date.
Notice of redemption of the Class A- Notes shall be
given by the Trustee in the name and at the expense of the
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Issuer. Failure to give notice of redemption, or any defect
therein, to any Holder of any Class A- Note shall not impair or
affect the validity of the redemption of any other Class A-
Note.
(b) Prior notice of redemption under Sections 10.1(b)
is not required to be given to Noteholders.
SECTION 10.3 Notes Payable on Redemption Date. The
Class A- Notes to be redeemed shall, following notice of
redemption as required by Section 10.2 (in the case of redemption
pursuant to Section 10.1(a)), on the Redemption Date become due
and payable at the Redemption Price and (unless the Issuer shall
default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to
which accrued interest is calculated for purposes of calculating
the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.1 Compliance Certificates and Opinions,
etc. (a) Upon any application or request by the Issuer to the
Trustee to take any action under any provision of this Indenture,
the Issuer shall furnish to the Trustee (i) an Officer's
Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if
any, have been complied with and (iii) (if required by the TIA)
an Independent Certificate from a firm of certified public
accountants meeting the applicable requirements of this Section,
except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required
by any provision of this Indenture, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(i) a statement that each signatory of such
certificate or opinion has read or has caused to be read
such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
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(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or
investigation as is necessary to enable such signatory to
express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each
such signatory such condition or covenant has been complied
with.
(b) (i) Prior to the deposit of any Collateral or
other property or securities with the Trustee that is to be made
the basis for the release of any property or securities subject
to the lien of this Indenture, the Issuer shall, in addition to
any obligation imposed in Section 11.1(a) or elsewhere in this
Indenture, furnish to the Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such
certificate as to the fair value (within __ days of such deposit)
to the Issuer of the Collateral or other property or securities
to be so deposited.
(ii) Whenever the Issuer is required to furnish to the
Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in
clause (i) above, the Issuer shall also deliver to the
Trustee an Independent Certificate as to the same matters,
if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of
any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this
clause (ii), is % or more of the Outstanding Amount of
the Notes, but such a certificate need not be furnished with
respect to any securities so deposited, if the fair value
thereof to the Issuer as set forth in the related Officer's
Certificate is less than $ or less than percent
of the Outstanding Amount of the Notes.
(iii) Other than with respect to the release of any
Purchased Home Equity Loans or Liquidated Loans, whenever
any property or securities are to be released from the lien
of this Indenture, the Issuer shall also furnish to the
Trustee an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the
fair value (within __ days of such release) of the property
or securities proposed to be released and stating that in
the opinion of such person the proposed release will not
impair the security under this Indenture in contravention of
the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the
Trustee an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in
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clause (iii) above, the Issuer shall also furnish to the
Trustee an Independent Certificate as to the same matters if
the fair value of the property or securities and of all
other property other than Purchased Home Equity Loans and
Defaulted Loans, or securities released from the lien of
this Indenture since the commencement of the then current
calendar year, as set forth in the certificates required by
clause (iii) above and this clause (iv), equals % or more
of the Outstanding Amount of the Notes, but such certificate
need not be furnished in the case of any release of property
or securities if the fair value thereof as set forth in the
related Officer's Certificate is less than $ or less
than percent of the then Outstanding Amount of the
Notes.
(v) Notwithstanding Section 2.9 or any other provision
of this Section, the Issuer may (A) collect, liquidate, sell
or otherwise dispose of Home Equity Loans as and to the
extent permitted or required by the Basic Documents and (B)
make cash payments out of the Trust Accounts as and to the
extent permitted or required by the Basic Documents.
SECTION 11.2 Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an Authorized Officer of
the Issuer may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of,
or representations by, an officer or officers of the Servicer,
the Seller or the Issuer, stating that the information with
respect to such factual matters is in the possession of the
Servicer, the Seller or the Issuer, unless such counsel knows, or
in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
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statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
Whenever in this Indenture, in connection with any
application or certificate or report to the Trustee, it is
provided that the Issuer shall deliver any document as a
condition of the granting of such application, or as evidence of
the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or
report (as the case may be), of the facts and opinions stated in
such document shall in such case be conditions precedent to the
right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall
not, however, be construed to affect the Trustee's right to rely
upon the truth and accuracy of any statement or opinion contained
in any such document as provided in Article VI.
SECTION 11.3 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 agents duly appointed in writing; and
except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing
such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to
Section 6.1) conclusive in favor of the Trustee and the Issuer,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any person
of any such instrument or writing may be proved in any customary
manner of the Trustee.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Holder of any
Notes shall bind the Holder of every Note issued upon the
registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by
the Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
SECTION 11.4 Notices, etc., to Trustee, Issuer and
Rating Agencies. Any request, demand, authorization, direction,
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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 Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if
personally delivered, delivered by overnight courier or
mailed certified mail, return receipt requested and shall be
deemed to have been duly given upon receipt to the Trustee
at its Corporate Trust Office, or
(b) The Issuer by the Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if
personally delivered, delivered by overnight courier or
mailed certified mail, return receipt requested and shall be
deemed to have been duly given upon receipt to the Issuer
addressed to: , in care of
Attention: or at any
other address previously furnished in writing to the Trustee
by Issuer. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Trustee.
Notices required to be given to the Rating Agencies by the
Issuer, the Trustee or the Owner Trustee shall be in writing,
personally delivered, delivered by overnight courier or mailed
certified mail, return receipt requested to [(i) in the case of
Moody's, at the following address: Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10004 and (ii) in the
case of S&P, at the following address: Standard & Poor's Ratings
Group, 26 Broadway (15th Floor), New York, New York 10004,
Attention of Asset Backed Surveillance Department;] or as to each
of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 11.5 Notices to Noteholders; Waiver. Where
this Indenture provides for notice to Noteholders of any event,
such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class,
postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such
notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in
the manner here in provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner,
such notice may be waived in writing by any Person entitled to
receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice
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by Noteholders shall be filed with the Trustee but such filing
shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail
service as a result of a strike, work stoppage or similar
activity, it shall be impractical to mail notice of any event to
Noteholders when such notice is required to be given pursuant to
any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other
rights or obligations created hereunder, and shall not under any
circumstance constitute a Default or Event of Default.
SECTION 11.6 Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the
Notes to the contrary, the Issuer may enter into any agreement
with any Holder of a Note providing for a method of payment, or
notice by the Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for
such payments or notices, provided that such methods are
reasonable and consented to by the Trustee (which consent shall
not be unreasonably withheld). The Issuer will furnish to the
Trustee a copy of each such agreement and the Trustee will cause
payments to be made and notices to be given in accordance with
such agreements.
SECTION 11.7 Conflict with Trust Indenture Act. If
any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this
indenture by any of the provisions of the Trust Indenture Act,
such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose
duties on any person (including the provisions automatically
deemed included herein unless expressly excluded by this
Indenture) are a part of and govern this Indenture, whether or
not physically contained herein.
SECTION 11.8 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction
hereof.
SECTION 11.9 Successors and Assigns. All covenants
and agreements in this Indenture and the Notes by the Issuer
shall bind its successors and assigns, whether so expressed or
not. All agreements of the Trustee in this Indenture shall bind
its successors.
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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, express or implied, shall give to any
Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured
hereunder, and any other person with an Ownership interest in any
part of the Trust Estate, 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 on which any payment is due shall not be a Business Day,
then (notwithstanding any other provision of the Notes or this
Indenture) payment need not be made on such date, but may be made
on the next succeeding Business Day with the same force and
effect as if made on the date an which nominally due, and no
interest shall accrue for the period from and after any such
nominal date.
SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF [NEW YORK],
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 Counterparts. This Indenture may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.15 Recording of Indenture. If this
Indenture is subject to recording in any appropriate public
recording offices, such recording is to be effected by the Issuer
and at its expense accompanied by an Opinion of Counsel (which
may be counsel to the Trustee or any other counsel reasonably
acceptable to the Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any
other person secured hereunder or for the enforcement of any
right or remedy granted to the Trustee under this Indenture.
SECTION 11.16 Trust Obligation. No recourse may be
taken, directly or indirectly, with respect to the obligations of
the Issuer, the Seller, the Servicer, the holder of the GP
Interest, the Owner Trustee or the Trustee on the Notes or under
this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against (i) the Seller, the
Servicer, the holder of the GP Interest, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner,
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beneficiary, agent, officer, director, employee or agent of the
Seller, the Servicer, the holder of the GP Interest, the Trustee
or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the
holder of the GP Interest, the Owner Trustee or the Trustee or of
any successor or assign of the Seller, the Servicer, the holder
of the GP Interest, the Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly
agreed (it being understood that the Trustee and the Owner
Trustee have no such obligations in their individual capacity)
and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any
unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties
or obligations of the Issuer hereunder, the Owner Trustee shall
be subject to, and entitled to the benefits of, the terms and
provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17 No Petition. The Trustee, by entering
into this Indenture, and each Noteholder, by accepting a Note,
hereby covenant and agree that they will not at any time
institute against the Seller, the holder of the GP Interest or
the Trust, or join in any institution against the Seller, the
holder of the GP Interest 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.
SECTION 11.18 Inspection. The Issuer agrees that, on
reasonable prior notice, it will permit any representative of the
Trustee, during the Issuer's normal business hours, to examine
all the books of account, records, reports, and other papers of
the Issuer, to make copies and extracts therefrom, to cause such
books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with
the Issuer's officers, employees, and independent certified
public accountants, all at such reasonable times and as often as
may be reasonably requested. The Trustee shall and shall cause
its representatives to hold in confidence all such information
except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are
unavailing) and except to the extent that the Trustee may
reasonably determine that such disclosure is consistent with its
Obligations hereunder.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Issuer and the 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.
_________________________________ ,
By: _________________________________ ,
not in its individual capacity but
solely as Owner Trustee,
By:_____________________________
Name:
Title:
_____________________ , not in its
individual capacity but solely as
Trustee,
By:_____________________________
Name:
Title:
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[Form of Note] EXHIBIT D
REGISTERED $_____________
No. R
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
[Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Issuer or its agent for registration
of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]
THE 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.
CLASS A- __ __ % ASSET BACKED NOTES
, a business trust organized
and existing under the laws of the State of Delaware (herein
referred to as the "Issuer"), for value received, hereby promises
to pay to CEDE & CO., or registered assigns, the principal sum of
[ ] DOLLARS payable on each Distribution Date
in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $[INSERT INITIAL PRINCIPAL
AMOUNT OF NOTE] and the denominator of which is $ by
(ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-
Notes pursuant to Section 3.1 of the Indenture; provided,
however, that the entire unpaid principal amount of this Note
shall be due and payable on the Distribution Date
(the "Class A- Final Scheduled Distribution Date"). The Issuer
will pay interest on this Note at the rate per annum shown above
on each Distribution Date until the principal of this Note is
paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Distribution Date (after
giving effect to all payments of principal made on the preceding
Distribution Date). Interest on this Note will accrue for each
D-1
<PAGE>
Distribution Date from the most recent Distribution Date on which
interest has been paid to but excluding such Distribution Date
or, if no interest has yet been paid, from , 199 .
Interest will be computed on the basis of the actual number of
days elapsed in a ___-day year. Such principal of and interest
on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable
in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and
private debts. All payments made by the Issuer with respect to
this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of
this Note.
Reference is made to the further provisions of this
Note set forth on the reverse hereof, which shall have the same
effect as though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has
been executed by the Trustee whose name appears below by manual
signature, this Note shall not be entitled to any benefit under
the Indenture referred to on the reverse hereof, or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this
instrument to be signed, manually or in facsimile, by its
Authorized Officer as of the date set forth below.
_______________________________ ,
by
________________________________ ,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
by
__________________________
Name:
Title:
Date:
D-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred
to in the within-mentioned Indenture.
Date:
___________________ , not in its
individual capacity but solely as
Trustee,
by______________________
Authorized Signatory
D-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of
the Issuer, designated as its Class A- % Asset Backed
Notes (herein called the "Class A- Notes"), all issued under an
Indenture dated as of , 199 (such indenture, as
supplemented or amended, is herein called the "Indenture"),
between the Issuer and __________________, as trustee (the
"Trustee", which term includes any successor Trustee under the
Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Notes. The Notes are subject to
all terms of the Indenture. All terms used in this Note that are
defined in the Indenture, as supplemented or amended, shall have
the meanings assigned to them in or pursuant to the Indenture, as
so supplemented or amended.
[List Class(es) of Notes] (together, the "Notes") are
and will be equally and ratably secured by the collateral pledged
as security therefor as provided in the Indenture.
Principal of the Class A- Notes will be payable on
each Distribution Date in an amount described on the face hereof.
"Distribution Date" means the fifteenth day of each month, or, if
any such date is not a Business Day, the next succeeding Business
Day, commencing , 199 .
As described above, the entire unpaid principal amount
of this Note shall be due and payable on the Class A- Final
Scheduled Distribution Date. Notwithstanding the foregoing, the
entire unpaid principal amount of the Notes shall be due and
payable on the date on which an Event of Default shall have
occurred and be continuing and the Trustee or the Holders of the
Notes representing not less than a majority of the Outstanding
Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Class A- Notes shall
be made pro rata to the Class A- Noteholders entitled thereto.
Payments of interest on this Note due and payable on
each Distribution Date, together with the installment of
principal, if any, to the extent not in full payment of this
Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor
Notes) on the Note Register as of the close of business on each
Record Date, except that with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payments will be made
by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it
D-4
<PAGE>
appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or
any one or more Predecessor Notes) effected by any payments made
on any Distribution Date shall be binding upon all future Holders
of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Distribution
Date, then the Trustee, in the name of and on behalf of the
Issuer, will notify the Person who was the Holder hereof as of
the Record Date preceding such Distribution Date by notice mailed
prior to such Distribution Date and the amount then due and
payable shall be payable only upon presentation and surrender of
this Note at the Trustee's principal Corporate Trust Office or at
the office of the Trustee's agent appointed for such purposes
located in The City of New York.
The Issuer shall pay interest on overdue installments
of interest at the Class A- Interest Rate to the extent lawful.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be
registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by
the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by, the Holder hereof
or his attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents
Medallion Program ("Stamp") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition
to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the
Trustee may require, 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.
Each Noteholder or Note Owner, by acceptance of a Note
or, in the case of a Note Owner, a beneficial interest in a Note
covenants and agrees that no recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the
Owner Trustee or the Trustee on the Notes or under the Indenture
or any certificate or other writing delivered in connection
therewith, against (i) the Seller, the Servicer, the holder of
D-5
<PAGE>
the GP Interest, the Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent,
officer, director or employee of the Seller, the Servicer, the
holder of the GP Interest, the Trustee or the Owner Trustee in
its individual capacity, any holder of a beneficial interest in
the Issuer, the Seller, the Servicer, the holder of the GP
Interest, the Owner Trustee or the Trustee or of any successor or
assign of the Seller, the Servicer, the holder of the GP
Interest, the Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it
being understood that the 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.
Each Noteholder or Note Owner, by acceptance of a Note
or, in the case of a Note Owner, a beneficial interest in a Note
covenants and agrees that by accepting the benefits of the
Indenture that such Noteholder will not at any time institute
against the Seller, the holder of the GP Interest, or the Issuer
or join in any institution against the Seller, the holder of the
GP Interest or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other
proceedings, under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the
Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of
transfer of this Note, the Issuer, the Trustee and any agent of
the Issuer or the 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
neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of
the rights and obligations of the Issuer and the rights of the
Holders of the Notes under the Indenture at any time by the
Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting
the Holders of Notes representing specified percentages of the
Outstanding Amount of the Notes, on behalf of the Holders of all
the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by
the Holder of this Note (or any one of more Predecessor Notes)
shall be conclusive and binding upon such Holder and upon all
D-6
<PAGE>
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 Trustee to amend
or waive certain terms and conditions set forth in the Indenture
without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any
successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of
the Trustee and the Holders of Notes under the Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain
limitations therein set forth.
This Note and the Indenture shall be construed in
accordance with the laws of the State of New York, without
reference to its conflict of law provisions, and the obligations,
rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the
obligation of the Issuer, which is absolute and unconditional, to
pay the principal of and interest on this Note at the times,
place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except
as expressly provided in the Indenture or the Basic Documents,
neither in its individual capacity,
in its individual capacity, any owner of a beneficial
interest in the Issuer, nor any of their respective partners,
beneficiaries, agents, officers, directors, employees or
successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of
or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this
Note or the Indenture, it being expressly understood that said
covenants, obligations and indemnifications have been made by the
Owner Trustee for the sole purposes of binding the interests of
the Owner Trustee in the assets of the Issuer. The Holder of
this Note by the acceptance hereof agrees that except as
expressly provided in the Indenture or the Basic Documents, in
the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to,
and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the
Indenture or in this Note.
D-7
<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: ___________ _______________________2
Signature Guaranteed:
2 NOTE: 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 whatsoever.
D-8
<PAGE>
EXHIBIT 4.2
================================================================================
DELTA FUNDING CORPORATION,
as Seller and Servicer,
and
_________________________________________________
as Trustee
-----------------------
POOLING AND SERVICING AGREEMENT
Dated as of _____________________, 199_
----------------------
Home Equity Loan Asset-Backed Certificates
Series 199_-_
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
Section 1.01. Definitions................................................ 1
Section 1.02. Interest Calculations......................................32
ARTICLE II
Conveyance of Initial Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Initial Mortgage Loans...................... 33
Section 2.02. Acceptance by Trustee..................................... 36
Section 2.03. Representations and Warranties Regarding the
Seller and the Servicer................................... 38
Section 2.04. Representations and Warranties of the Seller
Regarding the Mortgage Loans.............................. 41
Section 2.05. [Intentionally Omitted]................................... 49
Section 2.06. Substitution of Mortgage Loans............................ 49
Section 2.07. Execution and Authentication of Certificates.............. 51
Section 2.08. Designation of Interests in REMIC......................... 51
Section 2.09. Designation of Startup Day................................ 51
Section 2.10. REMIC Certificate Maturity Date........................... 51
Section 2.11. Tax Returns and Reports to Certificate-
holders................................................... 51
Section 2.12. Tax Matters Person........................................ 52
Section 2.13. REMIC Related Covenants................................... 52
Section 2.14. Subsequent Transfers...................................... 55
Section 2.15. Mandatory Prepayment...................................... 58
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Servicer.............................................. 59
Section 3.02. Collection of Certain Mortgage Loan Payments.............. 62
Section 3.03. Withdrawals from the Collection Account................... 64
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses....................................... 65
Section 3.05. Maintenance of Mortgage Impairment Insurance
Policy.................................................... 66
Section 3.06. Fidelity Bond............................................. 66
Section 3.07. Management and Realization Upon Defaulted
Mortgage Loans............................................ 66
Section 3.08. Trustee to Cooperate...................................... 68
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Page
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Section 3.09. Servicing Compensation; Payment of Certain
Expenses by Servicer...................................... 69
Section 3.10. Annual Statement as to Compliance......................... 69
Section 3.11. Annual Servicing Report................................... 70
Section 3.12. Access to Certain Documentation and Informa-
tion Regarding the Mortgage Loans......................... 70
Section 3.13. Maintenance of Certain Servicing Insurance
Policies.................................................. 70
Section 3.14. Reports to the Securities and Exchange
Commission................................................ 71
Section 3.15. Reports of Foreclosures and Abandonments of
Mortgaged Property, Returns Relating to
Mortgage Interest Received from Individuals
and Returns Relating to Cancellation of
Indebtedness.............................................. 71
Section 3.16. Advances by the Servicer.................................. 71
Section 3.17. Optional Purchase of Defaulted Mortgage
Loans..................................................... 71
Section 3.18. Superior Liens............................................ 72
Section 3.19. Assumption Agreements..................................... 73
Section 3.20. Payment of Taxes, Insurance and Other
Charges................................................... 74
ARTICLE IV
Certificate Insurance Policy,
Pre-Funding Account and Capitalized Interest Account
Section 4.01. [Intentionally Left Blank]................................ 75
Section 4.02. Certificate Insurance Policy.............................. 75
Section 4.03. Pre-Funding Account and Capitalized Interest
Account................................................... 76
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions............................................. 78
Section 5.02. [Intentionally Omitted]................................... 81
Section 5.03. [Intentionally Omitted]................................... 81
Section 5.04. Compensating Interest..................................... 81
Section 5.05. Statements................................................ 82
Section 5.06. [Intentionally Omitted]................................... 85
Section 5.07. Distribution Account...................................... 85
Section 5.08. Investment of Accounts.................................... 86
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<PAGE>
Page
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ARTICLE VI
The Certificates
Section 6.01. The Certificates.......................................... 88
Section 6.02. Registration of Transfer and Exchange of
Certificates.............................................. 88
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certifi-
cates..................................................... 94
Section 6.04. Persons Deemed Owners..................................... 94
Section 6.05. Appointment of Paying Agent............................... 95
ARTICLE VII
The Seller and the Servicer
Section 7.01. Liability of the Seller and the Servicer.................. 96
Section 7.02. Merger or Consolidation of, or Assumption of
the Obligations of, the Seller or the
Servicer.................................................. 96
Section 7.03. Limitation on Liability of the Servicer and
Others.................................................... 96
Section 7.04. Servicer Not to Resign.................................... 97
Section 7.05. Delegation of Duties...................................... 98
Section 7.06. Indemnification of the Trust by the Servicer.............. 98
Section 7.07. Inspection................................................ 98
ARTICLE VIII
Default
Section 8.01. Events of Default......................................... 99
Section 8.02. Trustee to Act; Appointment of Successor..................101
Section 8.03. Waiver of Defaults........................................103
Section 8.04. Rights of the Certificate Insurer to Exercise
Rights of Senior Certificateholders.......................103
Section 8.05. Trustee to Act Solely with Consent of the
Certificate Insurer.......................................104
Section 8.06. Mortgage Loans, Trust and Accounts Held for
Benefit of the Certificate Insurer........................104
Section 8.07. Certificate Insurer Default...............................105
Section 8.08. Notification to Certificateholders........................105
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee.........................................106
Section 9.02. Certain Matters Affecting the Trustee.....................107
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<PAGE>
Page
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Section 9.03. Trustee Not Liable for Certificates or
Mortgage Loans............................................113
Section 9.04. Trustee May Own Certificates..............................114
Section 9.05. Servicer to Pay Trustee's Fees and Expenses...............114
Section 9.06. Eligibility Requirements for Trustee......................114
Section 9.07. Resignation or Removal of Trustee.........................115
Section 9.08. Successor Trustee.........................................116
Section 9.09. Merger or Consolidation of Trustee........................116
Section 9.10. Appointment of Co-Trustee or Separate Trus-
tee.......................................................117
Section 9.11. Limitation of Liability...................................118
Section 9.12. Trustee May Enforce Claims Without Possession
of Certificates; Inspection...............................119
Section 9.13. Suits for Enforcement.....................................119
ARTICLE X
Termination
Section 10.01. Termination...............................................121
Section 10.02. Additional Termination Requirements.......................123
ARTICLE XI
Miscellaneous Provisions.................124
Section 11.01. Amendment.................................................124
Section 11.02. Recordation of Agreement..................................125
Section 11.03. Limitation on Rights of Certificateholders................126
Section 11.04. Governing Law.............................................127
Section 11.05. Notices...................................................127
Section 11.06. Severability of Provisions................................128
Section 11.07. Assignment................................................129
Section 11.08. Certificates Nonassessable and Fully Paid.................129
Section 11.09. Third-Party Beneficiaries.................................129
Section 11.10. Counterparts..............................................129
Section 11.11. Effect of Headings and Table of Contents..................129
Section 11.12. Insurance Agreement.......................................129
Section 11.13. Claims Upon the Certificate Insurance
Policy....................................................129
Section 11.14. Effect of Payments by the Certificate
Insurer; Subrogation......................................130
Section 11.15. Notices to the Certificate Insurer........................131
EXHIBIT A-I - FORM OF CLASS A CERTIFICATE................................ A-I-1
EXHIBIT A-II - FORM OF CLASS S CERTIFICATE................................A-II-1
EXHIBIT B - FORM OF CLASS R CERTIFICATE..................................... B-1
EXHIBIT C - MORTGAGE LOAN SCHEDULE.......................................... C-1
EXHIBIT D - [RESERVED]...................................................... D-1
EXHIBIT E - FORM OF MORTGAGE NOTE........................................... E-1
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<PAGE>
Page
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EXHIBIT F - FORM OF MORTGAGES................................................F-1
EXHIBIT G - TRANSFER AFFIDAVITS..............................................F-1
EXHIBIT H - LETTER OF REPRESENTATIONS........................................H-1
EXHIBIT I - FORM OF REQUEST FOR RELEASE......................................I-1
EXHIBIT J - [RESERVED]
EXHIBIT K - SPECIMEN OF CERTIFICATE INSURANCE POLICY.........................K-1
EXHIBIT L - DELINQUENCY AND LOSS INFORMATION.................................L-1
EXHIBIT M - FORM OF INVESTMENT LETTER [NON-RULE 144A]........................M-1
EXHIBIT N - FORM OF INSURANCE COMPANY LETTER.................................N-1
EXHIBIT O - FORM OF INITIAL CERTIFICATION....................................O-1
EXHIBIT P - FORM OF TRUSTEE FINAL CERTIFICATION..............................P-1
EXHIBIT _ - FORM OF SUBSEQUENT TRANSFER AGREEMENT...............................
v
<PAGE>
This Pooling and Servicing Agreement, dated as of
_________________________, 199_, between Delta Funding Corporation, as Seller
and Servicer (the "Seller" and the "Servicer", respectively), and
____________________________ ________________________________ as Trustee (the
"Trustee").
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
meanings specified in this Article.
Accounts: Collectively, the Collection Account, the Pre-Funding Account,
the Capitalized Interest Account and the Distribution Account.
Accrual Period: As to any Mortgage Loan and Monthly Payment, the period
commencing from and after the date through which interest was last paid up to
and including the date of receipt of such Monthly Payment.
Addition Notice: The notice given pursuant to Section 2.14 with respect to
the transfer of Subsequent Mortgage Loans to the Trust pursuant to such Section.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Aggregate Principal Balance: As of any date of determination, the sum of
all the Principal Balances of the Mortgage Loans.
Agreement: This Pooling and Servicing Agreement and all amendments hereof
and supplements hereto.
Amortized Overcollateralized Amount Requirement: As of any Distribution
Date, the product of (x) ____% and (y) the Principal Balance of the Mortgage
Loans at the end of the related Due Period.
<PAGE>
Appraised Value: The appraised value of the Mortgaged Property based upon
the appraisal made by or for the originator at the time of the origination of
the related Mortgage Loan.
Assignment of Mortgage: With respect to any Mortgage, an assignment, notice
of transfer or equivalent instrument, in recordable form, sufficient under the
laws of the jurisdiction in which the related Mortgaged Property is located to
reflect the sale of the Mortgage to the Trustee.
Authorized Newspaper: A newspaper of general circulation in the Borough of
Manhattan, The City of New York, printed in the English language and customarily
published on each Business Day, whether or not published on Saturdays, Sundays
and holidays.
Available Funds: As to any Distribution Date, the sum of (A) the sum of all
amounts described in clauses (i) through (vii) inclusive, of Section 3.02(b)
received by the Servicer (including any amounts paid by the Servicer and the
Seller and excluding (a) any amounts not required to be deposited in the
Collection Account pursuant to Sections 3.02(b) and (b) any amounts paid to the
Servicer pursuant to Sections 3.03(ii), (iii), (vii), (viii), (ix) and (x) as of
the related Determination Date and (c) any amounts paid by the Seller pursuant
to clause (iv) of the definition of Purchase Price or clause (b) of the
definition of Substitution Adjustment to the extent such payment is in respect
of amounts incurred by or imposed on the Trustee) during the related Due Period
and deposited into the Collection Account as of the Determination Date; (B) any
amounts deposited into the Distribution Account from the Capitalized Interest
Account pursuant to Section 4.03(f); and (C) any amounts to be deposited to the
Distribution Account from the Pre-Funding Account pursuant to Section 4.03(d) or
Section 4.03(e). No amount included in this definition by virtue of being
described by any component of the definition thereof shall be included twice by
virtue of also being described by any other component or otherwise.
Balloon Mortgage Loan: Any Mortgage Loan that provided on the date of
origination for scheduled monthly payment in level amounts substantially lower
than the amount of the final scheduled payment.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
Book-Entry Certificate: Any Class A Certificate registered in the name of
the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a
2
<PAGE>
Person maintaining an account with such Depository (directly or as an indirect
participant in accordance with the rules of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the States of New York or California are
required or authorized by law to be closed.
Capitalized Interest Account: The Capitalized Interest Account established
pursuant to Section 4.03.
Capitalized Interest Requirement: With respect to each of the Distribution
Dates occurring in _______________ 199_ and ___________________ 199_, the
excess, if any of (i) the amount of interest accruing at the weighted average
Certificate Rate for the Senior Certificates on the amount by which the sum of
the Class Principal Balances of the Certificates as of the first day of the
preceding month (or, in the case of the Distribution Date in
_____________________ 199_, as of the Closing Date) exceeds the aggregate
Principal Balance of the Mortgage Loans as of the first day of the preceding Due
Period for the number of remaining interest accrual periods relating to such
Distribution Dates (or, in the case of the Distribution Date in _______________
199_, as of the Closing Date) over (ii) the amount of Pre-Funding Account
Earnings calculated for the actual number of days from such Distribution Date
(or in the case of the Distribution Date in ______________ 199_, from the
Closing Date) to the ______________ 199_ Distribution Date at an annual rate of
____%.
Certificate: Any Class A, Class S or Class R Certificate.
Certificate Insurance Policy: The Financial Guaranty Insurance Policy
(No. ________) with respect to the Senior Certificates, and all endorsements
thereto dated the Closing Date, issued by the Certificate Insurer for the
benefit of the Holders of each Class of Senior Certificates.
Certificate Insurer: _____________________________, a stock insurance
company organized and created under the laws of the State of __________________,
and any successors thereto.
Certificate Insurer Default: The existence and continuance of any of the
following:
(a) the Certificate Insurer fails to make a payment required under the
Certificate Insurance Policy in accordance with its terms; or
(b) (i) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Certificate Insurer in
an involuntary
3
<PAGE>
case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, rehabilitation, reorganization or other similar law
or (B) a decree or order adjudging the Certificate Insurer a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, rehabilitation, arrangement, adjustment or composition of
or in respect of the Certificate Insurer under any applicable United States
federal or state law, or appointing a custodian, receiver, liquidator,
rehabilitator, assignee, trustee, sequestrator or other similar official of
the Certificate Insurer or of any substantial part of its property, or
ordering the winding-up or liquidation of its affairs, and the continuance
of any such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days; or
(ii) the commencement by the Certificate Insurer of a voluntary case or
proceeding under any applicable United States federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by the
Certificate Insurer to the entry of a decree or order for relief in respect
of the Certificate Insurer in an involuntary case or proceeding under any
applicable United States federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Certificate
Insurer, or the filing by the Certificate Insurer of a petition or answer
or consent seeking reorganization or relief under any applicable United
States federal or state law, or the consent by the Certificate Insurer to
the filing of such petition or to the appointment of or the taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official of the Certificate Insurer or of any
substantial part of its property, or the making by the Certificate Insurer
of an assignment for the benefit of its creditors, or the failure by the
Certificate Insurer to pay debts generally as they become due, or the
admission by the Certificate Insurer in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Certificate Insurer in furtherance of any such action.
Certificate Owner: The Person who is the beneficial owner of a Book-Entry
Certificate.
4
<PAGE>
Certificate Rate: With respect to the Class A-1 Certificates, ____% per
annum. With respect to the Class A-2 Certificates, ____% per annum. With respect
to the Class A-3 Certificates, ____% per annum. With respect to the Class A-4
Certificates, ____% per annum. With respect to the Class A-5 Certificates, ____%
per annum. With respect to the Class S Certificates, the Class S Pass-Through
Rate.
Certificate Register and Certificate Registrar: The regis- ter maintained
and the registrar appointed pursuant to Section 6.02.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Senior Certificate registered in the name of the Seller or any Person known
to a Responsible Officer to be an Affiliate of the Seller and (y) any Senior
Certificate for which the Seller or any Person known to a Responsible Officer to
be an Affiliate of the Seller is the Certificate Owner or Holder shall be deemed
not to be outstanding (unless to the knowledge of a Responsible Officer (i) the
Seller or such Affiliate is acting as trustee or nominee for a Person who is not
an Affiliate of such Seller and who makes the voting decision with respect to
such Senior Certificates or (ii) the Seller or such Affiliate is the Certificate
Owner or Holder of all the Class A Certificates or Class S Certificates, but
only with respect to the Class as to which the Seller or such Affiliate owns all
the Certificates) and the Percentage Interest evidenced thereby shall not be
taken into account in determining whether the requisite amount of Percentage
Interests necessary to effect any such consent, direction, waiver or request has
been obtained.
Civil Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
Civil Relief Act Interest Shortfall: With respect to any Distribution Date,
for any Mortgage Loan as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended Due Period as a result
of the application of the Civil Relief Act, the amount by which (i) interest
collectible on such Mortgage Loan during such Due Period is less than (ii) one
month's interest on the Principal Balance of such Mortgage Loan at the Loan Rate
for such Mortgage Loan before giving effect to the application of the Civil
Relief Act.
Class: With respect to each of Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class S, Class R, Class L-A1, Class L-A2, Class L-A3, Class L-A4 and
Class L-A5, all of the Certificates of such Class.
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<PAGE>
Class A Certificate: Any certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit A-I hereto and designated
as a Class A-1, Class A-2, Class A-3, Class A-4 or Class A-5 Certificate
pursuant to Section 6.01.
Class A Certificateholder: A Holder of a Class A Certificate.
Class A Guaranteed Principal Distribution Amount: With respect to any
Distribution Date, the positive excess, if any, of (i) the Class A Principal
Balance as of such Distribution Date (after taking into account distributions
(excluding Insured Payments) allocable to principal on such Distribution Date
pursuant to Section 5.01) over (ii) the sum of the amount on deposit in the
Pre-Funding Account and the Aggregate Principal Balance as of the end of the
related Due Period; provided that on the Final Scheduled Distribution Date, the
Class A Guaranteed Principal Distribution Amount shall equal the amount referred
to in clause (i) of this definition as of such Distribution Date.
Class A Monthly Principal Distributable Amoun: With respect to any
Distribution Date, the amount equal to the sum of the following amounts (without
duplication) with respect to the immediately preceding Due Period: (i) that
portion of all Monthly Payments allocable to principal, including all full and
partial principal prepayments received during the related Due Period, (ii) the
Principal Balance of all Mortgage Loans that became Liquidated Mortgage Loans
during the related Due Period, (iii) the portion of the Purchase Price allocable
to principal of all repurchased defective Mortgage Loans with respect to the
related Due Period, and any Substitution Adjustment Amounts deposited to the
Distribution Account pursuant to Section 2.06 on or prior to the related
Determination Date and not previously distributed, (iv) the amount of
Distributable Excess Spread in respect of such Distribution Date, and (v) with
respect to the Distribution Date immediately following the end of the Funding
Period, funds remaining in the Pre-Funding Account (other than reinvestment
earnings) at the end of the Funding Period.
Class A Principal Balance: As to any Distribution Date the sum of the Class
Principal Balances of each Class of Class A Certificates immediately prior to
such Distribution Date.
Class A Principal Carryover Shortfall: As of any Distribution Date, the
amount by which the Class A Monthly Principal Distributable Amount, if any,
exceeds the amount in respect of principal that is actually distributed to the
Class A Certificateholders on such Distribution Date.
Class A Principal Distribution: With respect to any Distribution Date
(other than the Final Scheduled Distribution
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Date), the sum of the Class A Monthly Principal Distributable Amount for such
Distribution Date and any Outstanding Class A Principal Carryover Shortfall as
of the close of business on the preceding Distribution Date; provided, however,
that the Class A Principal Distribution shall not exceed the Class A Certificate
Balance. The "Class A Principal Distribution" on the Final Scheduled
Distribution Date will equal the Class A Certificate Balance as of such
Distribution Date.
Class A-1 Certificate: Any Certificate substantially in the form attached
hereto as Exhibit A-I and designated as a Class A-1 Certificate pursuant to
Section 6.01.
Class A-1 Interest Remittance Amount: As to any Distribution Date and the
Class A-1 Certificates, interest accrued during the related Interest Period at
the Certificate Rate for the Class A-1 Certificates on the Class A-1 Principal
Balance immediately prior to the related Distribution Date, reduced by an amount
equal to such Class' pro rata share (based on the amount of interest to which
such Class would have otherwise been entitled) of the Civil Relief Act Interest
Shortfall, if any, for such Distribution Date.
Class A-2 Certificate: Any Certificate substantially in the form attached
hereto as Exhibit A-I and designated as a Class A-2 Certificate pursuant to
Section 6.01.
Class A-2 Interest Remittance Amount: As to any Distribution Date and the
Class A-2 Certificates, interest accrued during the related Interest Period at
the Certificate Rate for the Class A-2 Certificates on the Class A-2 Principal
Balance immediately prior to the related Distribution Date, reduced by an amount
equal to such Class' pro rata share (based on the amount of interest to which
such Class would have otherwise been entitled) of the Civil Relief Act Interest
Shortfall, if any, for such Distribution Date.
Class A-3 Certificate: Any Certificate substantially in the form attached
hereto as Exhibit A-I and designated as a Class A-3 Certificate pursuant to
Section 6.01.
Class A-3 Interest Remittance Amount: As to any Distribution Date and the
Class A-3 Certificates, interest accrued during the related Interest Period at
the Certificate Rate for the Class A-3 Certificates on the Class A-3 Principal
Balance immediately prior to the related Distribution Date, reduced by an amount
equal to such Class' pro rata share (based on the amount of interest to which
such Class would have otherwise been entitled) of the Civil Relief Act Interest
Shortfall, if any, for such Distribution Date.
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Class A-4 Certificate: Any Certificate substantially in the form attached
hereto as Exhibit A-I and designated as a Class A-4 Certificate pursuant to
Section 6.01.
Class A-4 Interest Remittance Amount: As to any Distribution Date and the
Class A-4 Certificates, interest accrued during the related Interest Period at
the Certificate Rate for the Class A-4 Certificates on the Class A-4 Principal
Balance immediately prior to the related Distribution Date, reduced by an amount
equal to such Class's pro rata share (based on the amount of interest to which
such Class would have otherwise been entitled) of the Civil Relief Act Interest
Shortfall, if any, for such Distribution Date.
Class A-5 Certificate: Any Certificate substantially in the form attached
hereto as Exhibit A-I and designated as a Class A-5 Certificate pursuant to
Section 6.01.
Class A-5 Interest Remittance Amount: As to any Distribution Date and the
Class A-5 Certificates, interest accrued during the related Interest Period at
the Certificate Rate for the Class A-5 Certificates on the Class A-5 Principal
Balance immediately prior to the related Distribution Date, reduced by an amount
equal to such Class's pro rata share (based on the amount of interest to which
such Class would have otherwise been entitled) of the Civil Relief Act Interest
Shortfall, if any, for such Distribution Date.
Class Interest Carryover Shortfall: With respect to any Class of Senior
Certificates and any Distribution Date the amount by which the Class Interest
Remittance Amount for such Class on such Distribution Date exceeded the amount
of interest actually distributed on such Class on such Distribution Date
together with 30 days interest thereon at the applicable Certificate Rate.
Class Interest Distribution: With respect to any Distribution Date and each
Class of Senior Certificates, the sum of (i) the applicable Class Interest
Remittance Amount for such Class on such Distribution Date and (ii) the
applicable Outstanding Class Interest Carryover Shortfall for such Class on such
Distribution Date.
Class Interest Remittance Amount: As to any Distribution Date and Class of
Senior Certificates the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5
and Class S Interest Remittance Amount for the related Class of Senior
Certificates.
Class L Interest Carry Over Shortfall: With respect to any Class L Interest
and any Distribution Date the amount by which the Class L Interest Remittance
Amount for such Class L Interest on such Distribution Date exceeded the amount
of interest actually distributed on such Class on such Distribution Date
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together with 30 days interest thereon at the applicable Pass-Through Rate.
Class L Interest Distribution: With respect to any Distribution Date and
each Class of Class L Interests the sum of (i) the applicable Class L Interest
Remittance Amount for such Class on such Distribution Date and (ii) the
applicable Outstanding Class L Interest Carryover Shortfall for such Class on
such Distribution Date.
Class L Interest Principal Balance: As to any Distribution Date and Class
of Class L Interests the Class Principal Balance of the Corresponding Class.
Class L Interest Remittance Amount: As to any Distribution Date and Class L
Interest, interest accrued during the related Interest Period at the Class L
Pass-Through Rate on the related Class L Interest Principal Balance of the
related Class L Interest immediately prior to such Distribution Date, reduced by
an amount equal to such Class's pro rata share (based on the amount of interest
to which such Class would have otherwise been entitled) of Civil Relief Act
Interest Shortfall, if any, for such Distribution Date.
Class L Interests: The Class L-A1, Class L-A2, Class L-A3, Class L-A4 or
Class L-A5 Interests.
Class L Pass-Through Rate: With respect to any Interest Period the average
of the Remittance Loan Rates on the first day of the Due Period preceding such
Interest Period weighted on the basis of Principal Balance of the Mortgage Loans
on such first day.
Class L Principal Balance: The sum of the Class L Interest Principal
Balances.
Class L Principal Distribution: As to any Distribution Date, the amount
equal to the Class A Principal Distribution for such Distribution Date.
Class L-A1 Interests: A Class of Certificates designated as "regular
interests" in the Lower Tier REMIC and as to which the Corresponding Class is
the Class A-1 Certificates.
Class L-A2 Interests: A Class of Certificates designated as "regular
interests" in the Lower Tier REMIC and as to which the Corresponding Class is
the Class A-2 Certificates.
Class L-A3 Interests: A Class of Certificates designated as "regular
interests" in the Lower Tier REMIC and as to which the Corresponding Class is
the Class A-3 Certificates.
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Class L-A4 Interests: A Class of Certificates designated as "regular
interests" in the Lower Tier REMIC and as to which the Corresponding Class is
the Class A-4 Certificates.
Class L-A5 Certificates: A Class of Certificates designated as "regular
interests" in the Lower Tier REMIC and as to which the Corresponding Class is
the Class A-5 Certificates.
Class Principal Balance: As of any date of determination and Class of
Certificates, the Original Class Certificate Principal Balance for such Class
reduced by the sum of all amounts previously distributed to the
Certificateholders of such Class in respect of principal on all previous
Distribution Dates.
Class R Certificate: Any Certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit B hereto. The Class R
Certificates will represent beneficial ownership of the U-R Interest and the L-R
Interest.
Class R Certificateholder: The Holder of a Class R Certificate.
Class S Certificate: Any Certificate executed and authenticated by the
Trustee substantially in the form set forth in Exhibit A-II hereto and
designated as a Class S Certificate pursuant to Section 6.01. The Class S
Certificates are not themselves an interest in the Upper Tier REMIC, but rather
represent beneficial ownership of all of the Class S Components.
Class S Components: Any one of the Class S-1, Class S-2, Class S-3, Class
S-4 or Class S-5 Components.
Class S Denominations: The minimum denominations of each Class S
Certificate which shall be a 10% Percentage Interest.
Class S Interest Remittance Amount: As to any Distribution Date, the sum of
the interest accrued during the related Interest Period (i) at the Class S-1
Pass-Through Rate on the Notional S-1 Component Balance, (ii) at the Class S-2
Pass-Through Rate on the Notional S-2 Component Balance, (iii) at the Class S-3
Pass-Through Rate on the Notional S-3 Component Balance, (iv) at the Class S-4
Pass-Through Rate on the Notional S-4 Component Balance, (v) at the Class S-5
Pass-Through Rate on the Notional S-5 Component Balance, in each case reduced by
an amount equal to such Class' pro rata share (based on the amount of interest
to which such class would otherwise have been entitled) of the Civil Relief Act
Interest Shortfall for such Distribution Date.
Class S Notional Amount: The sum of each of the Notional S-
1 Component Balance, the Notional S-2 Component Balance, the
Notional S-3 Component Balance, the Notional S-4 Component
Balance and the Notional S-5 Component Balance.
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Class S Pass-Through Rate: As to any Distribution Date, the weighted
average of the Class S-1 Pass-Through Rate, the Class S-2 Pass-Through Rate,
the Class S-3 Pass-Through Rate, the Class S-4 Pass-Through Rate and the Class
S-5 Pass-Through Rate (weighted by the related Notional Component Balance)
immediately prior to such Distribution Date.
Class S-1 Component: An interest in the Upper Tier REMIC which (i)
represents the right to receive the Class S-1 Distribution Amount and (ii) is
designated as a "regular interest" in the Upper Tier REMIC for purposes of the
REMIC Provisions. The Class S-1 Component is not transferable separately from
any other Class S Component and is uncertificated.
Class S-1 Pass-Through Rate: ____% per annum.
Class S-2 Component: An interest in the Upper Tier REMIC which (i)
represents the right to receive the Class S-2 Distribution Amount and (ii) is
designated as a "regular interest" in the Upper Tier REMIC for purposes of the
REMIC Provisions. The Class S-2 Component is not transferable separately from
any other Class S Component and is uncertificated.
Class S-2 Pass-Through Rate: 1.73% per annum.
Class S-3 Component: An interest in the Upper Tier REMIC which (i)
represents the right to receive the Class S-3 Distribution Amount and (ii) is
designated as a "regular interest" in the Upper Tier REMIC for purposes of the
REMIC Provisions. The Class S-3 Component is not transferable separately from
any other Class S Component and uncertificated.
Class S-3 Pass-Through Rate: ____% per annum.
Class S-4 Component: An interest in the Upper Tier REMIC which (i)
represents the right to receive the Class S-4 Distribution Amount and (ii) is
designated as a "regular interest" in the Upper Tier REMIC for purposes of the
REMIC Provisions. The Class S-4 Component is not transferable separately from
the other Class S Component and is uncertificated.
Class S-4 Pass-Through Rate: ____% per annum.
Class S-5 Component: An interest in the Upper Tier REMIC which (i)
represents the right to receive the Class S-5 Distribution Amount and (ii) is
designated as a "regular interest" in the Upper Tier REMIC for purposes of the
REMIC Provisions. The Class S-5 Component is not transferable and is
uncertificated.
Class S-5 Pass-Through Rate: ____% per annum.
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Closing Date: __________________________, 199_.
Code: The Internal Revenue Code of 1986, as the same may be amended from
time to time (or any successor statute thereto).
Collection Account: The custodial account or accounts created and
maintained for the benefit of the Certificateholders pursuant to Section
3.02(b). The Collection Account shall be an Eligible Account.
Combined Loan-to-Value Ratio or CLTV: With respect to any Mortgage Loan,
the sum of the original principal balance of such Mortgage Loan and the
outstanding principal balance of the First Lien, if any, as of the date of
origination of the Mortgage Loan, divided by the Appraised Value.
Compensating Interest: As to any Distribution Date, the amount calculated
pursuant to Section 5.04.
Corporate Trust Office: The principal office of the Trustee at which at any
particular time its corporate business shall be administered, which office on
the Closing Date is located at
_______________________________________________________________________________,
Attention: ____________________________.
Corresponding Class: As to each Class of Class L Interests, the Class of
Class A Certificates set forth below opposite the Class of Class L Interests.
Class L-A1 Class A-1
Class L-A2 Class A-2
Class L-A3 Class A-3
Class L-A4 Class A-4
Class L-A5 Class A-5
Cumulative Net Losses: The amount by which the aggregate Principal Balances
of, and accrued interest on, all Mortgage Loans that are Liquidated Mortgage
Loans exceeds the Net Liquidation Proceeds for such Mortgage Loans allocated to
principal and accrued interest.
Curtailment: With respect to a Mortgage Loan, any payment of principal
received during a Due Period as part of a payment that is in excess of the
amount of the Monthly Payment due for such Due Period and which is not intended
to satisfy the Mortgage Loan in full, nor is intended to cure a delinquency.
Cut-Off Date: With respect to the Initial Mortgage Loans the close of
business on __________________, 199_ and with respect to any Subsequent Mortgage
Loans the related Subsequent Cut-Off Date.
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Cut-Off Date Initial Pool Principal Balance:
$______________________________.
Cut-Off Date Principal Balance: With respect to any Mortgage Loan, the
unpaid principal balance thereof as of the Cut-Off Date (or as of the applicable
date of substitution with respect to an Eligible Substitute Mortgage Loan
pursuant to Section 2.02 or 2.04).
Defective Mortgage Loan: Any Mortgage Loan subject to repurchase or
substitution pursuant to Section 2.02 or 2.04.
Deficiency Amount: As defined in the Certificate Insurance Policy.
Definitive Certificates: As defined in Section 6.02(c).
Delinquency Loss Factor means the sum of:
(a) the principal balance of all loans 30-59 days contractually
delinquent multiplied by ______%;
(b) the principal balance of all loans 60-89 days contractually
delinquent multiplied by _____%; and
(c) the principal balance of all loans 90 or more days (including
loans in foreclosure and REO) contractually delinquent multiplied by
_____%.
Delinquent: A Mortgage Loan is "Delinquent" if any Monthly Payment due
thereon is not made by the close of business on the day the related Monthly
Payment is scheduled to be due. A Mortgage Loan is "30 days Delinquent" if such
Monthly Payment has not been received by the close of business on the
corresponding day of the month immediately succeeding the month in which such
Monthly Payment was due, or, if there is not such corresponding day (e.g., as
when a 30-day month follows a 31-day month in which a payment was due on the
31st day of such month) then on the last day of such immediately succeeding
month. Similarly for "60 days Delinquent," "90 days Delinquent" and so on.
Delta: Delta Funding Corporation, or any successor thereto.
Depository: The initial Depository shall be The Depository Trust Company
("DTC"), the nominee of which is Cede & Co., as the registered Holder of Class
A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates evidencing
$__________________, $____________________, $__________________,
$_______________ and $____________________, respectively, in initial aggregate
principal amount of such Certificates. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the UCC of the State of
New York.
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Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date, the fourth
Business Day prior to such Distribution Date.
Distributable Excess Spread: As to any Distribution Date the lesser of (i)
the amount of Excess Spread for such Distribution Date and (ii) the portion of
Excess Spread required to be distributed pursuant to 5.01(a)(v)(5) such that the
amount of Overcollateralization for such Distribution Date is equal to the
Specified Overcollateralization Amount.
Distribution Account: The account established by the Trustee pursuant to
Section 5.07. The Distribution Account shall be an Eligible Account.
Distribution Date: The twenty-fifth day of each month, or if such day is
not a Business Day, then the next Business Day, beginning in the month
immediately following the month of the initial issuance of the Certificates.
Due Date: As to any Mortgage Loan, the day of the month on which the
Monthly Payment is due from the Mortgagor.
Due Period: With respect to (a) the first Determination Date (i) for
collections of principal, the period from and including ________________, 199_
through and including ________________, 199_ and (ii) for collections of
interest, the period from and including _______________, 199_ through and
including _____________________, 199_ and (b) with respect to each Determination
Date thereafter, for collections of both interest and principal, the period from
and including the second day of the month preceding the month of such
Determination Date to and including the first day of the month of such
Determination Date.
Electronic Ledger: The electronic master record of home equity mortgage
loans maintained by the Servicer.
Eligible Account: A segregated account that is (i) maintained with a
depository institution whose debt obligations at the time of any deposit therein
have the highest short-term debt rating by the Rating Agencies and whose
accounts are fully insured by either the Savings Association Insurance Fund
("SAIF") or the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation established by such fund with a minimum long-term unsecured debt
rating of A2 by Moody's and A by Standard & Poor's, and which is any of (A) a
federal savings and loan association duly organized, validly existing and in
good
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standing under the federal banking laws, (B) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (C) a national banking association duly organized, validly existing and
good standing under the federal banking laws, (D) a principal subsidiary of a
bank holding company, and in each case of (A)-(D) above, approved in writing by
the Certificate Insurer; (ii) a segregated trust account maintained with the
corporate trust department of a federal or state chartered depository
institution or trust company, having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity or (iii) otherwise acceptable to
each Rating Agency and the Certificate Insurer as evidenced by a letter from
each Rating Agency and the Certificate Insurer to the Trustee, without reduction
or withdrawal of the then current ratings of the Certificates.
Eligible Investments: One or more of the following (excluding any
callable investments purchased at a premium):
(i) direct obligations of, or obligations fully guaranteed as to
timely payment of principal and interest by, the United States or any
agency or instrumentality thereof, provided that such obligations are
backed by the full faith and credit of the United States;
(ii) repurchase agreements on obligations specified in clause (i)
maturing not more than three months from the date of acquisition thereof,
provided that the short-term unsecured debt obligations of the party
agreeing to repurchase such obligations are at the time rated by each
Rating Agency in its highest short-term rating category (which is A-1+ for
Standard & Poor's and P-1 for Moody's);
(iii) certificates of deposit, time deposits and bankers' acceptances
(which, if Moody's is a Rating Agency, shall each have an original maturity
of not more than 90 days of any U.S. depository institution or trust
company incorporated under the laws of the United States or any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the unsecured short-term debt
obligations of such depository institution or trust company at the date of
acquisition thereof have been rated by each of Moody's and Standard &
Poor's in its highest unsecured short-term debt rating category;
(iv) commercial paper (having original maturities of not more than 90
days) of any corporation incorporated under the laws of the United States
or any state thereof which on the date of acquisition has been rated by
Standard & Poor's and Moody's in their highest short-term rating
categories;
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(v) short term investment funds ("STIFS") sponsored by any trust
company or national banking association incorporated under the laws of the
United States or any state thereof which on the date of acquisition has
been rated by Standard & Poor's and Moody's in their respective highest
rating category of long term unsecured debt;
(vi) interests in any money market fund which at the date of
acquisition of the interests in such fund and throughout the time as the
interest is held in such fund has a rating of Aaa by Moody's and either
AAAm or AAAm-G by Standard & Poor's; and
(vii) other obligations or securities that are acceptable to each
Rating Agency and the Certificate Insurer as an Eligible Investment
hereunder and will not result in a reduction in the then current rating of
the Certificates without regard to the Certificate Insurance Policy, as
evidenced by a letter to such effect from such Rating Agency and the
Certificate Insurer and with respect to which the Servicer has received
confirmation that, for tax purposes, the investment complies with the last
clause of this definition;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described hereunder may be purchased at a price greater than
par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
Seller for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not in excess of and not more than 5% less than
the Principal Balance of the Defective Mortgage Loan; (ii) have a Loan Rate not
less than the Loan Rate of the Defective Mortgage Loan and not more than 1%
higher than the Loan Rate of such Defective Mortgage Loan; (iii) have a Mortgage
of the same or higher level of priority as the Mortgage relating to the
Defective Mortgage Loan at the time such Mortgage was transferred to the Trust;
(iv) have a remaining term to maturity not more than six months earlier and not
later than the remaining term to maturity of the Defective Mortgage Loan; (v)
comply with each representation and warranty set forth in Section 2.04 (deemed
to be made as of the date of substitution); (vi) have an original
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Combined Loan-to-Value Ratio not greater than that of the Defective Mortgage
Loan; and (vii) have a Mortgagor of similar credit quality as the Mortgagor
under the Mortgage Note relating to such Defective Mortgage Loan. More than one
Eligible Substitute Mortgage Loan may be substituted for a Defective Mortgage
Loan if such Eligible Substitute Mortgage Loans meet the foregoing attributes in
the aggregate and such substitution is approved in writing in advance by the
Certificate Insurer.
Event of Default: As defined in Section 8.01.
Excess Spread: With respect to any Distribution Date, the amount equal to
the excess, if any, of Available Funds over the sum of the amounts distributed
pursuant to Sections 5.01(a)(i)-(iv), (v)(1), (v)(2), (v)(3) and (v)(4).
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation.
Final Scheduled Distribution Date: The Distribution Date in
____________________________.
First Lien: With respect to any Mortgage Loan which is a second priority
lien, the mortgage loan relating to the corresponding Mortgaged Property having
a first priority lien.
FNMA: The Federal National Mortgage Association.
Foreclosure Profits: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Loan Rate from the date interest was last paid through
the date of receipt of the final Liquidation Proceeds) of such Liquidated
Mortgage Loan immediately prior to the final recovery of its Liquidation
Proceeds.
Funding Period: The period commencing on the Closing Date and ending on the
earlier to occur of (i) the date on which the amount on deposit in the
Pre-Funding Account (exclusive of any investment earnings) is less than
$100,000, (ii) the date on which an Event of Default occurs pursuant to Section
8.01, (iii) the termination of the Trust, and (iv) ______________, 199_.
Initial Class A Certificate Balance: $____________________.
Initial Collateral Balance: As of the Closing Date, the sum of (a) the
Cut-Off Date Initial Pool Principal Balance and (b) the amount on deposit in the
Pre-Funding Account.
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Initial Mortgage Loan Schedule: The schedule of Initial Mortgage Loans
included in the Trust as of the Cut-Off Date, specifying with respect to each
such Initial Mortgage Loan the information set forth on Exhibit C attached
hereto.
Initial Mortgage Loans: The Initial Mortgage Loans transferred to the
Trust on the Cut-Off Date, as set forth in Exhibit C hereto.
Insurance Agreement: The Insurance Agreement dated as of
_____________________, 199_ among the Seller, the Trustee and the Certificate
Insurer, including any amendments and supplements thereto.
Insurance Proceeds: Proceeds paid by any insurer (other than the
Certificate Insurer) pursuant to any insurance policy covering a Mortgage Loan
or Mortgaged Property, or amounts required to be paid by the Servicer pursuant
to Section 3.05, net of any component thereof (i) covering any expenses incurred
by or on behalf of the Servicer in connection with obtaining such proceeds, (ii)
that is applied to the restoration or repair of the related Mortgaged Property,
(iii) released to the Mortgagor in accordance with the Servicer's normal
servicing procedures or (iv) required to be paid to any holder of a mortgage
senior to such Mortgage Loan.
Insured Distribution Amount: With respect to any Distribution Date the sum
of (i) the Class Interest Distribution for each Class of Senior Certificates and
(ii) the Class A Guaranteed Principal Distribution Amount for such Distribution
Date.
Insured Payment: The amount paid by the Certificate Insurer under the
Certificate Insurance Policy.
Interest Period: With respect to any Distribution Date, the period from the
first day of the calendar month preceding the month of such Distribution Date
through the last day of such calendar month.
Late Payment Rate: For any Distribution Date, the lesser of (i) the rate of
interest, as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 2% and (ii) the maximum rate permissible under any applicable law limiting
interest rates. The Late Payment Rate shall be computed on the basis of a year
of 365 days calculating the actual number of days elapsed.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage Loan in
respect of which the Servicer has determined, in
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accordance with the servicing procedures specified herein, as of the end of the
related Due Period that all Liquidation Proceeds which it expects to recover
with respect to the liquidation of the Mortgage Loan or disposition of the
related REO Property have been recovered.
Liquidation Loan Losses: For each Liquidated Mortgage Loan the amount, if
any, by which the Principal Balance thereof plus accrued and unpaid interest
thereon plus unreimbursed Servicing Advances is in excess of the Liquidation
Proceeds realized thereon.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Certificate Insurance Policy) received in
connection with the liquidation of any Mortgage Loan or related REO Property,
whether through trustee's sale, foreclosure sale or otherwise.
Loan Losses: The aggregate of the Liquidation Loan Losses for all
Liquidated Mortgage Loans.
Loan Rate: With respect to any Mortgage Loan as of any day, the per annum
rate of interest applicable under the related Mortgage Note to the calculation
of interest for such day on the Principal Balance.
Loss Factor: For the first 30 Distribution Dates, (i) if the Cumulative Net
Losses divided by the Maximum Collateral Amount is less than or equal to _____,
then the Loss Factor shall be equal to one and (ii) if the Cumulative Net Losses
divided by the Maximum Collateral Amount is greater than _____ the Loss Factor
shall be equal to two. Thereafter, (i) if the Cumulative Net Losses divided by
the Maximum Collateral Amount is less than or equal to _____, then the Loss
Factor shall be equal to one and (ii) if the Cumulative Net Losses divided by
the Maximum Collateral Amount is greater than _____ the Loss Factor shall be
equal to two; provided, however, that if Loss Factor pursuant to the first
sentence of this definition was two on the 30th Distribution Date, the factor
referred to above shall remain two.
Lower Tier Distributable Excess Spread: As to any Distribution Date, an
amount equal to Distributable Excess Spread for such Distribution Date.
Lower Tier Regular Interests: Interests evidencing the ownership of the
Lower Tier REMIC, which will be uncertificated and will represent "regular
interests" in the Lower Tier REMIC. Lower Tier Regular Interests will consist of
the Class L-A1, the Class L-A2, the Class L-A3, the Class L-A4 and the Class
L-A5 Interests.
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Lower Tier REMIC: The segregated pool of assets referred to as the Trust
(other than the Pre-Funding Account and the Capitalized Interest Account),
evidenced by Lower Tier REMIC Regular Interests, which will be uncertificated
and will represent "regular interests" in the Lower Tier REMIC.
Lower Tier REMIC Distribution Amount: As of any Distribution Date, the sum
of the (i) the Class L Interest Distribution and (ii) the Class L Principal
Distribution.
L-R Interest: The sole class of "residual interest" in the Lower Tier
REMIC.
Majority Certificateholder: The Holder or Holders of Class A Certificates
evidencing Percentage Interests in excess of 51% in the aggregate.
Maximum Collateral Amount: The aggregate Principal Balances of all Initial
Mortgage Loans as of the Cut-Off Date plus the aggregate Principal Balance of
all Subsequent Mortgage Loans as of the related Subsequent Cut-Off Date.
Monthly Advance: An advance made by the Servicer pursuant to Section 3.16.
Monthly Payment: The scheduled monthly payment of principal and/or interest
required to be made by a Mortgagor on the related Mortgage Loan.
Moody's: Moody's Investors Service, Inc. or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a first
or second lien on an estate in fee simple interest in real property securing a
Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining to
a particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of Mortgage
Loans constituting assets of the Trust, which list shall consist of the Initial
Mortgage Loan Schedule, together with any Subsequent Mortgage Loan Schedule
reflecting the Subsequent Mortgage Loans transferred to the Trust on a
Subsequent Transfer Date. The Initial Mortgage Loan Schedule of Initial Mortgage
Loans as of the Cut-Off Date is the schedule set forth herein as Exhibit C,
which schedule sets forth as to each Initial Mortgage Loan (i) the Cut-Off Date
Principal Balance, (ii) the account number, (iii) the original principal amount,
(iv) the CLTV as of the date of the origination of the related
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Initial Mortgage Loan, (v) the Due Date, (vi) the Loan Rate as of the Cut-Off
Date, (vii) the first date on which a Monthly Payment is or was due under the
Mortgage Note, (viii) the original stated maturity date of the Mortgage Note,
(ix) the remaining number of months to maturity as of the Cut-Off Date, (x) the
state in which the related Mortgaged Property is situated, (xi) the type of
property and (xii) the lien status.
Mortgage Loans: The mortgage loans that are transferred and assigned to the
Trustee pursuant to Sections 2.01 and 2.06, together with the Related Documents,
exclusive of Mortgage Loans that are transferred to the Depositor, the Servicer
or the Seller, as the case may be, from time to time pursuant to Section 2.02,
2.04, or 3.17, as from time to time are held as a part of the Trust, such
mortgage loans originally so held being identified in the Mortgage Loan Schedule
delivered on the Closing Date.
Mortgage Note: With respect to a Mortgage Loan, the note pursuant to which
the related mortgagor agrees to pay the indebtedness evidenced thereby which is
secured by the related Mortgage.
Mortgaged Property: The underlying property, including real property and
improvements thereon, securing a Mortgage Loan.
Mortgaged Property State: As to any Mortgage Loan, the state in which the
related Mortgaged Property is located.
Mortgagor: The obligor or obligors under a Mortgage Note.
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of unreimbursed Servicing Fees, Servicing Advances and
Monthly Advances with respect thereto.
Net Loan Rate: With respect to any Mortgage Loan as to any day, the Loan
Rate less the Servicing Fee Rate.
Nonrecoverable Advances: With respect to any Mortgage Loan, (i) any
Servicing Advance or Monthly Advance previously made and not reimbursed pursuant
to Section 3.03(ii), or (ii) a Servicing Advance or Monthly Advance proposed to
be made in respect of a Mortgage Loan or REO Property which, in the good faith
business judgment of the Servicer, as evidenced by an Officer's Certificate
delivered to the Certificate Insurer, the Seller and the Trustee no later than
the Business Day following such determination, would not be ultimately
recoverable pursuant to Sections 3.03(ii), 3.03(viii), 5.01(a)(v)(3) and
5.01(a)(v)(4).
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Notional S-1 Balance: As to any Distribution Date, the Class Principal
Balance of the A-1 Certificates immediately prior to such Distribution Date.
Notional S-2 Balance: As to any Distribution Date, the Class Principal
Balance of the A-2 Certificates immediately prior to such Distribution Date.
Notional S-3 Balance: As to any Distribution Date, the Class Principal
Balance of the A-3 Certificates immediately prior to such Distribution Date.
Notional S-4 Balance: As to any Distribution Date, the Class Principal
Balance of the A-4 Certificates immediately prior to such Distribution Date.
Notional S-5 Balance: As to any Distribution Date, the Class Principal
Balance of the A-5 Certificate immediately prior to such Distribution Date.
Officer's Certificate: A certificate signed by the President, an Executive
Vice President, a Senior Vice President, a First Vice President, a Vice
President, Assistant Vice President, the Treasurer, Assistant Treasurer,
Assistant Secretary, Controller or Assistant Controller of the Servicer and
delivered to the Trustee.
Opinion of Counsel: A written opinion of counsel reasonably acceptable to
the Trustee, who may be in-house counsel for the Servicer or the Depositor
(except that any opinion relating to the qualification of the Trust as two
separate REMICs or compliance with the REMIC Provisions must be an opinion of
independent outside counsel) and who, in the case of opinions delivered to each
of the Certificate Insurer and the Rating Agency, is reasonably acceptable to
it.
Original Class Certificate Principal Balance: With respect to the Class A-1
and Class A-L1 Interests, $__________, with respect to the Class A-2
Certificates and Class A-L2 Interests, $__________, with respect to the Class
A-3 Certificates and Class A-L3 Interests, $__________, with respect to the
Class A-4 Certificates and Class A-L4 Interests, $__________ and with respect to
the Class A-5 Certificates and Class A-L5 Interests, $----------.
Original Mortgage Loans: The Initial Mortgage Loans identified in Exhibit C
hereto, and conveyed, transferred, sold and assigned to, and deposited with, the
Trustee pursuant to Section 2.01 on the Closing Date.
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Original Pre-Funded Amount: The amount deposited in the Pre-Funding Account
on the Closing Date from the proceeds of the sale of the Certificates, which
amount is $__________.
Outstanding Class A Principal Carryover Shortfall: As to any Distribution
Date the amount of Class A Principal Carryover Shortfall that has not previously
been included in a Class A Principal Distribution.
Outstanding Class Interest Carryover Shortfall: As to any Class of Senior
Certificates and any Distribution Date the amount of Class Interest Carryover
Shortfall for such Class that has not previously been included in a Class
Interest Distribution for such Class of Senior Certificates.
Outstanding Class L Interest Carryover Shortfall: As to any Class of Class
L Interests and any Distribution Dates the amount of Class L Interest Carryover
Shortfall for such Class that has not previously been included in a Class L
Interest Distribution for such Class of Class L Interests.
Overcollateralization Amount: As of any Distribution Date the amount if any
and by which the sum of the Principal Balances of the Mortgage Loans as of the
end of the related Due Period and the amount on deposit in the Pre-Funding
Account (exclusive of any reinvestment earnings thereon) as of the end of the
related Due Period exceeds the Class A Certificate Balance after giving effect
to distributions of principal to be made on such Distribution Date.
Overfunded Interest Amount: With respect to each Subsequent Transfer Date
occurring in December 1995, the excess of (A) the amount on deposit in the
Capitalized Interest Account on such date over (B) the sum of the Capitalized
Interest Requirements (assuming amounts on deposit in the Pre-Funding Account
are invested at ____% per annum) which will be required on the first and second
Distribution Dates (assuming that the amount required for the second
Distribution Date will be the same as the Capitalized Interest Requirement for
the first Distribution Date).
Ownership Interest: As to any Certificate, or security interest in such
Certificate, including any interest in such Certificate as the Holder thereof
and any other interest therein, whether direct or indirect, legal or beneficial,
as owner or as pledgee.
Paying Agent: Any paying agent appointed pursuant to Section 6.05.
Percentage Interest: As to any Class A Certificate, the percentage obtained
by dividing the principal denomination of
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such Certificate by the aggregate of the principal denominations of all Class A
Certificates of the same Class. With respect to any Class S Certificate the
Percentage Interest specified on the face thereof. With respect to a Class R
Certificate, the portion of the Class evidenced thereby as stated on the face
thereof, which shall be either 99.999999% or, but only with respect to the Tax
Matters Person Residual Interest held by the Tax Matters Person, 0.000001%. For
purposes of determining the requisite amount of Percentage Interest that have
given notice, consented to or taken any action the Class A Certificates shall be
considered to represent in the aggregate 98% Percentage Interest and the Class S
Certificates shall be considered to represent 2% Percentage Interest.
Permitted Transferee: Any Person other than (i) the United States, or any
State or any political subdivision thereof, or any agency or instrumentality of
any of the foregoing, (ii) a foreign government, international organization or
any agency or instrumentality of either of the foregoing, (iii) an organization
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) (except
certain farmers' cooperatives describe in Code section 521) on any excess
inclusions (as defined in Section 860E(c)(1)) with respect to any Class R
Certificate, (iv) rural electric and telephone cooperatives described in Code
section 1381(a)(2)(C), (v) a Person that is not a citizen or resident of the
United States, a corporation, partnership, or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
or an estate or trust whose income from sources without the United States is
includible in gross income for United States federal income tax purposes
regardless or its connection with the conduct of a trade or business within the
United States, and (vi) any other Person so designated by the Trustee based on
an Opinion of Counsel to the effect that any transfer to such Person may cause
the Trust to fail to qualify as two separate REMICs at any time the Certificates
are outstanding. The terms "United States", "State" and "international
organization" shall have the meanings set forth in Code section 7701 or
successor provisions. A corporation will not be treated as an instrumentality of
the United States or of any State or political subdivision thereof if all of its
activities are subject to tax, and, with the exception of the FHLMC, a majority
of its board of directors is not selected by such governmental unit.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
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Pre-Funded Amount: With respect to any Determination Date, the amount
remaining on deposit in the Pre-Funding Account (exclusive of investment
earnings).
Pre-Funding Account: The Pre-Funding Account established in accordance with
Section 4.03 and maintained by the Trustee.
Pre-Funding Account Earnings: With respect to the Distribution Date in
___________ 199_, the actual investment earnings earned during the period from
the Closing Day through the Business Day that is one Business Day before the
related Determination Date (inclusive) as calculated by the Trustee pursuant to
Section 4.03; with respect to the Distribution Date in _________________ 199_,
the actual investment earnings earned during the period from _______________,
199_ through the Business Day that is one Business Day before the related
Determination Date (inclusive) as calculated by the Trustee pursuant to Section
4.03.
Premium Amount: As to any Distribution Date occurring during or after
____________________ 199_, the product of the Premium Percentage and the Class A
Principal Balance after giving effect to distributions to be made on such
Distribution Date.
Premium Percentage: As defined in the Insurance Agreement.
Prepayment Assumption: A conditional rate of prepayment equal to ____% per
annum in the first month of the life of the mortgage loans and an additional
____% (precisely ____) (expressed as a percentage per annum) in each month
thereafter until the twelfth month; beginning in the twelfth month and in each
month thereafter during the life of the mortgage loans, a conditional prepayment
rate of ____% per annum each month is assumed.
Prepayment Interest Shortfall: With respect to any Distribution Date, for
each Mortgage Loan that was the subject during the related Due Period of a
Principal Prepayment in full an amount equal to the excess, if any, of (i) 30
days' interest on the Principal Balance of such Mortgage Loan at the Net Loan
Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant
to application of the Civil Relief Act) over (ii) the amount of interest
actually remitted by the Mortgagor in connection with such Principal Prepayment
less the Servicing Fee for such Mortgage Loan in such month.
Principal Balance: As to any Mortgage Loan and any day, other than a
Liquidated Mortgage Loan, the related Cut-Off Date Principal Balance, minus all
collections credited against the Principal Balance of any such Mortgage Loan.
For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to
have a Principal Balance equal to the Principal Balance of the
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related Mortgage Loan immediately prior to the final recovery of related
Liquidation Proceeds and a Principal Balance of zero thereafter.
Principal Prepayment: Any payment or other recovery of principal on a
Mortgage Loan equal to the outstanding principal balance thereof, received in
advance of the final scheduled Due Date which is intended to satisfy a Mortgage
Loan in full.
Projected Monthly Excess Cashflow: As of any date of calculation, five
times the Excess Spread existing on the Distribution Date immediately preceding
such date of calculation.
Prospectus: The base prospectus of the Seller dated ________________, 199_.
Prospectus Supplement: The prospectus supplement dated
___________________________, 199_, relating to the offering of the Class A
Certificates.
Purchase Price: As to any Mortgage Loan repurchased on any date pursuant to
Section 2.02 or 2.04, an amount equal to the sum of (i) the unpaid Principal
Balance thereof, (ii) the greater of (a) all unpaid accrued interest thereon to
the end of the Due Period preceding the Distribution Date on which such Purchase
Price is included in Available Funds and (b) 30 days' interest thereon, computed
at the applicable Loan Rate; provided, however, that if at the time of
repurchase the Seller is the Servicer, the amount described in clause (ii) shall
be computed at the Net Loan Rate, (iii) (x) any unreimbursed Servicing Advances
with respect to such Mortgage Loan and (y) expenses reasonably incurred or to be
incurred by the Servicer or the Trustee in respect of the breach or defect
giving rise to the purchase obligation and (iv) the amount of any penalties,
fines, forfeitures, legal fees and related costs, judgments and any other costs,
fees and expenses incurred by or imposed on the Trustee or the Trust or with
respect to which any of them are liable arising from a breach by the Seller of
its representations and warranties in Section 2.04 of this Agreement.
Rating Agency: Any statistical credit rating agency, or its successor, that
rated the Senior Certificates at the request of the Depositor at the time of the
initial issuance of the Certificates. If such agency or a successor is no longer
in existence, "Rating Agency" shall be such statistical credit rating agency, or
other comparable Person, designated by the Seller, notice of which designation
shall be given to the Trustee. References herein to the highest short term
unsecured rating category of a Rating Agency shall mean A-1+ or better in the
case of Standard & Poor's and P-1 or better in the case of Moody's and in the
case of any other Rating Agency shall mean such equivalent ratings. References
herein to the highest long-term rating category of a
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Rating Agency shall mean "AAA" in the case of Standard & Poor's and "Aaa" in the
case of Moody's and in the case of any other Rating Agency, such equivalent
rating.
Record Date: The last Business Day of the month immediately preceding the
month in which the related Distribution Date occurs.
Reimbursable Amounts: As of any date of determination, an amount payable to
the Servicer or the Seller with respect to (i) Monthly Advances and Servicing
Advances not previously reimbursed, (ii) any advances reimbursable and not
previously reimbursed pursuant to Section 3.03(vi) and Sections 5.01(a)(v)(3)
and (4), and (iii) any other amounts reimbursable to the Servicer or the Seller
prior to a distribution to the Class R Certificateholders pursuant to this
Agreement.
Reimbursement Amount: As of any Distribution Date, the sum of (x) (i)
Insured Payments previously received by the Trustee and not previously re-paid
to the Certificate Insurer pursuant to Section 5.01(a)(v) hereof plus (ii)
interest accrued on such Insured Payment not previously repaid calculated at the
Late Payment Rate from the date the Trustee received such Insured Payment and
(y) (i) the amount of any Insurance Premium not paid on the date due and (ii)
interest on such amount at the Late Payment Rate. The Certificate Insurer shall
notify the Trustee and Delta of the amount of any Reimbursement Amount.
Related Documents: As defined in Section 2.01.
Released Mortgaged Property Proceeds: As to any Mortgage Loan, proceeds
received by the Servicer in connection with (a) a taking of an entire Mortgaged
Property by exercise of the power of eminent domain or condemnation or (b) any
release of part of the Mortgaged Property from the lien of the related Mortgage,
whether by partial condemnation, sale or otherwise, which are not released to
the Mortgagor in accordance with applicable law and mortgage servicing standards
the Servicer would use in servicing mortgage loans for its own account and this
Agreement.
REMIC: A "real estate mortgage investment conduit" within the meaning of
Section 860D of the Code.
REMIC Certificate Maturity Date: The "latest possible maturity date" as
that term is defined in Section 2.10.
REMIC Change of Law: Any proposed, temporary or final regulation, revenue
ruling, revenue procedure or other official announcement or interpretation
relating to the REMICs and the REMIC Provisions issued after the Closing Date.
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REMIC Provisions: Provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear at Sections 860A through 860G
of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
REO Property: A Mortgaged Property that is acquired by the Servicer on
behalf of the Trustee in foreclosure or by deed in lieu of foreclosure.
Remittance Loan Rate: As to any Mortgage Loan the related Net Loan Rate
minus the sum of the Trustee Fee Rate and the Premium Rate.
Residential Dwelling: A one- to four-family dwelling, a unit in a planned
unit development, a unit in a condominium development or a townhouse.
Responsible Officer: When used with respect to the Trustee, any officer
assigned to the corporate trust group (or any successor thereto), including any
vice president, assistant vice president, trust officer, any assistant
secretary, any trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and having direct responsibility for the administration of this
Agreement. When used with respect to the Seller or Servicer, the President or
any Vice President, Assistant Vice President or any Secretary or Assistant
Secretary.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Seller: Delta Funding Corporation, a New York corporation, or any successor
thereto.
Senior Certificates: The Class A Certificates and the Class S Certificates.
Servicer: Delta Funding Corporation, a New York corporation, or any
successor thereto or any successor hereunder.
Servicing Advances: All reasonable and customary "out of pocket" costs and
expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of the REO Property, including reasonable fees paid
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to any independent contractor in connection therewith, (iv) compliance with the
obligations under Section 3.04, 3.07 or 3.20 and (v) in connection with the
liquidation of a Mortgage Loan, expenditures relating to the purchase or
maintenance of the First Lien pursuant to Section 3.18, all of which reasonable
and customary out-of-pocket costs and expenses are reimbursable to the Servicer
to the extent provided in Sections 3.03(ii), 3.03(viii), 3.07 and 5.01(a)(v).
Servicing Certificate: A certificate completed and executed by a Servicing
Officer on behalf of the Servicer.
Servicing Compensation: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to Section 3.09.
Servicing Fee: As to each Distribution Date and each Mortgage Loan, the
annual fee payable to the Servicer, which subject to Section 3.02 is calculated
as an amount equal to the product of the Servicing Fee Rate and the Principal
Balance thereof at the beginning of the related Due Period.
Servicing Fee Rate: ____% per annum.
Servicing Officer: Any officer of the Servicer involved in, or responsible
for, the administration and servicing of the Mortgage Loans whose name and
specimen signature appear on a list of servicing officers furnished to the
Trustee (with a copy to the Certificate Insurer) by the Servicer, as such list
may be amended from time to time.
Specified Overcollateralized Amount means:
(a) for any Distribution Date occurring during the period commencing
on the Closing Date and ending on the last day of the Due Period in which
the final Subsequent Transfer Date has occurred, $__________;
(b) for any Distribution Date occurring during the period commencing
after the end of the period described in clause (a) above and ending on the
later of the date upon which principal in the amount of one-half the
Maximum Collateral Amount has been received by the Class A
Certificateholders and the 30th Distribution Date following the Closing
Day, the greater of (i) an amount equal to ____% of the Maximum Collateral
Amount and (ii) the product of the Loss Factor and the excess of (A)
one-half of the aggregate Principal Balances of the sum of (x) all Mortgage
Loans which are 91 or more days Delinquent or for which foreclosure
proceedings have commenced and (y) of Mortgage Loans with respect to which
the related Mortgaged Property is REO Property and which became REO
Property prior to the related Mortgage Loan becoming 91 days' Delinquent
over (B) the
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Projected Monthly Excess Cash Flow as of such Distribution Date;
(c) for any Distribution Date occurring after the end of the period in
clause (b) above, the greatest of (i) the lesser of (A) $__________ and (B)
the Amortized Over- collateralized Amount Requirement, (ii) the product of
the Loss Factor and the excess of (A) one-half of the aggregate Principal
Balances of all Mortgage Loans which are 91 or more days Delinquent or for
which foreclosure proceedings have commenced over (B) the Projected Monthly
Excess Cashflow as of such date, (iii) an amount equal to $__________ and
(iv) the sum of the three largest Loan Balances; and
(d) notwithstanding anything to the contrary set forth in clauses (a),
(b) and (c) of this definition, on any Distribution Date on which an Event
of Default has occurred and is continuing, the Specified Overcollateralized
Amount for such Distribution Date shall be the same as the Specified
Overcollateralized Amount which existed on the last Distribution Date on
which an Event of Default had not occurred and was not continuing;
provided, however, that the Certificate Insurer may, in its sole discretion, at
the request of Delta, modify clause (b) and/or clause (c) above for the purpose
of reducing or eliminating, in whole or in part, the application of clause (b)
and/or clause (c) above and the Trustee and the Rating Agencies shall be
notified in writing of such modification prior to the related Distribution Date.
Standard & Poor's: Standard & Poor's Ratings Group, or its successor in
interest.
Startup Day: The day designated as such pursuant to Section 2.09.
Stayed Funds: As defined in Section 8.02(b) hereof.
Subsequent Cut-Off Date: With respect to any Subsequent Mortgage Loans, the
first day of the Due Period during which the related Subsequent Transfer Date
occurs.
Subsequent Mortgage Loan Schedule: As of any date of determination, each
schedule that is identified as a schedule of Subsequent Mortgage Loans and is
attached to a Subsequent Transfer Agreement.
Subsequent Mortgage Loans: The Mortgage Loans identified on a Subsequent
Mortgage Loan Schedule which Subsequent Mortgage Loan must, as of the date of
its transfer to the Trust: (i) not
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be 30 or more days contractually delinquent as of the related Subsequent Cut-Off
Date; (ii) have a remaining term to stated maturity not in excess of 30 years
for fully amortizing loans or 15 years for "Balloon Loans"; (iii) be secured by
a Mortgage in a first or second lien position; (iv) not have a Loan Rate less
than ____%; and (v) be otherwise acceptable to the Depositor and the Certificate
Insurer.
Subsequent Transfer Agreement: Each Subsequent Transfer Agreement entered
into between Delta and the Trustee substantially in the form attached hereto as
Exhibit __.
Subsequent Transfer Date: With respect to any Subsequent Mortgage Loans,
the date such Mortgage Loans are conveyed to the Trust pursuant to the related
Subsequent Transfer Agreement.
Subservicer: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies the requirements set forth in Section
3.01(b) in respect of the qualification of a Subservicer.
Subservicing Agreement: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Mortgage
Loans as provided in Section 3.01(b), a copy of which shall be delivered, along
with any modifications thereto, to the Trustee and the Certificate Insurer.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Section 2.06, the sum of (a) the excess of (i) the aggregate
Principal Balances of all Defective Mortgage Loans to be replaced by Eligible
Substitute Mortgage Loans (after application of principal payments received on
or before the date of substitution of any Eligible Substitute Mortgage Loans as
of the date of substitution) over (ii) the Principal Balance of such Eligible
Substitute Mortgage Loan and (b) the greater of (x) accrued and unpaid interest
on such excess through the Due Period relating to the Distribution Date for
which such Substitution Adjustment will be included as part of Available Funds
and (y) 30 days' interest on such excess calculated on a 360-day year in each
case at the Loan Rate (or Net Loan Rate if the Seller is the Servicer) and (c)
if the Servicer is not the Seller, the amount of any unreimbursed Servicing
Advances made by the Servicer with respect to such Defective Mortgage Loan and
(d) the amount referred to in clause (iv) of the definition of Purchase Price in
respect of such Defective Mortgage Loan.
Tax Matters Person Residual Interest: A 0.000001% interest in the Class R
Certificates, which shall be issued to and held by the Trustee.
Total Expected Losses means the sum of the (i) Cumulative Net Losses on all
the loans from the Closing Date through and
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including the date of determination and (ii) the Delinquency Loss Factor.
Trust: The trust created by this Agreement, the corpus of which consists of
the Mortgage Loans, such assets as shall from time to time be deposited in the
Collection Account, the Pre- Funding Account, the Capitalized Interest Account
and/or the Distribution Account in accordance with this Agreement, property that
secured a Mortgage Loan and that has become REO Property, the Certificate
Insurance Policy, certain hazard insurance policies maintained by the Mortgagors
or the Servicer in respect of the Mortgage Loans and an assignment of the
Depositor's rights under the Purchase Agreement and all proceeds of each of the
foregoing.
Trustee: _____________________________________, or any successor Trustee
appointed in accordance with this Agreement that has accepted such appointment
in accordance with this Agreement.
Trustee's Fee: The fee owed to the Trustee pursuant to a letter agreement
between the Servicer and the Trustee.
Trustee Fee Rate: The per annual rate at which the Trustee Fee is
calculated.
Upper Tier REMIC: The REMIC the assets of which consist of the Lower Tier
Regular Interests, and the right to receive the Lower Tier REMIC Distribution
Amount as evidenced by the Class A and Class S Certificates.
U-R Interest: The sole class of "residual interest" in the Upper Tier
REMIC.
Valuation: With respect to any Mortgaged Property at the time referred to
herein, the Appraised Value of the Mortgaged Property based upon the most recent
appraisal made by or on behalf of the Servicer or the originator of the related
Mortgage Loan.
Section 1.02. Interest Calculations. All calculations of interest hereunder
that are made in respect of the Principal Balance of a Mortgage Loan shall be
made on the basis of a 365-day year and the actual number of days elapsed. All
calculations of interest on the Certificates shall be made on the basis of a
360-day year consisting of twelve 30-day months. The calculation of the
Servicing Fee shall be made in the same manner as described above with respect
to the Mortgage Loans. All dollar amounts calculated hereunder shall be rounded
to the nearest penny with one-half of one penny being rounded down.
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ARTICLE II
Conveyance of Initial Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Initial Mortgage Loans. (a) The Seller,
concurrently with the execution and delivery of this Agreement, does hereby
transfer, assign, set over and otherwise convey to the Trust without recourse
(subject to Sections 2.02 and 2.04)(i) all of its right, title and interest in
and to each Initial Mortgage Loan, including the related CutOff Date Principal
Balance, all interest accruing thereon after the related Due Date in ___________
199_ and all collections in respect of principal received after the Cut-Off Date
(other than payments in respect of accrued interest on the Mortgage Loans due on
or before ___________________, 199_); (ii) property which secured such Mortgage
Loan and which has been acquired by foreclosure or deed in lieu of foreclosure;
(iii) its interest in any insurance policies in respect of the Initial Mortgage
Loans; (iv) such amounts as may be deposited into and held by the Trustee in the
Pre-Funding Account and the Capitalized Interest Account, together with all
investment earnings on such amounts; and (v) all proceeds of any of the
foregoing. In addition, on or prior to the Closing Date, the Seller shall cause
the Certificate Insurer to deliver the Certificate Insurance Policy to the
Trustee.
In connection with such transfer, assignment and conveyance by the Seller
the Seller has delivered to, and deposit with the Trustee, on or before the
Closing Date, the following documents or instruments with respect to each
Mortgage Loan (the "Related Documents") and the Seller, in connection with any
Subsequent Transfer, shall deliver to, and deposit with the Trustee, on or
before the Subsequent Transfer Date, the Related Documents with respect to each
Subsequent Mortgage Loan:
(i) The original Mortgage Note, with all prior and intervening
endorsements showing a complete chain of endorsements from the originator
of the Mortgage Loan to the Person so endorsing the Mortgage Loan to the
Trustee, endorsed by such Person "Pay to the order of
__________________________________, as Trustee for Delta Funding Home
Equity Loan Trust 199_-_ without recourse" and signed, by facsimile or
manual signature, in the name of the Seller by a Responsible Officer;
(ii) Any of: (1) the original Mortgage, and related power of attorney,
if any, with evidence of recording thereon, (2) a copy of the Mortgage and
related power of attorney, if any, certified as a true copy of the original
Mortgage or power of attorney by a Responsible Officer of
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the Seller by facsimile or manual signature or by the closing attorney or
by an officer of the title insurer or agent of the title insurer that
issued the related title insurance policy, in each case, if the original
has been transmitted for recording until such time as the original is
returned by the public recording office or (3) a copy of the original
recorded Mortgage and related power of Attorney, if any, certified by the
public recording office;
(iii) The original Assignment of Mortgage in recordable form, from the
Seller to "____________________________, as Trustee for Delta Funding Home
Equity Loan Trust 199_-_";
(iv) The original lender's policy of title insurance or a true copy
thereof, or if such original lender's title insurance policy has been lost,
a copy thereof certified by the appropriate title insurer to be true and
complete, or if such lender's title insurance policy has not been issued as
of the Closing Date, a marked up commitment (binder) to issue such policy;
(v) All intervening assignments, if any, showing a complete chain of
assignments from the originator to the Seller, including any recorded
warehousing assignments, with evidence of recording thereon, or a copy
thereof certified by a Responsible Officer of the Seller by facsimile or
manual signature or by the closing attorney or by an officer of the title
insurer or agent of the title insurer that issued the related title
insurance policy, as a true copy of the original of such intervening
assignments if the original has been transmitted for recording until such
time as the original is returned by the public recording office or a copy
of the original recorded intervening assignments certified by the public
recording office; and
(vi) Originals of all assumption, written assurance, substitution and
modification agreements, if any.
In instances where the original recorded Mortgage is not delivered as
provided above, and in instances where intervening assignments called for by
clause (v) above are unavailable, the Seller will deliver or cause to be
delivered the original recorded Mortgage and intervening assignments to the
Trustee promptly upon receipt thereof but in no event later than one year after
the Closing Date.
The Seller hereby confirms to the Trustee that it has caused the portions
of the Electronic Ledger relating to the Mortgage Loans to be clearly and
unambiguously marked, and has made the appropriate entries in its general
accounting records, to indicate that such Mortgage Loans have been transferred
to the
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Trustee and constitute part of the Trust in accordance with the terms of the
trust created hereunder.
(b) The parties hereto intend that the transaction set forth herein be a
sale by the Seller to the Trust of all the Depositor's right, title and interest
in and to the Mortgage Loans and other property described above. In the event
the transaction set forth herein is deemed not to be a sale, the Seller hereby
grants to the Trust a security interest in all of the Seller's right, title and
interest in, to and under the Mortgage Loans and other property described above;
and this Agreement shall constitute a security agreement under applicable law.
The Seller, the Servicer and the Trustee shall, to the extent consistent with
this Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of the Agreement.
Except as may otherwise expressly be provided herein, neither the Seller,
the Servicer nor the Trustee shall (and the Servicer shall ensure that no
Subservicer shall) assign, sell, dispose of or transfer any interest in the
Trust or any portion thereof, or permit the Trust or any portion thereof to be
subject to any lien, claim, mortgage, security interest, pledge or other
encumbrance of, any other Person.
In the event that the parties hereto have failed to transfer the entire
legal ownership in and to each Mortgage Loan to the Trust, the parties hereto
intend that this document operate to transfer the entire equitable ownership
interest in and to each Mortgage Loan to the Trust.
(c) Within 30 days of the Closing Date or any Subsequent Transfer Date, as
the case may be, the Seller, at its own expense, shall either (i) prepare and
send for recording the Assignments of Mortgage in favor of the Trustee in the
appropriate real property or other records or (ii) deliver to the Trustee the
Assignments of Mortgage in favor of the Trustee in form for recordation,
together with an Opinion of Counsel (a copy of which shall be delivered to the
Rating Agencies and the Certificate Insurer) to the effect that recording is not
required to protect the Trustee's right, title and interest in and to the
related Mortgage Loan (to the extent provided herein) or, in the event a court
should recharacterize the conveyance of the Mortgage Loans (to the extent
provided herein) as a loan or a pledge of security for a loan, to perfect a
first priority security interest in favor of the Trustee in the related Mortgage
Loan. With respect to any Assignment of Mortgage as to which the related
recording information is unavailable within 30 days following the Closing Date
or any Subsequent Transfer Date, as
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the case may be, such Assignment of Mortgage shall be submitted for recording
within 30 days after receipt of such information but in no event later than one
year after the Closing Date or any Subsequent Transfer Date, as the case may be.
The Trustee shall be required to retain a copy of each Assignment of Mortgage
submitted for recording. In the event that any such Assignment of Mortgage is
lost or returned unrecorded because of a defect therein, the Seller shall
promptly prepare a substitute Assignment of Mortgage or cure such defect, as the
case may be, and thereafter the Seller shall be required to submit each such
Assignment of Mortgage for recording. Any failure of the Seller to comply with
this Section 2.01(c) shall result in the obligation of the Seller to purchase or
substitute for the related Mortgage Loans pursuant to the provisions of Section
2.02.
(d) [RESERVED]
(e) The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in Section 2.02. Without limiting the effect
of the preceding sentence, in reviewing any Mortgage File pursuant to such
subsection, the Trustee shall have no responsibility for determining whether any
document is valid and binding, whether the text of any assignment or endorsement
is in proper or recordable form (except, if applicable, to determine if the
Trustee is the assignee or endorsee), whether any document has been recorded in
accordance with the requirements of any applicable jurisdiction, or whether a
blanket assignment is permitted in any applicable jurisdiction, but shall only
be required to determine whether a document has been executed, that it appears
to be what it purports to be, and, where applicable, that it purports to be
recorded, but shall not be required to determine whether any Person executing
any document is authorized to do so or whether any signature thereon is genuine.
Section 2.02. Acceptance by Trustee. The Trustee hereby acknowledges its
receipt of the Certificate Insurance Policy and the sale and assignment of the
Mortgage Loans, and, subject to the review and period for delivery provided for
in Section 2.01, its receipt of the Mortgage Files, and declares that the
Trustee holds and will hold such documents and all amounts received by it
thereunder and hereunder in trust, upon the terms herein set forth, for the use
and benefit of all present and future Certificateholders and the Certificate
Insurer. If the Seller is given notice under this Section 2.02 that the Mortgage
File is defective or incomplete and if the Seller does not correct or cure such
omission or defect within the 60-day period specified in Section 2.02, the
Seller shall purchase such Mortgage Loan from the Trustee (i) on the
Determination Date in the month following the month in which such 60-day period
expired at the Purchase Price of such Mortgage Loan or (ii) upon the expiration
of such 60-day period if the omission or defect would result in
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the related Mortgage Loan not being a Qualified Mortgage Loan for purposes of
Section 860G(a)(3) of the Code. The Purchase Price for the purchased Mortgage
Loan shall be deposited in the Collection Account no later than the applicable
Determination Date or the Business Day preceding the expiration of such 60-day
period, as the case may be, and, upon receipt by the Trustee of written
notification of such deposit signed by an officer of the Seller, the Trustee
shall release to the Seller the related Mortgage File and the Trustee shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, as shall be necessary to vest in the Seller or its designee
any Mortgage Loan released pursuant hereto. It is understood and agreed that the
obligation of the Seller to purchase any Mortgage Loan as to which a material
defect in or omission of a constituent document exists shall constitute the sole
remedy against the Seller respecting such defect or omission available to the
Certificate Insurer, the Certificateholders or the Trustee on behalf of
Certificateholders. An Opinion of Counsel to the effect set forth in Section
2.06(d) shall be delivered to the Trustee and the Certificate Insurer in
connection with any such repurchase.
The Servicer, promptly following the transfer of (i) a Defective Mortgage
Loan from or (ii) an Eligible Substitute Mortgage Loan to the Trust pursuant to
this Section 2.02 and Section 2.06, as the case may be, shall amend the Mortgage
Loan Schedule, appropriately mark the Electronic Ledger and make appropriate
entries in its general account records to reflect such transfer and the addition
of any Eligible Substitute Mortgage Loan, if applicable.
No later than the 30th day following the Closing Date, with respect to the
Initial Mortgage Loans, and the final Subsequent Transfer Date, with respect to
the Subsequent Mortgage Loans, the Trustee shall certify to the Seller, the
Certificate Insurer and the Servicer that it has reviewed each Mortgage File and
that, 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 the certification in the form annexed hereto as Exhibit _ as not
covered by such certification), (i) all documents constituting part of such
Mortgage File required to be delivered to it pursuant to paragraphs (i) - (v) of
Section 2.01(a) of this Agreement are in its possession, (ii) such documents
have been reviewed by it and appear regular on their face and relate to such
Mortgage Loan, (iii) based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule which corresponds to items
(i), (ii), (iii), (v) and (vii) of the definition of "Mortgage Loan Schedule"
accurately reflects information set forth in the Mortgage File. If within such
30-day period the Trustee finds any document constituting a part of a Mortgage
File not to have been executed or received or to be unrelated to the Mortgage
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Loans identified in said Mortgage Loan Schedule or, if in the course of its
review, the Trustee determines that such Mortgage File is otherwise defective in
any material respect, the Trustee shall promptly upon the conclusion of its
review notify the Seller and the Certificate Insurer, in the form of an
exception report and the Seller shall have a period of 60 days after such notice
within which to correct or cure any such defect.
On the 360th day following the final Subsequent Transfer Date, the Trustee
shall deliver to the Seller, the Servicer and the Certificate Insurer an updated
exception report showing the documents outstanding pursuant to 2.01 (a) along
with a final certification annexed hereto as Exhibit P from the previous
certification issued in the form of Exhibit _. The Trustee shall also maintain
records adequate to determine the date on which any document required to be
delivered to it after such 360th day following the final Subsequent Transfer
Date must be delivered to it, and on each such date, the Trustee shall review
the related Mortgage File to determine whether such document has, in fact, been
delivered. After the delivery of the final certification, a form of which is
attached hereto as Exhibit _, the Trustee shall provide to the Servicer, the
Seller and the Certificate Insurer, and the Seller shall provide to the
Certificate Insurer, the Trustee and the Servicer, no less frequently than
monthly, updated certifications indicating the then current status of exceptions
until all such exceptions have been eliminated; provided that the delivery of
the final certification shall not act as a waiver of any of the rights the
Certificate Insurer and the Certificateholders may have with respect to such
exceptions, and all rights are reserved with respect thereto.
The Trustee makes no representations as to and shall not be responsible to
verify (i) the validity, sufficiency, legality, due authorization, recordation
or genuineness of any document or (ii) the collectability, insurability or
effectiveness of any of the Mortgage Loans.
Section 2.03. Representations and Warranties Regarding the Seller and the
Servicer. The Seller and the Servicer represent and warrant that, (i) as of the
Closing Date and (ii) as of each Subsequent Transfer Date:
(i) Each of the Seller and the Servicer is a corporation licensed as a
mortgage banker duly organized, validly existing and in good standing under
the laws of the State of New York and has, and had at all relevant times,
full corporate power to originate the Mortgage Loans, to own its property,
to carry on its business as presently conducted and to enter into and
perform its obligations under this Agreement;
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(ii) The execution and delivery of this Agreement by the Seller and
the Servicer and the performance by each of them of and compliance with the
terms of this Agreement will not violate the Seller's or the Servicer's
articles of incorporation or by-laws or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, or result in the breach or acceleration of, any material contract,
agreement or other instrument to which the Seller or the Servicer is a
party or which may be applicable to the Seller or the Servicer or any of
their respective assets;
(iii) Each of the Seller and the Servicer has the full power and
authority to enter into and consummate all transactions contemplated by
this Agreement to be consummated by it, has duly authorized the execution,
delivery and performance of this Agreement, and has duly executed and
delivered this Agreement. This Agreement, assuming due authorization,
execution and delivery by the other parties hereto, constitutes a valid,
legal and binding obligation of the Seller and the Servicer, enforceable
against it in accordance with the terms hereof, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, receivership,
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);
(iv) Neither the Seller nor the Servicer is in violation of, and the
execution and delivery of this Agreement by the Seller and the Servicer and
the performance by each of them and compliance with the terms of this
Agreement will not constitute a violation with respect to, any order or
decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction, which violation would
materially and adversely affect the condition (financial or otherwise) or
operations of the Seller or the Servicer or any of their respective
properties or materially and adversely affect the performance of any of
their respective duties hereunder;
(v) There are no actions or proceedings against, or investigations of,
the Seller or the Servicer pending or, to the knowledge of the Seller or
the Servicer, threatened, before any court, administrative agency or other
tribunal (A) that, if determined adversely, would prohibit its entering
into this Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (C) that, if determined
adversely, would prohibit or materially and adversely affect the
performance by the Seller or the Servicer of any of their respective
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obligations under, or the validity or enforceability of this Agreement;
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of, or compliance by the Seller or the Servicer
with, this Agreement, or for the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained prior to the
Closing Date;
(vii) The Seller did not sell the Mortgage Loans to the Trust with any
intent to hinder, delay or defraud any of its creditors; the Seller will
not be rendered insolvent as a result of the sale of the Mortgage Loans to
the Trust;
(viii) The Seller acquired title to the Mortgage Loans in good faith,
without notice of any adverse claim;
(ix) The collection practices used by the Seller and the Servicer with
respect to the Mortgage Loans have been, in all material respects, legal,
proper, prudent and customary in the non-conforming mortgage servicing
business;
(x) The transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by the Seller pursuant to this Agreement are not subject to
the bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction;
(xi) The Servicer believes that the Servicing Fee Rate provides a
reasonable level of base compensation to the Servicer for servicing the
Mortgage Loans on the terms set forth herein;
(xii) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer; and
(xiii) The Servicer has caused or hereby agrees to cause to be
performed any and all acts required to be performed to preserve the rights
and remedies of the Trustee in any insurance policies applicable to the
Mortgage Loans, including, without limitation, any necessary notifications
of insurers, assignments of policies or interests therein, and
establishments of co-insured, joint loss payee and mortgagee rights in
favor of the Trustee.
The representations and warranties set forth in this Section 2.03 shall survive
the sale and assignment of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representations and warranties which materially and adversely
affects the interests
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of the Certificateholders or the Certificate Insurer, the Person discovering
such breach shall give prompt written notice to the other parties and to the
Certificate Insurer. Within 60 days of its discovery or its receipt of notice of
such breach, or, with the prior written consent of a Responsible Officer of the
Trustee and the Certificate Insurer, such longer period specified in such
consent, the Servicer shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Seller Regarding the
Mortgage Loans. (a) The Seller represents and warrants to the Trustee on behalf
of the Certificateholders as follows as of the Closing Date with respect to the
Initial Mortgage Loans and as of each related Subsequent Transfer Date with
respect to the Subsequent Mortgage Loans:
(a)(i) The information set forth on the Mortgage Loan Schedule
relating to the Initial Mortgage Loans is complete, true and correct as of
the Cut-Off Date;
(ii) The information set forth on the Mortgage Loan Schedule relating
to any Subsequent Transfer Date is complete, true and correct as of the
related Subsequent Cut-Off Date;
(b) The Mortgage Note and the Mortgage have not been assigned or pledged by
the Seller to a Person other than the Purchaser, and immediately prior to the
transactions herein contemplated, the Seller had good and marketable title
thereto, and was the sole owner and holder of the Mortgage Loan free and dear of
any and all liens, claim, encumbrances, participation interests, equities,
pledges, charges or security interests of any nature (collectively, a "Lien"),
other than any such Lien released simultaneously with the sale contemplated
herein, and had full right and authority, subject to no interest or
participation of, or agreement with, any other party, to sell and assign the
same pursuant to this Agreement, and immediately upon the transfer and
assignment of each Mortgage Loan as contemplated by the Mortgage Loan Purchase
Agreement, the Purchaser will be the sole beneficial owner of, each Mortgage
Loan free and clear of any lien, claim, participation interest, mortgage,
security interest, pledge, charge or other encumbrance or other interest of any
nature;
(c) The Mortgage is a valid and existing lien on the property therein
described, and the Mortgaged Property is free and clear of all encumbrances and
liens having priority over the lien of the Mortgage, except liens for real
estate taxes and special assessments not yet due and payable, in the case of a
Mortgaged Property that is a condominium or an individual unit in a planned unit
development, liens for common charges permitted by statute, and in the case of a
Mortgage Loan secured by a second
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lien on the related Mortgaged Property, the lien securing the related First
Lien. Any security agreement, chattel mortgage or equivalent document related to
the Mortgage and delivered to the Trustee establishes in the Seller a valid and
subsisting lien on the property described therein, and the Seller has full right
to sell and assign the same to the Purchaser;
(d) The terms of the Mortgage Note and the Mortgage have not been impaired,
altered or modified in any respect, except by a written instrument which has
been recorded, if necessary to protect the interests of the Purchaser, and which
has been delivered to the Trustee. The substance of any such alteration or
modification is reflected on the Mortgage Loan Schedule;
(e) No instrument of release or waiver has been executed in connection with
the 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
primary mortgage guaranty insurer, if any, and which has been delivered to the
Trustee;
(f) Except with respect to delinquencies described in clause (l) hereof, no
Mortgagor is in default in complying with the terms of the Mortgage Note or the
Mortgage, and the Seller has not waived any default, breach, violation or event
of acceleration except that the Seller may have accepted late payments, and all
taxes, governmental assessments, insurance premiums, or water, sewer and
municipal charges which previously became due and owing have been paid, or an
escrow of funds has been established in an amount sufficient to pay for every
such item which remains unpaid and which has been assessed but is not yet due
and payable. The Seller has not 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,
except for interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage proceeds, whichever is more recent, to the day
which precedes by one month the Due Date of the first installment of principal
and interest;
(g) There is no proceeding pending or threatened for the total or partial
condemnation of the Mortgaged Property, nor is such a proceeding currently
occurring, and such property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or otherwise, so as to affect adversely the
value of the Mortgaged Property as security for the Mortgage Loan or the use for
which the premises were intended;
(h) There are no mechanics' or similar liens or claims which have been
filed for work, labor or material (and no rights are outstanding that under law
could give rise to such lien)
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affecting the Mortgaged Property which are, or may be, liens prior or equal to,
or coordinate with, the lien of the Mortgage except those that are stated in the
title insurance policy and for which related losses are affirmatively insured
against by such policy;
(i) All of the improvements that were included for the purpose of
determining the Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property, and no improvements
on adjoining properties encroach upon the Mortgaged Property except those that
are stated in the title insurance policy and for which related losses are
affirmatively insured against by such policy;
(j) There do not exist any circumstances or conditions with respect to the
Mortgage Loan, the Mortgaged Property, the Mortgagor or the Mortgagor's credit
standing that can be reasonably expected to adversely affect the value or
marketability of the Mortgage Loan;
(k) 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 and, with respect to the use and occupancy of
the same, including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities and the Mortgaged Property is lawfully occupied under applicable
law;
(l) All parties that have had any interest in the Mortgage Loan, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (1) in compliance with any and
all licensing requirements of the United States and of the laws of the state
wherein the Mortgaged Property is located that are applicable to such parties,
and (2)(A) organized under the laws of such state, or (B) qualified to do
business in such state or exempt from such qualification in a manner so as not
to affect adversely the enforceability of such Mortgage Loan, or (C) federal
savings and loan associations or national banks having principal offices in such
state, or (D) not doing business in such state;
(m) With respect to the Initial Mortgage Loans, as of the Cut-Off Date, (i)
all payments required to be made on each Initial Mortgage Loan under the terms
of the related Mortgage Note have been made except for ____% of the Initial
Mortgage Loans (calculated as a percentage of the aggregate Loan Balances of all
the Initial Mortgage Loans) which are up to ____ days Delinquent, and (ii) no
payment required to be made on any Initial Mortgage Loan has been more than ____
days Delinquent
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more than once during the twelve month period immediately preceding the Cut-Off
Date;
(n) Each of the documents and instruments included in a Mortgage File is
duly executed and in due and proper form and each such document or instrument is
in a form generally acceptable to prudent institutional mortgage lenders that
regularly originate or purchase mortgage loans;
(o) The Mortgage Note and the related 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, receivership, 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). All parties to the Mortgage Note and the
Mortgage had legal capacity to execute the Mortgage Note and the Mortgage, and
each Mortgage Note and Mortgage have been duly and properly executed by such
parties. The Mortgagor is a natural person who is a party to the Mortgage Note
and the Mortgage in an individual capacity, and not in the capacity of a trustee
or otherwise;
(p) 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 the Origination and Servicing of the Mortgage Loan or otherwise
applicable to the Mortgage Loan have been complied with, and the Seller has and
shall maintain in its possession, available for the Trustee's inspection, and
shall deliver to the Trustee upon demand, evidence of compliance with all such
requirements;
(q) The proceeds of the Mortgage Loan have been fully disbursed, there is
no requirement for future advances thereunder and 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, closing or recording the Mortgage Loan were paid;
(r) Each Mortgage Loan is covered by an ALTA mortgage title insurance
policy or such other form of policy acceptable to FNMA or FHLMC, issued by and
constituting the valid and binding obligation of a title insurer generally
acceptable to prudent mortgage lenders that regularly originate or purchase
mortgage loans comparable to the Mortgage Loans for sale to prudent investors in
the secondary market that invest in mortgage loans such as the Mortgage Loans
and qualified to do business in the jurisdiction where the Mortgaged Property is
located, insuring
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the Seller, its successors and assigns, as to the first priority lien of the
Mortgage in the case of a Mortgage Loan secured by a first lien on the related
Mortgaged Property and the second priority lien of the Mortgage in the case of a
Mortgage Loan secured by a second lien on the related Mortgaged Property, in the
original principal amount of the Mortgage Loan. The Seller is the sole named
insured of such mortgage title insurance policy, the assignment to the Purchaser
or the Trustee as assignee of the Purchaser of the Seller's interest in such
mortgage title insurance policy does not require the consent of or notification
to the insurer or the same has been obtained, and 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 Purchaser or the Trustee as assignee of the
Purchaser upon the consummation of the transactions contemplated by this
Agreement. No claims have been made under such mortgage title insurance policy
and no prior holder of the related Mortgage, including the Seller, has done, by
act or omission, anything that would impair the coverage of such mortgage title
insurance policy;
(s) All improvements upon the Mortgaged Property are insured by a generally
acceptable insurer 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 this
Pooling and Servicing Agreement. If the Mortgaged Property was, at the time of
origination of the related Mortgage Loan, in an area identified on a Flood
Hazard Boundary Map or Flood Hazard Rate Map issued by the Federal Emergency
Management Agency as having special flood hazards (and if the flood insurance
policy referenced herein has been made available), a flood insurance policy is
in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage described in this Pooling and
Servicing Agreement. All individual insurance policies (collectively, the
"hazard insurance policy") are the valid and binding obligation of the insurer
and contain a standard mortgagee clause naming the Seller, its successors and
assigns, as mortgagee. All premiums thereon have been paid. The Mortgage
obligates the Mortgagor thereunder 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;
(t) The Mortgage Loan is not subject to any right of rescission, 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 in accordance with the terms thereof, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in
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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;
(u) The Mortgage Loan was originated or purchased and reunderwritten by the
Seller. No more than ____% of the Initial Mortgage Loans, measured by
outstanding principal balances as of the Cut-Off Date, were originated by
Independent originators and acquired by the Seller;
(v) Except with respect to any Balloon Mortgage Loan, each Mortgage Loan is
payable in equal monthly installments of principal and interest which would be
sufficient, in the absence of late payments, to fully amortize such loan within
the term thereof, beginning no later than ____ days after disbursement of the
proceeds of the Mortgage Loan and bears a fixed interest rate for the term of
the Mortgage Loan. Each Balloon Mortgage Loan has an original term of not less
than __________ years and which provides for level monthly payments based on a
__________ year amortization schedule and a final Monthly Payment substantially
greater than the preceding Monthly Payments;
(w) The Mortgage contains a customary provision for the acceleration of the
payment of the unpaid principal balance of the Mortgage Loan in the event the
related Mortgaged Property is sold without the prior consent of the holder
thereunder;
(x) No Mortgage Loan is a construction loan;
(y) The Mortgage Note is not and has not been secured by any collateral,
pledged account or other security except the lien of the corresponding Mortgage
and the security interest of any applicable security agreement or chattel
mortgage referred to in clause (c) above;
(z) The Mortgage contains customary and enforceable provisions which render
the rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security, including, (i)
in the case of a Mortgage designated as a deed of trust, by trustee's sale, and
(ii) otherwise by judicial or nonjudicial foreclosure. There is no homestead or
other exemption available to the Mortgagor that would interfere with the right
to sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage;
(aa) With respect to each Mortgage constituting 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, and no fees or
expenses are or will become payable by the Trustee or the Certificateholders to
the
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trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor, which fees and expenses shall constitute
Servicing Advances;
(ab) The Mortgaged Property is located in the state identified in the
Mortgage Loan Schedule and consists of at least one parcel of real property with
a one family residence erected thereon, or a two- to four-family dwelling, or an
individual condominium unit, provided, however, that no residence or dwelling is
a co-operative unit or a mobile home or a manufactured dwelling. No Mortgaged
Properties are held under a ground lease;
(bb) The Mortgage Loans were underwritten in accordance with the Seller's
underwriting guidelines described in the Prospectus Supplement under the heading
"Delta Funding Corporation--Underwriting";
(cc) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for repayment
thereof have not been made, and no escrow deposits or payments of other charges
or payments due the Seller have been capitalized under the Mortgage or the
related Mortgage Note;
(dd) No Mortgage Loan was originated under a buy-down plan;
(ee) Other than as provided by this Agreement, there is no obligation on
the part of the Seller or any other party to make payments in addition to those
made by the Mortgagor;
(ff) The Seller is in possession of a complete Mortgage File, except those
documents delivered as directed by the Purchaser to the Trustee, and there are
no custodial agreements in effect adversely affecting the right or ability of
the Seller to make the document deliveries required hereby;
(gg) No Mortgage Loan was selected for inclusion under this Agreement on
any basis which was intended to have a material adverse effect on the
Certificateholders or the Certificate Insurer;
(hh) No Mortgage Loan has a shared appreciation or other contingent
interest feature;
(ii) With respect to each Mortgage Loan secured by a second lien on the
related Mortgaged Property:
(i) if the Loan-to-Value Ratio is higher than ____%, either the related
first lien does not provide for a balloon payment or the maturity date of each
Mortgage Loan with
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respect to which a first lien on the related Mortgaged Property provides for a
balloon payment is prior to the maturity date of the mortgage loan relating to
such first lien;
(ii) the related first lien on any Mortgaged Property with respect to
which the related Mortgage Loan secured by a second lien does not provide
for negative amortization;
(iii) either no consent for the Mortgage Loan secured by a second lien
on the related Mortgaged Property is required by the holder of the related
first lien or such consent has been obtained and is contained in the
Mortgage File; and
(iv) except with respect to no more than ____% of the Initial Mortgage
Loans which are Mortgage Loans secured by a second lien on the related
Mortgaged Property, measured by outstanding Principal Balances as of the
Cut-Off Date, the related first lien is not held by an individual;
(jj) Each Mortgage Loan conforms, and all such Mortgage Loans in the
aggregate conform, in all material respects to the description thereof set forth
in the Prospectus Supplement;
(kk) A full appraisal on forms approved by FNMA or FHLMC was performed in
connection with the origination of the related Mortgage Loan. Each appraisal
meets guidelines that would be generally acceptable to prudent mortgage lenders
that regularly originate or purchase mortgage loans comparable to the Mortgage
Loans for sale to prudent investors in the secondary market that invest in
mortgage loans such as the Mortgage Loans;
(ll) To the best of the Seller's knowledge, no Mortgaged Property was, as
of the Cut-Off Date or, with respect to Subsequent Mortgage Loans, as of the
related Subsequent Cut-Off Date, located within a one-mile radius of any site
listed in the National Priorities List as defined under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
on any similar state list of hazardous waste sites which are known to contain
any hazardous substance or hazardous waste;
(mm) None of the Mortgage Loans are subject to a bankruptcy proceeding;
(nn) No more than ____% of the aggregate Principal Balance of all the
Initial Mortgage Loans as of Cut-Off Date relates to Mortgage Loans originated
or purchased under the Seller's limited documentation program for self-employed
borrowers;
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(oo) The range of points financed or "net funded" on Mortgage Loans
originated after ________________ is ____% to ____%; and
(pp) Each Mortgage Loan constitutes a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code.
(b) It is understood and agreed that the representations and warranties set
forth in this Section 2.04 shall survive delivery of the respective Mortgage
Files to the Trustee and the termination of the rights and obligations of the
Servicer pursuant to Section 7.04 or 8.01. Upon discovery by the Seller, the
Servicer, the Certificate Insurer or a Responsible Officer of the Trustee of a
breach of any of the foregoing representations and warranties, which materially
and adversely affects the interests of the Trust or the Certificateholders or
the Certificate Insurer in the related Mortgage Loan, the party discovering such
breach shall give prompt written notice to the other parties and the Certificate
Insurer. Within ____ days of its discovery or its receipt of notice of breach,
the Seller shall use all reasonable efforts to cure such breach in all material
respects or shall purchase from the Trust or substitute an Eligible Substitute
Mortgage Loan as provided in Section 2.06 for such Mortgage Loan from the Trust.
Any such purchase by the Seller shall be at the Purchase Price, and in each case
shall be accomplished in the manner set forth in Section 2.02. It is understood
and agreed that the obligation of the Seller to cure, substitute or purchase any
Mortgage Loan as to which such a breach has occurred and is continuing shall
constitute the sole remedies against the Seller respecting such breach available
to Certificateholders, the Certificate Insurer or the Trustee on behalf of
Certificateholders. An Officer's Certificate and Opinion of Counsel to the
effect set forth in Section 2.06(d) shall be delivered to the Trustee in
connection with any such repurchase.
Section 2.05. [Intentionally Omitted]
Section 2.06. Substitution of Mortgage Loans. (a) On a Determination Date
within two years following the Closing Date and which is on or before the date
on which the Seller would otherwise be required to repurchase a Mortgage Loan
under Section 2.02, or 2.04, the Seller may deliver to the Trustee one or more
Eligible Substitute Mortgage Loans in substitution for any one or more of the
Defective Mortgage Loans which the Seller would otherwise be required to
repurchase pursuant to Section 2.02 or 2.04.
(b) The Seller shall notify the Servicer and the Trustee in writing not
less than five Business Days before the related Determination Date which is on
or before the date on which the Seller would otherwise be required to repurchase
such Mortgage Loan pursuant to Section 2.02, or 2.04 of its intention to effect
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a substitution under this Section 2.06. On such Determination Date (the
"Substitution Date"), the Seller shall deliver to the Trustee (1) the Eligible
Substitute Mortgage Loans to be substituted for the Defective Mortgage Loans,
(2) a list of the Defective Mortgage Loans to be substituted for by such
Eligible Substitute Mortgage Loans, (3) an Officer's Certificate (A) stating
that no failure by the Servicer described in Section 8.01 shall have occurred
and be continuing, (B) stating that the aggregate principal balance of all
Eligible Substitute Mortgage Loans (determined with respect to each Eligible
Substitute Mortgage Loan as of the Determination Date on which it was
substituted) including the principal balance of Eligible Substitute Mortgage
Loans being substituted on such Determination Date does not exceed an amount
equal to 5% of the greater of the Aggregate Principal Balance (i) as of the
Closing Date or (ii) as of the end of the Funding Period, (C) stating that all
conditions precedent to such substitution specified in subsection (a) have been
satisfied and attaching as an exhibit a supplemental Mortgage Loan schedule (the
"Supplemental Mortgage Loan Schedule") setting forth the same type of
information as appears on the Mortgage Loan Schedule and representing as to the
accuracy thereof and (D) confirming that the representations and warranties
contained in Section 2.04 are true and correct in all material respects with
respect to the Substitute Mortgage Loans on and as of such Determination Date,
provided that remedies for the inaccuracy of such representations are limited as
set forth in Sections 2.02, 2.04 and this Section 2.06, (4) an Opinion of
Counsel to the effect set forth below and (5) a certificate stating that cash in
the amount of the related Substitution Adjustment, if any, has been deposited to
the Collection Account. Upon receipt of the foregoing, the Trustee shall release
such Defective Mortgage Loans to the Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Sections 2.06(a) and (b) above and the grant of such Eligible Substitute
Mortgage Loans to the Trustee pursuant to Section 2.06(a) above, Exhibit C to
this Agreement shall be deemed to be amended to exclude all Mortgage Loans being
replaced by such Eligible Substitute Mortgage Loans and to include the
information set forth on the Supplemental Mortgage Loan Schedule with respect to
such Eligible Substitute Mortgage Loans, and all references in this Agreement to
Mortgage Loans shall include such Eligible Substitute Mortgage Loans and be
deemed to be made on or after the related Substitution Date, as the case may be,
as to such Eligible Substitute Mortgage Loans.
(d) In connection with any Mortgage Loan that the Seller is required to
purchase or replace, the Seller shall deliver to the Trustee and the Certificate
Insurer an Opinion of Counsel to the effect that such purchase or substitution
will not cause (x) any federal tax to be imposed on the Trust, including without
limitation, any Federal tax imposed on "prohibited transactions"
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under Section 860F(a)(1) of the Code or on "contributions after the start-up
day" under Section 860G(d)(1) of the Code or (y) any portion of the Trust to
fail to qualify as a REMIC at any time that any Certificate is outstanding. In
the event that such opinion indicates that a repurchase or substitution will
result in the imposition of a prohibited transaction tax, give rise to net
taxable income or be deemed a contribution to a REMIC after its Startup Day, the
Seller shall not be required to repurchase or replace any such Mortgage Loan
unless and until the Servicer has determined there is an actual or imminent
default with respect thereto or that such defect or breach adversely affects the
enforceability of such Mortgage Loan.
Section 2.07. Execution and Authentication of Certificates. The Trustee on
behalf of the Trust shall cause to be executed, authenticated and delivered on
the Closing Date to or upon the order of the Depositor, in exchange for the
Mortgage Loans, concurrently with the sale, assignment and conveyance to the
Trustee of the Mortgage Loans, each Class of Senior Certificates in authorized
denominations and the Class R Certificates, together evidencing the ownership of
the entire Trust.
Section 2.08. Designation of Interests in REMIC. The Class U-R Interests
are hereby designated as the single class of "residual interests" in the Upper
Tier REMIC for purposes of the REMIC Provisions. The Class A Certificates and
the Class S Components are hereby designated as "regular interests" in the Upper
Tier REMIC for purposes of the REMIC Provisions. The Class L-R Interests are
hereby designated as the single class of "residual interests" in the Lower Tier
REMIC for purposes of the REMIC Provisions. The Lower Tier Regular Interests are
hereby designated as "regular interests" in the Lower Tier REMIC for purposes of
the REMIC Provisions.
Section 2.09. Designation of Startup Day of REMICs. The Closing Date is
hereby designated as the "start-up day" of both the Upper Tier REMIC and the
Lower Tier REMIC within the meaning of Section 860G(a)(9) of the Code.
Section 2.10. REMIC Certificate Maturity Date. Solely for purposes of
satisfying Section 1.860G-1(a)(4)(iii) of the Treasury Regulations, the "latest
possible maturity date" of both the Upper Tier REMIC and the Lower Tier REMIC is
the Distribution Date in ___________________.
Section 2.11. Tax Returns and Reports to Certificateholders. (a) For
federal income tax purposes, the Trust shall have a calendar year and shall
maintain its books on the accrual method of accounting.
(b) The Trustee shall prepare or cause to be prepared, execute and deliver
to the Servicer or Certificateholders, as
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applicable, any income tax information returns for each taxable year with
respect to the Trust containing such information at the times and in the manner
as may be required by the Code or state or local tax laws, regulations, or
rules, and shall furnish or cause to be furnished to the Trust and the
Certificateholders the schedules, statements or information at such times and in
such manner as may be required thereby. Within thirty (30) days of the Closing
Date, the Trustee shall furnish or cause to be furnished to the Internal Revenue
Service, on Form 8811 or as otherwise required by the Code, the name, title,
address and telephone number of the person that Holders of the Certificates may
contact for tax information relating thereto, together with such additional
information at the time or times and in the manner required by the Code. Such
federal, state, or local income tax or information returns shall be signed by
the Trustee, or such other Person as may be required to sign such returns by the
Code or state or local tax laws, regulations, or rules.
(c) In the first federal income tax return of the Trust for its short
taxable year ending ______________________, two separate REMIC elections shall
be made with respect to all assets of the Trust other than the Pre-Funding
Account and the Capitalized Interest Account for such taxable year and all
succeeding taxable years.
(d) The Trustee will maintain or cause to be maintained such records
relating to the Trust, including but not limited to the income, expenses, assets
and liabilities of the Trust, and the fair market value and adjusted basis of
the Trust property and assets determined at such intervals as may be required by
the Code, as may be necessary to prepare the foregoing returns, schedules,
statements or information.
(e) The Servicer, upon request, shall promptly furnish the Trustee with all
such information as may be required in connection with the Trustee's REMIC
reporting obligations pursuant to this Agreement.
Section 2.12. Tax Matters Person. The tax matters person with respect to
REMICs shall be the Trustee. The Trustee shall at all times hold the Tax Matters
Person Residual Interest and shall have the same duties with respect to the
Trust as those of a "tax matters partner" under Subchapter C of Chapter 63 of
Subtitle F of the Code. Each holder of a Class R Certificate shall be deemed to
have agreed, by acceptance thereof, to be bound by this Section 2.12.
Section 2.13. REMIC Related Covenants. For as long as the Trust shall
exist, the Trustee shall act in accordance herewith to assure continuing
treatment of the Trust as two REMICs and avoid the imposition of tax on the
Trust. In particular:
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(a) The Trustee shall not create, or permit the creation of, any
"interests" in the Trust within the meaning of Code Section 860D(a)(2) other
than the interests represented by the Class A Certificates, the Class S
Components, the Lower Tier Regular Interests, the Class U-R Interests and the
Class L-R Interests.
(b) Except as otherwise provided in the Code, the Seller shall not grant
and the Trustee shall not accept property unless (i) substantially all of the
property held in the Trust constitutes either "qualified mortgages" or
"permitted investments" as defined in Code Sections 860G(a)(3) and (5),
respectively, and (ii) no property shall be contributed to the Trust after the
Startup Day unless such grant would not subject the Trust to the 100% tax on
contributions to a REMIC after its Startup Day imposed by Code Section 860G(d).
(c) The Trustee shall not accept on behalf of the Trust any fee or other
compensation for services (other than as otherwise provided herein) and shall
not accept on behalf of the Trust any income from assets other than those
permitted to be held by a REMIC.
(d) The Trustee shall not sell or permit the sale of all or any portion of
the Mortgage Loans (other than in accordance with Section 2.02, 2.04 or 3.17),
unless such sale is pursuant to a "qualified liquidation" as defined in Code
Section 860F(a)(4)(A) and in accordance with Article VIII.
(e) The Trustee shall maintain books with respect to both REMICs on a
calendar year taxable year and on an accrual basis.
(f) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Class R Certificates the Form 1066 and each Form
1066Q for both REMICs and shall respond promptly to written requests made not
more frequently than quarterly by any Holder of Class R Certificates with
respect to the following matters:
(i) The original projected principal and interest cash flows on the
Closing Date on each class of regular and residual interests created
hereunder and on the Mortgage Loans, based on the Prepayment Assumption;
(ii) The projected remaining principal and interest cash flows as of
the end of any calendar quarter with respect to each class of regular and
residual interests created hereunder and the Mortgage Loans, based on the
Prepayment Assumption;
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(iii) The Prepayment Assumption and any interest rate assumptions used
in determining the projected principal and interest cash flows described
above;
(iv) The original issue discount (or, in the case of the Mortgage
Loans, market discount) or premium accrued or amortized through the end of
such calendar quarter with respect to each class of regular or residual
interests created hereunder and with respect to the Mortgage Loans,
together with each constant yield to maturity used in computing the same;
(v) The treatment of losses realized with respect to the Mortgage
Loans or the regular interests created hereunder, including the timing and
amount of any cancellation of indebtedness income of either REMIC with
respect to such regular interests or bad debt deductions claimed with
respect to the Mortgage Loans;
(vi) The amount and timing of any non-interest expenses of either
REMIC; and
(vii) Any taxes (including penalties and interest) imposed on either
REMIC, including, without limitation, taxes on "prohibited transactions,"
"contributions" or "net income from foreclosure property" or state or local
income or franchise taxes.
In the event that any tax is imposed on "prohibited transactions" of the
Trust as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of a REMIC as defined in Section 860G(c) of the Code, on
any contribution to the Trust after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax (other than any minimum tax imposed by Section
23151(a) or 23153(a) of the California Revenue and Taxation Code) is imposed,
such tax shall be paid by (i) the Trustee, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Agreement,
(ii) the Servicer, if such tax arises out of or results from a breach by the
Servicer of any of its obligations under this Agreement, or otherwise (iii) the
Holders of the Class R Certificates in proportion to their Percentage Interests.
Notwithstanding the previous sentence, any tax imposed on the Trust by Section
23151 or Section 23153 of the California Revenue and Taxation Code shall be
timely paid by the Trustee out of its own funds without right of reimbursement
therefor if such taxes arise solely from the Trustee's presence in California,
and otherwise by the Servicer. To the extent any tax is chargeable against the
Holders of the Class R Certificates, notwithstanding anything to the contrary
contained herein, the Trustee is hereby authorized to retain from amounts
otherwise distributable to the Holders of the Class R Certificates on any
Distribution Date
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sufficient funds to reimburse the Trustee for the payment of such tax (to the
extent that the Trustee has not been previously reimbursed or indemnified
therefor).
The Trustee shall not engage in a "prohibited transaction" (as defined in
Code Section 860F(a)(2)), except that, with the prior written consent of the
Seller, the Trustee may engage in the activities otherwise prohibited by the
foregoing clauses (b), (c) and (d), provided that the Seller shall have
delivered to the Trustee an Opinion of Counsel to the effect that such
transaction will not result in the imposition of a contribution or prohibited
transaction tax on the Trust and will not disqualify the Trust from treatment as
two separate REMICs; and provided that the Seller shall have demonstrated to the
satisfaction of the Trustee that such action will not adversely affect the
rights of the holders of the Certificates and the Trustee and that such action
will not adversely impact the rating of the Senior Certificates.
(g) The Trustee shall pay out of its own funds, without any right of
reimbursement, any and all tax related expenses of the Trust (including, but not
limited to, tax return preparation and filing expenses and any professional fees
or expenses related to audits or any administrative or judicial proceedings with
respect to the Trust that involve the Internal Revenue Service or state tax
authorities), other than the expense of obtaining any Opinion of Counsel
required pursuant to Sections 2.06, 3.07 and 10.02 and other than taxes except
as specified herein.
Section 2.14. Subsequent Transfers. (a) During the Funding Period, subject
to the satisfaction of the conditions set forth in Section 2.01 and paragraph
(b) below and pursuant to the terms of the related Subsequent Transfer
Agreement, in consideration of the Trustee's delivery on the relevant Subsequent
Transfer Dates to or upon the order of Delta of all or a portion of the balance
of funds in the Pre-Funding Account, Delta shall on any Subsequent Transfer Date
sell, transfer, assign, set over and otherwise convey without recourse, to the
Trustee, all right, title and interest of Delta in and to each Subsequent
Mortgage Loan listed on the Subsequent Mortgage Loan Schedule delivered by Delta
on such Subsequent Transfer Date, including the related Principal Balance (i)
all interest due on and accruing after the Subsequent Cut-Off Date and all
collections in respect of principal received on or after the related Subsequent
Cut-Off Date; (ii) property which secured such Subsequent Mortgage Loan and
which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its
interest in any insurance policies in respect of such Subsequent Mortgage Loan;
and (iv) all proceeds of the foregoing. The transfer by Delta of the Subsequent
Mortgage Loans set forth on the Subsequent Mortgage Loan Schedule to the Trustee
shall be absolute and shall be intended by Delta and all parties hereto to be
treated as a sale by Delta to the Trust. If the assignment and transfer of the
Mortgage Loans and
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the other property specified in this Section 2.14 from Delta to the Trustee
pursuant to this Agreement is held or deemed not to be a sale or is held or
deemed to be a pledge of security for a loan, Delta intends that the rights and
obligations of the parties shall be established pursuant to the terms of this
Agreement and that, in such event, (i) Delta shall be deemed to have granted and
does hereby grant to the Trustee as of the related Subsequent Transfer Date a
first priority security interest in the entire right, title and interest of
Delta in and to the Subsequent Mortgage Loans and all other property conveyed to
the Trustee pursuant to this Section 2.14 and all proceeds thereof, and (ii)
this Agreement shall constitute a security agreement under applicable law. The
amount released from the Pre-Funding Account shall be one-hundred percent (100%)
of the aggregate of the Principal Balances of the Subsequent Mortgage Loans so
transferred.
(b) Delta shall transfer and deliver to the Trustee the Subsequent Mortgage
Loans and the other property and rights related thereto described in paragraph
(a) above only upon the satisfaction of each of the following conditions on or
prior to the related Subsequent Transfer Date:
(i) Delta shall have provided the Trustee, the Rating Agencies and the
Certificate Insurer with an Addition Notice, which notice shall be given
not less than five Business Days prior to the related Subsequent Transfer
Date and shall designate the Subsequent Mortgage Loans to be sold to the
Trust and the aggregate Principal Balance of such Mortgage Loans;
(ii) Delta shall have delivered to the Trustee a duly executed written
assignment (including an acceptance by the Trustee) in substantially the
form of Exhibit A to the Purchase Agreement (the "Subsequent Transfer
Agreement");
(iii) Delta shall have deposited in the Distribution Account all
principal collected and interest collected to the extent the same accrued
in respect of such Subsequent Mortgage Loans on or after the related
Subsequent Cut-Off Date;
(iv) Delta shall have delivered an Officer's Certificate to the
Trustee confirming that as of each Subsequent Transfer Date, Delta was not
insolvent, nor will it be made insolvent by such transfer, nor is it aware
of any pending insolvency;
(v) Delta shall have delivered an Officer's Certificate to the Trustee
confirming that the Funding Period shall not have ended;
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(vi) Delta shall have delivered to the Trustee an Officer's
Certificate confirming the satisfaction of each condition precedent
specified in this paragraph (b) and in the related Subsequent Transfer
Agreement;
(vii) The Trustee shall have received a letter from the Certificate
Insurer consenting to such transfer of the Subsequent Mortgage Loans (which
consent shall not be unreasonably withheld or delayed);
(viii) Delta shall have delivered an Officer's Certificate to the
Trustee confirming that the representations and warranties of Delta
pursuant to Section 2.03 and pursuant to Section 2.04(a) are true and
correct with respect to Delta and the Subsequent Mortgage Loans as of the
Subsequent Transfer Date;
(ix) As of each Subsequent Transfer Date, the Seller was not insolvent
nor will the Seller be made insolvent by such transfer nor is the Seller
aware of any pending insolvency;
(x) Such addition will not result in a material adverse tax
consequence to either REMIC or the Holders of the Certificates;
(xi) Delta shall have provided the Rating Agencies and the Certificate
Insurer with an Opinion of Counsel relating to the sale (i.e., "True Sale
Opinion") of the Subsequent Mortgage Loans to the Trustee, the
enforceability of the Subsequent Transfer Agreement and to the effect that
the transfer of such Subsequent Mortgage Loans will not adversely affect
the status of either REMIC as a REMIC; and
(xii) Following the purchase of such Subsequent Mortgage Loan by the
Trust on a Subsequent Transfer Date, the Mortgage Loans (including such
Subsequent Mortgage Loan) as of the related Subsequent Cut-Off Date: (a)
will have a weighted average Loan Rate of at least ____%; (b) will have a
weighted average remaining term to stated maturity of not more than ____
months; (c) will have a weighted average Combined Loan-to-Value Ratio of
not more than ____%; (d) will not have more than ____% by aggregate
principal balance "Balloon Loans"; (e) will have no Mortgage Loan with a
principal balance in excess of $__________; (f) will have a state
concentration not in excess of ____% for any one state; (g) will have not
more than ____% in aggregate principal balance of the Mortgage Loans
concentrated in any single zip code; (h) will have not more than ____% in
aggregate principal balance of Mortgage Loans relating to non-owner
occupied properties; (i) will not include Mortgage Loans in excess of 12%
by aggregate principal balance
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secured by Mortgaged in a second lien position; (j) such Subsequent
Mortgage loan shall be secured by a mortgage on property which, at the time
of the origination of such Subsequent Mortgage Loan, has an appraised value
of not more than $__________; and (k) the first payment on such Subsequent
Mortgage Loan is due no later than the last day of the Due Period in which
the purchase occurs, unless there is deposited into the Certificate Account
an amount equal to 30 days' interest on any such Subsequent Mortgage Loan
at the Loan Rate less the applicable Servicing Fee Rate, then the first
payment on such Subsequent Mortgage Loan is due no later than the last day
of the Due Period following the Due Period in which the purchase occurs.
On the Subsequent Transfer Date, the parties to this Agreement shall, if
reasonably requested by the Certificate Insurer, if the Subsequent Mortgage
Loans, in the aggregate, do not comply in all material respects with the
conditions specified in Section 2.14, amend the definition of "Specified
Overcollateralization Amount" for the purpose of increasing the Specified
Overcollateralization Amount or amend this Agreement to provide for the
establishment and funding of a reserve account; provided, however, that any such
amendment must comply with the provisions of Section 11.01 hereof, including
without limitation any requirement for Certificateholder consent set forth
therein. Notice of such change or amendment shall be given to each Rating
Agency.
(c) In connection with each Subsequent Transfer Date and on the first and
second Distribution Dates the Trustee shall determine the amount and correct
dispositions of the Capitalized Interest Requirement, Overfunded Interest Amount
and Pre-Funding Account Earnings for such Distribution Date in accordance with
the provisions of Section 4.03. In the event that any amounts are released as a
result of calculation error by the Trustee from the Pre-Funding Account or from
the Capitalized Interest Account, the Trustee shall not be liable therefor, and
Delta shall immediately repay such amounts to the Trustee.
Section 2.15. Mandatory Prepayment. In the event that, on
_____________________________, not all of the Pre-Funded Amount has been used to
acquire Subsequent Mortgage Loans, then the Trustee shall pay such portion of
the Pre-Funded Amount remaining on deposit in the Pre-Funding Account and
deposit such amount in the Distribution Account as part of the Class A Principal
Distribution on the Distribution Date in ____________________.
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ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Servicer. (a) It is intended that the Trust formed
hereunder shall constitute, and that the affairs of the Trust shall be conducted
so as to qualify it as, two separate "real estate mortgage investment conduits"
("REMICs") as defined in and in accordance with the REMIC Provisions. In
furtherance of such intentions, the Servicer covenants and agrees that it shall
not knowingly or intentionally take any action or omit to take any action that
would cause the termination of the REMIC status of either REMIC.
(b) The Servicer, as independent contract servicer, shall service and
administer the Mortgage Loans and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement. The Servicer may enter into Subservicing
Agreements for any servicing and administration of Mortgage Loans with any
institution which is in compliance with the laws of each state necessary to
enable it to perform its obligations under such Subservicing Agreement and (1)
(x) has been designated an approved Seller-Servicer by FHLMC or FNMA for first
and second mortgage loans, or (y) is an affiliate of the Servicer and
satisfactory to the Certificate Insurer or (2) is otherwise approved by the
Certificate Insurer. The Servicer shall give notice to the Certificate Insurer
and the Trustee of the appointment of any Subservicer. Any such Subservicing
Agreement shall be consistent with and not violate the provisions of this
Agreement. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and either itself directly service the related Mortgage Loans or enter
into a Subservicing Agreement with a successor subservicer which qualifies
hereunder.
(c) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable for the servicing and
administering of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Mortgage Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Mortgage Loans when the Subservicer has received such payments. The
Servicer shall be
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entitled to enter into any agreement with a Subservicer for indemnification of
the Servicer by such Subservicer, and nothing contained in this Agreement shall
be deemed to limit or modify such indemnification.
(d) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone, and the Trustee and Certificateholders
shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Subservicer except as set
forth in Section 3.01(e). The Servicer shall be solely liable for all fees owed
by it to any Subservicer irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.
(e) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Trustee or its
designee approved by the Certificate Insurer shall thereupon assume all of the
rights and obligations of the Servicer under each Subservicing Agreement that
the Servicer may have entered into, unless the Trustee or designee approved by
the Certificate Insurer elects to terminate any Subservicing Agreement. Any fee
payable in connection with such a termination will be payable by the outgoing
Servicer. If the Trustee does not terminate a Subservicing Agreement, the
Trustee, its designee or the successor servicer for the Trustee shall be deemed
to have assumed all of the Servicer's interest therein and to have replaced the
Servicer as a party to each Subservicing Agreement to the same extent as if the
Subservicing Agreements had been assigned to the assuming party, except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreements with regard to events that occurred prior to the date
the Servicer ceased to be the Servicer hereunder. The Servicer at its expense
and without right of reimbursement therefor, shall, upon request of the Trustee,
deliver to the assuming party all documents and records relating to each
Subservicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Subservicing
Agreements to the assuming party.
(f) Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's good faith determination such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Certificateholders and the Certificate Insurer, provided,
however, that (unless (x) the Mortgagor is in default
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with respect to the Mortgage Loan, or such default is, in the judgment of the
Servicer, imminent, (y) with respect to any modification lowering the Loan Rate
or effecting the forgiveness of any amount owed under the Mortgage Note, or
extending the final maturity date on such Mortgage Loan, the Certificate Insurer
has consented to such modification and (z) such waiver, modification,
postponement or indulgence would not cause either REMIC to be disqualified or
otherwise cause a tax to be imposed on either REMIC) the Servicer may not permit
any modification with respect to any Mortgage Loan that would change the Loan
Rate, defer or forgive the payment of any principal or interest (unless in
connection with the liquidation of the related Mortgage Loan) or extend the
final maturity date on the Mortgage Loan. No costs incurred by the Servicer or
any Subservicer in respect of Servicing Advances shall for the purposes of
distributions to Certificateholders be added to the amount owing under the
related Mortgage Loan. Without limiting the generality of the foregoing, the
Servicer shall continue, and is hereby authorized and empowered to execute and
deliver on behalf of the Trustee and each Certificateholder, all instruments of
satisfaction or cancellation, or of partial or full release, discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. If reasonably required by the Servicer, the
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 under this Agreement.
Notwithstanding anything to the contrary contained herein, the Servicer, in
servicing and administering the Mortgage Loans, shall employ or cause to be
employed procedures (including collection, foreclosure and REO Property
management procedures) and exercise the same care that it customarily employs
and exercises in servicing and administering mortgage loans for its own account,
in accordance with accepted mortgage servicing practices of prudent lending
institutions servicing mortgage loans similar to the Mortgage Loans and giving
due consideration to the Certificate Insurer's and the Certificateholders
reliance on the Servicer.
(g) On and after such time as the Trustee receives the resignation of, or
notice of the removal of, the Servicer from its rights and obligations under
this Agreement, and with respect to resignation pursuant to Section 7.04, after
receipt by the Trustee and the Certificate Insurer of the Opinion of Counsel
required pursuant to Section 7.04, the Trustee or its designee approved by the
Certificate Insurer shall assume all of the rights and obligations of the
Servicer, subject to Section 8.02. The Servicer shall, upon request of the
Trustee but at the expense of the Servicer, deliver to the Trustee all documents
and records relating to the Mortgage Loans and an accounting of amounts
collected and held by the Servicer and otherwise use its
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best efforts to effect the orderly and efficient transfer of servicing rights
and obligations to the assuming party.
(h) The Servicer shall deliver a list of Servicing Officers to the Trustee
and the Certificate Insurer by the Closing Date.
(i) Consistent with the terms of this Agreement, the Servicer may consent
to the placing of a lien senior to that of the Mortgage on the related Mortgaged
Property; provided that such senior lien secures a mortgage loan that refinances
a First Lien and the combined loan-to-value ratio of the related Mortgage Loan
immediately following the refinancing (based on the outstanding principal
balance of the Mortgage Loan and the original principal balance of such
refinanced mortgage loan) is not greater than the Combined Loan-to-Value Ratio
of such Mortgage Loan as of the Cut-Off Date or Subsequent Cut-Off Date, as
applicable.
Section 3.02. Collection of Certain Mortgage Loan Payments. (a) The
Servicer shall make reasonable efforts to collect all payments called for under
the terms and provisions of the Mortgage Loans, and shall, to the extent such
procedures shall be consistent with this Agreement, follow such collection
procedures as it follows with respect to mortgage loans in its servicing
portfolio comparable to the Mortgage Loans. Consistent with the foregoing, and
without limiting the generality of the foregoing, the Servicer may in its
discretion (i) waive any prepayment penalty or late payment charge or any
assumption fees or other fees which may be collected in the ordinary course of
servicing such Mortgage Loan and (ii) arrange with a Mortgagor a schedule for
the payment of interest due and unpaid; provided that such arrangement is
consistent with the Servicer's policies with respect to the mortgage loans it
owns or services; provided, further, that notwithstanding such arrangement such
Mortgage Loans will be included in the monthly information delivered by the
Servicer to the Trustee pursuant to Section 5.05.
(b) The Servicer shall establish and maintain a separate trust account (the
"Collection Account") titled "______________________________________, as
Trustee, in trust for the registered holders of Home Equity Loan Asset Backed
Certificates, Series 199_-_." The Collection Account shall be an Eligible
Account. The Servicer shall on the Closing Date deposit any amounts representing
payments on and any collections in respect of the Mortgage Loans received after
the Cut-Off Date and prior to the Closing Date, and thereafter shall use its
best efforts to deposit within one Business Day, and shall in any event deposit
within two Business Days following receipt thereof the following payments and
collections received or made by it (without duplication):
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(i) all payments received after the Cut-Off Date on account of
principal on the Mortgage Loans and all Principal Prepayments and
Curtailments collected after the Cut-Off Date;
(ii) all payments received after the Cut-Off Date on account of
interest on the Mortgage Loans (exclusive of payments in respect of
interest on the Mortgage Loans which has accrued and was due on or prior to
_________________ and in the case of Subsequent Mortgage Loan payments in
respect of interest due prior to the first day of the Due Period during
which the related Subsequent Transfer Date occurs);
(iii) all Net Liquidation Proceeds net of Foreclosure Profits;
(iv) all Insurance Proceeds other than any portion thereof
constituting Net Liquidation Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Initial Mortgage Loan and the amount of any Substitution Adjustment
pursuant to Sections 2.02, 2.04, 2.06 and 3.17; and
(vii) any amount required to be deposited in the Collection Account
pursuant to Sections 3.05, 3.07, 3.16, 5.04 or 5.08;
provided, however, that, with respect to each Due Period, the Servicer shall be
permitted to retain (x) from payments in respect of interest on a Mortgage Loan
with respect to which the Loan Rate is at least ____% per annum, the lesser of
(i) the Servicing Fee for such Mortgage Loan and (ii) the amount by which the
related Loan Rate exceeds ____% and (y) from payments from Mortgagors,
Liquidation Proceeds, Insurance Proceeds and Released Mortgaged Property
Proceeds, related unreimbursed Servicing Advances and Monthly Advances. The
foregoing requirements respecting deposits to the Collection Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, the Servicer need not deposit in the Collection Account amounts
representing Servicing Compensation, or amounts received by the Servicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items.
The Servicer may cause the institution maintaining the Collection Account
to invest any funds in the Collection Account in Eligible Investments (including
obligations of the Servicer or any of its Affiliates, if such obligations
otherwise qualify as Eligible Investments) pursuant to Section 5.08.
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Section 3.03. Withdrawals from the Collection Account. The Servicer shall
withdraw or cause to be withdrawn funds from the Collection Account for the
following purposes:
(i) on the _____________ Business Day prior to each Distribution Date,
to deposit the portion of Available Funds then in the Collection Account to
the Distribution Account;
(ii) to reimburse the Servicer for any accrued unpaid Servicing
Compensation which the Servicer would not have been required to deposit in
the Collection Account and for unreimbursed Monthly Advances and Servicing
Advances. The Servicer's right to reimbursement for unpaid Servicing Fees
and unreimbursed Servicing Advances shall be limited to late collections on
the related Mortgage Loan, including Liquidation Proceeds, Released
Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as
may be collected by the Servicer from the related Mortgagor or otherwise
relating to the Mortgage Loan in respect of which such reimbursed amounts
are owed. The Servicer's right to reimbursement for unreimbursed Monthly
Advances shall be limited to late collections of interest on any Mortgage
Loan and to Liquidation Proceeds, Released Mortgaged Property Proceeds and
Insurance Proceeds on related Mortgage Loans;
(iii) 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 United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;
(iv) RESERVED;
(v) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein (such as Servicing Compensation)
or were deposited therein in error and to pay such funds to the appropriate
Person;
(vi) RESERVED;
(vii) to withdraw funds necessary for the conservation and disposition
of REO Property pursuant to Section 3.07 to the extent not advanced by the
Servicer;
(viii) to reimburse the Servicer for (a) Nonrecoverable Advances that
are not, with respect to aggregate Servicing Advances on any single
Mortgage Loan or REO Property, in excess of the Principal Balance thereof
and (b) expenses incurred pursuant to Section 7.03;
(ix) to pay to the Seller collections received in respect of accrued
interest on the Initial Mortgage Loans
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due on or before _________________ and on the Subsequent Mortgage Loans due
on or before the Subsequent Cut-off Date;
(x) to pay to itself or remit to the Depositor the portion of any
Purchase Price in respect of clause (iv) of the definition thereof or of
any Substitution Adjustment in respect of clause (b) of the definition
thereof to the extent paid in respect of amounts incurred by or imposed on
the Depositor or the Trustee, as the case may be; and
(xi) to clear and terminate the Collection Account upon the
termination of this Agreement and to pay any amounts remaining therein to
the Class R Certificateholders.
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. The Servicer shall cause to be maintained for each Mortgage Loan fire
and hazard insurance naming the Servicer as loss payee thereunder providing
extended coverage in an amount which is at least equal to the lesser of (i) the
maximum insurable value of the improvements securing such Mortgage Loan from
time to time, (ii) the combined principal balance owing on such Mortgage Loan
and any mortgage loan senior to such Mortgage Loan and (iii) the minimum amount
required to compensate for damage or loss on a replacement cost basis. 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, (ii) the
combined principal balance owing on such Mortgage Loan and any mortgage loan
senior to such Mortgage Loan and (iii) the minimum amount required to compensate
for damage or loss on a replacement cost basis at the time of such foreclosure,
fire and or deed in lieu of foreclosure plus accrued interest and the good-faith
estimate of the Servicer of related Servicing Advances 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 called for by Section
3.02. In cases in which any Mortgaged Property is located in a federally
designated flood area, the hazard insurance to be maintained for the related
Mortgage Loan shall include flood insurance to the extent such flood insurance
is available and the Servicer has determined such insurance to be necessary in
accordance with accepted mortgage loan servicing standards for mortgage loans
similar to the Mortgage Loans. All such flood insurance shall be in amounts
equal to the least of the amount in clause (i) above, clause (ii) above and the
maximum amount of insurance available under the National Flood Insurance Act of
1968, as amended. The Servicer shall be under no obligation to require that any
Mortgagor maintain earthquake 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 pur-
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suant to such applicable laws and regulations as shall at any time be in force
and as shall require such additional insurance.
Section 3.05. Maintenance of Mortgage Impairment Insurance Policy. In the
event that the Servicer shall obtain and maintain a blanket policy with an
insurer either (A) having a General Policy rating of A:VIII or better in Best's
Key Rating Guide or (B) approved by the Certificate Insurer, such approval not
to be unreasonable withheld, insuring against fire and hazards of extended
coverage on all of the Mortgage Loans, then, to the extent such policy names the
Servicer as loss payee and provides coverage in an amount equal to the aggregate
unpaid principal balance on the Mortgage Loans without co-insurance, and
otherwise complies with the requirements of Section 3.04, the Servicer shall be
deemed conclusively to have satisfied its obligations with respect to fire and
hazard insurance coverage under Section 3.04, it being understood and agreed
that such blanket 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 3.04, and there shall
have been a loss which would have been covered by such policy, deposit in the
Collection Account the difference, if any, between the amount that would have
been payable under a policy complying with Section 3.04 and the amount paid
under such blanket policy. Upon the request of the Certificate Insurer or the
Trustee, the Servicer shall cause to be delivered to the Certificate Insurer or
the Trustee, as the case may be, a certified true copy of such policy. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Trustee, the Certificate Insurer and Certificateholders, claims under any such
policy in a timely fashion in accordance with the terms of such policy.
Section 3.06. [RESERVED]
Section 3.07. Management and Realization Upon Defaulted Mortgage Loans. The
Servicer shall manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prudent and prompt disposition
and sale. The Servicer shall, either itself or through an agent selected by the
Servicer, manage, conserve, protect and operate the REO Property in the same
manner that it manages, conserves, protects and operates other foreclosed
property for its own account, and in the same manner that similar property in
the same locality as the REO Property is managed. The Servicer shall attempt to
sell the same (and may temporarily rent the same) on such terms and conditions
as the Servicer deems to be in the best interest of the Certificate Insurer and
the Certificateholders.
The Servicer shall cause to be deposited, no later than _________ Business
Days after the receipt thereof, in the
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Collection Account, all revenues received with respect to the related REO
Property and shall retain, or cause the Trustee to withdraw therefrom funds
necessary for the proper operation, management and maintenance of the REO
Property and the fees of any managing agent acting on behalf of the Servicer.
The disposition of REO Property shall be carried out by the Servicer for
cash at such price, and upon such terms and conditions, as the Servicer deems to
be in the best interest of the Certificateholders and, as soon as practicable
thereafter, the expenses of such sale shall be paid. The cash proceeds of sale
of the REO Property shall be promptly deposited in the Collection Account, net
of Foreclosure Profits and of any related unreim- bursed Servicing Advances,
accrued and unpaid Servicing Fees and unreimbursed Monthly Advances payable to
the Servicer in accordance with Section 3.03, for distribution to the
Certificateholders in accordance with Section 5.01.
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 either when no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.02 subject to the
provisions contained in the last paragraph of this Section 3.07.
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 Trustee, or to its nominee on behalf of
Certificateholders and the Certificate Insurer.
In the event any Mortgaged Property is acquired as aforesaid or otherwise
in connection with a default or imminent default on a Mortgage Loan, the
Servicer shall (i) dispose of such Mortgaged Property within two years after its
acquisition or (ii) prior to the expiration of any extension to such two-year
grace period which is requested on behalf of the Trust by the Servicer (at the
expense of the Trust) more than 60 days prior to the end of such two-year grace
period and granted by the Internal Revenue Service, unless the Servicer shall
have received an Opinion of Counsel to the effect that the holding of such
Mortgaged Property subsequent to two years after its acquisition will not result
in the imposition of taxes on "prohibited transactions" as defined in Section
860F of the Code or cause either REMIC to fail to qualify as a REMIC at any time
that any Class A Certificates are outstanding. Notwithstanding any other
provision of this Agreement, (i) no Mortgaged Property acquired by the Servicer
pursuant to this Section 3.07 shall be rented (or allowed to continue to be
rented) or otherwise used for the production of income by or on behalf of the
Trust, and (ii) no construction shall take place on such Mortgaged Property in
such a manner or pursuant to any terms, in either case, that would cause such
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Mortgaged Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code or result in the receipt by the Trust
of any "net income from foreclosure property" which is subject to taxation
within the meaning of Sections 860G(c) and 857(b)(4)(B) of the Code. If a period
greater than two years is permitted under this Agreement and is necessary to
sell any REO Property, the Servicer shall give appropriate notice to the Trustee
and the Certificate Insurer and shall report monthly to the Trustee as to the
progress being made in selling such REO Property.
If the Servicer has actual knowledge that a Mortgaged Property which the
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a 1 mile radius of any site with environmental or
hazardous waste risks known to the Servicer, the Servicer will notify the
Certificate Insurer prior to acquiring the Mortgaged Property and shall not take
any action without prior written approval to the Certificate Insurer. Nothing in
this Section 3.07 shall affect the Servicer's right to deem certain advances
proposed to be made Nonrecoverable Advances. For the purpose of this Section
3.07, actual knowledge of the Servicer means actual knowledge of a Responsible
Officer of the Servicer involved in the servicing of the relevant Mortgage Loan.
Actual knowledge of the Servicer does not include knowledge imputable by virtue
of the availability of or accessibility to information relating to environmental
or hazardous waste sites or the locations thereof.
Section 3.08. Trustee to Cooperate. Upon any Principal Prepayment in full,
the Servicer is authorized to execute, pursuant to the authorization contained
in Section 3.01(f), if the related Assignment of Mortgage has been recorded as
required hereunder, 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
is understood and agreed that no expenses incurred in connection with such
instrument of satisfaction or transfer shall be reimbursed from amounts
deposited in the Collection Account. If the Trustee is holding the Mortgage
Files, from time to time and as appropriate for the servicing or foreclosure of
any Mortgage Loan, the Trustee shall, upon request of the Servicer and delivery
to the Trustee of a Request for Release, in the form annexed hereto as Exhibit
__, signed by a Servicing Officer, release the related Mortgage File to the
Servicer, and the Trustee shall execute such documents, in the forms provided by
the Servicer, as shall be necessary to the prosecution of any such proceedings
or the taking of other servicing actions. Such Request for Release shall
obligate the Servicer to return the Mortgage File to the Trustee 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
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specified, the Request for Release shall be released by the Trustee to the
Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recordation of the related
Assignment of Mortgage in accordance with the provisions hereof, the Trustee
shall, if so requested in writing by the Servicer, execute an appropriate
assignment in the form provided to the Trustee by the Servicer to assign such
Mortgage Loan for the purpose of collection to the Servicer (any such assignment
shall unambiguously indicate that the assignment is for the purpose of
collection only), and, upon such assignment, such assignee for collection will
thereupon bring all required actions in its own name and otherwise enforce the
terms of the Mortgage Loan and deposit or credit the Net Liquidation Proceeds,
exclusive of Foreclosure Profits, received with respect thereto in the
Collection Account. In the event that all delinquent payments due under any such
Mortgage Loan are paid by the Mortgagor and any other defaults are cured then
the assignee for collection shall promptly reassign such Mortgage Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.
Section 3.09. Servicing Compensation; Payment of Certain Expenses by
Servicer. Subject to Section 5.04, the Servicer shall be entitled to retain the
Servicing Fee in accordance with Section 3.02 as compensation for its services
in connection with servicing the Mortgage Loans. Moreover, additional servicing
compensation in the form of prepayment penalties or late payment charges or
other receipts not required to be deposited in the Collection Account,
including, without limitation, Foreclosure Profits, and, subject to Section
5.08, investment income on the Accounts (other than the Capitalized Interest
Account and the Pre-Funding Account) 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 other fees and expenses not
expressly stated hereunder to be for the account of the Trust or the
Certificateholders) and shall not be entitled to reimbursement therefor except
as specifically provided herein.
Section 3.10. Annual Statement as to Compliance. (a) The Servicer will
deliver to the Trustee, the Certificate Insurer and the Rating Agencies, on or
before the last day of the _______ month following the end of the Servicer's
fiscal year (December 31), beginning in ______, an Officer's Certificate stating
that (i) a review of the activities of the Servicer dur- ing the preceding
fiscal year (or such shorter period as is applicable in the case of the first
report) and of its perfor- mance under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Servicer has fulfilled all its material
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obligations under this Agreement throughout such fiscal 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. The Servicer
shall promptly notify the Certificate Insurer, the Trustee, S&P and Moody's upon
any change in the basis on which its fiscal year is determined.
(b) The Servicer shall deliver to the Trustee, the Certificate Insurer and
each of the Rating Agencies, promptly after having obtained knowledge thereof,
but in no event later than five Business Days thereafter, written notice by
means of an Officer's Certificate of any event which with the giving of notice
or the lapse of time or both, would become an Event of Default.
Section 3.11. Annual Servicing Report. Not later than the last day of the
________ month following the end of the Servicer's fiscal year (December 31),
beginning in ____, the Servicer, at its expense, shall cause a firm of
independent public accountants reasonably acceptable to the Trustee and the
Certificate Insurer to furnish a letter or letters to the Certificate Insurer,
the Trustee, S&P and Moody's to the effect that such firm has with respect to
the Servicer's overall servicing operations examined such operations in
accordance with the requirements of the Uniform Single Audit Program for
Mortgage Bankers, and stating such firm's conclusions relating thereto.
Section 3.12. Access to Certain Documentation and Information Regarding the
Mortgage Loans. The Servicer shall provide to the Trustee, the Certificate
Insurer, Certificateholders which are federally insured savings and loan
associations, the Office of Thrift Supervision, the FDIC and the supervisory
agents and examiners of the Office of Thrift Supervision access to the
documentation regarding the Mortgage Loans required by applicable regulations of
the Office of Thrift Supervision and the FDIC (acting as operator of the SAIF or
the BIF), such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer. Nothing
in this Section 3.12 shall derogate from the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Servicer to provide access as provided in this
Section 3.12 as a result of such obligation shall not constitute a breach of
this Section 3.12.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The
Servicer shall during the term of its service as servicer maintain in force (i)
a policy or policies of insurance covering errors and omissions in the
performance of its obligations as servicer hereunder and (ii) a fidelity bond in
respect of its officers, employees or agents. Each such policy or policies and
bond shall, together, comply with the requirements
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from time to time of the Federal National Mortgage Association for persons
performing servicing for mortgage loans purchased by such Association.
Section 3.14. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Seller and the Servicer shall cooperate with
the Trustee in the preparation of any such report and shall provide to the
Trustee in a timely manner all such information or documentation as the Trustee
may reasonably request in connection with the performance of its duties and
obligations under this Section 3.14.
Section 3.15. Reports of Foreclosures and Abandonments of Mortgaged
Property, Returns Relating to Mortgage Interest Received from Individuals and
Returns Relating to Cancellation of Indebtedness. The Servicer shall make
reports of foreclosures and abandonments of any Mortgaged Property for each year
beginning in ____. The Servicer shall file reports relating to each instance
occurring during the previous calendar year in which the Servicer (i) on behalf
of the Trustee acquires an interest in any Mortgaged Property through
foreclosure or other comparable conversion in full or partial satisfaction of a
Mortgage Loan, or (ii) knows or has reason to know that any Mortgaged Property
has been abandoned. The reports from the Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by Sections 6050J, 6050H
and 6050P of the Code.
Section 3.16. Advances by the Servicer. (a) Not later than the close of
business on each Determination Date, the Servicer shall deposit in the
Collection Account and remit to the Trustee an amount (as indicated in the
Trustee's Remittance report prepared pursuant to Section 5.05), to be
distributed on the related Distribution Date pursuant to Section 5.01, equal to
the interest accrued on each Mortgage Loan through the related Due Date, but not
received as of the close of business on the last day of the related Due Period
(net of the Servicing Fee); such amount being defined herein as the "Monthly
Advance."
(b) Notwithstanding anything herein to the contrary, no Servicing Advance
or Monthly Advance shall be required to be made hereunder if the Servicer
determines that such Servicing Advance or Monthly Advance would, if made,
constitute a Nonrecoverable Advance.
Section 3.17. Optional Purchase of Defaulted Mortgage Loans. The Servicer,
in its sole discretion, shall have the
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right to elect (by written notice sent to the Trustee and the Certificate
Insurer) to purchase for its own account from the Trust any Mortgage Loan which
is ____ days or more Delinquent in the manner and at the price specified in
Section 2.02. The Purchase Price for any Mortgage Loan purchased hereunder shall
be deposited in the Collection Account and the Trustee, upon receipt of such
deposit, shall release or cause to be released to the purchaser of such Mortgage
Loan the related 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 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 Trustee, the
Certificate Insurer or the Certificateholders with respect thereto.
Notwithstanding the foregoing, unless the Certificate Insurer consents, the
Servicer may only exercise its option pursuant to this Section 3.17 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 Servicer to the
Certificate 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 any the
Servicer proposes to repurchase. If the Certificate Insurer fails to respond to
such request within ____ Business Days after receipt thereof, the Servicer may
repurchase the Mortgage Loan or Mortgage Loans proposed to be repurchased
without the consent of, or any further action by, the Certificate Insurer.
Section 3.18. Superior Liens. The Servicer shall file (or cause to be
filed) of record a request for notice of any action by a superior lienholder
under a First Lien for the protection of the Trustee's interest, where permitted
by local law and whenever applicable state law does not require that a junior
lienholder be named as a party defendant in foreclosure proceedings in order to
foreclose such junior lienholder's equity of redemption.
If the Servicer is notified that any superior lienholder has accelerated or
intends to accelerate the obligations secured by the First Lien, or has declared
or intends to declare a default under the mortgage or the promissory note
secured thereby, or has filed or intends to file an election to have the
Mortgaged Property sold or foreclosed, the Servicer shall take, on behalf of the
Trust, whatever actions are necessary to protect the interests of the
Certificateholders and the Certificate Insurer,
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and/or to preserve the security of the related Mortgage Loan, subject to the
application of the REMIC Provisions in accordance with the terms of this
Agreement. The Servicer shall immediately notify the Trustee and the Certificate
Insurer of any such action or circumstances. The Servicer shall advance the
necessary funds to cure the default or reinstate the superior lien, if such
advance is in the best interests of the Certificate Insurer and the
Certificateholders in accordance with the servicing standards in Section 3.01.
The Servicer shall not make such an advance except to the extent that it
determines in its reasonable good faith judgment that the advance would be
recoverable from Liquidation Proceeds on the related Mortgage Loan and in no
event in an amount that is greater than the Principal Balance of the related
Mortgage Loan, except with the consent of the Certificate Insurer, which consent
shall not be unreasonably withheld. The Servicer shall thereafter take such
action as is necessary to recover the amount so advanced.
Section 3.19. Assumption Agreements. When a Mortgaged Property has been or
is about to be conveyed by the Mortgagor, the Servicer shall, to the extent it
has knowledge of such conveyance or prospective conveyance, exercise its rights
to accelerate the maturity of the related Mortgage Loan under any "due-on-sale"
clause contained in the related Mortgage or Mortgage Note; provided, however,
that the Servicer shall not exercise any such right if the "due-on-sale" clause,
in the reasonable belief of the Servicer, is not enforceable under applicable
law. In such event, the Servicer shall enter into an assumption and modification
agreement 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, unless prohibited by applicable law, the Mortgagor remains liable thereon.
The Servicer, in accordance with accepted mortgage loan servicing standards for
mortgage loans similar to the Mortgage Loans, is also authorized to enter into a
substitution of liability and such person is substituted as mortgagor and be
comes liable under the Mortgage Note. The Servicer shall notify the Trustee and
the Certificate Insurer that any such substitution or assumption agreement has
been completed by forwarding to the Trustee the original of such substitution or
assumption agreement and a duplicate thereof to the Certificate Insurer, which
original shall be added by the Trustee to the related Mortgage File and shall,
for all purposes, be considered a part of such Mortgage File to the same extent
as all other documents and instruments constituting a part thereof. In
connection with any assumption or substitution agreement entered into pursuant
to this Section 3.18, the Servicer shall not change the Loan Rate or the Monthly
Payment, defer or forgive the payment of principal or interest, reduce the
outstanding principal amount or extend the final maturity date on such Mortgage
Loan.
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Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 3.20. Payment of Taxes, Insurance and Other Charges. With respect
to each Mortgage Loan, the Servicer shall maintain accurate records reflecting
fire and hazard insurance coverage.
With respect to each Mortgage Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates and other charges which
are or may become a lien upon the Mortgaged Property and the status of primary
mortgage guaranty insurance premiums, if any, and fire and hazard insurance
coverage and shall obtain, from time to time, all bills for the payment of such
charges (including renewal premiums) and shall effect payment thereof prior to
the applicable penalty or termination date and at a time appropriate for
securing maximum discounts allowable, employing for such purpose deposits of the
Mortgagor in any escrow account which shall have been estimated and accumulated
by the Servicer in amounts sufficient for such purposes, as allowed under the
terms of the Mortgage. To the extent that a Mortgage does not provide for escrow
payments, the Servicer shall, if it has received notice of a default or
deficiency, monitor such payments to determine if they are made by the
Mortgagor.
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ARTICLE IV
Certificate Insurance Policy,
Pre-Funding Account and Capitalized Interest Account
Section 4.01. [Intentionally Left Blank]
Section 4.02. Certificate Insurance Policy. As soon as possible, and in no
event later than 3:00 p.m., New York time, on the _______ Business Day
immediately preceding each Distribution Date, the Trustee shall determine the
amount of Available Funds for such Distribution Date minus the amount of any
Premium Amount and any Trustee's Fee to be paid on such Distribution Date.
If for any Distribution Date a Deficiency Amount exists, the Trustee shall
complete a notice in the form set forth as Exhibit A to the Certificate
Insurance Policy (the "Notice") and shall submit such Notice to the Fiscal Agent
no later than 12:00 noon, New York time, on the _______ Business Day preceding
such Distribution Date. The Notice shall constitute a claim for an Insured
Payment pursuant to the Certificate Insurance Policy for an amount equal to such
excess. Upon receipt of Insured Payments, at or prior to the latest time
payments of Insured Payment are to be made by the Certificate Insurer pursuant
to the Certificate Insurance Policy, on behalf of the Class A Certificateholders
and Class S Certificateholders, the Trustee shall deposit such Insured Payments
in the Distribution Account and shall distribute such Insured Payments only in
accordance with Sections 5.01(a)(iii)(B) and (a)(iv)(B).
The Trustee shall receive, as attorney-in-fact of each Holder of a Senior
Certificate, any Insured Payment from the Certificate Insurer and disburse the
same to each Holder of a Senior Certificate in accordance with the provisions of
Article V. Insured Payments disbursed by the Trustee from proceeds of the
Certificate Insurance Policy shall not be considered payment by the Trust nor
shall such payments discharge the obligation of the Trust with respect to such
Senior Certificate, and the Certificate Insurer shall become the owner of such
unpaid amounts due from the Trust in respect of such Insured Payments as the
deemed assignee of such Holders and shall be entitled to receive the
Reimbursement Amount pursuant to Section 5.01(a)(v)(2). The Trustee hereby
agrees on behalf of each Holder of a Senior Certificate for the benefit of the
Certificate Insurer that it and they recognize that to the extent the
Certificate Insurer makes Insured Payments, either directly or indirectly (as by
paying through the Trustee), to the Senior Certificateholders, the Certificate
Insurer will be entitled to receive the Reimbursement Amount pursuant to Section
5.01(a)(v)(2).
It is understood and agreed that the intention of the parties is that the
Certificate Insurer shall not be entitled to
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reimbursement on any Distribution Date for amounts previously paid by it unless
on such Distribution Date the Senior Certificateholders shall also have received
the full amount of the Insured Distribution Amount, for such Distribution Date.
Section 4.03. Pre-Funding Account and Capitalized Interest Account. (a) The
Trustee has heretofore established or caused to be established and shall
hereafter maintain or cause to be maintained a separate account denominated a
Pre-Funding Account, which in each case is and shall continue to be an Eligible
Account in the name of the Trustee and shall be designated
"_____________________________________________, as Trustee of the Delta Funding
Home Equity Loan Trust 199_-_ Pre-Funding Account." The Pre-Funding Account
shall be treated as an "outside reserve fund" under applicable Treasury
regulations and will not be part of either REMIC. Any investment earnings on the
Pre-Funding Account will be treated as owned by the Class R Certificate- holders
and will be taxable to such Holders. The Trustee has heretofore established or
caused to be established and shall hereafter maintain or cause to be maintained
a separate account denominated a Capitalized Interest Account, which in each
case is and shall continue to be an Eligible Account in the name of the Trustee
and shall be designated "_____________________________, as Trustee of the Delta
Funding Home Equity Loan Trust Series 199_-_ Capitalized Interest Account". The
Capitalized Interest Account shall be treated as an "outside reserve fund" under
applicable Treasury regulations and will not be part of either REMIC. Any
investment earnings on the Capitalized Interest Account will be treated as owned
by the Class R Certificateholders and will be taxable to such Holders. The
amount on deposit in the Pre-Funding Account and the Capitalized Interest
Account shall be invested in Eligible Investments in accordance with the
provisions of Section 5.08.
(b) On the Closing Date, Delta will cause to be deposited in the
Pre-Funding Account the Original Pre-Funded Amount and shall deposit in the
Capitalized Interest Account the amount of $_______________ from the sale of the
Senior Certificates.
(c) On any Subsequent Transfer Date, upon satisfaction of the conditions
set forth in Section 2.14(b), the Trustee shall withdraw from the Pre-Funding
Account an amount equal to 100% of the aggregate Principal Balances of the
Subsequent Mortgage Loans sold to the Trust on such Subsequent Transfer Date and
pay such amount to or upon the order of Delta upon satisfaction of the
conditions set forth in Section 2.14 with respect to such transfer.
(d) (i) If the Pre-Funded Amount has not been reduced to zero by
_________________________, the Trustee shall withdraw from the Pre-Funding
Account the amount on deposit in the Pre- Funding Account on the Business Day
preceding the Distribution
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Date in _____________________ (after giving effect to all withdrawals from the
Pre-Funding Account on such date) and deposit such amount in the Distribution
Account;
(ii) If the Pre-Funded Amount is reduced to less than or equal to
$_________________ as of either of the first two Determination Dates, the
Trustee shall withdraw from the Pre- Funding Account the amount remaining on
deposit in the Pre- Funding Account on such Determination Date (after giving
effect to all withdrawals from the Pre-Funding Account on such date) and deposit
such amount in the Distribution Account.
The amount deposited to the Distribution Account pursuant to either
paragraph (i) or (ii) of this Subsection shall be net of any Pre-Funding Account
Earnings.
(e) On the first and second Distribution Dates, the Trustee shall transfer
from the Pre-Funding Account to the Distribution Account the Pre-Funding Account
Earnings, if any, applicable to such Distribution Date.
(f) On the Business Day prior to each of the first and second Distribution
Dates, the Trustee shall transfer from the Capitalized Interest Account to the
Distribution Account the Capitalized Interest Requirement, if any, for such
Distribution Date.
(g) On each Subsequent Transfer Date, the Trustee shall distribute the
Overfunded Interest Amount (calculated by the Trustee on the day of such
Subsequent Transfer Date) to Delta, and on the last day of the Funding Period
the Trustee shall distribute to Delta any amounts remaining in the Capitalized
Interest Account after taking into account the withdrawal of the Capitalized
Interest Requirement for the following Distribution Date. The Capitalized
Interest Account shall be closed on the second Distribution Date. All amounts,
if any, remaining in the Capitalized Interest Account on such day shall be
transferred to the Class R Certificateholder.
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ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions. (a) On the ___________ Business Day preceding
each Distribution Date, the Servicer shall withdraw Available Funds for such
Distribution Date from the Collection Account and deposit such amount into the
Distribution Account. On each Distribution Date, the Trustee shall withdraw from
the Distribution Account Available Funds, if any, and make distributions thereof
as described below and to the extent of Available Funds (plus, with respect to
clauses (iii) and (iv), any Insured Payment):
(i) to the Certificate Insurer the Premium Amount owed to the
Certificate Insurer on such Distribution Date;
(ii) to the Trustee the Trustee's Fee owed to the Trustee on such
Distribution Date;
(iii) (A) to the Lower Tier Regular Interests (to be distributed out
of the Upper Tier REMIC pursuant to (B) below) an amount equal to the
lesser of (x) Available Funds remaining after the distribution referred to
in clauses (i) and (ii) above together with any Insured Payments and (y)
the Class L Interest Distribution, any shortfall to be allocated pro rata
between the Classes of Class L Interests based on the amount of interest
each such Class would otherwise have been entitled to receive;
(B) to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and
Class S Certificateholders, an amount equal to the lesser of (x) the Class
L Interest Distribution, and (y) the Class Interest Distribution for such
Class, any shortfall to be allocated pro rata between the Classes of Senior
Certificates based on the amount of interest each such Class would
otherwise have been entitled to receive;
(iv) (A) (a) to the Lower Tier Regular Interests (to be distributed
out of the Upper Tier REMIC pursuant to (B) below) then entitled to
distribution of principal, as a distribution in reduction of the Class L
Principal Balance, in the amount and to the extent provided below, the
lesser of (x) the balance of Available Funds remaining after the
distribution referred to in clauses (i), (ii) and (iii) above together with
any remaining Insured Payments and (y) subject to the proviso at the end of
this paragraph, the Class L Principal Distribution other than any portion
thereof attributable to Lower Tier Distributable Excess Spread and (b) if
such Distribution Date is the Final
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Scheduled Distribution Date to the Class L Interests, the Class L Principal
Balance after taking into account the amount distributed pursuant to clause
(iv) A(a) above on such Distribution Date;
(B)(a) to the Classes of Class A Certificates then entitled to
distributions of principal, as a distribution in reduction of the Class A
Principal Balance, in the amount and to the extent provided below, the
lesser of (x) the Class L Principal Distribution and (y) subject to the
proviso at the end of this paragraph, the Class A Principal Distribution
other than any portion thereof attributable to Distributable Excess Spread
and (b) if such Distribution Date is the Final Scheduled Distribution Date
to the Class A Certificateholders the Class A Principal Balance after
taking into account the amount distributed pursuant to clause (iv)(B)(a)
above on such Distribution Date;
(v) after making the distributions referred to in clauses (i), (ii),
(iii) and (iv) above, the Trustee shall make distributions in the following
order of priority and to the extent of remaining Available Funds:
(1) to the Servicer, the amount of any accrued and unpaid Servicing
Fee;
(2) to the Certificate Insurer, an amount equal to any Reimbursement
Amount owed to the Certificate Insurer;
(3) to the Servicer and/or the Seller, certain Reimbursable Amounts
not previously reimbursed;
(4) to the Servicer, Nonrecoverable Advances not previously
reimbursed;
(5) (A) to the Class L Interests (to be distributed out of the Upper
Tier REMIC pursuant to (B) below) then entitled to distributions of
principal, as a distribution in reduction of the Class L Principal Balance,
subject to the proviso at the end of this paragraph, an amount equal to
such Class' entitlement thereto based on the percentages set forth below of
the amount of Lower Tier Distributable Excess Spread for such Distribution
Date;
(B) to the Classes of Class A Certificateholders then entitled to
distributions of principal, as a distribution in reduction of the Class A
Principal Balance, subject to the proviso at the end of this paragraph, an
amount equal to such Class' entitlement thereto based on the percentages
set forth below of the amount of Distributable Excess Spread for such
Distribution Date;
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(6) to the Certificate Insurer, any other amounts due to the
Certificate Insurer under the Insurance Agreement; and
(7) to the Class R Certificateholders, the balance, if any;
provided, however, that, with respect to any Distribution Date as to which (a)
the Specified Overcollateralization Amount has been reduced below the then
existing amount of Overcollateralization or (b) a full distribution of the
amounts referred to in clauses (iv) and (v)(5) above would cause the amount of
Overcollateralization to exceed the Specified Overcollateralization Amount,
the amounts to be distributed pursuant to clauses (iv) and (v)(5) shall be
reduced by the amount of such reduction in the case of clause (a) above and the
amount of such excess in the case of (b) above.
On any Distribution Date, so long as a Certificate Insurer Default has not
occurred and is not continuing, the amount distributed on the Class L Interest
and the Class A Certificates pursuant to clauses (iv) and (v)(5) above shall be
distributed as follows (and to each Class of Class L Interests as is set forth
below for the related Corresponding Class): __________% to the Class A-1
Certificates and __________% to the Class A-5 Certificates concurrently until
the Class Principal Balance of the Class A-1 Certificates has been reduced to
zero; _________% to the Class A-2 Certificates and __________% to the Class A-5
Certificates concurrently until the Class Principal Balance of the Class A-2
Certificates has been reduced to zero; __________% to the Class A-3 Certificates
and _____________% to the Class A-5 Certificates concurrently until the Class
Principal Balance of the Class A-3 Certificates has been reduced to zero; and
__________% to the Class A-4 Certificates and __________% to the Class A-5
Certificates concurrently until the Class Principal Balance of the Class A-4
Certificates has been reduced to zero; and ___% to the Class A-5 Certificates
until the Class Principal Balance thereof has been reduced to zero.
On any Distribution Date as to which a Certificate Insurer Default has
occurred and is continuing the amount to be distributed on the Class L Interest
and the Class A Certificates pursuant to clauses (iv) and (v)(5) above shall be
distributed pro rata on each Class of Class L Interest and Class of Class A
Certificates based on the Class Principal Balance and Class L Principal Balance,
as the case may be of each such Class immediately prior to such Distribution
Date.
(b) Distribution of Insured Payments. With respect to any Distribution
Date, in the event of an Insured Payment, the Trustee shall make such payments
from the amount drawn under the Certificate Insurance Policy for such
Distribution Date pursuant
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to Section 4.02. Any Insured Payment not required to make distributions pursuant
to clauses (iii) or (iv) of Section 5.01(a) above shall be returned to the
Certificate Insurer.
(c) [Intentionally Left Blank].
(d) Method of Distribution. The Trustee shall make distributions in respect
of a Distribution Date to each Certificateholder of record on the related
Record Date (other than as provided in Section 10.01 respecting the final
distribution), in the case of Class A Certificateholders, by check or money
order mailed to such Certificateholder at the address appearing in the
Certificate Register, or, upon written request by a Class A Certificateholder
delivered to the Trustee at least five Business Days prior to such Record Date,
by wire transfer (but only if such Class A Certificateholder is the Depository
or such Class A Certificateholder owns of record one or more Class A
Certificates aggregating at least $1,000,000 Original Class Certificate
Principal Balance), and, in the case of Class S and Class R Certificateholders,
by wire transfer. Distributions among Certificateholders shall be made in
proportion to the Percentage Interests evidenced by the Certificates held by
such Certificateholders.
(e) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the
Certificates. None of the Trustee, the Paying Agent, the Certificate Registrar,
the Depositor, the Servicer or the Seller shall have any responsibility therefor
except as otherwise provided by applicable law.
Section 5.02. [Intentionally Omitted]
Section 5.03. [Intentionally Omitted]
Section 5.04. Compensating Interest. Not later than the close of business
on each Determination Date, the Servicer shall remit to the Trustee for deposit
to the Collection Account an amount equal to the lesser of (A) the aggregate of
the Prepayment Interest Shortfalls for the related Distribution Date resulting
from Principal Prepayments during the related Due Period and
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(B) its aggregate Servicing Fees received in the related Due Period. The
Servicer shall not have the right to reimbursement for any amounts deposited to
the Collection Account pursuant to this Section 5.04.
Section 5.05. Statements. (a) Not later than ___________________ time on
the _________ Business Day following the last day of a Due Period, the Servicer
shall deliver to the Trustee by mail or electronic modem a computer diskette or
file containing the information called for by clauses (i) through (xxi) below as
of such Due Period and such other information as the Trustee shall reasonably
require. Not later than ____________________ time on the Determination Date, the
Trustee shall deliver to the Servicer, the Depositor and to the Certificate
Insurer, by telecopy, with a hard copy thereof to be delivered on the succeeding
Distribution Date, a statement (the "Trustee's Remittance Report") containing
the information set forth below with respect to such Distribution Date, which
information shall be based upon the information furnished by the Servicer upon
which the Trustee shall conclusively rely without independent verification or
calculation thereof:
(i) The Available Funds and each Class's Certificate Rate for the
related Distribution Date;
(ii) The Class Principal Balance and Class S Notional Amount of each
Class of Senior Certificates and the Aggregate Principal Balance of the
Mortgage Loans as reported in the prior Trustee's Remittance Report
pursuant to subclause (xii) below, or, in the case of the first
Determination Date, the Original Class Principal Balance and initial Class
S Notional Amount of each Class and the Cut-Off Date Initial Pool Principal
Balance of the Mortgage Loans;
(iii) The number and Principal Balances of all Mortgage Loans that
were the subject of Principal Prepayments during the Due Period;
(iv) The amount of all Curtailments that were received during the Due
Period;
(v) The principal portion of all Monthly Payments received during the
Due Period;
(vi) The interest portion of all Monthly Payments received on the
Mortgage Loans during the Due Period;
(vii) The amount of the Monthly Advances and the Compensating Interest
payment to be made on the Deter- mination Date;
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(viii) [RESERVED]
(ix) The Class A Principal Distribution, the portion thereof to be
distributed on each Class of Class A Certificates then entitled to
distributions of principal, and the Class Interest Distribution to be
distributed on each Class of Senior Certificates;
(x) The amount of the Insured Payments, if any, to be made on the
Distribution Date;
(xi) The amount to be distributed to the Class R Certificateholders
for the Distribution Date;
(xii) The Class Principal Balance of each Class of Class A
Certificates, the Class S Notional Amount and the Aggregate Principal
Balance after giving effect to the distribution to be made on the
Distribution Date;
(xiii) The weighted average remaining term to maturity of the Mortgage
Loans and the weighted average Loan Rate;
(xiv) The Servicing Fee and the Premium Amount and Reimbursement
Amount to be paid to the Certificate Insurer pursuant to Section 5.01;
(xv) The amount of all payments or reimbursements to the Servicer
pursuant to Sections 3.03(ii) and (viii);
(xvi) The Overcollateralization Amount and the Specified
Overcollateralization Amount for such Distribution Date;
(xvii) The amounts which are reimbursable to the Servicer or the
Seller, as appropriate, pursuant to Section 5.01(a)(v) and the amount paid
to Class R Certificateholders pursuant to Section 5.01(a)(v);
(xviii) The number of Mortgage Loans outstanding at the beginning and
at the end of the related Due Period;
(xix) [RESERVED];
(xx) The amount on deposit in the Pre-Funding Account and the
Capitalized Interest Account after the Distribution Date; and
(xxi) The amount of Liquidation Losses experienced during the
preceding Due Period and the Loan Losses and the Cumulative Net Losses as a
percentage of the Initial Collateral Balance.
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The Trustee shall forward such report to the Servicer, the
Certificateholders and the Rating Agencies on the Distribution Date. The Trustee
may fully rely upon and shall have no liability with respect to information
provided by the Servicer. The Servicer shall calculate all items in clauses (i)
- - (xxi) above.
To the extent that there are inconsistencies between the telecopy of the
Trustee's Remittance Report and the hard copy thereof, the Servicer may rely
upon the latter.
In the case of information furnished pursuant to subclauses (ii), (xii) and
(xvii) above, the amounts shall be expressed in a separate section of the report
as a dollar amount for each Class for each $1,000 original dollar amount as of
the Cut-Off Date or Subsequent Cut-Off Date, as the case may be.
(b) Within a reasonable period of time after the end of each calendar year,
the Trustee shall furnish to each Person who at any time during the calendar
year was a Class A Certificateholder, if requested in writing by such Person,
such information as is reasonably necessary to provide to such Person a
statement containing the information set forth in subclauses (ix) and (xiv)
above, aggregated for such calendar year or applicable portion thereof during
which such Person was a Certificateholder. Such obligation of the Trustee shall
be deemed to have been satisfied to the extent that substantially comparable
information shall be prepared and furnished by the Trustee to Certificateholders
pursuant to any requirements of the Code as are in force from time to time.
(c) On each Distribution Date, the Trustee shall forward to the Class R
Certificateholders a copy of the reports forwarded to the Class A
Certificateholders in respect of such Distribution Date and a statement setting
forth the amounts actually distributed to the Class R Certificateholders on such
Distribution Date together with such other information as the Trustee deems
necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar year,
the Trustee shall deliver to each Person who at any time during the calendar
year was a Class R Certificateholder, if requested in writing by such Person,
such information as is reasonably necessary to provide to such Person a
statement containing the information provided pursuant to the previous paragraph
aggregated for such calendar year or applicable portion thereof during which
such Person was a Class R Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished to Certificateholders by
the Trustee pursuant to any requirements of the Code as from time to time in
force.
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(e) The Servicer and the Trustee shall furnish to each Certificateholder
and to the Certificate Insurer (if requested in writing), during the term of
this Agreement, such periodic, special, or other reports or information, whether
or not provided for herein, as shall be necessary, reasonable, or appropriate
with respect to the Certificateholder or the Certificate Insurer, as the case
may be, or otherwise with respect to the purposes of this Agreement, all such
reports or information to be provided by and in accordance with such applicable
instructions and directions (if requested in writing) as the Certificateholder
or the Certificate Insurer, as the case may be, may reasonably require; provided
that the Servicer and the Trustee shall be entitled to be reimbursed by such
Certificateholder or the Certificate Insurer, as the case may be, for their
respective fees and actual expenses associated with providing such reports, if
such reports are not generally produced in the ordinary course of their
respective businesses or readily obtainable.
(f) Reports and computer diskettes or files furnished by the Servicer
pursuant to this Agreement shall be deemed confidential and of a proprietary
nature, and shall not be copied or distributed except to the extent required by
law or for the internal use of the Certificate Insurer and its counsel or to the
Rating Agencies, the Certificate Insurer's reinsurers, parent, regulators,
liquidity providers and auditors, provided that the Certificate Insurer shall
attempt in good faith to cause such additional Persons to acknowledge in writing
the foregoing restrictions, and in connection with the purposes and requirements
of this Agreement. No Person entitled to receive copies of such reports or
diskettes or files or lists of Certificateholders shall use the information
therein for the purpose of soliciting the customers of the Seller or for any
other purpose except as set forth in this Agreement.
Section 5.06. [Intentionally Omitted]
Section 5.07. Distribution Account. The Trustee shall establish with
__________________________, a separate trust account (the "Distribution
Account") titled "________________________________, as Trustee, in trust for the
registered holders of Home Equity Loan Asset-Backed Certificates, Series
199_-_." The Distribution Account shall be an Eligible Account. The Trustee
shall deposit any amounts representing payments on and any collections in
respect of the Mortgage Loans received by it immediately following receipt
thereof, including, without limitation, all amounts withdrawn by the Servicer
from the Collection Account pursuant to Section 3.03 for deposit to the
Distribution Account. Amounts on deposit in the Distribution Account may be
invested in Eligible Investments pursuant to Section 5.08.
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Section 5.08. Investment of Accounts. (a) So long as no Event of Default
shall have occurred and be continuing, and consistent with any requirements of
the Code, all or a portion of any Account held by the Trustee shall be invested
and reinvested by the Trustee, as directed in writing by the Servicer, in one or
more Eligible Investments bearing interest or sold at a discount. If an Event of
Default shall have occurred and be continuing or if the Servicer does not
provide investment directions, the Trustee shall invest all Accounts in Eligible
Investments described in paragraph (vi) of the definition of Eligible
Investments. No such investment in any Account shall mature later than the
Business Day immediately preceding the next Distribution Date (except that (i)
if such Eligible Investment is an obligation of the Trustee, then such Eligible
Investment shall mature not later than such Distribution Date and (ii) any other
date may be approved by the Rating Agencies and the Certificate Insurer).
(b) If any amounts are needed for disbursement from any Account held by the
Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. The Trustee shall not be
liable for any investment loss or other charge resulting therefrom unless the
Trustee's failure to perform in accordance with this Section 5.08 is the cause
of such loss or charge.
(c) Subject to Section 9.01, the Trustee shall not in any way be held
liable by reason of any insufficiency in any Account held by the Trustee
resulting from any investment loss on any Eligible Investment included therein
(except to the extent that the Trustee is the obligor and has defaulted thereon
or as provided in subsection (b) of this Section 5.08).
(d) The Trustee shall invest and reinvest funds in the Accounts held by the
Trustee, to the fullest extent practicable, in such manner as the Servicer shall
from time to time direct as set forth in Section 5.08(a), but only in one or
more Eligible Investments.
(e) So long as no Event of Default shall have occurred and be continuing,
all net income and gain realized from investment of, and all earnings on, funds
deposited in the Collection Account and the Distribution Account shall be for
the benefit of the Servicer as servicing compensation (in addition to the
Servicing Fee), and shall be subject to withdrawal on or before the first
Business Day of the month following the month in which such income or gain is
received. The Servicer shall deposit in the Collection Account, the Distribution
Account, the Pre-Funding Account or the Capitalized Interest Account, as the
case may be, the amount of any loss incurred in respect of any Eligible
Investment held therein which is in excess of the income and gain
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thereon immediately upon realization of such loss, without any right to
reimbursement therefore from its own funds.
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ARTICLE VI
The Certificates
Section 6.01. The Certificates. Each of the Class A Certificates, Class S
Certificates and Class R Certificates shall be substantially in the forms set
forth in Exhibits __, __ and __, respectively, and shall, on original issue, be
executed, authenticated and delivered by the Trustee with the sale and
assignment to the Trustee of the Trust. Each Class of Class A Certificates shall
be initially evidenced by one or more certificates representing a fraction of
the Original Class A Certificate Principal Balance and shall be held in minimum
dollar denominations of $1,000 and dollar multiples in excess thereof, except
that one of each of the Class A Certificate may be in a different denomination
so that the sum of the denominations of all outstanding Class A Certificates
shall equal the Original Class A Certificate Principal Balance. Each Class S
Certificate shall be issued in definitive fully registered form in minimum
Percentage Interests of 10%.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by a Responsible Officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trust, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless such Certificate shall have been manually authenticated by the
Trustee substantially in the form provided for herein, and such authentication
upon any Certificate shall be conclusive evidence, and the only evidence, that
such Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication. Subject to Section
6.02(c), the Class A Certificates shall be Book-Entry Certificates. The Class S
and Class R Certificates shall not be Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Certificates. (a)
The Certificate Registrar shall cause to be kept at the Corporate Trust Office a
Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Certificate Registrar shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.
The Trustee shall initially serve as Certificate Registrar for the purpose of
registering Certificates and transfers and exchanges of Certificates as herein
provided.
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Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, and, in the case of a Class S Certificate
or a Class R Certificate, upon satisfaction of the conditions set forth below,
the Trustee on behalf of the Trust shall execute, authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Certificates of the same aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged for
other Certificates in authorized denominations and the same aggregate Percentage
Interests, upon surrender of the Certificates to be exchanged at any such office
or agency. Whenever any Certificates are so surrendered for exchange, the
Trustee shall execute and authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for registration of transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of such Certificates may not be
transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of such Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository as representative of the Certificate Owners of the Certificates for
purposes of exercising the rights of Holders under this Agreement, and requests
and directions for and votes of such representative shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and Persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certifi- cates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only
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transfer Book-Entry Certificates of Certificate Owners that it represents or of
brokerage firms for which it acts as agent in accordance with the Depository's
normal procedures. The parties hereto are hereby authorized to execute a Letter
of Representations with the Depository or take such other action as may be
necessary or desirable to register a Book-Entry Certificate to the Depository.
In the event of any conflict between the terms of any such Letter of
Representation and this Agreement the terms of this Agreement shall control.
(c) If (i)(x) the Depository advises the Trustee in writing that the
Depository is no longer willing or able to discharge properly its
responsibilities as Depository, and (y) the Trustee is unable to locate a
qualified successor, (ii) the Seller, at its sole option, with the consent of
the Trustee, elects to terminate the book-entry system through the Depository or
(iii) after the occurrence of an Event of Default, the Certificate Owners of
each Class of Class A Certificates representing Percentage Interests aggregating
not less than 51% advises the Trustee and Depository through the Financial
Intermediaries and the DTC participants in writing that the continuation of a
book-entry system through the Depository to the exclusion of definitive, fully
registered certificates (the "Definitive Certificates") to Certificate Owners is
no longer in the best interests of the Certificate Owners. Upon surrender to the
Certificate Registrar of each Class of Class A Certificates by the Depository,
accompanied by registration instructions from the Depository for registration,
the Trustee shall at the _____________'s expense, in the case of (i) and (ii)
above, or the Seller's expense, in the case of (iii) above, execute and
authenticate the Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, the Trustee, the Certificate
Registrar, the Servicer, any Paying Agent and the Depositor shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
(d) Except with respect to the initial transfer of the Class R Certificates
and the Class S Certificates by the Seller, no transfer, sale, pledge or other
disposition of any Class S Certificate or any Class R Certificate shall be made
unless such disposition is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities laws or is made in accordance with the 1933 Act and laws. In the
event of any such transfer, other than the transfer of the Tax Matters Person
Residual Interest to the Trustee (i) unless such transfer is made in reliance
upon Rule 144A under the 1933 Act, the Trustee and the Seller shall require a
written Opinion of Counsel (which may be in-house counsel) acceptable to and in
form and substance reasonably
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satisfactory to the Trustee that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from the
1933 Act or is being made pursuant to the 1933 Act, which Opinion of Counsel
shall not be an expense of the Trustee or (ii) the Trustee shall require the
transferor to execute a transferor certificate (in substantially the form
attached hereto as Exhibit __) and the transferee to execute an investment
letter (in substantially the form attached hereto as Exhibit __) acceptable to
and in form and substance reasonably satisfactory to the Trustee certifying to
the Trustee the facts surrounding such transfer, which investment letter shall
not be an expense of the Trustee. The Holder of a Class S or Class R Certificate
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.
No transfer of a Class S or Class R Certificate shall be made unless the
Trustee shall have received either (i) a representation from the transferee of
such Certificate acceptable to and in form and substance satisfactory to the
Trustee, such requirement is satisfied only by the Trustee's receipt of a
representation letter from the transferee substantially in the form of Exhibit
__ or Exhibit __, as appropriate), to the effect that such transferee is not an
employee benefit plan or arrangement subject to Section 406 of ERISA or a plan
subject to Section 4975 of the Code, nor a person acting on behalf of any such
plan or arrangement nor using the assets of any such plan or arrangement to
effect such transfer, or ((ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60") and that the purchase and holding of such
Certificates are covered under PTCE 95-60 or (iii) in the case of any such Class
S or Class R Certificate presented for registration in the name of an employee
benefit plan subject to ERISA, or a plan or arrangement subject to Section 4975
of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan or any other person acting on behalf of any such plan
or arrangement or using such plan's or arrangement's assets, an Opinion of
Counsel satisfactory to the Trustee, which Opinion of Counsel shall not be an
expense of either the Trustee or the Trust, addressed to the Trustee, to the
effect that the purchase or holding of such Class S or Class R Certificate will
not result in the assets of the Trust being deemed to be "plan assets" and
subject to the prohibited transaction provisions of ERISA and the Code and will
not subject the Trustee to any obligation in addition to those expressly
undertaken in this Agreement or to any liability. Notwithstanding anything else
to the contrary herein, any purported transfer of a Class S or Class R
Certificate to or on
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behalf of an employee benefit plan subject to ERISA or to the Code without the
delivery to the Trustee of an Opinion of Counsel satisfactory to the Trustee as
described above shall be void and of no effect.
Each Person who has or who acquires any Ownership Interest in a Class R
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Seller or its designee as its attorney-in-fact to
negotiate the terms of any mandatory sale under clause (v) below and to execute
all instruments of transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in a Class R Certificate are expressly subject to the following
provisions:
(i) Each Person holding or acquiring any Ownership Interest in a Class
R Certificate shall be a Permitted Transferee and shall promptly notify the
Trustee of any change or impending change in its status as a Permitted
Transferee.
(ii) No Person shall acquire an Ownership Interest in a Class R
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(iii) In connection with any proposed transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall as a condition to
registration of the transfer, require delivery to it, in form and substance
satisfactory to it, of each of the following:
(A) an affidavit in the form of Exhibit G hereto from the
proposed transferee to the effect that such transferee is a Permitted
Transferee and that it is not acquiring its Ownership Interest in the
Class R Certificate that is the subject of the proposed transfer as a
nominee, trustee or agent for any Person who is not a Permitted
Transferee; and
(B) a covenant of the proposed transferee to the effect that the
proposed transferee agrees to be bound by and to abide by the transfer
restrictions applicable to the Class R Certificates.
(iv) Any attempted or purported transfer of any Ownership Interest in
a Class R Certificate in violation of the provisions of this Section 6.02
shall be absolutely null and void and shall vest no rights in the purported
trans- feree. If any purported transferee shall, in violation of the
provisions of this Section 6.02, become a Holder of a Class R Certificate,
then the prior Holder of such Class R
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Certificate that is a Permitted Transferee shall, upon discovery that the
registration of transfer of such Class R Certificate was not in fact
permitted by this Section 6.02, be restored to all rights as Holder thereof
retroactive to the date of registration of transfer of such Class R
Certificate. The Trustee shall be under no liability to any Person for any
registration of transfer of a Class R Certificate that is in fact not
permitted by this Section 6.02 or for making any distributions due on such
Class R Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of the Agreement so long as the
Trustee received the documents specified in clause (iii). The Trustee shall
be entitled to recover from any Holder of a Class R Certificate that was in
fact not a Permitted Transferee at the time such distributions were made
all distributions made on such Class R Certificate. Any such distributions
so recovered by the Trustee shall be distributed and delivered by the
Trustee to the prior Holder of such Class R Certificate that is a Permitted
Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section 6.02, then the Trustee shall have the right
but not the obligation, without notice to the Holder of such Class R
Certificate or any other Person having an Ownership Interest therein, to
notify the Depositor to arrange for the sale of such Class R Certificate.
The proceeds of such sale, net of commissions (which may include
commissions payable to the Depositor or its affiliates in connection with
such sale), expenses and taxes due, if any, will be remitted by the Trustee
to the previous Holder of such Class R Certificate that is a Permitted
Transferee, except that in the event that the Trustee determines that the
Holder of such Class R Certificate may be liable for any amount due under
this Section 6.02 or any other provisions of this Agreement, the Trustee
may withhold a corresponding amount from such remittance as security for
such claim. The terms and conditions of any sale under this clause (v)
shall be determined in the sole discretion of the Trustee, and it shall not
be liable to any Person having an Ownership Interest in a Class R
Certificate as a result of its exercise of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section 6.02, then the Trustee, based on information
provided to the Trustee by the Depositor will provide to the Internal
Revenue Service, and to the persons specified in Sections 860E(e)(3) and
(6) of the Code, information needed to compute the tax imposed under
Section 860E(e)(5) of the Code on transfers of residual interests to
disqualified organizations.
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The foregoing provisions of this Section 6.02(d) shall cease to apply to
transfers occurring on or after the date on which there shall have been
delivered to the Trustee, in form and substance satisfactory to the Trustee, (i)
written notification from each Rating Agency that the removal of the
restrictions on Transfer set forth in this Section 6.02 will not cause such
Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion of
Counsel to the effect that such removal will not cause the Trust to fail to
qualify as two separate REMICs.
The Tax Matters Person Residual Interest shall at all times be registered
in the name of the Trustee.
(e) No service charge shall be made for any registration of transfer or
exchange of Certificates of any Class, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer or exchange shall
be cancelled by the Certificate Registrar and disposed of pursuant to its
standard procedures.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i) any
mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Trustee and
the Certificate Registrar such security or indemnity as may be required by them
to save each of them harmless, then, in the absence of notice to the Trustee or
the Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute, authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like tenor and Percentage Interest. Upon the issuance of any new
Certificate under this Section 6.03, the Trustee or the Certificate Registrar
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee and the Certificate
Registrar) in connection therewith. Any duplicate Certificate issued pursuant to
this Section 6.03, shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Servicer, the Trustee, the
Certificate Registrar, the Certificate Insurer, any Paying Agent and any agent
of the Servicer, the Trustee, any Paying Agent or the Certificate Registrar may
treat the Person, including a Depository, in whose name any Certificate
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is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.01 and for all other purposes whatsoever,
and none of the Servicer, the Trustee, the Certificate Registrar nor any agent
of any of them shall be affected by notice to the contrary; provided, however,
that to the extent the Certificate Insurer makes an Insured Payment with respect
to a Certificate it shall be deemed to be the owner of such Certificate to the
extent provided in Section 4.02 of this Agreement.
Section 6.05. Appointment of Paying Agent. (a) The Paying Agent shall make
distributions to Certificateholders from the Distribution Account pursuant to
Section 5.01 and shall report the amounts of such distributions to the Trustee.
The duties of the Paying Agent may include the obligation (i) to withdraw funds
from the Collection Account pursuant to Section 3.03 and for the purpose of
making the distributions referred to above and (ii) to distribute statements and
provide information to Certificate- holders as required hereunder. The Paying
Agent hereunder shall at all times be a corporation duly incorporated and
validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal or state authorities. The
Paying Agent shall initially be the Trustee. The Trustee may appoint a successor
to act as Paying Agent, which appointment shall be reasonably satisfactory to
the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold all sums, if any,
held by it for payment to the Certificateholders in trust for the benefit of the
Certif- icateholders entitled thereto until such sums shall be paid to such
Certificateholders and shall agree that it shall comply with all requirements of
the Code regarding the withholding of payments in respect of Federal income
taxes due from Certificate Owners and otherwise comply with the provisions of
this Agreement applicable to it.
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ARTICLE VII
The Seller and the Servicer
Section 7.01. Liability of the Seller and the Servicer. The Seller and the
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Seller or Servicer,
as the case may be, herein.
Section 7.02. Merger or Consolidation of, or Assumption of the Obligations
of, the Seller or the Servicer. Any corporation into which the Seller or the
Servicer may be merged or consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Seller, the Servicer or the
Depositor shall be a party, or any corporation succeeding to the business of the
Seller or the Servicer, shall be the successor of the Seller or the Servicer, as
the case may be, hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that the successor Servicer shall
satisfy all the requirements of Section 8.02 with respect to the qualifications
of a successor Servicer.
Section 7.03. Limitation on Liability of the Servicer and Others. Neither
the Servicer nor any of the directors or officers or employees or agents of the
Servicer shall be under any liability to the Trust or the Certificateholders for
any action taken or for refraining from the taking of any action by the Servicer
in good faith pursuant to this Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Servicer or any such Person
against any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or negligence in the performance of duties of the
Servicer or by reason of its reckless disregard of its obligations and duties of
the Servicer hereunder; provided, further, that this provision shall not be
construed to entitle the Servicer to indemnity in the event that amounts
advanced by the Servicer to retire any senior lien exceed Net Liquidation
Proceeds realized with respect to the related Mortgage Loan. The preceding
sentence shall not limit the obligations of the Servicer pursuant to Section
9.05. The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Servicer and any director or officer or employee or agent of the Servicer
shall be indemnified by the Trust and held harmless against any loss, liability
or expense incurred in connection with any legal action relating to this
Agreement or the Certificates, other than any loss, liability or expense related
to any specific Mortgage Loan or Mortgage Loans (except as any such loss,
liability or expense shall be otherwise
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reimbursable pursuant to this Agreement) and any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of its reckless disregard of
obligations and duties hereunder and such amounts shall be payable only pursuant
to Section 5.01(v)(3). The Servicer may with the consent of the Certificate
Insurer undertake any such action which it may deem necessary or desirable in
respect of this Agreement, and the rights and duties of the parties hereto and
the interests of the Certificateholders hereunder. In such event, the reasonable
legal expenses and costs of such action and any liability resulting therefrom
shall be expenses, costs and liabilities of the Trust and the Servicer shall be
entitled to be reimbursed therefor only pursuant to Section 5.01(v)(3). The
Servicer's right to indemnity or reimbursement pursuant to this Section 7.03
shall survive any resignation or termination of the Servicer pursuant to Section
7.04 or 8.01 with respect to any losses, expenses, costs or liabilities arising
prior to such resignation or termination (or arising from events that occurred
prior to such resignation or termination). This paragraph shall apply to the
Servicer solely in its capacity as Servicer hereunder and in no other
capacities.
Section 7.04. Servicer Not to Resign. Subject to the provisions of Section
7.02, the Servicer shall not resign from the obligations and duties hereby
imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Servicer so causing such a conflict being of a type and nature
carried on by the Servicer or its subsidiaries or Affiliates at the date of this
Agreement or (ii) upon satisfaction of the following conditions: (a) the
Servicer has proposed a successor servicer to the Trustee in writing and such
proposed successor servicer is reasonably acceptable to the Trustee; (b) each
Rating Agency shall have delivered a letter to the Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Senior Certificates without
regard to the Certificate Insurance Policy; and (c) such proposed successor
servicer is reasonably acceptable to the Certificate Insurer and consented to by
the Certificate Insurer, as evidenced by a letter to the Trustee; provided,
however, that no such resignation by the Servicer shall become effective until
such successor servicer or, in the case of (i) above, the Trustee shall have
assumed the Servicer's responsibilities and obligations hereunder or the Trustee
shall have designated a successor servicer in accordance with Section 8.02. Any
such resignation shall not relieve the Servicer of responsibility for any of the
obligations specified in Sections
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8.01 and 8.02 as obligations that survive the resignation or termination of the
Servicer. Any such determination permitting the resignation of the Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee and the Certificate Insurer.
Section 7.05. Delegation of Duties. In the ordinary course of business, the
Servicer at any time may delegate any of its duties hereunder to any Person,
including any of its Affiliates, who agrees to conduct such duties in accordance
with standards comparable to those set forth in Section 3.01. Such delegation
shall not relieve the Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the meaning
of Section 7.04. The Servicer shall provide the Certificate Insurer and the
Trustee with written notice prior to the delegation of any of its duties to any
Person other than any of the Servicer's Affiliates or their respective
successors and assigns.
Section 7.06. Indemnification of the Trust by the Servicer. The Servicer
shall indemnify and hold harmless the Trust and the Trustee from and against any
loss, liability, expense, damage or injury suffered or sustained by reason of
the Servicer's willful misfeasance, bad faith or negligence in the performance
of its activities in servicing or administering the Mortgage Loans pursuant to
this Agreement, including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim related
to the Servicer's misfeasance, bad faith or negligence. Any such indemnification
shall not be payable from the assets of the Trust. The provisions of this
indemnity shall run directly to and be enforceable by an injured party subject
to the limitations hereof.
Section 7.07. Inspection. The Servicer shall (and shall require any
Subservicer in the related Subservicing Agreement to) afford the Certificate
Insurer, upon reasonable notice, during normal business hours, access to all
records maintained by the Servicer in respect of its rights and obligations
hereunder and access to officers of the Servicer and each Subservicer
responsible for such obligations. Upon request, the Servicer shall furnish to
the Certificate Insurer the Servicer's most recent publicly available financial
statements and each Sub- servicer's most recent financial statements (annual or
quarterly statements, as the case may be) and such other information relating to
their capacity to perform their obligations under this Agreement as the Servicer
or such Subservicer possesses.
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ARTICLE VIII
Default
Section 8.01. Events of Default. (a) If any one of the following events
("Events of Default") shall occur and be continuing:
(i) (A) The failure by the Servicer to make any Monthly Advance; or
(B) any other failure by the Servicer to deposit in the Collection Account
any deposit required to be made under the terms of this Agreement which
continues unremedied for a period of three Business Days after the date
upon which payment was required to have been made; or
(ii) The failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of 30 days, or the
failure by the Servicer duly to observe or perform, in any material
respect, any other covenants, obligations or agreements of the Servicer as
set forth in this Agreement, which failure continues unremedied for a
period of 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 Trustee or to the Servicer and the Trustee by any Certificateholder or
the Certificate Insurer; or
(iii) The entry against the Servicer of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises for
the appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt, mar-
shalling of assets and liabilities or similar proceedings, or for the
winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 30 consecutive days;
or
(iv) The Servicer shall voluntarily go into liquidation, consent to
the appointment of a conservator or receiver or liquidator or similar
person 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 its property, or a decree or order
of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver, liquidator or
similar person 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,
unbonded or unstayed for a period of 30 days; or the Servicer shall
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admit in writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations; or
(v)(A) On or prior to ________________, the Total Expected Losses
exceed ____% of the Maximum Collateral Amount or (B) after ______________,
the Total Expected Losses exceed ____% of the Maximum Collateral Amount; or
(vi) Any failure by the Servicer to pay when due any amount payable by
it under the Insurance Agreement which results in a drawing under the
Certificate Insurance Policy; or
(vii) The stockholders' equity of the Servicer calculated in
accordance with generally accepted accounting principles is less than
$________________;
(b) then, and in each and every such case, so long as an Event of Default
shall not have been remedied, (x) with respect solely to clause (i)(A) above, if
such Monthly Advance is not made by 12:00 Noon New York time on the second
Business Day prior to the applicable Distribution Date, the Trustee, upon
receipt of written notice or discovery by a Responsible Officer of such failure,
shall give immediate telephonic notice of such failure to a Servicing Officer of
the Servicer and to the Certificate Insurer and the Trustee shall terminate all
of the rights and obligations of the Servicer under this Agreement and the
Trustee, or a successor servicer appointed in accordance with Section 8.02,
shall immediately make such Monthly Advance and assume, pursuant to Section
8.02, the duties of a successor Servicer and (y) in the case of (i)(B), (ii),
(iii) and (iv), the Trustee shall, at the direction of the Certificate Insurer
or the Holders of each Class of Senior Certificates evidencing Percentage
Interests aggregating not less than 51% (with the consent of the Certificate
Insurer so long as no Certificate Insurer Default shall have occurred and be
continuing, by notice then given in writing to the Servicer (and to the Trustee
if given by Holders of Certificates), terminate all of the rights and
obligations of the Servicer as servicer under this Agreement. Any such notice to
the Servicer shall also be given to each Rating Agency and the Certificate
Insurer. On or after the receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Certificates or the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee pursuant to and under this Section 8.01; and, without
limitation, the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things
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necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of each Mortgage Loan and
related documents, or otherwise. The Servicer agrees to cooperate with the
Trustee in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the transfer to the Trustee
for the administration by it of all cash amounts that shall at the time be held
by the Servicer and to be deposited by it in the Collection Account, or that
have been deposited by the Servicer in the Collection Account or thereafter
received by the Servicer with respect to the Mortgage Loans. All reasonable
out-of-pocket costs and expenses (including attorneys' fees) incurred in
connection with transferring the Mortgage Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 8.01 shall be paid by the predecessor Servicer (or if the predecessor
Servicer is the Trustee, the initial Servicer) upon presentation of reasonable
documentation of such costs and expenses.
Section 8.02. Trustee to Act; Appointment of Successor. (a) On and after
the time the Servicer receives a notice of termination pursuant to Section 8.01
or 7.04, the 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 and after its succession. As compensation therefor, the
Trustee shall be entitled to such compensation as the Servicer would have been
entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Servicer, or (ii) if the Trustee is legally unable so to act, the Trustee shall
appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution, bank or other mortgage loan or
home equity loan servicer having a net worth of not less than $__________ 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; provided that
any such successor Servicer shall be acceptable to the Certificate Insurer, as
evidenced by the Certificate Insurer's prior written consent which consent shall
not be unreasonably withheld and provided, further, that the appointment of any
such successor Servicer will not result in the qualification, reduction or
withdrawal of the ratings assigned to the Certificates by the Rating Agencies.
Pending appointment of a successor to the Servicer hereunder, unless the Trustee
is prohibited by law from so acting, the Trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the
successor shall be entitled to receive compensation out of payments on Mortgage
Loans in an amount equal to the compensation which the Servicer would otherwise
have received pursuant to
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Section 3.09 (or such lesser compensation as the Trustee and such successor
shall agree). The appointment of a successor Servicer shall not affect any
liability of the predecessor Servicer which may have arisen under this Agreement
prior to its termination as Servicer to pay any deductible under an insurance
policy pursuant to Section 3.05 or to indemnify the Trustee pursuant to Section
7.06), nor shall any successor Servicer be liable for any acts or omissions of
the predecessor Servicer or for any breach by such Servicer of any of its
representations or warranties contained herein or in any related document or
agreement. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Servicer as servicer shall
during the term of its service as servicer (i) continue to service and
administer the Mortgage Loans for the benefit of Certificateholders and the
Certificate Insurer, (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and a fidelity bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.06.
If an Event of Default of the type described in Section 8.01(a)(i) hereof
(for purposes of this Section 8.02(b), such default shall be termed the failure
to make a "Remittance") occurs because the Servicer is the subject of a
proceeding under the Bankruptcy Code and the making of such Remittance is
prohibited by Section 362 of the Bankruptcy Code, the Trustee shall upon notice
of such prohibition, regardless of whether it has received or given a notice of
termination under Section 8.01, advance, the amount of such Remittance by
depositing such amount in the Distribution Account on the related Distribution
Date. The Trustee shall be obligated to make such advance only if (i) such
advance, in the good faith judgment of the Trustee, can reasonably be expected
to be ultimately recoverable from funds which are in the custody of the
Servicer, a trustee in bankruptcy or a federal bankruptcy court and should have
been the subject of such Remittance absent such prohibition (the "Stayed Funds")
and (ii) the Trustee is not prohibited by law from making such advance or
obligating itself to do so. Upon remittance of the Stayed Funds to the Trustee
or the deposit thereof in the Distribution Account by the Servicer, a trustee in
bankruptcy or a federal bankruptcy court, the Trustee may recover the amount so
advanced, without interest, by withdrawing such amount from the Distribution
Account; however, nothing in this Agreement shall be deemed to affect the
Trustee's rights to recover from the Servicer's own funds interest on any such
Stayed Funds. If the Trustee at any time makes an advance under this Subsection
which it later determines in its good faith judgment will not be ultimately
recoverable from the Stayed Funds with respect to
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which such advance was made, the Trustee shall, upon certification of such
nonrecoverability to the Certificate Insurer, be entitled to reimburse itself
(or direct the successor Servicer to reimburse it) for such advance, without
interest, by withdrawing an amount equal to such advance from the Distribution
Account.
Section 8.03. Waiver of Defaults. The Certificate Insurer or the Majority
Certificateholders with the consent of the Certificate Insurer may, on behalf of
all Certificateholders, waive any events permitting removal of the Servicer as
servicer pursuant to this Article VIII, provided, however, that the Majority
Certificateholders may not waive a default in making a required distribution on
a Certificate without the consent of the Holder of such Certificate. Upon any
waiver of a past default, such default shall cease to exist, and any 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 Trustee to
the Rating Agencies.
Section 8.04. Rights of the Certificate Insurer to Exercise Rights of
Senior Certificateholders. By accepting its Certificate, each Senior
Certificateholder agrees that unless a Certificate Insurer Default exists, the
Certificate Insurer shall be deemed to be the Certificateholders for all
purposes (other than with respect to payment on the Certificates) and shall have
the right to exercise all rights of the Senior Certificateholders under this
Agreement and under each Class of Senior Certificates without any further
consent of the Senior Certificateholders, including, without limitation:
(a) the right to require the Seller to repurchase Mortgage Loans pursuant
to Section 2.02 or 2.04;
(b) the right to give notices of breach or to terminate the rights and
obligations of the Servicer as servicer pursuant to Section 8.01 and to consent
to or direct waivers of Servicer defaults pursuant to Section 8.03;
(c) the right to direct the actions of the Trustee during the continuance
of a Servicer default pursuant to Sections 8.01 and 8.02;
(d) the right to institute proceedings against the Servicer pursuant to
Section 8.01;
(e) the right to direct the Trustee to investigate certain matters pursuant
to Section 9.02;
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(f) the right to remove the Trustee pursuant to Section 9.07;
(g) the right to direct foreclosures upon the failure of the Servicer to do
so in accordance with this Agreement; and
(h) any rights or remedies expressly given the Majority Certificateholders.
In addition, each Certificateholder agrees that unless a Certificate Insurer
Default exists, the rights specifically enumerated in this Agreement may be
exercised by the Certificateholders only with the prior written consent of the
Certificate Insurer.
Section 8.05. Trustee to Act Solely with Consent of the Certificate
Insurer. Unless a Certificate Insurer Default exists, the Trustee shall not,
without the Certificate Insurer's consent or unless directed by the Certificate
Insurer:
(a) terminate the rights and obligations of the Servicer as Servicer
pursuant to Section 8.01;
(b) agree to any amendment pursuant to Article XI, provided, however, that
such consent shall not be unreasonably withheld; or
(c) undertake any litigation.
The Certificate Insurer may, in writing and in its sole discretion renounce
all or any of its rights under Section 8.04, 8.05 or 8.06 or any requirement for
the Certificate Insurer's consent for any period of time.
Section 8.06. Mortgage Loans, Trust and Accounts Held for Benefit of the
Certificate Insurer. The Trustee shall hold the Trust and the Mortgage Files for
the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement and in the Certificates to the benefit of Holders
of the Certificates shall be deemed to include the Certificate Insurer. The
Trustee shall cooperate in all reasonable respects with any reasonable request
by the Certificate Insurer for action to preserve or enforce the Certificate
Insurer's rights or interests under this Agreement and the Certificates unless,
as stated in an Opinion of Counsel addressed to the Trustee and the Certificate
Insurer, such action is adverse to the interests of the Certificateholders or
diminishes the rights of the Certificateholders or imposes additional burdens
or restrictions on the Certificateholders.
The Servicer hereby acknowledges and agrees that it shall service the
Mortgage Loans for the benefit of the Certificate-
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holders and for the benefit of the Certificate Insurer, and all references in
this Agreement to the benefit of or actions on behalf of the Certificateholders
shall be deemed to include the Certificate Insurer.
Section 8.07. Certificate Insurer Default. Notwithstanding anything
elsewhere in this Agreement or in the Certificates to the contrary, if a
Certificate Insurer Default exists, or if and to the extent the Certificate
Insurer has delivered its written renunciation of its rights, the provisions of
this Article VIII and all other provisions of this Agreement which (a) permit
the Certificate Insurer to exercise rights of the Certificateholders, (b)
restrict the ability of the Certificateholders, the Servicer or the Trustee to
act without the consent or approval of the Certificate Insurer, (c) provide that
a particular act or thing must be acceptable to the Certificate Insurer, (d)
permit the Certificate Insurer to direct (or otherwise to require) the actions
of the Trustee, the Servicer or the Certificateholders, (e) provide that any
action or omission taken with the consent, approval or authorization of the
Certificate 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 Trustee
shall administer the Trust and perform its obligations hereunder solely for the
benefit of the Holders of the Certificates. Nothing in the foregoing sentence,
nor any action taken pursuant thereto or in compliance therewith, shall be
deemed to have released the Certificate Insurer from any obligation or liability
it may have to any party or to the Certificateholders hereunder, under any other
agreement, instrument or document (including, without limitation, the
Certificate Insurance Policy) or under applicable law.
Section 8.08. Notification to Certificateholders. Upon any termination or
appointment of a successor to the Servicer pursuant to this Article VIII or
Section 7.04, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate
Register, the Certificate Insurer and each Rating Agency.
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ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. (a) The Trustee, 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
(which has not been cured) of which a Responsible Officer has knowledge, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to be in the form specified in this Agreement, on its face, the Trustee
shall take action as it deems appropriate to have the instrument corrected, and
if the instrument is not corrected to the Trustee's satisfaction, the Trustee
will, at the expense of the Servicer, provide notice thereof to the Certificate
Insurer and will, at the expense of the Servicer, which expense shall be
reasonable given the scope and nature of the required action, take such further
action as directed by the Certificate Insurer.
The Trustee may, in accordance with its duties hereunder, do all things
necessary and proper as may be required in connection with any secondary
mortgage licensing laws and similar requirements, including but not limited to
consenting to jurisdiction, and the appointment of agents for service of
process, in jurisdictions in which the Mortgaged Properties are located.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own 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 Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee 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 Trustee and, in the absence of bad faith on
the part of the
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Trustee, the Trustee 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 Trustee and conforming to the
requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee, unless
it shall be proved that the Trustee was negligent in ascertaining or
investigating the facts related thereto;
(iii) the Trustee 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 consent or direction of the Certificate Insurer or in
accordance with the direction of the Holders of Class A Certificates
evidencing Percentage Interests aggregating not less than 51% (subject to
the Certificate Insurer's prior written consent) relating to the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising or omitting to exercise any trust or power
conferred upon the Trustee, under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any failure by
the Servicer to comply with the obligations of the Servicer referred to in
clauses (i) and (ii) of Section 8.01 unless a Responsible Officer of the
Trustee at the Corporate Trust Office obtains actual knowledge of such
failure or the Trustee receives written notice of such failure from the
Servicer, the Certificate Insurer or the Holders of Class A Certificates
evidencing Percentage Interests aggregating not less than 51%. This
paragraph shall not be construed to limit the effect of the first paragraph
of this Section 9.01.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if 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 Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. (a) Except as
otherwise provided in Section 9.01:
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(i) the Trustee may request and rely upon, and shall be protected in
acting or refraining from acting upon, any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal,
bond or other paper or document reasonably believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any written advice of
such counsel or 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 advice or
Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation hereunder or in relation hereto, at the request,
order or direction of any of the Certificateholders or the Certificate
Insurer, pursuant to the provisions of this Agreement, unless such
Certificateholders or the Certificate Insurer shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; the right of the
Trustee to perform any discretionary act enumerated in this Agreement shall
not be construed as a duty, and the Trustee shall not be answerable for
other than its negligence or willful misconduct in the performance of any
such act; nothing contained herein shall, however, relieve the Trustee of
the obligations, upon the occurrence of an Event of Default (which has not
been cured) of which a Responsible Officer has knowledge, 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 their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;
(iv) the Trustee 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;
(v) prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, the 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
documents, unless requested in writing to do so by the Certificate Insurer
or by Holders of Certificates
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evidencing Percentage Interests aggregating not less than 51% (subject to
the Certificate Insurer's prior written consent); provided, however, that
if the payment within a reasonable time to the 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 Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to such proceeding. The reasonable expense of
every such examination shall be paid by the Servicer or, if paid by the
Trustee, shall be reimbursed by the Servicer upon demand. Nothing in this
clause (v) shall derogate from the obligation of the Servicer to observe
any applicable law prohibiting disclosure of information regarding the
Mortgagors;
(vi) the Trustee shall not be accountable, shall have no liability and
makes no representation as to any acts or omissions hereunder of the
Servicer until such time as the Trustee may be required to act as Servicer
pursuant to Section 8.02;
(vii) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian; and
(viii) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act.
(b) It is intended that each of the REMICs formed hereunder shall
constitute, and that the affairs of the REMICs shall be conducted so as to
qualify it as, a REMIC as defined in and in accordance with the REMIC
Provisions. In furtherance of such intention, the Trustee covenants and agrees
that it shall act as agent (and the Trustee is hereby appointed to act as agent)
and as Tax Matters Person on behalf of each REMIC, and that in such capacities,
it shall:
(i) prepare, sign and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax
Return (Form 1066) and any other Tax Return required to be filed by the
REMICs, using a calendar year as the taxable year for the REMICs;
(ii) make, or cause to be made, an election, on behalf of each REMIC,
to be treated as a REMIC on the federal tax return of each of the REMICs
for its first taxable year;
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(iii) prepare and forward, or cause to be prepared and forwarded, to
the Servicer, the Certificateholders and to the Internal Revenue Service
and any other relevant governmental taxing authority all information
returns or reports as and when required to be provided to them in
accordance with the REMIC Provisions;
(iv) to the extent that the affairs of either REMIC are within its
control, conduct such affairs of such REMIC at all times that any
Certificates are outstanding so as to maintain the status of each REMIC as
a REMIC under the REMIC Provisions and any other applicable federal, state
and local laws, including, without limitation, information reports relating
to "original issue discount," as defined in the Code, based upon the
Prepayment Assumption and calculated by using the issue price of the
Certificates;
(v) not knowingly or intentionally take any action or omit to take any
action that would cause the termination of the REMIC status of either
REMIC;
(vi) pay the amount of any and all federal, state, and local taxes,
including, without limitation, any minimum tax imposed by Sections 23151(a)
and 23153(a) of the California Revenue and Taxation Code upon the Trustee
or the Certificateholders in connection with the Trust or the Mortgage
Loans, prohibited transaction taxes as defined in Section 860F of the Code,
other than any amount due as a result of a transfer or attempted or
purported transfer in violation of Section 6.02, imposed on the Trust when
and as the same shall be due and payable (but such obligation shall not
prevent the Trustee or any other appropriate Person from contesting any
such tax in appropriate proceedings and shall not prevent the Trustee from
withholding payment of such tax, if permitted by law, pending the outcome
of such proceedings). The Trustee shall be entitled to reimbursement in
accordance with Section 2.13;
(vii) ensure that any such returns or reports filed on behalf of the
Trust by the Trustee are properly executed by the appropriate person;
(viii) represent the Trust in any administrative or judicial
proceedings relating to an examination or audit by any governmental taxing
authority, request an administrative adjustment as to any taxable year of
the Trust, enter into settlement agreements with any government taxing
agency, extend any statute of limitations relating to any item of the Trust
and otherwise act on behalf of the Trust in relation to any tax matter
involving the Trust;
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(ix) as provided in Section 5.12, make available information necessary
for the computation of any tax imposed (1) on transferors of residual
interests to transferees that are not Permitted Transferees or (2) on
pass-through entities, any interest in which is held by an entity which is
not a Permitted Transferee. The Trustee covenants and agrees that it will
cooperate with the Servicer in the foregoing matters and that it will sign,
as Trustee, any and all Tax Returns required to be filed by the Trust.
Notwithstanding the foregoing, at such time as the Trustee becomes the
successor Servicer, the holder of the largest percentage of the Class R
Certificates shall serve as Tax Matters Person until such time as an entity
is appointed to succeed the Trustee as Servicer;
(x) make available to the Internal Revenue Service and those Persons
specified by the REMIC Provisions all information necessary to compute any
tax imposed (A) as a result of the Transfer of an Ownership Interest in a
Class R Certificate to any Person who is not a Permitted Transferee,
including the information described in Treasury regulations sections
1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess inclusions"
of such Class R Certificate and (B) as a result of any regulated investment
company, real estate investment trust, common trust fund, partnership,
trust, estate or organization described in Section 1381 of the Code that
holds an Ownership Interest in a Class R Certificate having as among its
record holders at any time any Person that is not a Permitted Transferee.
Reasonable compensation for providing such information may be accepted by
the Trustee; and
(xi) pay out of its own funds, without any right of reimbursement, any
and all tax related expenses of the Trust (including, but not limited to,
tax return preparation and filing expenses and any professional fees or
expenses related to audits or any administrative or judicial proceedings
with respect to the Trust that involve the Internal Revenue Service or
state tax authorities), other than the expense of obtaining any Opinion of
Counsel required pursuant to Sections 3.03, 5.10 and 11.02 and other than
taxes except as specified herein.
(xii) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Class R Certificates the Form 1066 and each
Form 1066Q for each REMIC and shall respond promptly to written requests
made not more frequently than quarterly by any Holder of Class R
Certificates with respect to the following matters:
(1) The original projected principal and interest cash flows on
the Closing Date on each class of regular
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and residual interests created hereunder and on the Mortgage Loans,
based on the Prepayment Assumption;
(2) The projected remaining principal and interest cash flows as
of the end of any calendar quarter with respect to each class of
regular and residual interests created hereunder and the Mortgage
Loans, based on the Prepayment Assumption;
(3) The Prepayment Assumption and any interest rate assumptions
used in determining the projected principal and interest cash flows
described above;
(4) The original issue discount (or, in the case of the Mortgage
Loans, market discount) or premium accrued or amortized through the
end of such calendar quarter with respect to each class of regular or
residual interests created hereunder and with respect to the Mortgage
Loans, together with each constant yield to maturity used in computing
the same;
(5) The treatment of losses realized with respect to the Mortgage
Loans or the regular interests created hereunder, including the timing
and amount of any cancellation of indebtedness income of each REMIC
with respect to such regular interests or bad debt deductions claims
with respect to the Mortgage Loans;
(6) The amount and timing of any non-interest expenses of each
REMIC; and
(7) Any taxes (including penalties and interest) imposed on
either REMIC, including, without limitation, taxes on "prohibited
transactions," "contribution" or "net income from foreclosure
property" or state or local income or franchise taxes.
(xiii) Following the Closing Date, and except as otherwise provided in
this Agreement, the Trustee shall not knowingly accept any contribution of
assets to the Trust unless it shall have been provided with an Opinion of
Counsel at the expense of the party delivering such assets acceptable to it
and the Certificate Insurer to the effect that the inclusion of such assets
in either REMIC will not cause such REMIC to fail to qualify as a REMIC at
any time that any Certificates are outstanding or subject to the Trust to
any tax under the REMIC Provisions or other applicable provisions of
federal, state and local law or ordinances.
(xiv) The Trustee agrees to indemnify the Trust, the Certificate
Insurer and the Servicer for any taxes and
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costs, including, without limitation, any reasonable attorneys' fees
imposed on or incurred by the Trust, the Certificate Insurer or the
Servicer, as a result of a breach of the Trustee's covenants set forth in
Section 9.02(xiii).
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans. The
recitals contained herein and in the Certificates (other than the authentication
of the Trustee on the Certificates) shall be taken as the statements of the
Seller, and the Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representations as to the validity or sufficiency of
this Agreement or of the Certificates (other than the signature and
authentication of the Trustee on the Certificates) or of any Mortgage Loan or
related document. The Trustee shall not be accountable for the use or
application by the Servicer, or 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 Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage or any Mortgage Loan, or the perfection and
priority of any Mortgage or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Trust or its ability to
generate the payments to be distributed to Certificateholders under this
Agreement, including, without limitation: the existence, condition and ownership
of any Mortgaged Property; the existence and enforceability of any hazard
insurance thereon (other than if the Trustee shall assume the duties of the
Servicer pursuant to Section 8.02); the validity of the assignment of any
Mortgage Loan to the Trustee or of any intervening assignment; the completeness
of any Mortgage Loan; the performance or enforcement of any Mortgage Loan (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
8.02); the compliance by the Seller or the Servicer with any warranty or
representation made under this Agreement or in any related document or the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any non-compliance therewith or any breach
thereof; any investment of monies by or at the direction of the Servicer or any
loss resulting therefrom, it being understood that the Trustee shall remain
responsible for any Trust property that it may hold in its individual capacity;
the acts or omissions of any of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02), any Subservicer or
any Mortgagor; any action of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 8.02), or any Subservicer
taken in the name of the Trustee; the failure of the Servicer or any Subservicer
to act or perform any duties required of it as agent of the Trustee hereunder;
or any action by the Trustee taken at the instruction of the Servicer (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
8.02); provided, how-
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ever, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement, including, without limitation, the
Trustee's duty to review the Mortgage Files pursuant to Section 2.01(d). Until
such time as the Trustee shall have become the Successor Servicer, the Trustee
shall have no responsibility to perfect or maintain the perfection of any
security interest or lien granted to it hereunder.
Section 9.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates with the
same rights as it would have if it were not Trustee and may transact any banking
and trust business with the Seller or the Servicer.
Section 9.05. Servicer to Pay Trustee's Fees and Expenses. The Servicer
will pay or reimburse, except as provided in Section 2.13(g), the Trustee upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any of the provisions of this Agreement
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all persons not regularly in its employ) except any such expense,
disbursement or advance as may arise from its negligence or bad faith or which
is the responsibility of Certificateholders hereunder. In addition, except as
provided in Section 2.13(g), the Servicer covenants and agrees to indemnify the
Trustee and its officers, directors, employees and agents from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
(i) incurred in connection with any legal action relating to this Agreement or
the Certificates, other than any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or negligence of the Trustee in the
performance of its duties hereunder or by reason of the Trustee's reckless
disregard of obligations and duties hereunder or (ii) resulting from any error
in any tax or information return prepared by the Servicer. This Section 9.05
shall survive termination of this Agreement or the resignation or removal of any
Trustee hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation duly incorporated and validly existing under
the laws of the United States of America or any state thereof, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000 and a minimum long-term debt rating of Baa3,
and subject to supervision or examination by federal or state authority. If such
corporation 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 this Section 9.06, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most
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recent report of condition so published. The principal office of the Trustee
(other than the initial Trustee) shall be in a state with respect to which an
Opinion of Counsel has been delivered to such Trustee at the time such Trustee
is appointed Trustee to the effect that the Trust will not be a taxable entity
under the laws of such state. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Seller, the Servicer, the Certificate Insurer and each
Rating Agency. Upon receiving such notice of resignation, the Seller shall
promptly appoint a successor Trustee (approved in writing by the Certificate
Insurer and the Servicer, so long as such approval shall not unreasonably be
withheld) by written instrument, in duplicate, copies of which instrument shall
be delivered to the resigning Trustee, the Certificate Insurer and the Successor
Trustee; provided, however, that any such successor Trustee shall be subject to
the prior written approval of the Servicer. If no successor Trustee shall have
been so appointed and having accept- ed appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee 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 Seller or the Certificate Insurer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Seller, the Servicer or the Certificate Insurer may remove the Trustee. If the
Seller, the Servicer or the Certificate Insurer removes the Trustee under the
authority of the immediately preceding sentence, the Seller shall promptly
appoint a successor Trustee (approved in writing by the Certificate Insurer, so
long as such approval is not unreasonably withheld) by written instrument, in
duplicate, copies of which instrument shall be delivered to the Trustee so
removed, the Certificate Insurer and to the successor Trustee.
The Holders of Certificates evidencing Percentage Interests aggregating
over 50% of all Senior Certificates may, with the prior written consent of the
Certificate Insurer, at any time remove the Trustee by written instrument or
instruments delivered to the Servicer, the Seller and the Trustee; shall
thereupon use
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its best efforts to appoint a successor trustee in accordance with this Section
9.07.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.07 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 9.08.
Notwithstanding anything to the contrary contained herein, so long as no
Certificate Insurer Default exists, the Trustee may not be removed by the Seller
or the Certificateholders without the prior written consent of the Certificate
Insurer, which consent shall not be unreasonably withheld.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Seller,
the Servicer and to its predecessor Trustee and the Certificate Insurer an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Trustee. The Seller, the
Servicer and the predecessor Trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for fully and certainly
vesting and confirming in the successor Trustee all such rights, powers, duties
and obligations.
No successor Trustee shall accept appointment as provided in this Section
9.08 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 9.08, the Servicer shall mail notice of the succession of such Trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to each Rating Agency. If the Servicer fails to mail
such notice within 30 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Servicer.
Notwithstanding anything to the contrary contained herein, so long as no
Certificate Insurer Default exists, the appointment of any successor Trustee
pursuant to any provision of this Agreement will be subject to the prior written
consent of the Certificate Insurer, which consent shall not be unreasonably
withheld.
Section 9.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or
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with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation 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 other than the prior
written consent of the Certificate Insurer, which consent shall not be
unreasonably withheld.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the Seller
and the Trustee acting jointly and with the consent of the Certificate Insurer
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee and the Certificate Insurer to act
as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Certificateholders and
the Certificate Insurer, such title to the Trust, or any part thereof, and,
subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Servicer and the Trustee may consider
necessary or desirable. Any such co-trustee or separate trustee shall be subject
to the written approval of the Servicer. If the Servicer shall not have joined
in such appointment within 15 days after the receipt by it of a request so to
do, or in the case an Event of Default shall have occurred and be continuing,
the Trustee alone and with the consent of the Certificate Insurer shall have the
power to make such appointment. Subject to the Certificate Insurer's written
approval, no co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 9.06 and no notice
to Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 9.08. The Servicer shall be responsible for the
fees of any co-trustee or separate trustee appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any
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jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer hereunder),
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Servicer and the Trustee acting jointly and with the consent
of the Certificate Insurer may at any time accept the resignation of or
remove any separate trustee or co-trustee except that following the
occurrence of an Event of Default, the Trustee acting with the consent of
the Certificate Insurer may accept the resignation or remove any separate
trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Seller, the Certificate Insurer and the Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 9.11. Limitation of Liability. The Certificates are executed by the
Trustee, not in its individual capacity but solely as Trustee of the Trust, in
the exercise of the powers and authority conferred and vested in it by this
Agreement. Each of
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the undertakings and agreements made on the part of the Trustee in the
Certificates is made and intended not as a personal undertaking or agreement by
the Trustee but is made and intended for the purpose of binding only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates; Inspection. (a) All rights of action and claims under this
Agreement or the Certificates may be prosecuted and enforced by the Trustee or
the Certificate Insurer without the possession of any of the Certificates or the
production thereof in any proceeding relating thereto, and such proceeding
instituted by the Trustee shall be brought in its own name or in its capacity as
Trustee. Any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursement and advances of the Trustee, its
agents and counsel, be for the ratable benefit of the Certificateholders or the
Certificate Insurer in respect of which such judgment has been recovered.
(b) The Trustee shall afford the Seller, the Servicer, the Certificate
Insurer and each Certificateholder upon reasonable notice during normal business
hours, access to all records maintained by the Trustee in respect of its duties
hereunder and access to officers of the Trustee responsible for performing such
duties. Upon request, the Trustee shall furnish the Seller, the Servicer, the
Certificate Insurer and any requesting Certificateholder with its most recent
financial statements. The Trustee shall cooperate fully with the Seller, the
Servicer, the Certificate Insurer and such Certificateholder and shall make
available to the Seller, the Servicer, the Certificate Insurer and such
Certificateholder for review and copying such books, documents or records as may
be requested with respect to the Trustee's duties hereunder. The Seller, the
Servicer, the Certificate Insurer and the Certificateholders shall not have any
responsibility or liability for any action or failure to act by the Trustee and
are not obligated to supervise the performance of the Trustee under this
Agreement or otherwise.
Section 9.13. Suits for Enforcement. In case an Event of Default or other
default by the Servicer or the Seller hereunder shall occur and be continuing,
the Trustee may, with the consent of the Certificate Insurer and shall at the
direction of the Certificate Insurer, proceed to protect and enforce its rights
and the rights of the Certificateholders or the Certificate Insurer under this
Agreement by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or other remedy, as the
Certificate Insurer, or if a Certificate Insurer Default shall have occurred and
be continuing, the Trustee, being advised by counsel, shall deem most effectual
to
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protect and enforce any of the rights of the Trustee or the Certificate Insurer
and the Certificateholders and the Certificate Insurer.
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ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
responsibilities of the Seller, the Servicer, and the Trustee created hereby
(other than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date and the obligation of the
Servicer to send certain notices as hereinafter set forth) shall terminate upon
notice to the Trustee of the later of (x) the distribution to Certificateholders
of the final payment or collection with respect to the last Mortgage Loan (or
Monthly Advances of same by the Servicer), (y) the disposition of all funds with
respect to the last Mortgage Loan and the remittance of all funds due under the
Agreement and the payment of all amounts due and payable to the Certificate
Insurer and the Trustee and (z) the Distribution Date in _____________________.
Notwithstanding the foregoing, in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.
The Servicer may, at its option, terminate the Agreement on the
Distribution Date following the Due Period at the end of which the aggregate
principal balance of the Mortgage Loans is less than ____% of the greater of the
aggregate principal balance of the Mortgage Loans as of (i) the Cut-Off Date or
(ii) the end of the Funding Period, by purchasing, on the such Distribution
Date, all of the outstanding Mortgage Loans and REO Properties at a price equal
to the sum of (x) 100% of the aggregate principal balance of the Mortgage Loans
and REO Properties, plus (y) the greater of (i) the aggregate amount of accrued
and unpaid interest on the Mortgage Loans through the related Due Period and
(ii) ____ days' accrued interest thereon at a rate equal to the Loan Rate, in
each case net of the Servicing Fee plus (z) any Reimbursement Amounts due to the
Certificate Insurer and any other amounts due to the Certificate Insurer under
the Insurance Agreement (the "Termination Price").
In connection with any such purchase pursuant to the preceding paragraph,
the Servicer shall deposit in the Distribution Account all amounts then on
deposit in the Collection Account (less amounts permitted to be withdrawn by the
Servicer pursuant to Section 3.03), which deposit shall be deemed to have
occurred immediately preceding such purchase.
Any such purchase shall be accomplished by deposit into the Distribution
Account on the Determination Date before such Distribution Date of the
Termination Price.
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(b) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee to the Certificate Insurer by letter to Certificate- holders mailed not
earlier than the ___th day and not later than the ___th day of the month next
preceding the month of such final distribution specifying (i) the Distribution
Date upon which final distribution of the Certificates will be made upon
presentation and surrender of Certificates at the office or agency of the
Trustee therein designated, (ii) the amount of any such final distribution and
(iii) that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Class A Certificates at the office or agency of the Trustee therein specified.
(c) Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the holders of Certificates on the Distribution Date
for such final distribution, in proportion to the Percentage Interests of their
respective Certificates and to the extent that funds are available for such
purpose, an amount equal to the amount required to be distributed to
Certificateholders pursuant to Section 5.01 for such Distribution Date. On the
final Distribution Date, the Trustee will withdraw from the Distribution Account
and remit to the Certificate Insurer the lesser of (x) the amount available for
distribution on such final Distribution Date, net of any portion thereof
necessary to pay Senior Certificateholders pursuant to Sections 5.01(a)(iii)(B)
and (iv)(B) and (y) the unpaid amounts due and owing to the Certificate Insurer
pursuant to Section 5.01(a).
(d) In the event that all of the Senior Certificateholders shall not
surrender their Senior Certificates for final payment and cancellation on or
before such final Distribution Date, the Trustee shall promptly following such
date cause all funds in the Distribution Account not distributed in final
distribution to Senior Certificateholders to be withdrawn therefrom and credited
to the remaining Senior Certificateholders by depositing such funds in a
separate escrow account for the benefit of such Senior Certificateholders and
the Servicer (if the Servicer has exercised its right to purchase the Mortgage
Loans) or the Trustee (in any other case) shall give a second written notice to
the remaining Senior Certificateholders to surrender their Senior Certificates
for cancellation and receive the final distribution with respect thereto. If
within one year after the second notice all the Senior Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Senior Certificateholders concerning surrender of their
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Senior Certificates, and the cost thereof shall be paid out of the funds on
deposit in such escrow account.
Section 10.02. Additional Termination Requirements. (a) In the event that
the Servicer exercises its purchase option as provided in Section 10.01, the
Trust shall be terminated in accordance with the following additional
requirements, unless the Trustee and the Certificate Insurer have been furnished
with an Opinion of Counsel to the effect that the failure of the Trust to comply
with the requirements of this Section 10.02 will not (i) result in the
imposition of taxes on "prohibited transactions" of the Trust as defined in
Section 860F of the Code, or (ii) cause either REMIC to fail to qualify as a
REMIC at any time that any Senior Certificates are outstanding:
(i) Within ____ days prior to the final Distribution Date, the
Servicer shall adopt and the Trustee shall sign a plan of complete
liquidation for both REMICs meeting the requirements of a "Qualified
Liquidation" under Section 860F of the Code and any regulations thereunder;
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Trustee
shall sell all of the assets of the Trust to the Servicer for cash; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to each Class of Senior Certificateholders the
related Class Principal Balance in the case of the Class A Certificates,
plus one month's interest on such Class Principal Balance or Notional
Amount, as the case may be, at the applicable Certificate Rate, (B) to the
Certificate Insurer, all amounts owing to the Certificate Insurer under
this Agreement and the Insurance Agreement and (C) to the Class R
Certificate- holders, all cash on hand after such payment to the Senior
Certificateholders (other than cash retained to meet claims) and the Trust
shall terminate at such time.
(b) By their acceptance of the Senior Certificates, the Holders thereof
hereby agree to appoint the Trustee as their attorney in fact to: (i) adopt such
a plan of complete liquidation (and the Certificateholders hereby appoint the
Trustee as their attorney in fact to sign such plan) as appropriate or upon the
written request of the Certificate 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.
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ARTICLE XI
Miscellaneous Provisions
Section 11.01. Amendment. This Agreement may be amended from time to time
by the Seller, the Servicer and the Trustee, in each case without the consent of
any of the Certificateholders, but only with the consent of the Certificate
Insurer (which consent shall not be unreasonably withheld), (i) to cure any
ambiguity, (ii) to correct any defective provisions or to correct or supplement
any provisions herein that may be inconsistent with any other provisions herein,
(iii) to add to the duties of the Servicer, (iv) to add any other provisions
with respect to matters or questions arising under this Agreement or the
Certificate Insurance Policy, as the case may be, which shall not be
inconsistent with the provisions of this Agreement, (v) to add or amend any
provisions of this Agreement as required by any Rating Agency or any other
nationally recognized statistical rating agency in order to maintain or improve
any rating of each Class of Senior Certificates, without regard to the
Certificate Insurance Policy (it being understood that, after obtaining the
ratings in effect on the Closing Date, neither the Trustee, the Certificate
Insurer, the Seller nor the Servicer is obligated to obtain, maintain or improve
any such rating), or (vi) to add or amend any provisions of this Agreement to
such extent as shall be necessary to maintain the qualification of each REMIC as
a REMIC; provided, however, that (x) as evidenced by an Opinion of Counsel (at
the expense of the requesting party) in each case such action shall not
adversely affect in any material respect the interest of any Certificateholder,
(y) in each case, such action is necessary or desirable to maintain the
qualification of each REMIC as a REMIC or shall not adversely affect such
qualification and (z) if the opinion called for in clause (x) cannot be
delivered with regard to an amendment pursuant to clause (vi) above, such
amendment is necessary to maintain the qualification of each REMIC as a REMIC;
and provided, further, that the amendment shall not be deemed to adversely
affect in any material respect the interests of the Certificateholders and no
Opinion of Counsel to that effect shall be required if the Person requesting the
amendment obtains a letter from the Rating Agency stating that the amendment
would not result in the downgrading or withdrawal of the respective ratings then
assigned to the Senior Certificates without regard to the Certificate Insurance
Policy.
This Agreement also may be amended from time to time by the Seller, the
Servicer and the Trustee, and the Servicer and the Certificate Insurer, may from
time to time consent to the amendment of the Certificate Insurance Policy with
the consent of the Holders of each Class of Senior Certificates which is
affected by such amendment, evidencing Percentage Interests aggregating not less
than 51%, and in the case of an amendment to this Agreement, with the consent of
the Certificate Insurer, for
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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 Certificateholders; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments on the
Certificates or distributions or payments under the Certificate Insurance Policy
which are required to be made on any Certificate without the consent of the
Holder of such Certificate or (ii) reduce the aforesaid percentage required to
consent to any such amendment, without the consent of the Holders of all
Certificates then outstanding.
Prior to the solicitation of consent of Certificateholders in connection
with any such amendment, the party seeking such amendment shall furnish the
Trustee and the Certificate Insurer with an Opinion of Counsel stating whether
such amendment would adversely affect the qualification of either REMIC as a
REMIC and notice of the conclusion expressed in such Opinion of Counsel shall be
included with any such solicitation. An amendment made with the consent of all
Certificateholders and the Certificate Insurer and executed in accordance with
this Section 11.01 shall be permitted or authorized by this Agreement
notwithstanding that such Opinion of Counsel may conclude that such amendment
would adversely affect the qualification of each REMIC as a REMIC.
Prior to the execution of any such amendment, the Trustee shall furnish
written notification of the substance of such amendment to each Rating Agency.
In addition, promptly after the execution of any such amendment made with the
consent of the Certificateholders, the Trustee shall furnish written
notification of the substance of such amendment to each Certificateholder and
fully executed original counterparts of the instruments effecting such amendment
to the Certificate Insurer.
It shall not be necessary for the consent of Certificateholders under
this Section 11.01 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
Section 11.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Trustee, but only upon direction of Certificateholders or the Certificate
Insurer accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of Certificateholders or the
Certificate Insurer,
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as applicable. The Certificateholders or the Certificate Insurer, as the case
may be, requesting such recordation shall bear all costs and expenses of such
recordation. The Trustee shall have no obligation to ascertain whether such
recordation so affects the interests of the Certificateholders or the
Certificate Insurer.
Section 11.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any 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.
No Certificateholder shall have any right to vote (except as provided in
Sections 8.01, 9.01, 9.02 and 11.01) 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
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder 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.
No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Class A Certificates evidencing Percentage Interests aggregating not
less than 51% shall have made written request upon the Trustee to institute such
action, suit or proceeding in its own name as Trustee hereunder and shall have
offered to the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for ____ days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee,
that no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common benefit of
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all Certificateholders. For the protection and enforcement of the provisions of
this Section 11.03, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Section 11.04. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF [NEW YORK] AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 11.05. Notices. (a) All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) in the case of the Seller, Delta Funding Corporation, 1000 Woodbury Road,
Woodbury, New York 11797, Attention: President, (b) in the case of the Trustee,
at the Corporate Trust Office, (c) in the case of the Certificate Insurer,
_______________________________________, Attention:_____________________________
, Telecopy No.: ____________________, Confirmation: ________________ (in each
case in which notice or other communication to the Certificate Insurer refers to
an Event of Default, a claim on the Certificate Insurance Policy or with respect
to which failure on the part of the Certificate Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or other
communication shall be marked to indicate "URGENT MATERIAL ENCLOSED"), (d) in
the case of Moody's, Residential Mortgage Monitoring Group, 4th Floor, 99 Church
Street, New York, New York 10007, and (e) in the case of Standard & Poor's, 26
Broadway, 15th Floor, New York, New York 10004, Attention: Residential Mortgage
Group, or, as to each party, at such other address as shall be designated by
such party in a written notice to each other party. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice. Any notice or other document required to
be delivered or mailed by the Trustee to any Rating Agency shall be given on a
best efforts basis and only as a matter of courtesy and accommodation and the
Trustee shall have no liability for failure to delivery such notice or document
to any Rating Agency.
(b) Notice to S&P and Moody's. The Trustee and the Servicer shall each be
obligated to use its best efforts promptly to provide notice, at the expense of
the Servicer, to S&P and Moody's with respect to each of the following of which
a Responsible Officer of the Trustee or Servicer, as the case may be, has actual
knowledge:
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(i) Any material change or amendment to this Agreement;
(ii) The occurrence of any Event of Default that has not been cured or
waived;
(iii) The resignation or termination of the Servicer or the Trustee;
(iv) The final payment to Holders of the Certificates of any Class;
(v) Any change in the location of any Account; and
(vi) Any event that would result in the inability of the Trustee to
make advances regarding Delinquent Mortgage Loans.
(c) In addition, (i) the Trustee shall promptly furnish to each Rating
Agency copies of the following:
(A) Each annual report to Certificateholders described in Section
5.05; and
(B) Each Statement to Certificateholders described in Section
5.05; and
(ii) The Servicer shall promptly furnish to each Rating Agency copies
of the following:
(A) Each annual statement as to compliance described in Section
3.10;
(B) Each annual independent public accountants' servicing report
described in Section 3.11; and
(C) Each notice delivered pursuant to Section 8.01(b) which
relates to the fact that the Servicer has not made a Delinquency
Advance.
Any such notice pursuant to this Section 11.05 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service to the
addresses specified above for each such Rating Agency.
Section 11.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
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or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
Section 11.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.02, 7.04 and 7.05 (or 3.01),
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Certificate Insurer and Holders of the Certificates
evidencing Percentage Interests aggregating not less than 662/3%. The Servicer
may assign the right to reimbursement for Servicing Advances and Monthly
Advances without the consent of any Person but with prior notice thereof to the
Certificate Insurer and the Trustee.
Section 11.08. Certificates Nonassessable and Fully Paid. The parties agree
that the Certificateholders shall not be personally liable for obligations of
the Trust, that the beneficial ownership interests represented by the
Certificates shall be non-assessable for any losses or expenses of the Trust or
for any reason whatsoever, and that the Certificates upon execution,
authentication and delivery thereof by the Trustee pursuant to Section 6.02 are
and shall be deemed fully paid.
Section 11.09. Third-Party Beneficiaries. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Certificateholders, the
Certificate Owners, the Certificate Insurer and their respective successors and
permitted assigns. The Certificate Insurer shall be a third-party beneficiary of
this Agreement, entitled to enforce the provisions hereof as if a party hereto.
Except as otherwise provided in this Agreement, no other person will have any
right or obligation hereunder.
Section 11.10. 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 11.11. 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 11.12. Insurance Agreement. The Trustee is authorized and directed
to execute and deliver the Insurance Agreement and to perform the obligations of
the Trustee thereunder.
Section 11.13. Claims Upon the Certificate Insurance Policy. (a) The
Trustee shall comply with the provisions of the Certificate Insurance Policy
with respect to claims upon the Certificate Insurance Policy.
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(b) The Trustee shall keep a complete and accurate record of the amount of
interest and principal paid in respect of any Class A Certificate or Class S
Certificate from moneys received under the Certificate Insurance Policy. The
Certificate Insurer shall have the right to inspect such records at reasonable
times during normal business hours upon one Business Day's prior written notice
to the Trustee.
(c) The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under the Bankruptcy Code (a "Preference Claim") of any distribution
made with respect to the Class A Certificates or Class S Certificates. Each
Certificateholder of Class A Certificates or Class S Certificates, by its
purchase of Class A Certificates or Class S Certificates, the Servicer,
Depositor and the Trustee hereby agree that the Certificate Insurer (so long as
no Certificate 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.
Section 11.14. Effect of Payments by the Certificate Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Class A Certificates or the Class S Certificates
which is made with moneys received pursuant to the terms of the Certificate
Insurance Policy shall not be considered payment of the Class A Certificates or
the Class S Certificates from the Trust and shall not result in the payment of
or the provision for the payment of the principal of or interest on the Class A
Certificates or the Class S Certificates within the meaning of Section 5.01. The
Seller, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Class A or Class S Certificate agrees, that without the need for
any further action on the part of the Certificate Insurer, the Seller, the
Servicer, the Trustee or the Certificate Registrar, to the extent the
Certificate Insurer makes payments, directly or indirectly, on account of
principal of or interest on the Senior Certificates to the Holders of such
Certificates, (i) the Certificate Insurer will be fully subrogated to the rights
of such Holders to receive such principal and interest from the Trust and (ii)
the Certificate Insurer shall be paid such principal and interest but only from
the sources and in the manner provided herein for the payment of such principal
and interest.
The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Certificate Insurer for action to preserve or enforce
the Certificate Insurer's rights or
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interests under this Agreement without limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.
Section 11.15. Notices to the Certificate Insurer. All notices, statements,
reports, certificates or opinions required by this Agreement to be sent to any
other party hereto or to the Certificateholders shall also be sent to the
Certificate Insurer.
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IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have caused
this Agreement to be duly executed by their respective officers all as of the
day and year first above written.
DELTA FUNDING CORPORATION,
as Seller and Servicer
By_________________________________
Title:
___________________________________
as Trustee
By_________________________________
Title:
<PAGE>
State of New York )
) ss.:
County of New York )
On the ____th day of ________________, 199_ before me, a notary public in
and for the State of New York, personally appeared _________________________,
known to me who, being by me duly sworn, did depose and say that he is the
__________________ of Delta Funding Corporation, a New York corporation, one of
the parties that executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation; and that he signed his name thereto by like order.
_________________________
Notary Public
[Notarial Seal]
<PAGE>
State of New York )
) ss.:
County of New York )
On the ____th day of __________________, 199_ before me, a notary public in
and for the State of New York, personally appeared __________________________,
known to me who, being by me duly sworn, did depose and say that he is the
_______________ ______________________, a national banking association, one of
the parties that executed the foregoing instrument; and that he signed his name
thereto by order of the Board of Directors of said association.
_________________________
Notary Public
[Notarial Seal]
<PAGE>
Exhibit 4.3
- --------------------------------------------------------------------------------
DELTA FUNDING HOME EQUITY LOAN
TRUST 199_-_
TRUST AGREEMENT
between
DELTA FUNDING CORPORATION
and
-------------------------
Dated as of __________, 199_
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
Page
ARTICLE I Definitions...............................................
Section 1.1. Capitalized Terms................................
Section 1.2. Other Definitional Provisions....................
ARTICLE II Organization.............................................
Section 2.1. Name ...........................................
Section 2.2. Office...........................................
Section 2.3. Purposes and Powers..............................
Section 2.4. Appointment of Owner Trustee.....................
Section 2.5. Initial Capital Contribution of
Trust Estate...................................
Section 2.6. Declaration of Trust.............................
Section 2.7. Transfer of Interest to GP Holder, Inc.;
Liability of the Holder of the
GP Interest....................................
Section 2.8. Title to Trust Property..........................
Section 2.9. Situs of Trust...................................
Section 2.10. Representations and Warranties
of the Seller..................................
Section 2.11. Representations and Warranties of
the Holder of the GP Interest..................
Section 2.12. Federal Income Tax Allocations...................
ARTICLE III Trust Certificates and Transfer of
Interests........................................
Section 3.1. Initial Ownership................................
Section 3.2. The Trust Certificates...........................
Section 3.3. Authentication of Trust Certificates.............
Section 3.4. Registration of Transfer and
Exchange of Trust Certificates.................
Section 3.5. Mutilated, Destroyed, Lost or
Stolen Trust Certificates......................
Section 3.6. Persons Deemed Certificateholders................
Section 3.7. Access to List of Certificate-
holders' Names and Addresses...................
Section 3.8. Maintenance of Office or Agency..................
Section 3.9. Appointment of Paying Agent......................
Section 3.10. [Reserved].......................................
Section 3.11. [Reserved].......................................
Section 3.12. Disposition by the Holder of the GP
Interest.......................................
Section 3.13. [Reserved].......................................
Section 3.14. Book-Entry Trust Certificates....................
Section 3.15. Notices to Clearing Agency.......................
Section 3.16. Definitive Trust Certificates....................
<PAGE>
ARTICLE IV Actions by Owner Trustee.................................
Section 4.1. Prior Notice to Owners
with Respect to Certain Matters................
Section 4.2. Action by Certificateholders with
Respect to Certain Matters.....................
Section 4.3. Action by Certificateholders with
Respect to Bankruptcy..........................
Section 4.4. Restrictions on Certificateholders'
Power..........................................
Section 4.5. Majority Control.................................
ARTICLE V Application of Trust Funds:
Certain Duties...................................
Section 5.1. Establishment of Certificate Distribution
Account........................................
Section 5.2. Application of Funds in
Certificate Distribution Account...............
Section 5.3. [Reserved].......................................
Section 5.4. Method of Payment................................
Section 5.5. No Segregation of Monies; No
Interest.......................................
Section 5.6. Accounting and Reports to the
Noteholders, Certificateholders,
the Internal Revenue Service and
Others.........................................
Section 5.7. Signature on Returns; Tax
Matters Partner................................
ARTICLE VI Authority and Duties of Owner
Trustee..........................................
Section 6.1. General Authority................................
Section 6.2. General Duties...................................
Section 6.3. Action upon Instruction..........................
Section 6.4. No Duties Except as Specified in
this Agreement or in Instructions..............
Section 6.5. No Action Except under Specified
Documents or Instructions......................
Section 6.6. Restrictions.....................................
ARTICLE VII Concerning the Owner Trustee............................
Section 7.1. Acceptance of Trusts and Duties..................
Section 7.2. Furnishing of Documents..........................
Section 7.3. Representations and Warranties...................
Section 7.4. Reliance; Advice of Counsel......................
Section 7.5. Not Acting in Individual Capacity................
Section 7.6. Owner Trustee Not Liable For
Trust Certificates or
Home Equity Loans..............................
Section 7.7. Owner Trustee May Own Trust
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<PAGE>
Certificates and Notes.........................
ARTICLE VIII Compensation of Owner Trustee..........................
Section 8.1. Owner Trustee's Fees and Expenses................
Section 8.2. Indemnification..................................
Section 8.3. Payments to the Owner Trustee....................
ARTICLE IX Termination of Trust Agreement...........................
Section 9.1. Termination of Trust Agreement...................
Section 9.2. Dissolution upon Bankruptcy of the
Holder of the GP Interest .....................
ARTICLE X Successor Owner Trustees and Additional
Owner Trustees...................................
Section 10.1. Eligibility Requirements for Owner
Trustee........................................
Section 10.2. Resignation or Removal of Owner
Trustee........................................
Section 10.3. Successor Owner Trustee..........................
Section 10.4. Merger or Consolidation of Owner
Trustee........................................
Section 10.5. Appointment of Co-Trustee or
Separate Trustee...............................
ARTICLE XI Miscellaneous............................................
Section 11.1. Supplements and Amendments.......................
Section 11.2. No Legal Title to Owner Trust
Estate in Certificateholders...................
Section 11.3. Limitations on Rights of Others..................
Section 11.4. Notices..........................................
Section 11.5. Severability.....................................
Section 11.6. Separate Counterparts............................
Section 11.7. Successors and Assigns...........................
Section 11.8. [Reserved].......................................
Section 11.9. No Petition......................................
Section 11.10. No Recourse......................................
Section 11.11. Headings.........................................
Section 11.12. Governing Law....................................
Section 11.13. Trust Certificate Transfer
Restrictions...................................
Section 11.14. Servicer.........................................
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<PAGE>
EXHIBITS
Exhibit A Form of Trust Certificate
Exhibit B Form of Certificate of Trust
Exhibit C Form of Certificate Depository Agreement
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<PAGE>
TRUST AGREEMENT dated as of ________, 199_
between Delta Funding Corporation, a New York
corporation, as Seller, and ______________________, a
________________________, as Owner Trustee.
ARTICLE I
Definitions
SECTION 1.1. Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Basic Documents" shall mean the Sale and Servicing Agreement, the
Indenture, the Certificate Depository Agreement, the Note Depository Agreement
and the other documents and certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
11.13.
"Book Entry Trust Certificates" means a beneficial interest in the Trust
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.14.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from time to
time.
"Certificate" means a certificate evidencing the beneficial interest of a
Certificateholder in the Trust, substantially in the form of Exhibit A attached
hereto.
"Certificate Depository Agreement" shall mean the agreement among the
Trust, the Owner Trustee, the Servicer and The Depository Trust Company, as the
initial Clearing Agency, dated as of the Closing Date, relating to the Trust
Certificates, substantially in the form attached hereto as Exhibit C, as the
same may be amended and supplemented from time to time.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
<PAGE>
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee located at
_________________________________; or at such other address as the Owner Trustee
may designate by notice to the Certificateholders and the Seller, or the
principal corporate trust office of any successor Owner Trustee (the address of
which the successor owner trustee will notify the Certificateholders and the
Seller).
"Definitive Trust Certificates" shall mean either or both (as the context
requires) of (i) Trust Certificates issued in certificated, fully registered
form as provided in Section 3.14 and (ii) Trust Certificates issued in
certificated, fully registered form as provided in Section 3.16.
"Demand Note" shall have the meaning assigned to such term in Section
2.11(e).
"Delaware Trustee" shall have the meaning assigned to such term in Section
10.1.
"ERISA" shall have the meaning assigned to such term in Section 11.13.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"GP Interest" shall have the meaning assigned to such term in Section 2.7.
"Holder" or "Certificateholder" shall mean the Person in whose name a Trust
Certificate is registered on the Certificate Register.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.2.
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<PAGE>
"Note Depository Agreement" shall mean the agreement among the Trust, the
Servicer and The Depository Trust Company, as the initial Clearing Agency, dated
as of the Closing Date, relating to the Notes, as the same may be amended or
supplemented from time to time.
"Owner" shall mean each Person who is the beneficial owner of a Book Entry
Certificate as reflected in the records of the Clearing Agency or if a Clearing
Agency Participant is not the Owner, then as reflected in records of a Person
maintaining an account with such Clearing Agency (directly or indirectly, in
accordance with the rules of such Clearing Agency).
"Owner Trust Estate" shall mean all right, title and interest of the Trust
in and to the property and rights assigned to the Trust pursuant to Article II
of the Sale and Servicing Agreement, all funds on deposit from time to time in
the Trust Accounts and the Certificate Distribution Account and all other
property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement.
"Owner Trustee" shall mean ______________________, a
__________________________, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
pursuant to Section 3.9 and shall initially be the Owner Trustee.
"Record Date" shall mean, with respect to any Distribution Date, the close
of business on the fourteenth day of the calendar month in which such
Distribution Date occurs.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
between the Trust, Delta Funding Corporation, as Seller and as Servicer, dated
as of _________, 199_, as the same may be amended and supplemented from time to
time.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
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<PAGE>
"Trust Certificate" shall mean a Certificate.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined have the
meanings assigned to them in the Sale and Servicing Agreement or, if not defined
therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such certificate or other document, as applicable. To the
extent that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II
Organization
SECTION 2.1. Name. The Trust created hereby shall be known as Delta Funding
Home Equity Loan Trust 199_-_," in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
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<PAGE>
SECTION 2.2. Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address as the Owner
Trustee may designate by written notice to the Certificateholders and the
Seller.
SECTION 2.3. Purposes and Powers. (a) The purpose of the Trust is, and the
Trust shall have the power and authority, to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement, and to sell the Notes and the
Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to fund the Reserve Account and to pay the organizational,
start-up and transactional expenses of the Trust and to pay the balance to
the Seller pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to the Indenture and to hold, manage and distribute
to the Certificateholders pursuant to the terms of the Sale and Servicing
Agreement any portion of the Trust Estate released from the Lien of, and
remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is a party;
(v) to engage in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the foregoing or
are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in such
other activities as may be required in connection with conservation of the
Owner Trust Estate and the making of distributions to the
Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4. Appointment of Owner Trustee. The Seller hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein.
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SECTION 2.5. Initial Capital Contribution of Trust Estate. The Seller
hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as
of the date hereof, the sum of $____. The Owner Trustee hereby acknowledges
receipt in trust from the Seller, as of the date hereof, of the foregoing
contribution, which shall constitute the initial Owner Trust Estate and shall be
deposited in the Certificate Distribution Account.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares that
it will hold the Owner Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Certificateholders, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership.
The parties agree that, unless otherwise required by appropriate tax
authorities, the Trust will file or cause to be filed annual or other necessary
returns, reports and other forms consistent with the characterization of the
Trust as a partnership for such tax purposes. Effective as of the date hereof,
the Owner Trustee shall have all rights, powers and duties set forth herein and
to the extent not inconsistent herewith, in the Business Trust Statute with
respect to accomplishing the purposes of the Trust. The Owner Trustee and the
Delaware Trustee shall file the Certificate of Trust with the Secretary of State
of Delaware.
SECTION 2.7. Transfer of Interest to ; Liability of the Holder of the GP
Interest. (a) On the Closing Date the Seller shall and does hereby transfer and
assign its entire interest in the Trust to __________ and ______________ shall
otherwise in addition purchase a ___% interest in the Trust (the "GP Interest").
The holder of the GP Interest shall pay organizational expenses of the Trust as
they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. The
holder of the GP Interest shall also be liable directly to and will indemnify
the injured party for all losses, claims, damages, liabilities and expenses of
the Trust (including Expenses, to the extent not paid out of the Owner Trust
Estate) to the extent that the holder of the GP Interest would be liable if the
Trust were a partnership under the Delaware Revised Uniform Limited Partnership
Act in which the holder of the GP Interest were a general partner; provided,
however, that the holder of the GP Interest shall not be liable for any losses
incurred by a Certificateholder in the capacity of an investor in the Trust
Certificates or a Noteholder in the capacity of an investor in the Notes. In
addition, any third party creditors of the Trust (other than in connection with
the
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obligations described in the preceding sentence for which the holder of the GP
Interest shall not be liable) shall be deemed third party beneficiaries of this
paragraph. The obligations of the holder of the GP Interest under this paragraph
shall be evidenced by the Trust Certificates described in Section 3.12, which
for purposes of the Business Trust Statute shall be deemed to be a separate
class of Trust Certificates from all other Trust Certificates issued by the
Trust.
(b) No Owner, other than to the extent set forth in clause (a), shall have
any personal liability for any liability or obligation of the Trust.
SECTION 2.8. Title to Trust Property. Legal title to all the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.9. Situs of Trust. The Trust will be located and administered in
the State of ___________. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
___________. Payments will be received by the Trust only in Delaware or
________, and payments will be made by the Trust only from Delaware or _______.
The only office of the Trust will be at the Corporate Trust Office in
__________.
SECTION 2.10. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Owner Trustee that:
(a) The Seller is duly organized and validly existing as a New York
corporation with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
presently conducted.
(b) The Seller has the corporate power and authority to execute and
deliver this Agreement and to carry out its terms; the Seller has full
power and authority to sell and assign the property to be sold and assigned
to and deposited with the Trust and the Seller has duly authorized such
sale and assignment and deposit to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement has
been duly authorized by the Seller by all necessary corporate action.
(c) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the
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terms and provisions of, or constitute (with or without notice or lapse of
time) a default under, the articles of association or by-laws of the
Seller, or any material indenture, agreement or other instrument to which
the Seller is a party or by which it is bound; nor result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement or other instrument (other than pursuant
to the Basic Documents); nor violate any law or, to the best of the
Seller's knowledge, any order, rule or regulation applicable to the Seller
of any court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Seller or its properties.
SECTION 2.11. Representations and Warranties of the Holder of the GP
Interest. __________, as intended holder of the GP Interest, hereby represents
and warrants to the Owner Trustee, as of the Closing Date, that:
(a) It is duly organized and validly existing as a corporation in good
standing under the laws of the State of _________, with corporate power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) It is duly qualified to do business as a foreign corporation in
good standing, and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of
its business shall require such qualifications.
(c) It has the corporate power and authority to execute and deliver
this Agreement and to carry out its terms and the execution, delivery and
performance of this Agreement has been duly authorized by all necessary
corporate action.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under its articles of
incorporation or bylaws, or any indenture, agreement or other instrument to
which it is a party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement or other instrument; nor violate any law or,
to the best of its knowledge, any order, rule or regulation applicable to
it of any court or of any Federal or state regulatory body, administrative
agency or
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other governmental instrumentality having jurisdiction over it or its
properties.
(e) It has been duly capitalized by the delivery of a demand note (the
"Demand Note") from the Seller in the amount of $__________, which Demand
Note has not been canceled, waived or terminated. The proceeds of such
Demand Note have not been used and will not be used to pay (i) any of the
expenses of the holder of the GP Interest in connection with the
transactions contemplated by the Basic Documents or (ii) the purchase price
for the Certificates purchased pursuant to Section 2.7. Such Demand Note is
enforceable against the Seller, subject to its terms, and subject to
applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and similar laws now or hereafter in effect relating to
creditors' rights generally or the rights of creditors of banks the deposit
accounts of which are insured by the Federal Deposit Insurance Corporation
and subject to general principles of equity (whether applied in a
proceeding at law or in equity).
SECTION 2.12. Federal Income Tax Allocations. Net income of the Trust for
any month as determined for Federal income tax purposes (and each item of
income, gain, loss, credit and deduction entering into the computation thereof)
shall be allocated:
(a) to the extent of available net income, among the
Certificateholders as of the first Record Date following the end of such
month, in proportion to their ownership of principal amount of Trust
Certificates on such date, an amount of net income up to the sum of (i) the
Certificateholders' Monthly Interest Distributable Amount for such month,
(ii) interest on the excess, if any, of the Certificateholders' Interest
Distributable Amount for the preceding Distribution Date over the amount in
respect of interest at the Certificate Rate that is actually deposited in
the Certificate Distribution Account on such preceding Distribution Date,
to the extent permitted by law, at the Certificate Rate from such preceding
Distribution Date through the current Distribution Date, and (iii) the
portion of the market discount on the Home Equity Loans accrued during such
month that is allocable to the excess of the initial aggregate principal
amount of the Trust Certificates over their initial aggregate issue price;
and
(b) to the holder of the GP Interest, to the extent of any remaining
net income.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a) above, subsequent net income shall first be allocated to
make up such shortfall before
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being allocated as provided in clause (b). Net losses of the Trust, if any, for
any month as determined for Federal income tax purposes (and each item of
income, gain, loss, credit and deduction entering into the computation thereof)
shall be allocated to the holder of the GP Interest to the extent the holder of
the GP Interest is reasonably expected as determined by the Servicer to bear the
economic burden of such net losses, then net losses shall be allocated among the
Certificateholders as of the first Record Date following the end of such month
in proportion to their ownership of principal amount of Trust Certificates on
such Record Date until the principal balance of the Trust Certificates is
reduced to zero. The holder of the GP Interest is authorized to modify the
allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain or
loss to the holder of the GP Interest, the Certificateholders, or as otherwise
required by the Code.
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership. Upon the formation of the Trust by the
contribution by the Seller pursuant to Section 2.5 and until the issuance of the
Trust Certificates, the Seller shall be the sole beneficiary of the Trust.
SECTION 3.2. The Trust Certificates. The Trust Certificates shall be issued
in denominations of $1,000 and integral multiples thereof; provided, however,
that (a) Trust Certificates may be issued to the holder of the GP Interest
pursuant to Section 2.7 in such denominations as to represent at least 1% of the
initial Certificate Balance and (b) one Trust Certificate may be issued in a
denomination other than an integral multiple of $1,000. The Trust Certificates
shall be executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Trust Certificates
or did not hold such offices at the date of authentication and delivery of such
Trust Certificates. A transferee of a Trust Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder, upon due registration of such
Trust Certificate in such transferee's name pursuant to Section 3.4.
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SECTION 3.3. Authentication of Trust Certificates. Concurrently with the
initial sale of the Home Equity Loans to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause the Trust Certificates in an
aggregate principal amount equal to the initial Certificate Balance to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Seller, signed by its chairman of the board, its president
or any vice president, without further corporate action by the Seller, in
authorized denominations. No Trust Certificate shall entitle its holder to any
benefit under this Agreement, or shall be valid for any purpose, unless there
shall appear on such Trust Certificate a certificate of authentication
substantially in the form set forth in Exhibit A, executed by the Owner Trustee
or _________, as the Owner Trustee's authentication agent, by manual signature;
such authentication shall constitute conclusive evidence that such Trust
Certificate shall have been duly authenticated and delivered hereunder. All
Trust Certificates shall be dated the date of their authentication.
SECTION 3.4. Registration of Transfer and Exchange of Trust Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.8, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Trust Certificates and of transfers and
exchanges of Trust Certificates as herein provided. The Owner Trustee shall be
the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause _________________________,
as its authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Trust Certificates in
authorized denominations of a like class and aggregate face amount dated the
date of authentication by the Owner Trustee or any authenticating agent. At
the option of a Holder, Trust Certificates may be exchanged for other Trust
Certificates of the same class in authorized denominations of a like aggregate
amount upon surrender of the Trust Certificates to be exchanged at the office
or agency maintained pursuant to Section 3.8.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Certificateholder or his attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Certificate Registrar, which requirements include
membership or
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participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Certificate
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act. Each Trust Certificate surrendered for registration of
transfer or exchange shall be canceled and subsequently disposed of by the Owner
Trustee in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Trust Certificates. If
(a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Trust Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless,
then in the absence of notice that such Trust Certificate shall have been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee, or _______________________
_______________________, as the Owner Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Trust Certificate, a new Trust Certificate of like
class, tenor and denomination. In connection with the issuance of any new Trust
Certificate under this Section, the Owner Trustee or the Certificate Registrar
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Trust Certificate issued pursuant to this Section shall constitute conclusive
evidence of an ownership interest in the Trust, as if originally issued, whether
or not the lost, stolen or destroyed Trust Certificate shall be found at any
time.
SECTION 3.6. Persons Deemed Certificateholders. Every person by virtue of
becoming a Certificateholder or Owner in accordance with this Agreement shall be
deemed to be bound by the terms of this Agreement. Prior to due presentation of
a Trust Certificate for registration of transfer, the Owner Trustee or the
Certificate Registrar may treat the Person in whose name any Trust Certificate
shall be registered in the Certificate Register as the Owner of such Trust
Certificate for the purpose of receiving distributions pursuant to Section 5.2
and for all other purposes whatsoever, and neither the Owner Trustee nor the
Certificate Registrar shall be bound by any notice to the contrary.
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SECTION 3.7. Access to List of Certificateholders' Names and Addresses. The
Owner Trustee shall furnish or cause to be furnished to the Servicer, the Seller
and the holder of the GP Interest, within __ days after receipt by the Owner
Trustee of a request therefor from the Servicer, the Seller or the holder of the
GP Interest in writing, a list, in such form as the Servicer, the Seller or the
holder of the GP Interest may reasonably require, of the names and addresses of
the Certificateholders as of the most recent Record Date. If three or more
Holders of Trust Certificates or one or more Holders of Trust Certificates
evidencing not less than 25% of the Certificate Balance apply in writing to the
Owner Trustee, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Trust Certificates and such application is
accompanied by a copy of the communication that such applicants propose to
transmit, then the Owner Trustee shall, within five Business Days after the
receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Trust Certificate, shall be deemed to have agreed not to
hold either the Seller or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic Documents
may be served. The Owner Trustee initially designates ________________________,
as its principal corporate trust office for such purposes. The Owner Trustee
shall give prompt written notice to the Seller and to the Certificateholders
of any change in the location of the Certificate Register or any such office
or agency.
SECTION 3.9. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.2 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Paying Agent shall initially be the Owner
Trustee, and any co-paying agent chosen by the Owner Trustee, and acceptable to
the Servicer. The Paying Agent shall be permitted to resign upon 30 days'
written
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notice to the Owner Trustee and the Servicer. In the event that the Owner
Trustee shall no longer be the Paying Agent, the Owner Trustee shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Owner Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Paying Agent shall return all unclaimed funds to the
Owner Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Owner Trustee. The provisions of
Sections 7.1, 7.3, 7.4 and 8.1 shall apply to the Owner Trustee also in its role
as Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and,
to the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
SECTION 3.10. [Reserved]
SECTION 3.11. [Reserved]
SECTION 3.12. Disposition by the Holder of the GP Interest. On and after
the Closing Date, the holder of the GP Interest shall retain beneficial and
record ownership of Trust Certificates representing at least 1% of the initial
Certificate Balance. Any attempted transfer of any Trust Certificate that would
reduce such interest of the holder of the GP Interest below 1% of the
Certificate Balance shall be void. The Owner Trustee shall cause any Trust
Certificate issued to the holder of the GP Interest to contain a legend stating
"THIS CERTIFICATE IS NOT TRANSFERABLE".
SECTION 3.13. [Reserved]
SECTION 3.14. Book-Entry Trust Certificates. The Trust Certificates, upon
original issuance, will be issued in the form of a typewritten Trust Certificate
or Trust Certificates representing Book-Entry Trust Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by or on
behalf of the Trust; provided, however, that one Definitive Certificate (as
defined below) may be issued to GP Holder, Inc., as holder of the GP Interest
pursuant to Section 2.7. Such Book-Entry Trust Certificate or Trust Certificates
shall initially be registered on the Certificate Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no beneficial owner (other
than the Seller and the holder of the GP Interest) will receive a definitive
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Trust Certificate representing such beneficial owner's interest in such Trust
Certificate, except as provided in Section 3.16. Unless and until Definitive
Trust Certificates have been issued to beneficial owners pursuant to Section
3.16:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Certificate Registrar and the Owner Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Agreement
relating to the Book-Entry Trust Certificates (including the payment of
principal of and interest on the Book-Entry Trust Certificates and the
giving of instructions or directions to Owners of Book-Entry Trust
Certificates) as the sole Holder of Book-Entry Trust Certificates and shall
have no obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section
shall control;
(iv) the rights of the Owners of the Book-Entry Trust Certificates
shall be exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Owners and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Certificate Depository Agreement, unless and until Definitive Trust
Certificates are issued pursuant to Section 3.16, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest
on the Book-Entry Trust Certificates to such Clearing Agency Participants;
and
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Book-Entry Trust Certificates
and has delivered such instructions to the Owner Trustee.
SECTION 3.15. Notices to Clearing Agency. Whenever a notice or other
communication to the Owners is required under this Agreement, unless and until
Definitive Trust Certificates shall have been issued to Owners pursuant to
Section 3.16, the Owner Trustee shall give all such notices and communications
specified herein to be given to Owners to the Clearing Agency,
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and shall have no obligations to the Owners, except to the holder of the GP
Interest.
SECTION 3.16. Definitive Trust Certificates. If (i) the Servicer advises
the Owner Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Trust
Certificates, and the Servicer is unable to locate a qualified successor, (ii)
the Servicer at its option advises the Owner Trustee in writing that it elects
to terminate the book-entry system through the Clearing Agency or (iii) after
the occurrence of an Event of Default, Owners of Certificates representing
beneficial interests aggregating at least a majority of the Certificate Balance
advise the Clearing Agency in writing that the continuation of a book-entry
system through the Clearing Agency is no longer in the best interest of the
Owners of Trust Certificates, then the Clearing Agency shall notify all Owners
and the Owner Trustee of the occurrence of any such event and of the
availability of the Definitive Trust Certificates to Owners requesting the same.
Upon surrender to the Owner Trustee of the typewritten Trust Certificate or
Trust Certificates representing the Book Entry Trust Certificates by the
Clearing Agency, accompanied by registration instructions, the Owner Trustee
shall execute and authenticate the Definitive Trust Certificates in accordance
with the instructions of the Clearing Agency. Neither the Certificate Registrar
nor the Owner Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Trust Certificates, the Owner
Trustee shall recognize the Holders of the Definitive Trust Certificates as
Certificateholders. The Definitive Trust Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof.
ARTICLE IV
Actions by Owner Trustee
SECTION 4.1. Prior Notice to Owners with Respect to Certain Matters. With
respect to the following matters, the Owner Trustee shall not take action unless
at least __ days before the taking of such action, the Owner Trustee shall have
notified the Certificateholders in writing of the proposed action and the
Certificateholders shall not have notified the Owner Trustee in writing prior to
the __th day after such notice is given that such Certificateholders have
withheld consent or provided alternative direction:
(a) the initiation of any material claim or lawsuit by the Trust
except claims or lawsuits brought in
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connection with the collection of the Home Equity Loans and the compromise
of any material action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for
collection of the Home Equity Loans);
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business
Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Note- holder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the
Certificateholders;
(e) the amendment, change or modification of the Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or supplement
any provision in a manner that would not materially adversely affect the
interests of the Certificateholders; or
(f) the appointment pursuant to the Indenture of a successor Trustee
or the consent to the assignment by the Note Registrar, Paying Agent or
Trustee or Certificate Registrar of its obligations under the Indenture or
this Agreement, as applicable.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, Paying Agent or Certificate Registrar
within five Business Days thereof.
SECTION 4.2. Action by Certificateholders with Respect to Certain Matters.
The Owner Trustee shall not have the power, except upon the direction of the
Certificateholders, to (a) remove the Servicer under the Sale and Servicing
Agreement pursuant to Section 8.1 thereof or (b) except as expressly provided in
the Basic Documents, sell the Home Equity Loans after the termination of the
Indenture. The Owner Trustee shall take the actions referred to in the preceding
sentence only upon written instructions signed by the Certificateholders.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy. The
Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
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SECTION 4.4. Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
SECTION 4.5. Majority Control. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Holders of Trust Certificates evidencing not less than a majority
of the Certificate Balance. Except as expressly provided herein, any written
notice of the Certificateholders delivered pursuant to this Agreement shall be
effective if signed by Holders of Certificates evidencing not less than a
majority of the Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds:
Certain Duties
SECTION 5.1. Establishment of Certificate Distribution Account. The Owner
Trustee, for the benefit of the Certificateholders, shall establish and maintain
in the name of the Trust an Eligible Deposit Account (the "Certificate
Distribution Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders. Except as
otherwise provided herein, the Certificate Distribution Account shall be under
the sole dominion and control of the Owner Trustee for the benefit of the
Certificateholders. The Certificate Distribution Account shall not be held in
the State of [Texas].
SECTION 5.2. Application of Funds in Certificate Distribution Account. (a)
On each Distribution Date, the Owner Trustee will, based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date pursuant to Section 4.9 of the Sale and Servicing Agreement, distribute to
Certificateholders, to the extent of the funds available, amounts deposited in
the Certificate Distribution Account pursuant to Section 5.5 of the Sale and
Servicing Agreement on such Distribution Date in the following order of
priority:
(i) first, to the Certificateholders, on a pro rata basis, an amount
equal to the Certificateholders' Interest Distributable Amount; and
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(ii) second, to the Certificateholders, on a pro rata basis, an amount
equal to the Certificateholders' Principal Distributable Amount.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement provided to the Owner Trustee by the Servicer
pursuant to Section 5.8 of the Sale and Servicing Agreement on such Distribution
Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Certificateholder, such tax shall reduce the
amount otherwise distributable to the Certificateholder in accordance with this
Section. The Owner Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Certificateholders sufficient funds for
the payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to a non-US
Certificateholder), the Owner Trustee may in it sole discretion withhold such
amounts in accordance with this clause (c). In the event that an Owner wishes to
apply for a refund of any such withholding tax, the Owner Trustee shall
reasonably cooperate with such Certificateholder in making such claim so long as
such Certificateholder agrees to reimburse the Owner Trustee for any
out-of-pocket expenses incurred.
SECTION 5.3. [Reserved.]
SECTION 5.4. Method of Payment. Subject to Section 9.1(c), distributions
required to be made to Certificateholders on any Distribution Date shall be made
to each Certificateholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Holder at a
bank or other entity having appropriate facilities therefor, if (i) such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Distribution Date
and such Holder's Trust Certificates in the aggregate evidence a denomination of
not less than $__________ or (ii) such Certificateholder is the holder of the GP
Interest, or an Affiliate thereof, or, if not, by check mailed to such
Certificateholder at the address of such holder appearing in the Certificate
Register; provided, however, that, unless Definitive Certificates have been
issued pursuant to Section 3.16, with respect to Trust Certificates registered
on the Record Date in
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the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), distributions will be made by wire transfer in immediately
available funds to the account designated by such nominee. Notwithstanding the
foregoing, the final distribution in respect of any Trust Certificate (whether
on the Final Scheduled Distribution Date or otherwise) will be payable only upon
presentation and surrender of such Trust Certificate at the office or agency
maintained for that purpose by the Owner Trustee pursuant to Section 3.8.
SECTION 5.5. No Segregation of Monies; No Interest. Subject to Sections 5.1
and 5.2, monies received by the Owner Trustee hereunder need not be segregated
in any manner except to the extent required by law and may be deposited under
such general conditions as may be prescribed by law, and the Owner Trustee shall
not be liable for any interest thereon.
SECTION 5.6. Accounting and Reports to the Noteholders, Certificateholders,
the Internal Revenue Service and Others. Subject to Sections 10.1(b)(iii) and
10.1(c) of the Sale and Servicing Agreement, the holder of the GP Interest shall
(a) maintain (or cause to be maintained) the books of the Trust on a calendar
year basis on the accrual method of accounting, (b) deliver (or cause to be
delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1) to enable each Certificateholder to prepare its Federal and state
income tax returns, (c) file or cause to be filed such tax returns relating to
the Trust (including a partnership information return, Form 1065), and direct
the Owner Trustee to make such elections as may from time to time be required or
appropriate under any applicable state or Federal statute or rule or regulation
thereunder so as to maintain the Trust's characterization as a partnership for
Federal income tax purposes and (d) collect or cause to be collected any
withholding tax as described in and in accordance with Section 5.2(c) with
respect to income or distributions to Certificateholders. The Owner Trustee
shall make all elections pursuant to this Section as directed by the holder of
the GP Interest. The Owner Trustee shall sign all tax information returns filed
pursuant to this Section 5.6 and any other returns as may be required by law,
and in doing so shall rely entirely upon, and shall have no liability for
information provided by, or calculations provided by, the holder of the GP
Interest. The Owner Trustee shall elect under Section 1278 of the Code to
include in income currently any market discount that accrues with respect to the
Home Equity Loans. The Owner Trustee shall not make the election provided under
Section 754 of the Code.
SECTION 5.7. Signature on Returns; Tax Matters Partner. (a) Notwithstanding
the provisions of Section 5.6, the Owner Trustee shall sign on behalf of the
Trust the tax returns of the Trust, unless applicable law requires a
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Certificateholder or an Owner to sign such documents, in which case such
documents shall be signed by the holder of the GP Interest.
(b) The holder of the GP Interest shall be the "tax matters partner" of the
Trust pursuant to the Code.
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is named
as a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is named as a party and
any amendment thereto, in each case, in such form as the Seller shall approve as
evidenced conclusively by the Owner Trustee's execution thereof, and on behalf
of the Trust, to direct the Trustee to authenticate and deliver [List Class(es)
of Notes and Aggregate Principal Amount(s)]. In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust pursuant to the Basic Documents. The Owner Trustee is
further authorized from time to time to take such action as the Servicer
recommends with respect to the Basic Documents.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee to
discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Sale and Servicing Agreement and to
administer the Trust in the interest of the Owners, subject to the Basic
Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Servicer has agreed in the Sale and Servicing
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be liable
for the default or failure of the Servicer to carry out its obligations under
the Sale and Servicing Agreement.
SECTION 6.3. Action upon Instruction. (a) Subject to Article IV, the
Certificateholders may, by written instruction, direct the Owner Trustee in the
management of the Trust. Such direction may be exercised at any time by written
instruction of the Certificateholders pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Basic Document if the Owner Trustee shall have reasonably determined,
or shall have been advised by counsel, that such action is likely to result in
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liability on the part of the Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Basic Document, the Owner Trustee shall promptly give notice (in such form as
shall be appropriate under the circumstances) to the Certificateholders
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Certificateholders received, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Certificateholders
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Basic
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
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taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Basic Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any Liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate.
SECTION 6.5. No Action Except under Specified Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any action (a)
that is inconsistent with the purposes of the Trust set forth in Section 2.3 or
(b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties. The Owner Trustee accepts the
trusts hereby created and agrees to perform its duties hereunder with respect to
such trusts but only upon the terms of this Agreement. The Owner Trustee also
agrees to disburse all moneys actually received by it constituting part of the
Owner Trust Estate upon the terms of the Basic Documents and this Agreement. The
Owner Trustee shall not be answerable or accountable hereunder or under any
Basic Document under any circumstances, except (i) for its own willful
misconduct, bad faith or negligence or (ii) in the case of the
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inaccuracy of any representation or warranty contained in Section 7.3 expressly
made by the Owner Trustee. In particular, but not by way of limitation (and
subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of
the Servicer or any Certificateholder;
(c) no provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or
under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution
hereof by the Seller or for the form, character, genuineness, sufficiency,
value or validity of any of the Owner Trust Estate or for or in respect of
the validity or sufficiency of the Basic Documents, other than the
certificate of authentication on the Trust Certificates, and the Owner
Trustee shall in no event assume or incur any liability, duty or obligation
to any Noteholder or to any Certificateholder, other than as expressly
provided for herein and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Trustee or the Servicer under any of the Basic Documents
or otherwise and the Owner Trustee shall have no obligation or liability to
perform the obligations of the Trust under this Agreement or the Basic
Documents that are required to be performed by the Trustee under the
Indenture or the Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or otherwise or in
relation
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to this Agreement or any Basic Document, at the request, order or direction
of any of the Certificateholders, unless such Certificateholders have
offered to the Owner Trustee security or indemnity satisfactory to it
against the costs, expenses and liabilities that may be incurred by the
Owner Trustee therein or thereby. The right of the Owner Trustee to perform
any discretionary act enumerated in this Agreement or in any Basic Document
shall not be construed as a duty, and the Owner Trustee shall not be
answerable for other than its negligence, bad faith or willful misconduct
in the performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish to
the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Seller, for the benefit of the
Certificateholders, that:
(a) It is a ____________________ duly organized and validly existing
in good standing under the laws of the ___________ and having an office
within the State of New York. It has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement,
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene
any federal, Delaware, New York or ___________ state law, governmental rule
or regulation governing the banking or trust powers of the Owner Trustee or
any judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
SECTION 7.4. Reliance; Advice of Counsel. (a) The Owner Trustee shall incur
no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be
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signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of the determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer,
secretary or other authorized officers of the relevant party, as to such fact or
matter, and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Basic Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as provided in this
Article VII, in accepting the trusts hereby created
_______________________________ acts solely as Owner Trustee hereunder and not
in its individual capacity and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Basic Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Trust Certificates or Home Equity
Loans. The recitals contained herein and in the Trust Certificates (other than
the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Seller and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Basic Document or of the Trust Certificates (other than the signature and
countersignature of the Owner Trustee on the Trust Certificates) or the Notes,
or of any Home Equity Loan or related documents. The Owner Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Home Equity Loan, or the perfection and
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priority of any security interest created by any Home Equity Loan in any
Mortgaged Property or the maintenance of any such perfection and priority, or
for or with respect to the sufficiency of the Owner Trust Estate or its ability
to generate the payments to be distributed to Certificateholders under this
Agreement or the Noteholders under the Indenture, including, without limitation:
the existence, condition and ownership of any Mortgaged Property; the existence
and enforceability of any insurance thereon; the existence and contents of any
Home Equity Loan on any computer or other record thereof; the validity of the
assignment of any Home Equity Loan to the Trust or of any intervening
assignment; the completeness of any Home Equity Loan; the performance or
enforcement of any Home Equity Loan; the compliance by the Seller or the
Servicer with any warranty or representation made under any Basic Document or in
any related document or the accuracy of any such warranty or representation or
any action of the Trustee or the Servicer or any subservicer taken in the name
of the Owner Trustee.
SECTION 7.7. Owner Trustee May Own Trust Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Trust Certificates or Notes and may deal with the Seller, the Trustee and the
Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Seller and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the holder
of the GP Interest for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.2. Indemnification. The holder of the GP Interest shall be liable
as primary obligor for, and shall indemnify the Owner Trustee and its
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 the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this
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Agreement, the Basic Documents, the Owner Trust Estate, the administration of
the Owner Trust Estate or the action or inaction of the Owner Trustee hereunder,
except only that the holder of the GP Interest shall not be liable for or
required to indemnify the Owner Trustee from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.1. The indemnities contained in this Section shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the holder of the GP Interest, which approval shall
not be unreasonably withheld.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid to the Owner
Trustee pursuant to this Article VIII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement. (a) This Agreement (other than
Article VIII) and the Trust shall terminate and be of no further force or
effect, (i) upon the final distribution by the Owner Trustee of all moneys or
other property or proceeds of the Owner Trust Estate in accordance with the
terms of the Indenture, the Sale and Servicing Agreement and Article V or (ii)
at the time provided in Section 9.2. The bankruptcy, liquidation, dissolution,
death or incapacity of any Certificateholder or Owner, other than the holder of
the GP Interest as described in Section 9.2, shall not (x) operate to terminate
this Agreement or the Trust, nor (y) entitle such Certificateholder's or Owner's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of all or any part of the
Trust or Owner Trust Estate nor (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Seller nor the holder of
the GP Interest nor any Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which the Certificateholders shall surrender their Trust Certificates
to the Paying Agent for payment of the final distribution and cancellation,
shall be given by the Owner Trustee by letter to Certificate-
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holders mailed within five Business Days of receipt of notice of such
termination from the Servicer given pursuant to Section 9.1(c) of the Sale and
Servicing Agreement, stating (i) the Distribution Date upon or with respect to
which final payment of the Trust Certificates shall be made upon presentation
and surrender of the Trust Certificates at the office of the Paying Agent
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
payments being made only upon presentation and surrender of the Trust
Certificates at the office of the Paying Agent therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the Trust Certificates,
the Paying Agent shall cause to be distributed to Certificateholders amounts
distributable on such Distribution Date pursuant to Section 5.2.
In the event that all of the Certificateholders shall not surrender their
Trust Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their Trust
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Trust Certificates
shall not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Trust
Certificates, and the cost thereof shall be paid out of the funds and other
assets that shall remain subject to this Agreement. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed, subject to
applicable escheat laws, by the Owner Trustee to the holder of the GP Interest.
(d) Any funds remaining in the Trust after funds for final distribution
have been distributed or set aside for distribution shall be distributed by the
Owner Trustee to the holder of the GP Interest (other than any amounts remaining
in the Reserve Account which shall be distributed to the Seller).
(e) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
SECTION 9.2. Dissolution upon Bankruptcy of the Holder of the GP Interest.
In the event that an Insolvency Event shall occur with respect to the holder of
the GP Interest, this Agreement shall be terminated in accordance with Section
9.1 90 days after the date of such Insolvency Event, unless,
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before the end of such 90-day period, the Owner Trustee shall have received
written instructions from Certificateholders holding a majority of the
Certificate Balance (other than the holder of the GP Interest) to the effect
that each such party disapproves of the liquidation of the Home Equity Loans and
termination of the Trust. Promptly after the occurrence of any Insolvency Event
with respect to the holder of the GP Interest, (i) the holder of the GP Interest
shall give the Trustee and the Owner Trustee written notice of such Insolvency
Event, (ii) the Owner Trustee shall, upon the receipt of such written notice
from the holder of the GP Interest, give prompt written notice to the
Certificateholders and the Trustee of the occurrence of such event and (iii) the
Trustee shall, upon receipt of written notice of such Insolvency Event from the
Owner Trustee or the holder of the GP Interest, give prompt written notice to
the Noteholders of the occurrence of such event; provided, however, that any
failure to give a notice required by this sentence shall not prevent or delay,
in any manner, a termination of the Trust pursuant to the first sentence of this
Section 9.2. Upon a termination pursuant to this Section, the Owner Trustee
shall direct the Trustee promptly to sell the assets of the Owner Trust Estate
in a commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Sale and Servicing Agreement and shall be distributed in
accordance with Section 9.1(b) thereof.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner Trustee
shall at all times be a corporation authorized to exercise corporate trust
powers; and having a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by Federal or state authorities. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.2. In addition, at all times the Owner
Trustee or a co-trustee shall be a person that satisfies the requirements of
Section 3807(a) of the Business Trust Statute (the "Delaware Trustee").
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner Trustee
may at any time resign and be
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discharged from the trusts hereby created by giving written notice thereof to
the Servicer. Upon receiving such notice of resignation, the Servicer shall
promptly appoint a successor Owner Trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Owner Trustee
and one copy to the successor Owner Trustee. If no successor Owner Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Owner Trustee may petition
any court of competent jurisdiction for the appointment of a successor Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the Servicer, or if at any time the Owner Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver
of the Owner Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Owner Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Owner Trustee. If the Servicer shall remove the Owner
Trustee under the authority of the immediately preceding sentence, the Servicer
shall promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing Owner
Trustee so removed and one copy to the successor Owner Trustee and payment of
all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Servicer shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Servicer and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall upon payment of its fees and expenses deliver to
the successor Owner Trustee all documents and statements and monies held by it
under this Agreement; and the Servicer and the predecessor Owner Trustee
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<PAGE>
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Servicer shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Trustee, the Noteholders and the Rating
Agencies. If the Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the Servicer.
SECTION 10.4. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Mortgaged Property may at the time be located,
the Servicer and the Owner Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Owner Trustee to act as co-trustee, jointly with the Owner Trustee, or
separate trustee or separate trustees, of all or any part of the Owner Trust
Estate, and to vest in such Person, in such capacity, such title to the Trust,
or any part thereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Servicer and the Owner
Trustee may consider necessary or desirable. If the Servicer shall not have
joined in such appointment within 15 days after the receipt by it of a request
so to do, the Owner Trustee alone shall have the power to make such appointment.
[Pursuant to the
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<PAGE>
Co-Trustee Agreement, dated as of __________, 199_, between ____________________
and ________________, the Owner Trustee shall appoint __________________ as a
co-trustee hereunder for the purpose of his acting as Delaware Trustee and such
agreement is hereby incorporated herein by reference.] If the Delaware Trustee
shall die, become incapable of acting, resign or be removed, unless the Owner
Trustee is qualified to act as Delaware Trustee, a successor co-trustee shall
promptly be appointed in the manner specified in this Section 10.5 to act as
Delaware Trustee. No co-trustee or separate trustee under this Agreement shall
be required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.1 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized
to act separately without the Owner Trustee joining in such act), except to
the extent that under any law of any jurisdiction in which any particular
act or acts are to be performed, the Owner Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at the
direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Servicer and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Owner Trustee or
separately, as may be provided therein, subject to all the
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<PAGE>
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.]
ARTICLE XI
Miscellaneous
SECTION 11.1. Supplements and Amendments. This Agreement may be amended by
the Seller and the Owner Trustee, with prior written notice to the Rating
Agencies, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity or defect, to correct or supplement
any provisions in this Agreement or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions in this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Seller and the
Owner Trustee, with prior written notice to the Rating Agencies, with the
consent of the Holders of Notes evidencing not less than a majority of the
Outstanding Amount of the Notes and, to the extent affected thereby, the consent
of the Holders of Certificates evidencing not less than a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Home Equity Loans or distributions that shall be required to be made
for the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance required to consent to any such
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<PAGE>
amendment, without the consent of the Holders of all the outstanding Notes and
Holders of all outstanding Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Certificateholder, the Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2. No Legal Title to Owner Trust Estate in Certificateholders.
The Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title or interest of the Certificateholders to and in their ownership interest
in the Owner Trust Estate shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of legal title to any part of the Owner Trust Estate.
SECTION 11.3. Limitations on Rights of Others. Except for Section 2.7, the
provisions of this Agreement are solely for the benefit of the Owner Trustee,
the Seller, the Certificateholders, the Servicer and, to the extent expressly
provided herein, the Trustee and the Noteholders, and nothing in this Agreement,
whether express or implied, shall be construed
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<PAGE>
to give to any other Person any legal or equitable right, remedy or claim in the
Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 11.4. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed certified mail, return receipt requested and shall be deemed to have
been duly given upon receipt, if to the Owner Trustee, addressed to
_____________________; if to the Seller, addressed to Delta Funding Corporation,
1000 Woodbury Road, Woodbury, New York 11797, Attention: _________________; if
to the holder of the GP Interest, addressed to
______________________________________________, Attention: _________; or, as to
each party, at such other address as shall be designated by such party in a
written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Seller,
the holder of the GP Interest, the Owner Trustee and its successors and each
Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.
SECTION 11.8. [Reserved.]
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<PAGE>
SECTION 11.9. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Trust Certificate, and the Trustee and each
Noteholder by accepting the benefits of this Agreement, hereby covenants and
agrees that they will not at any time institute against the holder of the GP
Interest, or join in any institution against the holder of the GP Interest 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
Trust Certificates, the Notes, this Agreement or any of the Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting a Trust
Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Seller, the Servicer, the holder of the GP Interest,
the Owner Trustee, the Trustee or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Trust Certificates or the Basic
Documents.
SECTION 11.11. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF [DELAWARE], WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Trust Certificate Transfer Restrictions. The Trust
Certificates may not be acquired by or for the account of (i) an employee
benefit plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of
Title 1 of ERISA, (ii) a plan described in Section 4975(e) (1) of the Code, or
(iii) any entity whose underlying assets include plan assets by reason of a
plan's investment in the entity (each, a "Benefit Plan"). By accepting and
holding a Trust Certificate, the Holder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
SECTION 11.14. Servicer. The Servicer is authorized to execute on behalf of
the Trust all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Trust to prepare, file or deliver
pursuant to the Basic Documents. Upon written request, the Owner Trustee shall
execute and deliver to the Servicer a power of attorney
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<PAGE>
appointing the Servicer the Trust's agent and attorney-in-fact to execute all
such documents, reports, filings, instruments, certificates and opinions.
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized as of the
day and year first above written.
____________________________
By:_________________________
Name:
Title:
DELTA FUNDING CORPORATION
Seller,
By:_________________________
Name:
Title:
Accepted and Agreed
with respect to the
provisions relating to
the intended holder of
the GP Interest:
________________
By:_______________________
Name:
Title:
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<PAGE>
EXHIBIT A
NUMBER $
R- CUSIP NO.
SEE REVERSE FOR CERTAIN DEFINITIONS
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
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 PRINCIPAL OF THIS TRUST CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS
SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS
TRUST CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF.]
[THIS CERTIFICATE IS NOT TRANSFERABLE](1)
DELTA FUNDING HOME EQUITY LOAN
TRUST 199_-_
__% ASSET BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes a pool of closed-end
and/or revolving home equity loans or certain balances thereof and home
improvement sales contracts and installment loan agreements sold to the Trust by
Delta Funding Corporation
(This Trust Certificate does not represent an interest in or obligation of Delta
Funding Corporation or any of its Affiliates, except to the extent described
below.)
THIS CERTIFIES THAT ____________________ is the registered owner of
_______________ DOLLARS nonassessable, fully-paid, beneficial ownership interest
in certain distributions of Delta Funding Home Equity Loan Trust 199_-_ (the
"Trust") formed by Delta Funding Corporation, a New York corporation (the
"Seller"). The Trust Certificates have a Certificate Rate of ___% per annum.
________
(1) To be inserted on the Certificate to be held by the holder of the GP
Interest.
A-1
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned
Trust Agreement.
___________________ ___________________
as Owner Trustee or as Owner Trustee
By _____________
Authenticating Agent
by__________________________
by_____________________
The Trust was created pursuant to a Trust Agreement dated as of ________,
199_ (the "Trust Agreement"), between the Seller and
___________________________, as owner trustee (the "Owner Trustee"), a summary
of certain of the pertinent provisions of which is set forth below. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Trust Certificates
designated as "____% Asset Backed Certificates" (herein called the "Trust
Certificates"). Also issued under the Indenture dated as of __________, 199_,
between the Trust and _________________, as trustee, are [ ] classes of Notes
designated as [List Classes of Notes]. This Trust Certificate is issued under
and is subject to the terms, provisions and conditions of the Trust Agreement,
to which Trust Agreement the holder of this Trust Certificate by virtue of the
acceptance hereof assents and by which such holder is bound. The property of the
Trust includes closed-end and/or revolving home equity loans or certain balances
thereof and home improvement sales contracts and installment loan agreements
(the "Home Equity Loans"), all monies received on the Home Equity Loans on or
after __________, 199_, security interests in the properties financed thereby,
certain bank accounts and the proceeds thereof, proceeds from claims on certain
insurance policies and certain other rights under the Trust Agreement and the
Sale and Servicing Agreement.
Under the Trust Agreement, there will be distributed on the __th day of
each month or, if such __th day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing in ________, 199_, to the Person in whose
name this Trust Certificate is registered at the close of business on the 14th
day of such month (the "Record Date") such Certificateholder's fractional
undivided interest in the amount
A-2
<PAGE>
to be distributed to Certificateholders on such Distribution Date; provided,
however, that principal will be distributed to the Certificateholders on (to the
extent of funds remaining after the Class A-_ Notes have been paid in full) and
after the date on which the Class A-_ Notes have been paid in full.
The holder of this Trust Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.
It is the intent of the Seller, Servicer, holder of the GP Interest and
Certificateholders that, for purposes of Federal income taxes, the Trust will be
treated as a partnership and the Certificateholders (including the holder of the
GP Interest) will be treated as partners in that partnership. The holder of the
GP Interest and the other Certificateholders by acceptance of a Trust
Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Trust Certificates for such tax purposes as partnership
interests in the Trust.
Each Certificateholder, by its acceptance of a Trust Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the holder of the GP Interest, or join in any institution against the holder of
the GP Interest 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 Trust Certificates, the Notes, the Trust Agreement or any of the Basic
Documents.
Distributions on this Trust Certificate will be made as provided in the
Trust Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Trust Certificate Register without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon, except that with respect to Trust Certificates 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. Except as
otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Trust Certificate will be made after due notice by
the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Trust Certificate at the office or agency
maintained for the purpose by the Owner Trustee in the Borough of Manhattan, The
City of New York.
A-3
<PAGE>
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been executed by
an authorized officer of the Owner Trustee, by manual signature, this Trust
Certificate shall not entitle the holder hereof to any benefit under the Trust
Agreement or the Sale and Servicing Agreement or be valid for any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Trust Certificate to be duly executed.
DELTA FUNDING HOME EQUITY LOAN TRUST 199_-_
By: ________________,
as Owner Trustee
Dated: By: ________________________
A-4
<PAGE>
(Reverse of Trust Certificate)
The Trust Certificates do not represent an obligation of, or an interest
in, the Seller, the Servicer, the holder of the GP Interest, the Owner Trustee
or any Affiliates of any of them and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated herein or
in the Trust Agreement, the Indenture or the Basic Documents. In addition, this
Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections with
respect to the Home Equity Loans (and certain other amounts), all as more
specifically set forth herein and in the Sale and Servicing Agreement. The Trust
Certificates are limited in right of payment to certain collections and
recoveries respecting the Home Equity Loans, all as more specifically set forth
in the Sale and Servicing Agreement. A copy of each of the Sale and Servicing
Agreement and the Trust Agreement may be examined during normal business hours
at the principal office of the Seller, and at such other places, if any,
designated by the Seller, by any Certificateholder upon written request.
The Trust Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Trust Agreement at any
time by the Seller and the Owner Trustee with the consent of the holders of the
Notes and the Trust Certificates evidencing not less than a majority of the
outstanding Notes and the Certificate Balance. Any such consent by the holder of
this Trust Certificate shall be conclusive and binding on such holder and on all
future holders of this Trust Certificate and of any Trust Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Trust Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the holders of any of the Trust Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Trust Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Owner Trustee in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing, and thereupon one or more
new Trust Certificates in authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee. The initial
Certificate
A-5
<PAGE>
Registrar appointed under the Trust Agreement is
________________, __________________, ________________.
Except for Trust Certificates issued to the Seller and transferred to the
holder of the GP Interest, the Trust Certificates are issuable only as
registered Trust Certificates without coupons in denominations of $1,000 or
integral multiples thereof; except as otherwise provided in the Trust Agreement.
As provided in the Trust Agreement and subject to certain limitations therein
set forth, Trust Certificates are exchangeable for new Trust Certificates in
authorized denominations evidencing the same aggregate denomination, as
requested by the holder surrendering the same. No service charge will be made
for any such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the Owner
Trustee or the Certificate Registrar may treat the person in whose name this
Trust Certificate is registered as the owner hereof for all purposes, and none
of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Trust Agreement and the
Sale and Servicing Agreement and the disposition of all property held as part of
the Trust. The Seller of the Home Equity Loans may at its option purchase the
corpus of the Trust at a price specified in the Sale and Servicing Agreement,
and such purchase of the Home Equity Loans and other property of the Trust will
effect early retirement of the Trust Certificates; however, such right of
purchase is exercisable, subject to certain restrictions, only as of the last
day of any Collection Period as of which the Pool Balance is % or less of the
Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
1 of ERISA, (b) a plan described in Section 4975(e) (l) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Trust Certificate, the Holder hereof shall be deemed to have represented and
warranted that it is not a Benefit Plan.
A-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip
code, of assignee)
________________________________________________________________________________
the within Trust Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
_______________________________________________ Attorney to transfer said Trust
Certificate on the books of the Trust Certificate Registrar, 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 Certificate 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 Certificate
Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee
program" as may be determined by the Certificate Registrar
in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
A-7
<PAGE>
EXHIBIT B
[FORM OF]
CERTIFICATE OF TRUST OF
DELTA FUNDING HOME EQUITY LOAN
TRUST 199_-_
THIS Certificate of Trust of Delta Funding Home Equity Loan Trust 199_-_
(the "Trust"), dated as of ________ __, 199_, is being duly executed and filed
by ________________________, a _____________________, and ________, a
__________, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is DELTA FUNDING HOME
EQUITY LOAN TRUST 199_-_.
2. Delaware Trustee. The name and business address of the trustee of the
Trust resident in the State of Delaware is
___________________________________________________.
3. This Certificate of Trust will be effective ______ __, 199_.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
____________________________,
not in its individual capacity but
solely as owner trustee of the Trust.
By:________________________________
Name:
Title:
___________________________________
not in [his] individual capacity but
solely as trustee of the Trust.
A-8
<PAGE>
Exhibit 5.1
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
_________, 1996
Delta Funding Corporation
l000 Woodbury Road
Woodbury, New York ll797
Gentlemen:
We have acted as special counsel to Delta Funding Corporation, a New York
corporation (the "Company"), in connection with the preparation of the
registration statement on Form S-3 (No. 333-3418) (the "Registration
Statement") relating to the proposed offering from time to time in one or more
series (each, a "Series") by one or more trusts of asset backed notes (the
"Notes") and asset backed certificates (the "Certificates," and, together with
the Notes, the "Securities"). The Registration Statement has been filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). As set forth in the Registration Statement,
each Series of Securities is to be issued under and pursuant to the terms of a
separate pooling and servicing agreement, or sale and servicing agreement, trust
agreement, and indenture (each, an "Agreement") between the Company, as seller
and servicer and an independent trustee (the "Trustee") to be identified in the
prospectus supplement for each Series of Securities.
As such counsel, we have examined copies of the Certificate of Incorporation and
By-Laws of the Company, the Registration Statement, the base Prospectus and form
of Prospectus Supplement included therein, the form of each Agreement, and
originals or copies of such other corporate minutes, records, agreements and
other instruments of the Company, certificates of public officials and other
documents and have made such examinations of law, as we have deemed necessary to
form the basis for the opinions hereinafter expressed. In our examination of
such materials, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all copies submitted to us. As to various questions of
fact material to such opinions, we have relied, to the extent we deemed
appropriate, upon representations, statements and
<PAGE>
certificates of officers and representatives of the Company and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not express any opinion herein concerning
any law other than the federal laws of the United States of America, the laws of
the State of New York and the General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. When the issuance, execution and delivery of each Series of Notes
have been authorized by all necessary corporate action of the Company in
accordance with the provisions of the related Agreement or Agreements, and when
such Notes have been duly executed and delivered, authenticated by the Trustee
and sold as described in the Registration Statement, assuming that the terms of
such Notes are otherwise in compliance with applicable law at such time, such
Notes will constitute valid and binding obligations of the issuer thereof in
accordance with their terms and the terms of such Agreement or Agreements. This
opinion is subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto and we express no
opinion with respect to the application of equitable principles or remedies in
any proceeding, whether at law or in equity.
2. When the issuance, execution and delivery of each Series of
Certificates have been authorized by all necessary corporate action of the
Company in accordance with the provisions of the related Agreement or
Agreements, and when such Certificates have been duly executed and delivered,
authenticated by the Trustee and sold as described in the Registration
Statement, assuming that the terms of such Certificates are otherwise in
compliance with applicable law at such time, such Certificates will be legally
issued, fully paid and non-assessable and entitled to the benefits of the
related Agreement.
3. The statements set forth in the Prospectus under the heading
"Federal Income Tax Considerations," to the extent they constitute matters of
law or legal conclusions with respect thereto, are correct in all material
respects.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the references to this firm in the Prospectus and the
related Prospectus Supplement which forms a part of the Registration Statement
and to the filing of this opinion as an exhibit to any application made by or on
behalf of the Company or any dealer in connection with the registration of the
Securities
<PAGE>
Delta Funding Corporation
______________, 1996
Page 3
under the securities or blue sky laws of any state or jurisdiction. In giving
such consent, we do not admit hereby that we come within the category of persons
whose consent is required under Section 7 of the Act or the Rules and
Regulations of the Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN
<PAGE>
Exhibit 10.1
________________________________________________________________________________
SALE AND SERVICING
AGREEMENT
among
DELTA FUNDING HOME EQUITY
LOAN TRUST 199_-_
Issuer,
DELTA FUNDING CORPORATION
Seller and Servicer
Dated as of __________, 199
________________________________________________________________________________
<PAGE>
Table of Contents
Page
ARTICLE I
Definitions
SECTION 1.1. Definitions......................................
SECTION 1.2. Other Definitional Provisions....................
SECTION 1.3. Interest Calculations............................
ARTICLE II
Conveyance of Home Equity Loans
SECTION 2.1. Conveyance of Home Equity Loans..................
SECTION 2.2. Acceptance by Trustee ...........................
SECTION 2.3. [Intentionally omitted] .........................
SECTION 2.4. Representations and Warranties of
Seller Regarding the Home Equity Loans ........
SECTION 2.5. Substitution of Home Equity Loans ...............
ARTICLE III
Administration and Servicing of Home Equity Loans
SECTION 3.1. Duties of Servicer...............................
SECTION 3.2. Collection and Allocation of
Home Equity Loan Payments......................
SECTION 3.3. Withdrawals from each Collection
Account .......................................
SECTION 3.4. Maintenance of Hazard Insurance;
Property Protection Expenses ..................
SECTION 3.5. Maintenance of Impairment Insurance
Policy.........................................
SECTION 3.6. Fidelity Bond....................................
SECTION 3.7. Management and Realization Upon Defaulted
Home Equity Loans..............................
SECTION 3.8. Trustee to Corporate.............................
SECTION 3.9. Servicing Fee....................................
SECTION 3.10. Servicer's Certificate ..........................
SECTION 3.11. Annual Statement as to Compliance;
Notice of Default..............................
SECTION 3.12. Annual Independent Certified Public
Accountants' Report............................
SECTION 3.13. Access to Certain Documentation and
Information Regarding Home Equity Loans
SECTION 3.14 Servicer Expenses................................
SECTION 3.15. Advances by the Servicer ........................
SECTION 3.16. Optional Purchase of Defaulted Mortgage
Loans .........................................
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<PAGE>
SECTION 3.17. Superior Liens...................................
SECTION 3.18. Payment of Taxes, Insurance and Other
Charges .......................................
SECTION 3.19 Appointment of Subservicer.......................
ARTICLE IV
Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 4.1. Establishment of Trust Accounts..................
SECTION 4.2. [Intentionally Omitted]..........................
SECTION 4.3. Application of Collections.......................
SECTION 4.4. Additional Deposits..............................
SECTION 4.5. Distributions....................................
SECTION 4.6. Reserve Account..................................
SECTION 4.7. [Intentionally Omitted]..........................
SECTION 4.8. Statements to Certificateholders
and Noteholders................................
SECTION 4.9. Net Deposits.....................................
ARTICLE V
The Seller
SECTION 5.1. Representations of Seller........................
SECTION 5.2. Corporate Existence..............................
SECTION 5.3. Liability of Seller; Indemnities.................
SECTION 5.4. Merger or Consolidation of, or
Assumption of the Obligations of,
Seller.......................................
SECTION 5.5. Limitation on Liability of Seller
and Others.....................................
SECTION 5.6. Seller May Own Certificates or Notes.............
ARTICLE VI
The Servicer
SECTION 6.1. Representations of Servicer......................
SECTION 6.2. Indemnities of Servicer..........................
SECTION 6.3. Merger or Consolidation of, or
Assumption of the Obligations of,
Servicer.....................................
SECTION 6.4. Limitation on Liability of Servicer
and Others.....................................
SECTION 6.5. Delta Funding Corporation Not To
Resign as Servicer.............................
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<PAGE>
ARTICLE VII
Default
SECTION 7.1. Servicer Default.................................
SECTION 7.2. Appointment of Successor.........................
SECTION 7.3. Payment of Servicing Fee.........................
SECTION 7.4. Notification to Noteholders and
Certificateholders.............................
SECTION 7.5. Waiver of Past Defaults..........................
ARTICLE VIII
Termination
SECTION 8.1. Optional Purchase of All Home Equity Loans.......
ARTICLE IX
Administrative Duties of the Servicer
SECTION 9.1. Administrative Duties............................
SECTION 9.2. Records..........................................
SECTION 9.3. Additional Information to be Furnished
to the Issuer..................................
ARTICLE X
Miscellaneous Provisions
SECTION 10.1. Amendment........................................
SECTION 10.2. Protection of Title to Trust.....................
SECTION 10.3. Notices..........................................
SECTION 10.4. Assignment.......................................
SECTION 10.5. Limitations on Rights of Others..................
SECTION 10.6. Severability.....................................
SECTION 10.7. Separate Counterparts............................
SECTION 10.8. Headings.........................................
SECTION 10.9. Governing Law....................................
SECTION 10.10. Assignment to Trustee............................
SECTION 10.11. Nonpetition Covenant.............................
SECTION 10.12. Limitation of Liability of
Owner Trustee and Trustee......................
SECTION 10.13. Independence of the Servicer.....................
SECTION 10.14. No Joint Venture.................................
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<PAGE>
EXHIBITS
Exhibit A - Home Equity Loan Schedule
Exhibit B - Form of Monthly Certificateholder Statement
Exhibit C - Form of Monthly Noteholder Statement
Exhibit D - Form of Servicer's Certificate
Exhibit E - Form of Request for Release
-iv-
<PAGE>
SALE AND SERVICING AGREEMENT dated as of
___________________, 199 , among DELTA FUNDING HOME
EQUITY LOAN TRUST 199_-_, a Delaware business trust
(the "Issuer"), and DELTA FUNDING CORPORATION, as
Seller (the "Seller") and as servicer (the
"Servicer").
WHEREAS, the Issuer desires to purchase a portfolio of mortgage loans from
the Seller;
WHEREAS, the Seller has purchased such mortgage loans from ________________
and is willing to sell such mortgage loans to the Issuer; and
WHEREAS, the Servicer is willing to service such mortgage loans.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Accrual Period" means as to any Simple Interest Loan and Monthly Payment,
the period commencing from and after the date through which interest was last
paid up to but excluding the date of receipt of such Monthly Payment. As to any
Actuarial Loan and Monthly Payment, the period from and including a Due Date for
such Actuarial Loan to but excluding the succeeding Due Date.
"Actuarial Loan" means a Home Equity Loan for which the relative
application of each Monthly Payment to interest and principal is based on the
period between Due Dates and not on the timing of receipt of such Monthly
Payment.
"Aggregate Net Losses" means with respect to a Due Period, the aggregate
principal balance of all Home Equity Loans newly designated during such Due
Period as Liquidated Home Equity Loans minus Liquidation Proceeds collected
during such Due Period with respect to all Liquidated Home Equity Loans.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended and supplemented from time to time.
<PAGE>
"ARM" means a Home Equity Loan which is serviced as an Actuarial Loan and
the Mortgage Rate of which is subject to adjustment on each Change Date by
reference to the Index, subject to rounding and the Periodic Cap, the applicable
Lifetime Cap and the applicable Lifetime Floor.
"Assignment of Mortgage" means, with respect to any Mortgage, an
assignment, notice of transfer or equivalent instrument, in recordable form,
sufficient under the laws of the jurisdiction in which the related Mortgaged
Property is located to reflect the sale of the Mortgage to the Issuer, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering the Home Equity Loans secured by
Mortgaged Properties located in the same jurisdiction.
"Available Principal" means with respect to any Distribution Date, the sum
of the following amounts without duplication: (a) that portion of all
collections on the Home Equity Loans allocable to principal in respect of the
preceding Due Period; (b) Liquidation Proceeds attributable to the principal
amount of Home Equity Loans which became Liquidated Home Equity Loans during the
preceding Due Period in accordance with the Servicer's customary servicing
procedures; and (c) to the extent attributable to principal, the Purchase Price
of each Home Equity Loan repurchased by the Seller or purchased by the Servicer
during the preceding Due Period; provided, however, that in calculating the
Available Principal, all payments and proceeds (including Liquidation Proceeds)
of any Home Equity Loans repurchased by the Seller or purchased by the Servicer
the Purchase Price of which has been included in the Available Principal in a
prior Due Period shall be excluded.
"Basic Documents" means the Certificate of Trust, the Trust Agreement, the
Indenture, the Depository Agreements and other documents and certificates
delivered in connection therewith.
"Business Day" means any day other than (i) a Saturday or a Sunday or (ii)
a day on which banking institutions in the States of New York or ____________
are required or authorized by law to be closed.
"Certificate" means a Trust Certificate (as defined in the Trust
Agreement).
"Certificate Balance" equals, initially, $__________ and, thereafter,
equals the initial Certificate Balance, reduced by all amounts allocable to
principal previously distributed to Certificateholders.
"Certificate Distribution Account" has the meaning assigned to such term in
the Trust Agreement.
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<PAGE>
"Certificate Rate" means _____% per annum.
"Certificateholder" has the meaning assigned to such term in the Trust
Agreement.
"Certificateholders' Distributable Amount" means, with respect to any
Distribution Date, the sum of the Certificateholders' Interest Distributable
Amount and the Certificateholders' Principal Distributable Amount.
"Certificateholders' Interest Carryover Shortfall" means, with respect to
any Distribution Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Distribution Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Distribution
Date, over the amount in respect of interest at the Certificate Rate that is
actually deposited in the Certificate Distribution Account on such preceding
Distribution Date, plus interest on such excess, to the extent permitted by law,
at the Certificate Rate from and including such preceding Distribution Date to
but excluding the current Distribution Date.
"Certificateholders' Interest Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for such Distribution Date and the Certificateholders'
Interest Carryover Shortfall for such Distribution Date.
"Certificateholders' Monthly Interest Distributable Amount" means, with
respect to any Distribution Date, 30 days of interest (or, in the case of the
first Distribution Date, interest accrued from and including the Closing Date to
but excluding such Distribution Date) at the Certificate Rate on the Certificate
Balance on the immediately preceding Distribution Date, after giving effect to
all payments of principal to the Certificateholders on or prior to such
Distribution Date (or, in the case of the first Distribution Date, the
Certificate Balance on the Closing Date).
"Certificateholders' Monthly Principal Distributable Amount" means, with
respect to any Distribution Date, the Certificateholders' Percentage of the
Principal Distribution Amount or, with respect to any Distribution Date on or
after the Distribution Date on which the outstanding principal balance of the
Class A-____ Notes is reduced to zero, 100% of the Principal Distribution Amount
(less any amount required on the first such Distribution Date to reduce the
outstanding principal balance of the Class A-____ Notes to zero, which shall be
deposited into the Note Distribution Account).
"Certificateholders' Percentage" means 100% minus the Noteholders'
Percentage.
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<PAGE>
"Certificateholders' Principal Carryover Shortfall" means, as of the close
of any Distribution Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Distribution Date, over the amount in
respect of principal that is actually deposited in the Certificate Distribution
Account on such current Distribution Date.
"Certificateholders' Principal Distributable Amount" means, with respect to
any Distribution Date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for such Distribution Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Distribution
Date; provided, however, that the Certificateholders' Principal Distributable
Amount shall not exceed the Certificate Balance. In addition, on the Certificate
Final Scheduled Distribution Date, the principal required to be distributed to
Certificateholders will include the lesser of (a) any payments of principal due
and remaining unpaid on each Home Equity Loan in the Trust as of _______, _____
or (b) the portion of the amount that is necessary (after giving effect to the
other amounts to be deposited in the Certificate Distribution Account on such
Distribution Date and allocable to principal) to reduce the Certificate Balance
to zero, in either case after giving effect to any required distribution of the
Noteholders' Principal Distributable Amount to the Note Distribution Account. In
addition, on any Distribution Date on which, after giving effect to all
distributions to the Servicer, the Noteholders and the Certificateholders on
such Distribution Date, (i) the outstanding principal balance of the Notes is
zero and (ii) the amount on deposit in the Reserve Account is equal to or
greater than the Certificate Balance, Certificateholders' Principal
Distributable Amount shall include an amount equal to such Certificate Balance.
"Change Date" means the date on which the Mortgage Rate of each ARM is
subject to adjustment, which date is the Due Date set forth in the related
Mortgage Note and every twelfth Due Date thereafter.
"Charge-off Rate" means, with respect to a Due Period, the Aggregate Net
Losses with respect to the Home Equity Loans expressed, on an annualized basis,
as a percentage of the average of (x) the Pool Balance on the last day of the
immediately preceding Due Period and (y) the Pool Balance on the last day in
such Due Period.
"Civil Relief Act" means the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"Closing Date" means ________ ___, 199___.
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<PAGE>
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 3.2(c).
"Cutoff Date" means _________ __, 199__.
"Cutoff Date Principal Balance" means with respect to any Home Equity Loan,
the unpaid principal balance thereof as of the Cut-Off Date (or as of the
applicable date of substitution with respect to an Eligible Substitute Home
Equity Loan pursuant to Section 2.2 or 2.4).
"Debt Service Reduction" means with respect to any Home Equity Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on
such Home Equity Loan.
"Defective Home Equity Loan" means any Home Equity Loan subject to
repurchase or substitution pursuant to Section 2.2 or 2.4.
"Delinquency Percentage" means, with respect to a Due Period, the ratio of
(a) the outstanding principal balance of all outstanding Home Equity Loans 60
days or more delinquent (which amount shall include Home Equity Loans in respect
of Mortgaged Properties that have been repossessed but not yet sold or otherwise
liquidated) as of the last day of such Due Period, determined in accordance with
the Servicer's normal practices, divided by (b) the outstanding principal
balance of all Home Equity Loans on the last day of such Due Period.
"Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9.105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Trustee or its nominee or
custodian by physical delivery to the Trustee or its nominee or custodian
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank, and, with respect to a certificated
security (as defined in Section 8-102 of the UCC) transfer thereof (i) by
delivery of such certificated security endorsed to, or registered in the
name of, the Trustee or its nominee or custodian or endorsed in blank to a
financial intermediary (as defined in Section 8-313 of the UCC) and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Trustee or its
nominee or custodian and the sending by such financial intermediary of a
confirmation of the purchase of such certificated security by the Trustee
or its nominee or custodian, or (ii) by delivery thereof to a "clearing
corporation" (as defined in Section 8-102(3) of
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<PAGE>
the UCC) and the making by such clearing corporation of appropriate entries
on its books reducing the appropriate securities account of the transferor
and increasing the appropriate securities account of a financial
intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated securities
for the sole and exclusive account of the financial intermediary, the
maintenance of such certificated securities by such clearing corporation or
a "custodian bank" (as defined in Section 8-102(4) of the UCC) or the
nominee of either subject to the clearing corporation's exclusive control,
the sending of a confirmation by the financial intermediary of the purchase
by the Trustee or its nominee or custodian of such securities and the
making by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Trustee or its
nominee or custodian (all of the foregoing, "Physical Property"), and, in
any event, any such Physical Property in registered form shall be in the
name of the Trustee or its nominee or custodian; and such additional or
alternative procedures as may hereafter become appropriate to effect the
complete transfer of ownership of any such Trust Account Property to the
Trustee or its nominee or custodian, consistent with changes in applicable
law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, FHLMC
or by FNMA that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
Federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial intermediary
which is also a "depository" pursuant to applicable Federal regulations and
issuance by such financial intermediary of a deposit advice or other
written confirmation of such book-entry registration to the Trustee or its
nominee or custodian of the purchase by the Trustee or its nominee or
custodian of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such
book-entry security held through the Federal Reserve System pursuant to
Federal book-entry regulations as belonging to the Trustee or its nominee
or custodian and indicating that such custodian holds such Trust Account
Property solely as agent for the Trustee or its nominee or custodian; and
such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust
Account Property to the Trustee or its nominee or custodian, consistent
with changes
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<PAGE>
in applicable law or regulations or the interpretation
thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed
by clause (b) above, registration on the books and records of the issuer
thereof in the name of the financial intermediary, the sending of a
confirmation by the financial intermediary of the purchase by the Trustee
or its nominee or custodian of such uncertificated security, the making by
such financial intermediary of entries on its books and records identifying
such uncertificated certificates as belonging to the Trustee or its nominee
or custodian.
"Delta Funding Corporation" means ___________________ in its individual
capacity and not as Servicer.
"Depository Agreements" mean the Certificate Depository Agreement and the
Note Depository Agreement.
"Determination Date" means, with respect to any Distribution Date, the
fourth Business Day prior to each Distribution Date.
"Distribution Date" means, with respect to each Due Period, the __th day of
the following month, or if such day is not a Business Day, the immediately
following Business Day, commencing on ______ __, 199__.
"Due Period" means a calendar month, except with respect to the first Due
Period, which shall be the period from the Cutoff Date to _____ __, 199__. Any
amount stated "as of the close of business on the last day of a Due Period"
shall give effect to the following calculations as determined as of the end of
the day on such last day: (1) all applications of collections and (2) all
distributions to be made on the immediately following Distribution Date.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution (other than the Seller or any affiliate
of the Seller) organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any domestic branch of
a foreign bank), having corporate trust powers and acting as trustee for funds
deposited in such account, so long as any of the securities of such depository
institution have a credit rating from each Rating Agency in one of its generic
rating categories which signifies investment grade.
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<PAGE>
"Eligible Institution" means a depository institution (other than the
Seller or any affiliate of the Seller) organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), which (i) has (A) either a long-term
senior unsecured debt rating of [AAA] or a short-term senior unsecured debt or
certificate of deposit rating of [A-l+] or better by [Standard & Poor's] and
(B)(1) a long-term senior unsecured debt rating of [Al] or better and (2) a
short-term senior unsecured debt rating of [Pl] or better by [Moody's], or any
other long-term, short-term or certificate of deposit rating acceptable to the
Rating Agencies and (ii) whose deposits are insured by the Federal Deposit
Insurance Corporation. If so qualified, the Owner Trustee or the Trustee may be
considered an Eligible Institution.
"Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution (including the Seller or any Affiliate of the
Seller) or trust company incorporated under the laws of the United States
of America or any state thereof or the District of Columbia (or any
domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution
authorities (including depository receipts issued by any such institution
or trust company as custodian with respect to any obligation referred to in
clause (a) above or portion of such obligation for the benefit of the
holders of such depository receipts); provided, however, that at the time
of the investment or contractual commitment to invest therein (which shall
be deemed to be made again each time funds are reinvested following each
Distribution Date), the commercial paper or other short-term senior
unsecured debt obligations (other than such obligations the rating of which
is based on the credit of a Person other than such depository institution
or trust company) of such depository institution or trust company shall
have a credit rating from [Standard & Poor's of A-1+ and from Moody's of
P1];
(c) commercial paper (including commercial paper of the Seller or any
Affiliate of the Seller) having, at the time of the investment or
contractual commitment to invest therein, a rating from [Standard & Poor's
of A-1+ and from Moody's of P1];
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<PAGE>
(d) investments in money market funds (including funds for which the
Seller, the Trustee or the Owner Trustee or any of their respective
Affiliates is investment manager or advisor) having a rating from [Standard
& Poor's of AAA-m or AAAm-G and from Moody's of Aaa];
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) referred to in clause (b) above; and
(g) any other investment which would not cause either Rating Agency to
downgrade or withdraw its then current rating of any class of Notes or the
Certificates.
"Eligible Substitute Home Equity Loan" means a Home Equity Loan substituted
by the Seller for a Defective Home Equity Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance not in excess of and not
more than __% less than the Principal Balance of the Defective Home Equity Loan;
(ii) have a current Mortgage Rate not less than the Mortgage Rate of the
Defective Home Equity Loan and not more than __% in excess of the Mortgage Rate
of such Defective Home Equity Loan; (iii) have a Mortgage of the same or higher
level of lien priority as the Mortgage relating to the Defective Home Equity
Loan at the time such Mortgage was transferred to the Trust; (iv) have a
remaining term to maturity not more than six months earlier and not later than
the remaining term to maturity of the Defective Home Equity Loan; (v) comply
with each representation and warranty set forth in Section 2.4 (deemed to be
made as of the date of substitution); and (vi) have an original Loan-to-Value
Ratio not greater than that of the Defective Home Equity Loan; (vii) be an ARM
if the Defective Home Equity Loan was an ARM; and (viii) if an ARM, use the same
Index, have the same Periodic Cap, have a Lifetime Cap and a Gross Margin no
less than, those of the Defective Home Equity Loan.
"FHLMC" means Federal Home Loan Mortgage Corporation or any successor
thereto.
"Final Scheduled Distribution Date" means with respect to [List Classe(s)
of Notes and their Respective Final Scheduled Distribution Dates].
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<PAGE>
"Final Scheduled Maturity Date" means _________ ___, ____.
"First Lien" means, with respect to any Home Equity Loan which is a second
priority lien, the mortgage loan relating to the corresponding Mortgaged
Property having a first priority lien.
"Fitch" means Fitch Investors Service, L.P., or its successors.
"FNMA" means Federal National Mortgage Association or any successor
thereto.
"Foreclosure Profits" means, with respect to a Liquidated Home Equity Loan,
the amount, if any, by which (i) the aggregate of the related Net Liquidation
Proceeds exceeds (ii) the related Principal Balance (plus accrued and unpaid
interest thereon at the applicable Mortgage Rate from the date interest was last
paid through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Home Equity Loan immediately prior to the final recovery of its
Liquidation Proceeds.
"Gross Margin" means, with respect to each ARM, the number of basis points
set forth in the related Mortgage Note which is added to the Index to determine
the Mortgage Rate on the related Change Date, subject to rounding and the
Periodic Cap and the applicable Lifetime Cap and the applicable Lifetime Floor.
"GP Interest" means the __% interest in the Trust held by
___________________, a ___________, pursuant to the Trust Agreement.
"Home Equity Loan" means a mortgage loan transferred and assigned to the
Trustee pursuant to Section 2.1 or Section 2.4 and held as a part of the Trust,
as identified in the Home Equity Loan Schedule.
"Home Equity Loan Schedule" means with respect to any date, the schedule of
Home Equity Loans included in the Trust on such date. The initial schedule of
Home Equity Loans as of the Cutoff Date is the schedule set forth herein as
Exhibit A, which schedule sets forth as to each Home Equity Loan (i) the Cut-Off
Date Principal Balance, (ii) the account number, (iii) the original principal
amount, (iv) the Loan-to-Value Ratio as of the date of the origination of the
related Home Equity Loan, (v) the Due Date, (vi) the current Mortgage Rate,
(vii) the first date on which a Monthly Payment is due under the Mortgage Note,
(viii) the original stated maturity date of the Mortgage Note, (ix) the
remaining number of months to maturity as of the Cutoff Date, (x) the State in
which the related Mortgaged Property is situated, (xi) the type of property,
(xii) the lien status,
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(xiii) a code indicating whether the Home Equity Loan is an ARM, and (xiv) for
each ARM, the Gross Margin and the Mortgage Rate at origination.]
"Indenture" means the Indenture dated as of _______ __, 199 , between the
Issuer and the Trustee, as the same may be amended and supplemented from time to
time.
"Index" means [the weekly average yield on United States Treasury
securities adjusted to a constant maturity of one year, as made available by the
Federal Reserve Board and most recently available as of the date __ days before
each Change Date].
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver
(including any receiver appointed under the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended), liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or ordering the winding-up or liquidation of
such Person's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (b) the commencement by such
Person of a voluntary case under any applicable Federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the consent by
such Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of any
of the foregoing.
"Insurance Proceeds" means proceeds paid by any insurer pursuant to any
insurance policy covering a Home Equity Loan, or amounts required to be paid by
the Servicer pursuant to Section 3.5, net of any component thereof (i) covering
any expenses incurred by or on behalf of the Servicer in connection with
obtaining such proceeds, (ii) that is applied to the restoration or repair of
the related Mortgaged Property, (iii) released to the Mortgagor in accordance
with the Servicer's normal servicing procedures or (iv) required to be paid to
any holder of a mortgage senior to such Home Equity Loan.
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"Interest Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts without duplication: (a) that portion of
all collections on the Home Equity Loans allocable to interest in respect of the
preceding Due Period; (b) Liquidation Proceeds attributable to interest on the
Home Equity Loans which became Liquidated Home Equity Loans during the preceding
Due Period in accordance with the Servicer's customary servicing procedures; (c)
the Purchase Price of each Home Equity Loan that became a Purchased Home Equity
Loan during the preceding Due Period to the extent attributable to accrued
interest on such Home Equity Loan; (d) Recoveries for such Due Period and (e)
Investment Earnings for such Distribution Date; provided, however, that in
calculating the Interest Distribution Amount, all payments and proceeds
(including Liquidation Proceeds) of any Purchased Home Equity Loans the Purchase
Price of which has been included in the Interest Distribution Amount in a prior
Due Period shall be excluded.
"Investment Earnings" means, with respect to any Distribution Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts and the Certificate Distribution Account to be
deposited into the Collection Account on such Distribution Date pursuant to
Section 4.1(b).
"Issuer" means Delta Funding Home Equity Loan Trust 199_-_.
"Lien" means a security interest, lien, charge, pledge or encumbrance of
any kind, other than tax liens, mechanics' liens and any liens which attach to
the respective Home Equity Loan by operation of law as a result of any act or
omission by the related Mortgagor.
"Lifetime Cap" means the provision in the Mortgage Note for each ARM which
limits the maximum Mortgage Rate over the life of such ARM to ___ basis points
greater than the Mortgage Rate on the date of origination of such ARM.
"Lifetime Floor" means the provision in the Mortgage Note for each ARM
which limits the minimum Mortgage Rate over the life of such ARM to the Mortgage
Rate on the date of origination of such ARM.
"Liquidated Home Equity Loan" means, as to any Distribution Date, any Home
Equity Loan with respect to which the Servicer has determined, in accordance
with the servicing procedures specified herein, as of the end of the related Due
Period that all Liquidation Proceeds which it expects to recover with respect to
the liquidation of the Home Equity Loan or disposition of the related REO
Property have been recovered.
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"Liquidation Proceeds" means proceeds (including Insurance Proceeds)
received in connection with the liquidation of any Home Equity Loan or related
REO Property, whether through trustee's sale, foreclosure sale or otherwise.
"Loan-to-Value Ratio" means the fraction, expressed as a percentage, the
numerator of which is the original principal balance of the related Home Equity
Loan and the denominator of which is the Original Value of the related Mortgaged
Property.
"Monthly Advance" means an advance made by the Servicer pursuant to Section
3.15 hereof.
"Monthly Payment" means the scheduled monthly payment of principal and/or
interest required to be made by a Mortgagor on the related Home Equity Loan.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Mortgage" means the mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Home Equity Loan.
"Mortgage File" means the mortgage documents listed in Section 2.1(b)
pertaining to a particular Home Equity Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Note" means the originally executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under the related Home
Equity Loan.
"Mortgaged Property" means the land and improvements securing the
indebtedness of a Mortgagor under the related Home Equity Loan.
"Mortgagor" means the obligor or obligors on a Mortgage Note.
"Net Liquidation Proceeds" means, with respect to any Liquidated Home
Equity Loan, Liquidation Proceeds net of unreimbursed Servicing Fees,
unreimbursed Servicing Advances and Monthly Advances with respect thereto.
"Net Rate" means, with respect to any Home Equity Loan as to any day, the
Mortgage Rate less the related Servicing Fee Rate.
"Nonrecoverable Advances" means, with respect to any Home Equity Loan, (i)
any Monthly Advance previously made and not reimbursed pursuant to Section
3.2(c) or 3.3(ii), or (ii) a Servicing Advance or Monthly Advance proposed to be
made in
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respect of a Home Equity Loan or REO Property which, in the good faith business
judgment of the Servicer, will not or, in the case of a proposed advance, would
not be ultimately recoverable pursuant to Sections 3.2(c) or 3.3(ii).
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 4.1.
"Noteholders' Distributable Amount" means, with respect to any Distribution
Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Distribution Date, the excess of the Noteholders' Monthly Interest Distributable
Amount for the preceding Distribution Date and any outstanding Noteholders'
Interest Carryover Shortfall on such preceding Distribution Date, over the
amount in respect of interest that is actually deposited in the Note
Distribution Account on such preceding Distribution Date, plus interest on the
amount of interest due but not paid to Noteholders on the preceding Distribution
Date, to the extent permitted by law, at the respective Interest Rate borne by
each class of Notes from such preceding Distribution Date through the current
Distribution Date.
"Noteholders' Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Distribution Date and the Noteholders' Interest Carryover
Shortfall for such Distribution Date.
"Noteholders' Monthly Interest Distributable Amount" means, with respect to
any Distribution Date, the product of (i)(A) in the case of the Class A-__
Notes, the product of the Interest Rate for such class and a fraction, the
numerator of which is the number of days elapsed from and including the prior
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to but excluding such Distribution Date and the
denominator of which is ___ and (B) in the case of each other class of Notes,
___________ of the Interest Rate for such class (or, in the case of the first
Distribution Date, the Interest Rate for such class multiplied by a fraction,
the numerator of which is the number of days elapsed from and including the
Closing Date to but excluding such Distribution Date and the denominator of
which is ___) and (ii) the outstanding principal balance of the Notes of such
class on the immediately preceding Distribution Date, after giving effect to all
distributions of principal to Noteholders of such class on such Distribution
Date (or, in the case of the first Distribution Date, on the Closing Date).
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"Noteholders' Monthly Principal Distributable Amount" means, with respect
to any Distribution Date, the Noteholders' Percentage of the Principal
Distribution Amount.
"Noteholders' Percentage" means 100% until the point in time at which [List
Class(es) of Notes] have been paid in full and zero thereafter.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding Distribution Date over the amount in respect of
principal that is actually deposited in the Note Distribution Account.
"Noteholders' Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Noteholder's Monthly Principal Distributable
Amount for such Distribution Date and the Noteholders' Principal Carryover
Shortfall as of the close of the preceding Distribution Date; provided, however,
that the Noteholders' Principal Distributable Amount shall not exceed the
outstanding principal balance of the Notes. In addition, on the Final Scheduled
Distribution Date of each class of Notes, the principal required to be deposited
in the Note Distribution Account will include the amount necessary (after giving
effect to the other amounts to be deposited in the Note Distribution Account on
such Distribution Date and allocable to principal) to reduce the Outstanding
Amount of such class of Notes to zero.
"Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, any executive vice
president, any senior vice president or any vice president and (b) a cashier,
assistant cashier, secretary or assistant secretary of the Seller or the
Servicer, as appropriate, provided that no one person may sign in a capacity
fulfilling both clause (a) and clause (b).
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be acceptable to the Trustee, the Owner Trustee or the Rating Agencies, as
applicable.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date which
is $____________.
"Original Value" means the value of the Mortgaged Property at the time of
origination of the related Home Equity Loan, such value being the lower of the
value of such property set forth in an appraisal acceptable to the originator of
the Home Equity Loan or the sales price of such property at the time of
origination or, in the case of a refinancing, the value of
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such property set forth in an appraisal acceptable to the originator.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means _________________________, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"Payahead" on a Actuarial Home Equity Loan means the amount, as of the
close of business on the last day of a Due Period, computed in accordance with
Section 4.3 with respect to such Home Equity Loan.
"Payahead Account" means the account designated as such, established and
maintained pursuant to Section 4.1(d)(ii).
"Payahead Balance" on a Actuarial Home Equity Loan means the sum, as of the
close of business on the last day of a Due Period, of all Payaheads made by or
on behalf of the Mortgagor with respect to such Actuarial Home Equity Loan, as
reduced by applications of previous Payaheads with respect to such Actuarial
Home Equity Loan, pursuant to Sections 4.3 and 4.4.
"Periodic Cap" means the provision in the Mortgage Note for each ARM which
limits increases or decreases in the Mortgage Rate on each Change Date to _____
basis points.
"Person" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Pool Balance" as of the close of business on the last day of a Due Period
means the aggregate Principal Balance of the Home Equity Loans (excluding
Purchased Home Equity Loans and Liquidated Home Equity Loans).
"Primary Mortgage Insurance Policy" means the certificate of primary
mortgage insurance relating to a particular Home Equity Loan, or any replacement
policy therefor.
"Principal Balance" means as to any Home Equity Loan other than a
Liquidated Home Equity Loan and any day, the related Cut-Off Date Principal
Balance (or unpaid principal balance as of the date of substitution), minus all
collections
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credited against the Principal Balance of any such Home Equity Loan. For
purposes of this definition, a Liquidated Home Equity Loan shall be deemed to
have a Principal Balance equal to the Principal Balance of the related Home
Equity Loan immediately prior to the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter.
"Principal Distribution Amount" means, with respect to any Distribution
Date, the sum of the following amounts, without duplication, in respect of the
preceding Due Period: (a) that portion of all collections on Home Equity Loans
(including, with respect to Actuarial Loans, amounts withdrawn from the Payahead
Account but excluding amounts deposited into the Payahead Account) allocable to
principal, (b) Liquidation Proceeds attributable to the principal amount of Home
Equity Loans which became Liquidated Home Equity Loans during such Due Period in
accordance with the Servicer's customary servicing procedures, plus the amount
of Realized Losses with respect to such Liquidated Home Equity Loans, (c) to the
extent attributable to principal, the Purchase Price of each Home Equity Loan
that became a Purchased Home Equity Loan during such Due Period and (d) on the
Final Scheduled Distribution Date for the Certificates, any amounts advanced by
the Servicer on such Final Scheduled Distribution Date with respect to principal
on the Home Equity Loans; provided, however, that in calculating the Principal
Distribution Amount the following will be excluded: (i) amounts received on
Actuarial Home Equity Loans to the extent that the Servicer has previously made
an unreimbursed Precomputed Advance of principal, (ii) Liquidation Proceeds with
respect to a particular Actuarial Home Equity Loan to the extent of any
unreimbursed Precomputed Advances of principal, (iii) all payments and proceeds
(including Liquidation Proceeds) of any Purchased Home Equity Loans the Purchase
Price of which has been included in the Principal Distribution Amount in a prior
Due Period and (iv) Recoveries.
"Purchase Price" means as to any Defective Home Equity Loan repurchased on
any date pursuant to Sections 2.2 or 2.4, an amount equal to the sum of (i) the
unpaid Principal Balance thereof, (ii) the greater of (a) all unpaid accrued
interest thereon and (b) ___ days' interest thereon, computed at the applicable
Mortgage Rate and (iii) any unreimbursed Servicing Advances with respect to such
Home Equity Loan; provided, however, that if at the time of repurchase the
Seller or an Affiliate is the Servicer, the amount described in clause (ii)
shall be computed at the Net Rate.
"Purchased Home Equity Loan" means a Home Equity Loan purchased as of the
close of business on the last day of a Due Period by the Servicer pursuant to
Section 3.16 or repurchased by the Seller pursuant to Section 2.2.
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"Rating Agency" means Moody's, Standard & Poor's, Fitch and/or any other
rating agency requested by the Seller or an affiliate thereof to rate the Notes
and/or the Certificates. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Seller, notice of
which designation shall be given to the Trustee, the Owner Trustee and the
Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' prior notice thereof (or such
shorter period as shall be acceptable to the Rating Agencies) and that neither
of the Rating Agencies shall have notified the Seller, the Servicer, the Owner
Trustee or the Trustee in writing that such action will, in and of itself,
result in a reduction or withdrawal of the then current rating of any class of
Notes, or the Certificates.
"Realized Losses" means the excess of the Principal Balance of any
Liquidated Home Equity Loan over Liquidation Proceeds to the extent allocable to
principal.
"Recoveries" means, with respect to any Liquidated Home Equity Loan, monies
collected in respect thereof, from whatever source, during any Due Period
following the Due Period in which such Home Equity Loan became a Liquidated Home
Equity Loan, net of the sum of any amounts expended by the Servicer for the
account of the Mortgagor and any amounts required by law to be remitted to the
Mortgagor.
"REO Property" means a Mortgaged Property that is acquired by the Servicer
on behalf of the Trustee in foreclosure or by deed-in-lieu of foreclosure.
"Released Mortgaged Property Proceeds" means, as to any Home Equity Loan,
proceeds received by the Servicer in connection with (a) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(b) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise, which are not
released to the Mortgagor in accordance with applicable law, mortgage servicing
standards the Servicer would use in servicing mortgage loans for its own account
and this Agreement.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 4.1.
"Reserve Account Initial Deposit" means, with respect to the Closing Date,
$__________.
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"Reserve Account Transfer Amount" means an amount equal to the lesser of
(i) the amount of cash or other immediately available funds on deposit in the
Reserve Account on such Distribution Date (before giving effect to any
withdrawals therefrom relating to such Distribution Date) or (ii) the amount, if
any, by which (x) the sum of the Total Servicing Fee, the Noteholders' Interest
Distributable Amount, the Certificateholders' Interest Distributable Amount, the
Noteholders' Principal Distributable Amount and the Certificateholders'
Principal Distributable Amount for such Distribution Date exceeds (y) the sum of
the Interest Distribution Amount and the Available Principal for such
Distribution Date.
"Seller" means Delta Funding Corporation, as the seller of the Home Equity
Loans, and each successor to Delta Funding Corporation (in the same capacity) to
the extent permitted hereunder.
"Servicer" means Delta Funding Corporation, the servicer of the Home Equity
Loans, and each successor to Delta Funding Corporation, (in the same capacity)
pursuant to Section 6.3 or 7.2.
"Servicer Default" means an event specified in Section 7.1.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 3.10, substantially in the form of Exhibit D.
"Servicing Advances" means all reasonable and customary "out of pocket"
costs and expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration and protection of the Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of the REO Property, including reasonable fees paid to any
independent contractor in connection therewith, (iv) compliance with the
obligations under Sections 3.4, 3.7 or 3.19 and (v) in connection with the
liquidation of a Home Equity Loan, expenditures relating to the purchase or
maintenance of the First Lien pursuant to Section 3.17.
"Servicing Compensation" means the Servicing Fee, the Supplemental
Servicing Fee and any other amounts to which the Servicer is entitled pursuant
to Section 3.9.
"Servicing Fee" has the meaning specified in Section 3.9.
"Servicing Fee Rate" means _____% per annum.
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"Simple Interest Loan" means any Home Equity Loan as to which, pursuant to
the Mortgage Note related thereto, interest is calculated on the basis of the
outstanding principal balance of the Home Equity Loan multiplied by the
applicable Mortgage Rate and further multiplied by a fraction, of which the
numerator is the number of days in the period elapsed since the date to which
interest was paid and the denominator is the number of days in the annual period
for which interest accrues on such Home Equity Loan, and the Monthly Payment
received is applied first to interest accrued to the date of payment and the
balance is applied to reduce the unpaid principal balance.
"Specified Reserve Account Balance" means, with respect to (i) any
Distribution Date prior to the Distribution Date on which the Outstanding Amount
of the Class A-1 Notes has been paid in full, $____________ and (ii) any
Distribution Date on or after the Distribution Date on which the Outstanding
Amount of the Class A-__ Notes has been paid in full the greater of (a) ____% of
the sum of the aggregate outstanding principal amount of each class of Notes
plus the outstanding Certificate Balance on such Distribution Date (after giving
effect to all payments on the Notes and distributions with respect to the
Certificates to be made on such Distribution Date); or (b) ____% of the sum of
the aggregate initial principal of the Notes plus the initial Certificate
Balance except that, if on any Distribution Date (x) the average of the
Charge-off Rates for the three preceding Due Periods exceeds ____% or (y) the
average of the Delinquency Percentages for the three preceding Due Periods
exceeds ____%, then the Specified Reserve Account Balance shall be an amount
equal to ____% of the sum of the aggregate outstanding principal amount of each
class of Notes and the aggregate outstanding Certificate Balance on such
Distribution Date (after giving effect to all payments on the Notes and
distributions with respect to the Certificates to be made on such Distribution
Date).
"Standard & Poor's" means Standard & Poor's Ratings Group, or its
successor.
"Supplemental Servicing Fee" means the fee payable to the Servicer for
certain services rendered during the respective Due Period, determined pursuant
to and defined in Section 3.9.
"Total Servicing Fee" means with respect to each Distribution Date the
Servicing Fee for the related Due Period and all accrued and unpaid Servicing
Fees for prior Due Periods.
"Total Distribution Amount" means, for each Distribution Date, the sum of
(i) the Interest Distribution Amount (ii) the Available Principal and (iii) the
Reserve Account Transfer Amount, in each case in respect of such Distribution
Date; provided, however, that if on the Class A-1 Final Scheduled Distribution
Date, the Total Distribution Amount
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(as defined above) would be insufficient to pay the Total Servicing Fee,
Noteholders' Interest Distributable Amount, Certificateholders' Interest
Distributable Amount and the Noteholders' Principal Distributable Amount for
such Distribution Date, then the Total Distribution Amount for such Distribution
Date will include, in addition to the Total Distribution Amount (as defined
above), an amount, up to the amount necessary to pay any such items, of the
Interest Distribution Amount and the Available Principal on deposit (or, if the
conditions specified in Section 3.2(c) have been satisfied, that would have been
required to have been deposited but for the satisfaction of such conditions) in
the Collection Account on the Determination Date relating to such Class A-1
Final Scheduled Distribution Date which would have constituted the Interest
Distribution Amount or Available Principal, as the case may be, for the Due
Period relating to the succeeding Distribution Date and the Interest
Distribution Amount and Available Principal, as the case may be, for such
succeeding Distribution Date will be reduced accordingly.
"Transfer Date" means, with respect to any Distribution Date, the Business
Day preceding such Distribution Date.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, and all
proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 4.1.
"Trust Agreement" means the Trust Agreement dated as of _________ __, ____,
between the Seller and the Owner Trustee, as the same may be amended and
supplemented from time to time.
"Trust Officer" means, (i) in the case of the Trustee, any Officer within
the Corporate Trust Office of the Trustee, including any Vice President,
Assistant Vice President, Assistant Treasurer, Assistant Secretary or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject and (ii)
in the case of the Owner Trustee, any officer in the corporate trust office of
the Owner Trustee with direct responsibility for the administration of this
Agreement or any of the Basic Documents on behalf of the Owner Trustee.
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"Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture, or, if not defined therein, in the
Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Agreement or in any such instrument,
certificate or other document, and accounting terms partly defined in this
Agreement or in any such instrument, certificate or other document to the extent
not defined, shall have the respective meanings given to them under generally
accepted accounting principles as in effect on the date of this Agreement or any
such instrument, certificate or other document, as applicable. To the extent
that the definitions of accounting terms in this Agreement or in any such
instrument, certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such instrument, certificate or other
document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
SECTION 1.3. Interest Calculations. All calculations of interest hereunder
that are made in respect of the Principal Balance of a Simple Interest Loan
shall be made on the basis of the actual number of days in an Accrual Period and
a year assumed to consist of 365 days. All calculations of interest in respect
of the Principal Balance of an Actuarial Loan or in
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respect of the Notes or the Certificates shall be made on the basis of a 360-day
year consisting of twelve 30-day months. The calculation of the Servicing Fee
shall be made on the basis of the actual number of days in an Accrual Period and
a year assumed to consist of 365 days.
ARTICLE II
Conveyance of Home Equity Loans
SECTION 2.1. Conveyance of Home Equity Loans. (a) In consideration of the
Issuer's delivery to or upon the order of the Seller on the Closing Date of the
net proceeds from the sale of the Notes and the Certificates and the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller does hereby sell, transfer, assign, set over
and otherwise convey to the Issuer, without recourse (subject to the obligations
herein):
(A) all right, title and interest of the Seller in and to the Home
Equity Loans, and all moneys received thereon, on or after the Cutoff Date;
(B) all right, title and interest of the Seller in the security
interests in the Mortgaged Properties granted by Mortgagors pursuant to the
Home Equity Loans and any other interest of the Seller in the Mortgaged
Properties;
(C) the interest of the Seller in any proceeds with respect to the
Home Equity Loans from claims on any physical damage, theft, credit life or
disability insurance policies covering Mortgaged Properties or Mortgagors;
(D) all right, title and interest in all funds on deposit from time to
time in the Certificate Distribution Account, in the Trust Accounts,
including the Reserve Account Initial Deposit, and in all investments and
proceeds thereof (including all income thereon); and
(E) the proceeds of any and all of the foregoing.
In connection with such transfer, assignment and conveyance by the Seller,
the Seller shall deliver to, and deposit with the Trustee, on or before the
Closing Date, the following documents or instruments with respect to each Home
Equity Loan (the "Related Documents"):
(i) The original Mortgage Note, with all prior and intervening
endorsements showing a complete chain of endorsements from the originator
of the Home Equity Loan to the Person so endorsing the Home Equity Loan to
the Trustee,
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endorsed by such Person "Pay to the order of ____________________, as
Trustee for Delta Funding Home Equity and Home Improvement Loan Trusts
199_-_ without recourse" and signed, by facsimile or manual signature, in
the name of the Seller by a Responsible Officer;
(ii) Any of: (1) the original Mortgage, and related power of attorney,
if any, with evidence of recording thereon, (2) a copy of the Mortgage and
related power of attorney, if any, certified as a true copy of the original
Mortgage or power of attorney by a Responsible Officer of the Seller or by
the closing attorney by facsimile or manual signature, or by an officer of
the title insurer or agent of the title insurer that issued the related
title insurance policy if the original has been transmitted for recording
until such time as the original is returned by the public recording office
or (3) a copy of the Mortgage and related power of attorney, if any,
certified by the public recording office;
(iii) The original Assignment of Mortgage in recordable form, to
"__________________, as Trustee for Delta Funding Home Equity and Home
Improvement Loan Trusts 199_-_". Any such Assignments of Mortgage may be
made by blanket assignments for Home Equity Loans secured by the Mortgaged
Properties in the same county, if permitted by applicable law;
(iv) The original lender's policy of title insurance or a true copy
thereof, or if such original lender's title insurance policy has been lost,
a copy thereof certified by the appropriate title insurer to be true and
complete, or if such lender's title insurance policy has not been issued as
of the Closing Date, a marked up commitment (binder) to issue such policy;
(v) All intervening assignments, if any, showing a complete chain of
assignments from the originator to the Seller, including any recorded
warehousing assignments, with evidence of recording thereon, certified by a
Responsible Officer of the Seller by facsimile or manual signature as a
true copy of the original of such intervening assignments; and
(vi) Originals of all assumption, written assurance, substitution and
modification agreements, if any.
In instances where the original recorded Mortgage cannot be delivered by
the Seller to the Trustee prior to or concurrently with the execution and
delivery of this Agreement due to a delay in connection with recording, the
Seller may in lieu of delivering such original recorded Mortgage, deliver to the
Trustee a copy thereof, provided that the Seller certifies
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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.
In all such instances, the Seller will deliver or cause to be delivered the
original recorded Mortgage to the Trustee promptly upon receipt of the original
recorded Mortgage but in no event later than one year after the Closing Date.
(b) The Trustee agrees, for the benefit of the Noteholders and the
Certificateholders, within 90 days after execution and delivery of this
Agreement, to review the Mortgage Files to ascertain that all required documents
set forth in paragraphs (i) - (v) of Section 2.1(a) have been executed and
received, and that the Mortgage Notes have been endorsed as set forth in Section
2.1(a), and that such documents relate to the Home Equity Loans identified on
the Home Equity Loan Schedule and in so doing the Trustee may rely on the
purported due execution and genuineness of any signature thereon. If within such
90-day period the Trustee finds any document constituting a part of a Mortgage
File not to have been executed or received or to be unrelated to the Home Equity
Loans identified in said Home Equity Loan Schedule or, if in the course of its
review, the Trustee determines that such Mortgage File is otherwise defective in
any material respect, the Trustee shall promptly upon the conclusion of its
review notify the Seller, and the Seller shall have a period of 90 days after
such notice within which to correct or cure any such defect.
(c) The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in Section 2.1(b). Without limiting the effect
of the preceding sentence, in reviewing any Mortgage File pursuant to such
subsection, the Trustee shall have no responsibility for determining whether any
document is valid and binding, whether the text of any assignment or endorsement
is in proper or recordable form (except, if applicable, to determine if the
Trustee is the assignee or endorsee), whether any document has been recorded in
accordance with the requirements of any applicable jurisdiction, or whether a
blanket assignment is permitted in any applicable jurisdiction, but shall only
be required to determine whether a document has been executed, that it appears
to be what it purports to be, and, where applicable, that it purports to be
recorded, but shall not be required to determine whether any Person executing
any document is authorized to do so or whether any signature thereon is genuine.
SECTION 2.2. Acceptance by Trustee. The Trustee hereby acknowledges,
subject to the review and period for delivery provided for in Section 2.1, its
receipt of the Mortgage Files, and declares that the Trustee holds and will hold
such documents and all amounts received by it thereunder and hereunder in trust,
upon the terms herein set forth, for the use and benefit of all present and
future Noteholders and
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Certificateholders. If the Seller is given notice under Section 2.1(c) above and
if the Seller does not correct or cure such omission or defect within the 90-day
period specified in Section 2.1(c) above, the Seller shall substitute one or
more Eligible Substitute Home Equity Loans therefor as provided in Section 2.5
hereof or purchase such Home Equity Loan from the Trustee on the Determination
Date in the month following the month in which such 90-day period expired at the
Purchase Price of such Home Equity Loan. The Purchase Price for the purchased
Home Equity Loan shall be deposited in the Collection Account no later than the
applicable Determination Date or the Business Day preceding the expiration of
such 90-day period, as the case may be, and, upon receipt by the Trustee of
written notification of such deposit signed by an officer of the Seller, the
Trustee shall release to the Seller the related Mortgage File and the Trustee
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as shall be necessary to vest in the Seller or its
designee any Home Equity Loan released pursuant hereto. It is understood and
agreed that the obligation of the Seller to cure, substitute for or purchase any
Home Equity Loan as to which a material defect in or omission of a constituent
document exists shall constitute the sole remedy against the Seller respecting
such defect or omission available to the Issuer, the Owner Trustee, the Trustee,
the Noteholders or the Certificateholders.
The Servicer, promptly following the transfer of (i) a Defective Home
Equity Loan from or (ii) an Eligible Substitute Home Equity Loan to the Trust
pursuant to this Section and Section 2.5, as the case may be, shall amend the
Home Equity Loan Schedule and make appropriate entries in its general account
records to reflect such transfer and the addition of any Eligible Substitute
Home Equity Loan, if applicable.
SECTION 2.3. [Intentionally Omitted].
SECTION 2.4. Representations and Warranties of the Seller Regarding the
Home Equity Loans. (a) The Seller represents and warrants to the Issuer as
follows as of the Closing Date:
(i) the information set forth in the Home Equity Loan Schedule in
Exhibit A hereto with respect to the Home Equity Loans was and will be true
and correct in all material respects at the date or dates respecting which
such information is furnished;
(ii) the terms of the Mortgage Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments, if required by law in the jurisdiction where the Mortgaged
Property is located, the substance of which waiver, alteration or
modification is reflected on the Home Equity Loan Schedule
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and the Mortgage File for such Home Equity Loan contains a true, accurate
and complete copy of each such waiver, alteration and modification;
(iii) except as otherwise set forth in the Home Equity Loan Schedule,
the Mortgage File for each Home Equity Loan contains a true, accurate and
complete copy of each of the documents contained in such Mortgage File,
including all amendments, modifications and, if applicable, waivers and
assumptions that have been executed in connection with such Home Equity
Loan, and except as reflected in the Mortgage File, the Home Equity Loan
Schedule for such Home Equity Loan, such Home Equity Loan has not been
further modified or amended;
(iv) immediately prior to the transfer to the Issuer, the Seller is
the sole owner of beneficial title and holder of each Mortgage and Mortgage
Note relating to the Home Equity Loans free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges, charges
or security interests of any nature and the Seller has full right and
authority, subject to no interest or participation of, or agreement with,
any other party, to sell or assign the same pursuant to this Agreement;
(v) each Mortgage is a valid and enforceable first lien or junior lien
(as to which all prior liens are being assigned) on the property securing
the related Mortgage Note and each Mortgaged Property is owned by the
Mortgagor in fee simple (except with respect to common areas in the case of
condominiums, PUDs and de minimis PUDs) or by leasehold for a term longer
than the term of the related Mortgage, subject only to (i) the lien of
current real property taxes and assessments, not yet due and payable, (ii)
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 or specifically reflected in the appraisal obtained
in connection with the origination of the related Home Equity Loan and
(iii) such 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;
(vi) as of the Cutoff Date, no payment of principal of or interest on
or in respect of any Home Equity Loan is more than ___ days past due;
(vii) there is no mechanics' lien or claim for work, labor or
materials affecting the premises subject to any Mortgage which is or may be
a lien prior to, or equal with, the lien of such Mortgage except those
which are
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insured against by the title insurance policy referred to in clause (x)
below;
(viii) as of the Cutoff Date, no Home Equity Loan has been delinquent
for ___ days or more during the preceding 12 months, and there is no
delinquent tax or assessment lien against the property subject to any
Mortgage;
(ix) there is no valid offset, defense or counterclaim to any Mortgage
Note or Mortgage, including the obligation of the Mortgagor to pay the
unpaid principal and interest on such Mortgage Note;
(x) the physical property subject to any Mortgage is free of material
damage and is in good repair and there is no proceeding pending or, to the
best of the Seller's knowledge, threatened for the total or partial
condemnation of any Mortgaged Property;
(xi) a lender's title insurance policy (on an ALTA or CLTA form) or
binder, or other assurance of title customary in the relevant jurisdiction
therefor in a form acceptable to FNMA or FHLMC, was issued on the date of
the origination of each related Home Equity Loan by a title insurance
company acceptable to FNMA or FHLMC and qualified to do business in the
jurisdiction where the related Mortgaged Property is located, insuring the
Seller and its successors and assigns that the Mortgage is a first priority
lien on the related Mortgaged Property in the original principal amount of
the Home Equity Loan. The Seller is the sole insured under such lender's
title insurance policy, and such policy, binder or assurance is valid and
remains in full force and effect, and each such policy, binder or assurance
shall contain all applicable endorsements including a negative amortization
endorsement, if applicable;
(xii) in the event the Mortgage constitutes a deed of trust, either a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage or
if no duly qualified trustee has been properly designated and so serves,
the Mortgage contains satisfactory provisions for the appointment of such
trustee by the holder of the Mortgage at no cost or expense to such holder,
and no fees or expenses are or will become payable by Issuer to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the mortgagor;
(xiii) as of the Cutoff Date, the Home Equity Loans had the
characteristics described in the Home Equity Loan Schedule for such Home
Equity Loans;
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(xiv) the original principal amount of each Home Equity Loan is not
more than ___% of the Original Value; except as otherwise set forth in the
Home Equity Loan Schedule, each Home Equity Loan for which the original
principal balance of the related Mortgage Note exceeded __% of the Original
Value is covered by a Primary Mortgage Insurance Policy issued by a private
mortgage insurer insuring against default under the Mortgage Note in an
amount at least equal to the excess of such outstanding principal amount
over __% of such Original Value until the principal balance of such Home
Equity Loan is reduced below __% of the Original Value or, based upon a new
appraisal, the principal balance of such Home Equity Loan represents less
than __% of the new appraised value. Each FHA insurance policy or VA
guaranty relating to each FHA/VA insured/guaranteed Home Equity Loan is
current, in full force and effect and may be assigned by the Seller to the
Issuer at no cost to the Issuer;
(xv) there has been no fraud, misrepresentation or dishonesty with
respect to the origination or servicing of any Home Equity Loan or which
has resulted or may result in the exclusion from, denial of or defense to
coverage under any Primary Mortgage Insurance Policy;
(xvi) upon origination of each Home Equity Loan, the originator
received an appraisal with respect to each Mortgaged Property which
conformed to all FNMA requirements, and a true, accurate and complete copy
of such appraisal is contained in the Mortgage File;
(xvii) on the basis of a representation by the Mortgagor at the time
of origination of the Home Equity Loans, at least ___% of the Home Equity
Loans (by aggregate principal balance) are secured by Mortgages on
properties which were owner-occupied primary residences at the time of the
origination of such Home Equity Loan;
(xviii) neither the Seller nor any servicer of the related Home Equity
Loans has advanced funds 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, except for (i) interest accruing from
the date of the origination of the related Mortgage Note or date of
disbursement of the Home Equity Loan proceeds, whichever is later, to the
first Due Date under the related Mortgage Note and (ii) customary advances
for insurance and taxes;
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(xix) each Mortgage Note, the related Mortgage and other agreements
executed in connection therewith 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 or other similar laws affecting the enforcement
of creditors' rights generally and by general equity principles (regardless
of whether such enforcement is considered in a proceeding in equity or at
law); and all parties to each Mortgage Note and the Mortgage had legal
capacity to execute the Mortgage Note and the Mortgage and each Mortgage
Note and Mortgage has been duly and properly executed by the Mortgagor;
(xx) if the Home Equity Loan provides that the interest rate on the
principal balance of the related Home Equity Loan may be adjusted, all of
the terms of the related Mortgage pertaining to interest rate adjustments,
payment adjustments and adjustments of the outstanding principal balance
are enforceable and such adjustments will not affect the priority of the
Mortgage lien;
(xxi) to the extent required under applicable law, each originator and
subsequent mortgagee or servicer of the Home Equity Loans was authorized to
transact and do business in the jurisdiction in which the related Mortgaged
Property is located at all times when it held or serviced the Home Equity
Loan; any requirements of any laws or regulations, including usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection, fair credit reporting, unfair collection practice, equal credit
opportunity and disclosure laws and regulations, applicable to the
origination and servicing of such Home Equity Loan have been complied with
in all material respects; and any obligations of the holder of the related
Mortgage Note, Mortgage and other loan documents have been complied with in
all material respects; servicing of each Home Equity Loan has been in
accordance with prudent mortgage servicing standards, any applicable laws,
rules and regulations and in accordance with the terms of the Mortgage
Notes, the Mortgage and other loan documents, whether such origination and
servicing was done by the Seller, its affiliates, or any third party which
originated the Home Equity Loan on behalf of, or sold the Home Equity Loan
to, any of them, or any servicing agent of any of the foregoing;
(xxii) the related Mortgage Note and Mortgage contain customary and
enforceable provisions such as to render the rights and remedies of the
holder adequate for the realization against the Mortgaged Property of the
benefits of the security, including realization by judicial, or, if
applicable, non-judicial foreclosure, and there is no
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homestead or other exemption available to the Mortgagor which would
interfere with such right to foreclosure;
(xxiii) the proceeds of the related Home Equity Loans have been fully
disbursed, there is no requirement for future advances thereunder and 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; and all costs, fees and expenses incurred in making, closing
or recording the related Home Equity Loan have been paid, except recording
fees with respect to Mortgages not recorded as of the Closing Date;
(xxiv) as of the Closing Date the Mortgaged Property securing the Home
Equity Loan is insured (by an insurer which is acceptable to the Seller)
against loss by fire and such hazards as are covered under a standard
extended coverage endorsement, in an amount which is not less than the
lesser of the maximum insurable value of the improvements securing such
Home Equity Loan and the outstanding principal balance of the Home Equity
Loan, but in no event in an amount less than an amount that is required to
prevent the Mortgagor from being deemed to be a co-insurer thereunder; if
the Mortgaged Property is a condominium unit, it is included under the
coverage afforded by a blanket policy for the condominium project; if upon
origination of the related Home Equity Loan, the improvements on the
Mortgaged Property were in an area identified as a federally designated
flood area, a flood insurance policy is in effect in an amount representing
coverage not less than the lesser of (i) the outstanding principal balance
of the Home Equity Loan, (ii) the restorable cost of improvements located
on such Mortgaged Property and (iii) the maximum coverage available; and
each Mortgage obligates the Mortgagor thereunder to maintain the insurance
referred to in the Mortgage at the Mortgagor's cost and expense;
(xxv) except for ___% of the Home Equity Loans (by aggregate principal
balance as of the Cutoff Date) which are no more than ___ days delinquent
as of the Cutoff Date, there is no material monetary default existing under
any Mortgage or the related Mortgage Note and there is no material event
which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach or event of
acceleration; and neither the Seller nor any servicer of any related Home
Equity Loan has taken any action to waive any default, breach or event of
acceleration; except for ___% of the Home Equity Loans (by aggregate
principal balance as of the Cutoff Date) which are no more than ___ days
delinquent as of the Cutoff Date, no foreclosure action is threatened or
has been commenced with respect to the Home Equity Loans;
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(xxvi) no Mortgagor, at the time of origination of the applicable
Mortgage, was a debtor in any state or federal bankruptcy or insolvency
proceeding;
(xxvii) each Home Equity Loan was originated by an entity described in
Section 3(a)(41) of the Securities Exchange Act of 1934, as amended;
(xxviii) all inspections, licenses and certificates required to be
made or issued with respect to the Mortgaged Property and, with respect to
the use and occupancy of the same, including, but not limited to,
certificates of occupancy and fire underwriting certificates, have been
made or obtained from the appropriate authorities;
(xxix) the Mortgaged Property and all improvements thereon comply with
all requirements of any applicable zoning and subdivision laws and
ordinances;
(xxx) 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 private
institutional investors to regard the Home Equity Loan as an unacceptable
investment, cause the Home Equity Loan to become delinquent or adversely
affect the value or marketability of the Home Equity Loan;
(xxxi) no instrument of release or waiver has been executed in
connection with the Home Equity Loans, and no Mortgagor has been released,
in whole or in part, except in connection with an assumption agreement
which has been approved by the primary mortgage guaranty insurer, if any,
and which has been delivered to the Issuer or its designee; and
(xxxii) except as otherwise provided in the Home Equity Loan Schedule,
no Home Equity Loan provides for a balloon payment and each Mortgage Note
contains provisions providing for its full amortization by the end of its
original term and is payable on the first day of each month in monthly
installments of principal and interest, with interest payable in arrears,
over an original term of not more than ___ years.
(b) It is understood and agreed that the representations and warranties set
forth in Section 2.4(a) shall survive the sale, transfer and assignment of the
Home Equity Loans to the Issuer and the pledge thereof to the Trustee pursuant
to the Indenture. Upon discovery by the Seller, the Servicer or the Owner
Trustee of a breach of any of the foregoing representations and warranties,
without regard to any
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limitation set forth therein concerning the knowledge of the Seller as to the
facts stated therein, which materially and adversely affects the interests of
the Noteholders or the Certificateholders in the related Home Equity Loan, the
party discovering such breach shall give prompt written notice to the other
parties and the Trustee. Within 60 days of its discovery or its receipt of
notice of breach, the Seller shall use all reasonable efforts to cure such
breach in all material respects or shall purchase from the Trust or substitute
an Eligible Substitute Home Equity Loan as provided in Section 2.5 for such Home
Equity Loan. Any such purchase by the Seller shall be at the Purchase Price, and
in each case shall be accomplished in the manner set forth in Section 2.2. It is
understood and agreed that the obligation of the Seller to cure, substitute for
or purchase any Home Equity Loan as to which such a breach has occurred and is
continuing shall constitute the sole remedies against the Seller respecting such
breach available to the Issuer, the Owner Trustee, the Trustee, the Noteholders
or Certificateholders. Neither the Owner Trustee nor the Trustee shall have a
duty to conduct any affirmative investigation as to the occurrence of any
conditions requiring the repurchase of any Home Equity Loan pursuant to this
Section.
SECTION 2.5. Substitution of Home Equity Loans. (a) On a Determination Date
within two years following the Closing Date and which is on or before the date
on which the Seller would otherwise be required to repurchase a Home Equity Loan
under Section 2.2 or 2.4, the Seller may deliver to the Trustee one or more
Eligible Substitute Home Equity Loans in substitution for any one or more of the
Defective Home Equity Loans which the Seller would otherwise be required to
repurchase pursuant to Sections 2.2 or 2.4.
(b) The Seller shall notify the Issuer, the Owner Trustee, the Servicer and
the Trustee in writing not less than five Business Days before the related
Determination Date which is on or before the date on which the Seller would
otherwise be required to repurchase such Home Equity Loan pursuant to Section
2.2 or 2.4 of its intention to effect a substitution under this Section. On such
Determination Date (the "Substitution Date"), the Seller shall deliver to the
Issuer (1) the Eligible Substitute Home Equity Loans to be substituted for the
Original Home Equity Loans, (2) a list of the Original Home Equity Loans to be
substituted for by such Eligible Substitute Home Equity Loans, (3) an Officers'
Certificate (A) stating that no failure by the Servicer described in Section 7.1
shall have occurred and be continuing, (B) stating that all conditions precedent
to such substitution specified in subsection (a) have been satisfied and
attaching as an exhibit a supplemental Home Equity Loan schedule (the
"Supplemental Home Equity Loan Schedule") setting forth the same type of
information as appears on the Home Equity Loan Schedule and representing as to
the accuracy thereof and (C) confirming that the representations and warran-
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ties contained in Section 2.4 are true and correct in all material respects with
respect to the Substitute Home Equity Loans on and as of such Determination
Date, provided that remedies for the inaccuracy of such representations are
limited as set forth in Sections 2.2, 2.4 and this Section 2.5 and (4) a
certificate stating that cash in the amount of the related Substitution
Adjustment, if any, has been deposited to the Collection Account. Upon receipt
of the foregoing, the Issuer shall release such Original Home Equity Loans to
the Seller.
(c) Concurrently with the satisfaction of the conditions set forth in
Section 2.5(a) and (b) above and the grant of such Eligible Substitute Home
Equity Loans to the Trustee pursuant to Section 2.5(a) above, Exhibit A to this
Agreement shall be deemed to be amended to exclude all Home Equity Loans being
replaced by such Eligible Substitute Home Equity Loans and to include the
information set forth on the Supplemental Home Equity Loan Schedule with respect
to such Eligible Substitute Home Equity Loans, and all references in this
Agreement to Home Equity Loans shall include such Eligible Substitute Home
Equity Loans and be deemed to be made on or after the related Substitution Date,
as the case may be, as to such Eligible Substitute Home Equity Loans.
ARTICLE III
Administration and Servicing of Home Equity Loans
SECTION 3.1. Duties of Servicer. (a) The Servicer, as agent for the Issuer
(to the extent provided herein) shall supervise, or take such actions as are
necessary to ensure, the servicing and administration of the Home Equity Loans
and any REO Property in accordance with this Agreement and the customary and
usual standards of an institution prudently servicing mortgage loans for its own
account and shall have full authority to do anything it reasonably deems
appropriate in connection with such servicing and administration. The Servicer
shall maintain servicing standards equivalent to those required for approval by
FNMA or FHLMC. The Servicer may perform its responsibilities relating to
servicing through other agents or independent contractors, but shall not thereby
be released from any of its responsibilities as hereinafter set forth. The
authority of the Servicer, in its capacity as servicer, shall include the power
to (i) supervise the filing and collection of insurance claims and take or cause
to be taken such actions on behalf of the insured person thereunder as shall be
reasonably necessary to prevent the denial of coverage thereunder, and (ii)
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing a related Home Equity Loan, including the employment of
attorneys, the institution of legal proceedings, the collection of deficiency
judgments, the
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acceptance of compromise proposals, the filing of claims under any Primary
Insurance Policy and any other matter pertaining to a delinquent Home Equity
Loan. The authority of the Servicer shall include, in addition, the power to (i)
execute and deliver customary consents or waivers and other instruments and
documents, (ii) consent to transfers of any related Mortgaged Property and
assumptions of the related Mortgage Notes and Security Instruments (but only in
the manner provided in this Agreement) and (iii) collect any Insurance Proceeds
and Liquidation Proceeds. Without limiting the generality of the foregoing, the
Servicer is authorized and empowered to execute and deliver, on behalf of
itself, the Issuer, the Owner Trustee, the Trustee, the Certificateholders and
the Noteholders or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to such Home Equity Loans or to the Mortgaged
Properties securing such Home Equity Loans.
(b) Notwithstanding the provisions of Subsection 3.1(a), the Servicer shall
not take any action inconsistent with the interest of the Noteholders or the
Certificateholders in the Home Equity Loans or with the rights and interests of
the Owner Trustee, the Trustee, the Noteholders or the Certificateholders under
this Agreement.
(c) The Owner Trustee shall furnish the Servicer with any powers of
attorney and other documents in form as provided to it necessary or appropriate
(as certified to the Owner Trustee by the Servicer) to enable the Servicer to
service and administer the related Home Equity Loans and REO Property.
SECTION 3.2. Collection and Allocation of Home Equity Loan Payments. (a)
The Servicer shall make reasonable efforts to collect all payments called for
under the terms and provisions of the Home Equity Loans as and when the same
shall become due and shall follow such collection procedures as it follows with
respect to all mortgage loans in its servicing portfolio comparable to the Home
Equity Loans that it services for itself or others.
(b) Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Home Equity Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the
Noteholders and the Certificateholders; provided, however, that the Servicer may
not permit any modification with respect to any Home Equity Loan that would
change the Mortgage Rate, defer or forgive the payment of any principal or
interest (unless in connection with the liquidation of the related Home Equity
Loan) or extend the Final Scheduled
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Maturity Date on the Home Equity Loan. No costs incurred by the Servicer in
respect of Servicing Advances shall for the purposes of distributions to
Noteholders or Certificateholders be added to the amount owing under the related
Home Equity Loan.
(c) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the Trustee an
Eligible Deposit Account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Noteholders and the Certificateholders. The Collection Account shall
initially be established with the Trustee. The Servicer shall on the Closing
Date deposit into the Collection Account any amounts representing payments on
and any collections in respect of the Home Equity Loans in received on or after
the Cutoff Date and prior to the Closing Date, and thereafter shall use its best
efforts to deposit within one Business Day, and shall in any event deposit
within two Business Days following receipt thereof the following payments and
collections received or made by it (without duplication) with respect to the
Home Equity Loans:
(i) all payments received on and after the Cutoff Date on account of
principal on the Home Equity Loans and all full or partial prepayments
collected after the Cutoff Date;
(ii) all payments received on and after the Cutoff Date on account of
interest on the Home Equity Loans;
(iii) all Net Liquidation Proceeds net of Foreclosure Profits;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any Home
Equity Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.2, 2.4, 2.6 and 3.16; and
(vii) any amount required to be deposited in the Collection Account
pursuant to Sections 3.5, 3.7, 3.15, 3.16 or 8.1;
provided, however, that (x) with respect to each Due Period, the Servicer shall
be permitted to retain from payments in respect of interest on the Home Equity
Loans, the Servicing Fee for such Due Period and (y) the Servicer shall be
permitted to retain late collections, including Liquidation Proceeds, Released
Mortgaged Property Proceeds and Insurance Proceeds, to the extent of any unpaid
Servicing Fees, unreimbursed Monthly
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Advance and/or Servicing Advance with respect to the related Home Equity Loan.
The foregoing requirements respecting deposits to the Collection Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, the Servicer need not deposit in the Collection Account amounts
representing Foreclosure Profits, fees (including annual fees), late charges or
penalties payable by Mortgagors, or amounts received by the Servicer for the
accounts of Mortgagors for application towards the payment of taxes, insurance
premiums, assessments and similar items.
SECTION 3.3. Withdrawals from each Collection Account. The Trustee shall
withdraw or cause to be withdrawn funds from the Collection Account for the
following purposes with respect to the Home Equity Loans:
(i) the deposits and distributions required by Section 4.5(d);
(ii) to the extent not retained by the Servicer as provided in Section
3.2(c), to reimburse the Servicer for any accrued unpaid Servicing Fees and
for unreimbursed Monthly Advances and Servicing Advances. The Servicer's
right to reimbursement for unpaid Servicing Fees and unreimbursed Servicing
Advances shall be limited to late collections on the related Home Equity
Loan, including Liquidation Proceeds, Released Mortgaged Property Proceeds,
Insurance Proceeds and such other amounts as may be collected by the
Servicer from the related Mortgagor or otherwise relating to the Home
Equity Loan in respect of which such reimbursed amounts are owed. If a
Monthly Advance was made net of the Servicing Fee as permitted by Section
3.15 hereof, no additional Servicing Fee for the related Mortgage loan and
Due Period shall be payable. The Servicer's right to reimbursement from
such Collection Account for unreimbursed Monthly Advances shall be limited
to late collections of interest on any Home Equity Loan and to Liquidation
Proceeds and Insurance Proceeds on related Home Equity Loans;
(iii) 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 United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;
(iv) (a) to make investments in Eligible Investments and (b) to pay to
the Servicer, interest earned in respect of Eligible Investments or on
funds deposited in the Collection Account;
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(v) to withdraw any funds deposited in such Collection Account that
were not required to be deposited therein (such as Servicing Compensation)
or were deposited therein in error and to pay such funds to the appropriate
Person;
(vi) to pay the Servicer Servicing Compensation pursuant to Section
3.9 hereof to the extent not retained or paid pursuant to Section 3.2(c);
(vii) to withdraw funds necessary for the conservation and disposition
of REO Property pursuant to Section 3.7; and
(viii) to clear and terminate such Collection Account upon the
termination of this Agreement and to pay any amounts remaining therein in
accordance with Section 8.1(b).
SECTION 3.4. Maintenance of Hazard Insurance; Property Protection Expenses.
The Servicer shall cause to be maintained for each Home Equity Loan fire and
hazard insurance naming the Servicer as loss payee thereunder providing extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements securing such Home Equity Loan from time to
time, (ii) the combined principal balance owing on such Home Equity Loan and any
related First Lien and (iii) the minimum amount required to compensate for
damage or loss on a replacement cost basis. The Servicer shall also maintain on
property acquired upon foreclosure, or by deedin-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, (ii) the combined principal balance owing on
such Home Equity Loan and any related First Lien and (iii) the minimum amount
required to compensate for damage or loss on a replacement cost basis at the
time of such foreclosure, fire and or deed in lieu of foreclosure plus accrued
interest and the good-faith estimate of the Servicer of related Servicing
Advances 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 called for by Section 3.2. In cases in which any Mortgaged Property
is located in a federally designated flood area, the hazard insurance to be
maintained for the related Home Equity Loan shall include flood insurance to the
extent such flood insurance is available and the Servicer has determined such
insurance to be necessary in accordance with accepted mortgage loan servicing
standards for mortgage loans comparable to the Home Equity Loans. All such flood
insurance shall be in amounts equal to the least of the amount in clause (i)
above, clause (ii) above and the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended. The Servicer shall be under no
obligation to require that any Mortgagor maintain earthquake or other additional
insurance and
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shall be under no obligation itself to maintain any such additional insurance on
property acquired in respect of a Home Equity 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.
SECTION 3.5. Maintenance of Mortgage Impairment Insurance Policy. In the
event that the Servicer shall obtain and maintain a blanket policy with an
insurer having a General Policy rating of A:VIII or better in Best's Key Rating
Guide insuring against fire and hazards of extended coverage on all of the Home
Equity Loans, then, to the extent such policy names the Servicer as loss payee
and provides coverage in an amount equal to the aggregate unpaid principal
balance on the Home Equity Loans without co-insurance, and otherwise complies
with the requirements of Section 3.4, the Servicer shall be deemed conclusively
to have satisfied its obligations with respect to fire and hazard insurance
coverage under Section 3.4, it being understood and agreed that such blanket
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 3.4, and there shall have been a loss
which would have been covered by such policy, deposit in the Collection Account
the difference, if any, between the amount that would have been payable under a
policy complying with Section 3.4 and the amount paid under such blanket policy.
Upon the request of the Owner Trustee or the Trustee, the Servicer shall cause
to be delivered to the Owner Trustee or the Trustee a certified true copy of
such policy. In connection with its activities as administrator and servicer of
the Home Equity Loans, the Servicer agrees to prepare and present, on behalf of
itself, the Owner Trustee, the Trustee, the Noteholders and the
Certificateholders, claims under any such policy in a timely fashion in
accordance with the terms of such policy.
SECTION 3.6. Fidelity Bond. The Servicer shall maintain with a responsible
company, and at its own expense, a blanket fidelity bond and an errors and
omissions insurance policy, in a minimum amount acceptable to FNMA or FHLMC or
otherwise in an amount as is commercially available at a cost that is not
generally regarded as excessive by industry standards, with broad coverage on
all officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Home Equity
Loans ("Servicer Employees"). Any such fidelity bond and errors and omissions
insurance shall protect and insure the Servicer against losses, including losses
resulting from forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Servicer Employees. Such fidelity bond shall also protect
and insure the Servicer against losses in connection with the release or
satisfaction of a Home Equity Loan without having obtained payment in full of
the indebtedness
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secured thereby. No provision of this Section 3.6 requiring such fidelity bond
and errors and omissions insurance shall diminish or relieve the Servicer from
its duties and obligations as set forth in this Agreement. Upon the request of
the Owner Trustee or the Trustee, the Servicer shall cause to be delivered to
the Owner Trustee or the Trustee a certified true copy of such fidelity bond and
insurance policy.
SECTION 3.7. Management and Realization Upon Defaulted Home Equity Loans.
On behalf of the Issuer, the Servicer shall manage, conserve, protect and
operate each REO Property for the Noteholders and the Certificateholders solely
for the purpose of its prudent and prompt disposition and sale. The Servicer
shall, either itself or through an agent selected by the Servicer, manage,
conserve, protect and operate the REO Property in the same manner that it
manages, conserves, protects and operates other foreclosed property for its own
account, and in the same manner that similar property in the same locality as
the REO Property is managed. The Servicer shall attempt to sell the same (and
may temporarily rent the same) on such terms and conditions as the Servicer
deems to be in the best interests of the Noteholders and the Certificateholders.
The Servicer shall cause to be deposited, no later than five Business Days
after the receipt thereof, in the Collection Account, all revenues received with
respect to the related REO Property and shall retain, or cause the Trustee to
withdraw therefrom funds necessary for the proper operation, management and
maintenance of the REO Property and the fees of any managing agent acting on
behalf of the Servicer.
The disposition of REO Property shall be carried out by the Servicer for
cash at such price, and upon such terms and conditions, as the Servicer deems to
be in the best interests of the Noteholders and the Certificateholders and, as
soon as practicable thereafter, the expenses of such sale shall be paid. The
cash proceeds of sale of the REO Property shall be promptly deposited in the
Collection Account, net of Foreclosure Profits and of any related unreimbursed
Servicing Advances, accrued and unpaid Servicing Fees and unreimbursed Monthly
Advances payable to the Servicer in accordance with Section 3.3, for
distribution to the Noteholders and the Certificateholders in accordance with
Section 4.5 hereof.
The Servicer shall foreclose upon or otherwise comparably convert to
ownership Mortgaged Properties securing such of the Home Equity Loans as come
into and continue in default when no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.2 subject to the
provisions contained in the last paragraph of this Section 3.7.
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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 Owner Trustee, or to its nominee on behalf of the
Noteholders and the Certificateholders.
SECTION 3.8. Trustee to Cooperate. Upon payment in full of any Home Equity
Loan, the Servicer is authorized to execute, pursuant to the authorization
contained in Section 3.1, if the related Assignment of Mortgage has been
recorded as required hereunder, 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 is understood and agreed that no expenses incurred in connection
with such instrument of satisfaction or transfer shall be reimbursed from
amounts deposited in the Collection Account. If the Trustee is holding the
Mortgage Files, from time to time and as appropriate for the servicing or
foreclosure of any Home Equity Loan, the Trustee shall, upon request of the
Servicer and delivery to the Trustee of a Request for Release, in the form
annexed hereto as Exhibit E, signed by a Servicing Officer, release the related
Mortgage File to the Servicer, and the Trustee shall execute such documents, in
the forms provided by the Servicer, as shall be necessary to the prosecution of
any such proceedings or the taking of other servicing actions. Such Request for
Release shall obligate the Servicer to return the Mortgage File to the Trustee
when the need therefor by the Servicer no longer exists unless the Home Equity
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 Trustee to the Servicer.
In order to facilitate the foreclosure of the Mortgage securing any Home
Equity Loan that is in default following recordation of the related Assignment
of Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Servicer, execute an appropriate assignment in the
form provided to the Trustee by the Servicer to assign such Home Equity Loan for
the purpose of collection to the Servicer (any such assignment shall
unambiguously indicate that the assignment is for the purpose of collection
only), and, upon such assignment, such assignee for collection will thereupon
bring all required actions in its own name and otherwise enforce the terms of
the Home Equity Loan and deposit or credit the Net Liquidation Proceeds,
exclusive of Foreclosure Profits, received with respect thereto in the
Collection Account. In the event that all delinquent payments due under any such
Home Equity Loan are paid by the Mortgagor and any other defaults are cured then
the assignee for collection shall promptly reassign such Home Equity Loan to the
Trustee and return it to the place where the related Mortgage File was being
maintained.
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SECTION 3.9. Servicing Fee. The servicing fee for a Distribution Date shall
equal the product of (a) one-twelfth, (b) the Servicing Fee Rate and (c) the
Pool Balance as of the first day of the preceding Due Period (the "Servicing
Fee"). The Servicer shall also be entitled to all late payment charges and other
administrative fees or similar charges, including without limitation,
Foreclosure Profits, allowed by applicable law with respect to Home Equity
Loans, collected (from whatever source) on the Home Equity Loans (the
"Supplemental Servicing Fee"). The Servicer also shall be entitled to and may
retain from Collections the Servicing Fee, as provided herein. The Servicer, in
its discretion at its election, may defer receipt of all or any portion of the
Servicing Fee or Supplemental Servicing Fee for any Due Period to and until a
later Due Period for any reason, including in order to avoid a shortfall in any
payments due on any Notes or Certificates. Any such deferred amount shall be
payable to (or may be retained from subsequent collections by) the Servicer on
demand.
SECTION 3.10. Servicer's Certificate. On each Determination Date, the
Servicer shall deliver to the Owner Trustee, the Trustee and the Seller, with a
copy to the Rating Agencies, a Servicer's Certificate containing all information
necessary to make the distributions pursuant to Sections 4.5 and 4.6 for the Due
Period preceding the date of such Servicer's Certificate. Home Equity Loans to
be purchased by the Servicer or to be repurchased by the Seller shall be
identified by the Servicer by account number with respect to such Home Equity
Loan (as specified in Exhibit A).
SECTION 3.11. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to the Owner Trustee and the Trustee, on or before
________ of each year beginning ________, 199__, an Officers' Certificate, dated
as of December 31 of the preceding year, stating that (i) a review of the
activities of the Servicer during the preceding twelve-month period (or, in the
case of the first such report, during the period from the Closing Date to
December 31, 199_) and of its performance under this Agreement has been made
under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its 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
officers and the nature and status thereof. The Trustee shall send a copy of
such certificate and the report referred to in Section 3.10 to the Rating
Agencies. A copy of such certificate and the report referred to in Section 3.10
may be obtained by any Certificateholder by a request in writing to the Owner
Trustee addressed to the Corporate Trust Office (as defined in the Trust
Agreement) or by any Noteholder by a request in writing to the Trustee addressed
to the Corporate Trust Office. Upon the telephone request of the Owner Trustee,
the Trustee will
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promptly furnish the Owner Trustee a list of Noteholders as of the date
specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the Trustee and the
Rating Agencies, promptly after having obtained knowledge thereof, but in no
event later than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 7.1(a) or (b).
SECTION 3.12. Annual Independent Certified Public Accountants' Report. The
Servicer shall cause a firm of independent certified public accountants, which
may also render other services to the Servicer or the Seller, to deliver to the
Seller, the Owner Trustee and the Trustee on or before ________ of each year
beginning ________, 199_, an letter addressed to the Servicer, the Seller, the
Owner Trustee and the Trustee and each Rating Agency, to the effect that such
firm has with respect to the Servicer's overall servicing operations examined
such operations in accordance with the requirements of the Uniform Single Audit
Program for Mortgage Bankers during the preceding calendar year (or, in the case
of the first such report, during the period from the Closing Date to December
31, 199__), and stating such firm's conclusions relating thereto.
Such report will also indicate that the firm is independent of the Servicer
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.
SECTION 3.13. Access to Certain Documentation and Information Regarding
Home Equity Loans. The Servicer shall provide to the Certificateholders and
Noteholders access to the Mortgage Files in such cases where the
Certificateholders or Noteholders shall be required by applicable statutes or
regulations to review such documentation as demonstrated by evidence
satisfactory to the Servicer in its reasonable judgment. Access shall be
afforded without charge, but only upon reasonable request and during the normal
business hours at the respective offices of the Servicer. Nothing in this
Section 3.13 shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors
and the failure of the Servicer to provide access to information as provided in
this Section 3.13 as a result of such obligation shall not constitute a breach
of this Section 3.13.
SECTION 3.14. Servicer Expenses. The Servicer shall be required to pay all
expenses incurred by it in connection with its activities hereunder, including
fees and disbursements of independent accountants, taxes imposed on the Servicer
and
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expenses incurred in connection with distributions and reports
to Certificateholders and Noteholders.
SECTION 3.15. Advances by the Servicer. (a) Not later than the close of
business on the second Business Day preceding each Distribution Date, the
Servicer shall remit to the Trustee for deposit in the Collection Account an
amount, to be distributed on the related Distribution Date pursuant to Section
4.5(d), equal to the sum of (a) the interest accrued on each Home Equity Loan at
the Mortgage Rate (or at such lower rate as may be in effect for such Home
Equity Loan pursuant to application of the Civil Relief Act and/or any Debt
Service Reduction) through the related Due Date, but not received as of the
close of business on the Determination Date for such Distribution Date (net of
the Servicing Fee) and (b) with respect to each REO Property which was acquired
during or prior to the related Due Period and as to which a final disposition
did not occur during the related Due Period, an amount equal to the excess, if
any, of interest on the Principal Balance of such REO Property at the Net Rate
for the most recently ended Due Period prior to the related Determination Date
for the related Home Equity Loan over the net income from the REO Property
transferred to the Collection Account for such Distribution Date pursuant to
Section 3.4; such sum being defined herein as the "Monthly Advance." The
Servicer may fund all or a portion of the Monthly Advance with respect to the
Home Equity Loans by instructing the Trustee on such Determination Date to use
funds deposited in the Collection Account which are not part of the Total
Distribution Amount for the related Distribution Date; provided that if such
funds are so used the Servicer shall replace such funds on or before any
subsequent Determination Date on which such funds are required to be part of the
Total Distribution Amount.
(b) Notwithstanding anything herein to the contrary, no Servicing Advance
or Monthly Advance shall be required to be made hereunder if the Servicer
determines that such Servicing Advance or Monthly Advance would, if made,
constitute a Nonrecoverable Advance.
SECTION 3.16. Optional Purchase of Defaulted Home Equity Loans. The
Servicer, in its sole discretion, shall have the right to elect (by written
notice sent to the Seller, the Owner Trustee and the Trustee) to purchase for
its own account from the Issuer any Home Equity Loan which is 90 days or more
delinquent in the manner and at the price specified in Section 2.2. The Purchase
Price for any Home Equity Loan purchased hereunder shall be deposited in the
Collection Account and the Trustee, upon receipt of such deposit, shall release
or cause to be released to the Servicer or its designee the related Mortgage
File and shall execute and deliver such instruments of transfer or assignment
prepared by the purchaser of such Home Equity Loan, in each case without
recourse, as shall be necessary to
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vest in the purchaser of such Home Equity Loan any Home Equity Loan released
pursuant hereto and the purchaser of such Home Equity Loan shall succeed to all
the Issuer's right, title and interest in and to such Home Equity Loan and all
security and documents related thereto. Such assignment shall be an assignment
outright and not for security. The purchaser of such Home Equity Loan shall
thereupon own such Home Equity Loan, and all security and documents, free of any
further obligation to the Owner Trustee, the Trustee, the Noteholders or the
Certificateholders with respect thereto.
SECTION 3.17. Superior Liens. The Servicer shall file (or cause to be
filed) of record a request for notice of any action by a superior lienholder
under a First Lien for the protection of the Issuer's interest, where permitted
by local law and whenever applicable state law does not require that a junior
lienholder be named as a party defendant in foreclosure proceedings in order to
foreclose such junior lienholder's equity of redemption.
If the Servicer is notified that any superior lienholder has accelerated or
intends to accelerate the obligations secured by the First Lien, or has declared
or intends to declare a default under the mortgage or the promissory note
secured thereby, or has filed or intends to file an election to have the
Mortgaged Property sold or foreclosed, the Servicer shall take, on behalf of the
Trust, whatever actions are necessary to protect the interests of the
Noteholders and the Certificateholders, and/or to preserve the security of the
related Home Equity Loan. The Servicer shall advance the necessary funds to cure
the default or reinstate the superior lien, if the Servicer reasonably believes
such advance is in the best interests of the Noteholders and the
Certificateholders. The Servicer shall not make such an advance except to the
extent that it determines in its reasonable good faith judgment that the advance
would be recoverable from Liquidation Proceeds on the related Home Equity Loan.
SECTION 3.18. Payment of Taxes, Insurance and Other Charges. With respect
to each Home Equity Loan, the Servicer shall maintain accurate records
reflecting fire and hazard insurance coverage.
With respect to each Home Equity Loan as to which the Servicer maintains
escrow accounts, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates and other charges which
are or may become a lien upon the Mortgaged Property and the status of primary
mortgage guaranty insurance premiums, if any, and fire and hazard insurance
coverage and shall obtain, from time to time, all bills for the payment of such
charges (including renewal premiums) and shall effect payment thereof prior to
the applicable penalty or termination date and at a time appropriate
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for securing maximum discounts allowable, employing for such purpose deposits of
the Mortgagor in any escrow account which shall have been estimated and
accumulated by the Servicer in amounts sufficient for such purposes, as allowed
under the terms of the Mortgage. To the extent that a Mortgage does not provide
for escrow payments, the Servicer shall, if it has received notice of a default
or deficiency, monitor such payments to determine if they are made by the
Mortgagor.
SECTION 3.19. Appointment of Subservicer. The Servicer may at any time
appoint a subservicer to perform all or any portion of its obligations as
Servicer hereunder; provided, however, that the Rating Agency Condition shall
have been satisfied in connection therewith; provided further that the Servicer
shall remain obligated and be liable to the Issuer, the Owner Trustee, the
Trustee, the Certificateholders and the Noteholders for the servicing and
administering of the Home Equity Loans in accordance with the provisions hereof
without diminution of such obligation and liability by virtue of the appointment
of such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the Home
Equity Loans. The fees and expenses of the subservicer shall be as agreed
between the Servicer and its subservicer from time to time and none of the
Issuer, the Owner Trustee, the Trustee, the Certificateholders or the
Noteholders shall have any responsibility therefor.
ARTICLE IV
Distributions; Reserve Account;
Statements to Certificateholders and Noteholders
SECTION 4.1. Establishment of Trust Accounts. (a) (i) The Servicer, for the
benefit of the Noteholders, shall establish and maintain in the name of the
Trustee an Eligible Deposit Account (the "Note Distribution Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Noteholders. The Note Distribution Account shall initially be
established with the Trustee.
(ii) The Servicer, for the benefit of the Noteholders and the
Certificateholders, shall establish and maintain in the name of the Trustee an
Eligible Deposit Account (the "Reserve Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Noteholders and the Certificateholders. The Reserve Account shall be maintained
with the Trustee as long as the Trustee is an Eligible Institution.
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(b) Funds on deposit in the Collection Account, the Note Distribution
Account and the Reserve Account (collectively, the "Trust Accounts") and the
Certificate Distribution Account shall be invested by the Trustee with respect
to Trust Accounts and by the Owner Trustee with respect to the Certificate
Distribution Account (or any custodian with respect to funds on deposit in any
such account) in Eligible Investments selected in writing by the Servicer
(pursuant to standing instructions or otherwise); provided, however, it is
understood and agreed that neither the Trustee nor the Owner Trustee shall be
liable for any loss arising from such investment in Eligible Investments. All
such Eligible Investments shall be held by or on behalf of the Trustee or the
Owner Trustee, as applicable, for the benefit of the Noteholders and the
Certificateholders, the Noteholders or the Certificateholders, as applicable;
provided that on each Distribution Date all interest and other investment income
(net of losses and investment expenses) on funds on deposit therein shall be
deposited into the Collection Account and shall be deemed to constitute a
portion of the Interest Distribution Amount. Other than as permitted by the
Rating Agencies, funds on deposit in the Collection Account, the Note
Distribution Account, the Certificate Distribution Account and the Reserve
Account shall be invested in Eligible Investments that will mature so that such
funds will be available at the close of business on the Transfer Date preceding
the following Distribution Date. Funds deposited in a Trust Account or the
Certificate Distribution Account on a Transfer Date which immediately precedes a
Distribution Date upon the maturity of any Eligible Investments are not required
to be invested overnight.
(c) (i) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Trust Accounts and in all proceeds
thereof (including all income thereon) and all such funds, investments, proceeds
and income shall be part of the Owner Trust Estate. Except as otherwise provided
herein, the Trust Accounts shall be under the sole dominion and control of the
Trustee for the benefit of the Noteholders and the Certificateholders, or the
Noteholders, as the case may be. If, at any time, any of the Trust Accounts or
the Certificate Distribution Account ceases to be an Eligible Deposit Account,
the Trustee (or the Servicer on its behalf) or the Owner Trustee, as applicable,
shall within 10 Business Days (or such longer period as to which each Rating
Agency may consent) establish a new Trust Account or a new Certificate
Distribution Account, as applicable, as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Trust Account or a new
Certificate Distribution Account, as applicable. In connection with the
foregoing, the Servicer agrees that,in the event that any of the Trust Accounts
are not accounts with the Trustee, the Servicer shall notify the
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Trustee in writing promptly upon any of such Trust Accounts ceasing to be an
Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Trustee, and with
respect to the Certificate Distribution Account, the Owner Trustee, agrees,
by its respective acceptance hereof, that:
(A) any Trust Account Property or any property in the Certificate
Distribution Account that is held in deposit accounts shall be held
solely in the Eligible Deposit Accounts subject to the penultimate
sentence of Section 4.1(c)(i); and, except as otherwise provided
herein, each such Eligible Deposit Account shall be subject to the
exclusive custody and control of the Trustee with respect to the Trust
Accounts and the Owner Trustee with respect to the Certificate
Distribution Account, and the Trustee or the Owner Trustee, as
applicable, shall have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical Property
shall be delivered to the Trustee in accordance with paragraph (a) of
the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a financial intermediary (as
such term is defined in Section 8-313(4) of the UCC) acting solely for
the Trustee;
(C) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trustee,
pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such
paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Trustee in accordance with
paragraph (c) of the definition of "Delivery" and shall be maintained
by the Trustee, pending maturity or disposition, through continued
registration of the Trustee's (or its nominee's) ownership of such
security.
(iii) The Servicer shall have the power, revocable by the Trustee or
by the Owner Trustee with the consent of the Trustee, to instruct the
Trustee to make withdrawals and payments from the Trust Accounts for the
purpose of permitting the Servicer or the Owner Trustee to carry out
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its respective duties hereunder or permitting the Trustee to carry out its
duties under the Indenture.
(d) (i) The Servicer shall establish and maintain with the Trustee an
Eligible Deposit Account (the "Payahead Account"). The Payahead Account shall
not be property of the Issuer.
(ii) The Servicer shall on or prior to each Distribution Date (and prior to
deposits to the Note Distribution Account or the Certificate Distribution
Account) transfer from the Collection Account to the Payahead Account all
Payaheads as described in Section 4.3 received by the Servicer during the Due
Period. Notwithstanding the foregoing, for so long as the Servicer is permitted
to make monthly remittances to the Collection Account pursuant to Section
3.2(c), Payaheads need not be remitted to and deposited in the Payahead Account
but instead may be remitted to and held by the Servicer. So long as such
condition is met, the Servicer shall not be required to segregate or otherwise
hold separate any Payaheads remitted to the Servicer as aforesaid but shall be
required to remit Payaheads to the Collection Account in accordance with the
first sentence of the third paragraph of Section 4.5(a).
SECTION 4.2. [Intentionally Omitted].
SECTION 4.3. Application of Collections.
(a) All collections for the Due Period shall be applied by the Servicer as
follows:
With respect to each Home Equity Loan (other than a Purchased Home Equity
Loan), payments by or on behalf of the Mortgagor shall be applied, in the case
of Actuarial Home Equity Loans, to the Scheduled Payment and, in the case of
Simple Interest Home Equity Loans, to interest and principal in accordance with
the Simple Interest Method. With respect to Actuarial Home Equity Loans, any
remaining excess shall be added to the Payahead Balance, and shall be applied to
prepay the Actuarial Home Equity Loan, but only if the sum of such excess and
the previous Payahead Balance shall be sufficient to prepay the Home Equity Loan
in full. Otherwise, any such remaining excess payments shall constitute a
Payahead and shall increase the Payahead Balance.
(b) All Liquidation Proceeds shall be applied to the related Home Equity
Loan in accordance with the Servicer's customary servicing procedures.
SECTION 4.4. Additional Deposits. The Servicer and the Seller shall deposit
or cause to be deposited in the Collection Account the aggregate Purchase Price
with respect to Purchased Home Equity Loans and the Seller shall deposit therein
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all amounts to be paid under Section 8.1. The Servicer will deposit the
aggregate Purchase Price with respect to Purchased Home Equity Loans within two
Business Days after such obligations become due, unless the Servicer shall not
be required to make deposits within two Business Days of receipt pursuant to
Section 3.2(c) (in which case such deposit will be made by the related Transfer
Date). All such other deposits shall be made on the Transfer Date following the
end of the related Due Period.
SECTION 4.5. Distributions. (a) On each Distribution Date, the Trustee
shall cause to be transferred from the Payahead Account, or from the Servicer in
the event the provisions of Section 4.1(d)(ii) are applicable, to the Collection
Account, in immediately available funds, the aggregate previous Payaheads to be
applied to Scheduled Payments on Actuarial Home Equity Loans for the related Due
Period or prepayments for the related Due Period, pursuant to Sections 4.3 and
4.4, in the amounts set forth in the Servicer's Certificate for such
Distribution Date. A single, net transfer may be made.
(b) On each Determination Date, the Servicer shall calculate all amounts
required to determine the amounts to be deposited from the Reserve Account into
the Collection Account and from the Collection Account into the Note
Distribution Account and the Certificate Distribution Account.
(c) On or before each Distribution Date, the Servicer shall instruct the
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Determination Date pursuant to Section 3.10) to
withdraw from the Reserve Account and deposit in the Collection Account and the
Trustee shall so withdraw and deposit the Reserve Account Transfer Amount for
such Distribution Date.
(d) Subject to the last paragraph of this Section 4.5(c), on each
Distribution Date, the Servicer shall instruct the Trustee (based on the
information contained in the Servicer's Certificate delivered on the related
Determination Date pursuant to Section 3.10) to make, and the Trustee shall
make, the following deposits and distributions from the Collection Account for
deposit in the applicable Account by [TIME], to the extent of the Total
Distribution Amount, in the following order of priority:
(i) to the Servicer, from the Total Distribution Amount, the Total
Servicing Fee;
(ii) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clause (i), the Noteholders'
Interest Distributable Amount;
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(iii) to the Owner Trustee for deposit in the Certificate Distribution
Account, from the Total Distribution Amount remaining after the application
of clause (i) and clause (ii), the Certificateholders' Interest
Distributable Amount;
(iv) to the Note Distribution Account, from the Total Distribution
Amount remaining after the application of clauses (i) through (iii), the
Noteholders' Principal Distributable Amount; and
(v) to the Owner Trustee for deposit in the Certificate Distribution
Account, from the Total Distribution Amount remaining after the application
of clauses (i) through (iv), the Certificateholders' Principal
Distributable Amount;
provided, however, that following the occurrence of an Event of Default pursuant
to Section 5.1(i), 5.1(ii), 5.1(iv) or 5.1(v) of the Indenture, an acceleration
of the Notes pursuant to Section 5.2 of the Indenture or an Insolvency Event
with respect to the holder of the GP Interest, amounts on deposit in the
Collection Account will be deposited in the Note Distribution Account to the
extent necessary to pay accrued and unpaid interest on the Notes and then, to
the extent funds are available therefore, principal on the Notes until the
principal balance of each class of Notes has been reduced to zero, before any
amounts are deposited in the Certificate Distribution Account. Following the
payment in full of the Notes, amounts on deposit in the Collection Account will
be deposited in the Certificate Distribution Account to the extent necessary to
pay accrued and unpaid interest on the Certificates and then, to the extent
funds are available therefore, principal on the Certificates until the principal
balance thereof has been reduced to zero.
In the event that the Collection Account is maintained with an institution
other than the Trustee, the Servicer shall instruct and cause such institution
to make all deposits and distributions pursuant to this Section 4.5(c) on the
related Transfer Date.
SECTION 4.6. Reserve Account. (a) On the Closing Date, the Seller shall
deposit the Reserve Account Initial Deposit into the Reserve Account.
(b) If the amount on deposit in the Reserve Account on any Distribution
Date (after giving effect to any withdrawals therefrom on such Distribution
Date) is greater than the Specified Reserve Account Balance for such
Distribution Date, the Servicer shall instruct the Trustee to distribute, and
the Trustee shall distribute, the amount of the excess to the Seller.
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Amounts properly distributed to the Seller pursuant to Section 4.6(b) shall
be deemed released from the Trust and the security interest therein granted to
the Trustee and the Seller shall in no event thereafter be required to refund
any such distributed amounts.
SECTION 4.7. [Intentionally Omitted].
SECTION 4.8. Statements to Certificateholders and Noteholders. On each
Determination Date, the Servicer shall provide to the Trustee (with a copy to
the Rating Agencies) for the Trustee to forward to each Noteholder of record, to
each Paying Agent, if any, and to the Owner Trustee for the Owner Trustee to
forward to each Certificateholder of record, a statement substantially in the
form of Exhibit B and Exhibit C, respectively, setting forth at least the
following information as to the Notes and the Certificates to the extent
applicable:
(i) the amount of such distribution allocable to principal of each
class of Notes and to the Certificate Balance of the Certificates;
(ii) the amount of such distribution allocable to interest on or with
respect to each class of Notes and to the Certificates;
(iii) the aggregate outstanding principal balance of each class of the
Notes and the Certificate Balance after giving effect to payments allocated
to principal reported under (i) above;
(iv) the amount of the Total Servicing Fee paid to the Servicer with
respect to the related Due Period;
(v) The amount of the Monthly Advances payment to be made on the
Determination Date;
(vi) the amount of the aggregate Realized Losses, if any, for such Due
Period;
(vii) the Reserve Account Transfer Amount, if any, for such
Distribution Date, the average of the Charge-off Rates and the Delinquency
Percentages for the three preceding Due Periods, the Specified Reserve
Account Balance for such Distribution Date, the amount distributed to the
Seller from the Reserve Account on such Distribution Date, and the balance
of the Reserve Account (if any) on such Distribution Date, after giving
effect to changes therein on such Distribution Date;
(viii) the Noteholders' Interest Carryover Shortfall,
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the Certificateholders' Interest Carryover Shortfall, the Noteholders'
Principal Carryover Shortfall, and the Certificateholders' Principal
Carryover Shortfall;
(ix) the amounts which are reimbursable to the Servicer for
Reimbursable Amounts and Nonrecoverable Advances;
(x) the amount of Servicing Advances for the preceding Due Period; and
(xi) the aggregate Purchase Price paid by the Seller or the Servicer
with respect to the related Due Period.
Each amount set forth pursuant to paragraph (i), (ii), (vi) or (xi) above shall
be expressed as a dollar amount per $1,000 of the initial principal balance of
the Notes (or class thereof) or the initial Certificate Balance, as applicable.
SECTION 4.9. Net Deposits. As an administrative convenience, unless the
Servicer is required to remit collections within two Business Days of receipt
thereof, the Servicer will be permitted to make the deposit of collections on
the Home Equity Loans and Purchase Prices for or with respect to the Due Period
net of distributions to be made to the Servicer with respect to the Due Period.
The Servicer, however, will account to the Owner Trustee, the Trustee, the
Noteholders and the Certificateholders as if all deposits, distributions and
transfers were made individually.
ARTICLE V
The Seller
SECTION 5.1. Representations of Seller. The Seller makes the following
representations on which the Issuer is deemed to have relied in acquiring the
Home Equity Loans. The representations speak as of the execution and delivery of
this Agreement and shall survive the sale of the Home Equity Loans to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller is duly organized and
validly existing as a corporation in good standing under the laws of the
State of New York with the corporate power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the power, authority and legal right to acquire and own the
Home Equity Loans.
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(b) Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business shall require such
qualifications.
(c) Power and Authority of the Seller. The Seller has the corporate
power and authority to execute and deliver this Agreement and to perform
its obligations under each of the Basic Documents to which the Seller is a
party; the Seller has full corporate power and authority to sell and assign
the property to be sold and assigned to and deposited with the Issuer and
the Seller has duly authorized such sale and assignment to the Issuer by
all necessary corporate action; and the execution, delivery and performance
of each of the Basic Documents to which the Seller is a party has been duly
authorized by the Seller by all necessary corporate action.
(d) Binding Obligation. This Agreement and each of the Basic Documents
to which the Seller is a party constitute legal, valid and binding
obligations of the Seller, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect
relating to creditors' rights generally and subject to general principles
of equity (whether applied in a proceeding at law or in equity).
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not result in any
breach of any of the terms and provisions of, nor constitute (with or
without notice or lapse of time or both) a default under, the articles of
association or by-laws of the Seller, or any material indenture, agreement
or other instrument to which the Seller is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any
law or, to the best of its knowledge, any order, rule or regulation
applicable to the Seller of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
against the Seller or, to its best knowledge, threatened against the
Seller, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
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properties: (i) asserting the invalidity of this Agreement or any of the
Basic Documents, the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic Documents,
(iii) seeking any determination or ruling that could reasonably be expected
to have a material and adverse effect on the performance by the Seller of
its obligations under, or the validity or enforceability of the Basic
Documents, the Notes or the Certificates or (iv) seeking to affect
adversely the Federal or state income tax or ERISA attributes of the
Issuer, the Notes or the Certificates.
(g) All Consents. All authorizations, consents, orders or approvals
of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Seller in connection with the execution
and delivery by the Seller of this Agreement or any of the Basic Documents
to which it is a party and the performance by the Seller of the
transactions contemplated by this Agreement or any of the Basic Documents
to which it is a party, have been duly obtained, effected or given and are
in full force and effect, except where failure to obtain the same would not
have a material adverse effect upon the rights of the Issuer, the
Noteholders or the Certificateholders.
SECTION 5.2. Corporate Existence. (a) During the term of this Agreement,
the Seller will keep in full force and effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation 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 Agreement, the Basic Documents
and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Seller as a legal
entity separate and apart from its Affiliates, including as follows:
(i) the Seller shall maintain corporate records and books of account
separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the Seller shall
not commingle its assets and funds with those of its Affiliates;
(iii) the Seller shall hold such appropriate meetings of its Board of
Directors as are necessary to authorize all the
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Seller's corporate actions required by law to be authorized by the Board of
Directors, shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities (and
any successor Seller not a corporation shall observe similar procedures in
accordance with its governing documents and applicable law);
(iv) the Seller shall at all times hold itself out to the public under
the Seller's own name as a legal entity separate and distinct from its
Affiliates; and
(v) all transactions and dealings between the Seller and its
Affiliates will be conducted on an arm's-length basis.
SECTION 5.3. Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee and the Trustee and their respective officers, directors,
employees and agents from and against any taxes that may at any time be
asserted against any such Person with respect to the transactions
contemplated in this Agreement and any of the Basic Documents (except any
income taxes arising out of fees paid to the Owner Trustee or the Trustee
and except any taxes to which the Owner Trustee or the Trustee may
otherwise be subject to), including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but,
in the case of the Issuer, not including any taxes asserted with respect
to, and as of the date of, the sale of the Home Equity Loans to the Owner
Trustee on behalf of the Issuer or the issuance and original sale of the
Certificates and the Notes, or asserted with respect to ownership of the
Home Equity Loans or Federal or other income taxes arising out of
distributions on the Certificates and the Notes) and costs and expenses in
defending against the same or in connection with any application relating
to the Notes or Certificates under any state securities laws.
(b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trustee, the Certificateholders and the Noteholders
and the officers, directors, employees and agents of the Issuer, the Owner
Trustee and the Trustee from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent arising out of, or
imposed upon such Person through (i) the Seller's willful misfeasance, bad
faith or negligence in the performance of its duties under this Agreement,
or by reason of reckless disregard of its
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obligations and duties under this Agreement and (ii) the Seller's or the
Issuer's violation of Federal or state securities laws in connection with
the offering and sale of the Notes and the Certificates or in connection
with any application relating to the Notes or Certificates under any state
securities laws.
(c) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Owner Trustee and its officers,
directors, employees and agents from and against any and all costs,
expenses, losses, claims, damages and liabilities arising out of, or
incurred in connection with, this Agreement or any of the Basic Documents,
the Owner Trust Estate, the acceptance or performance of the trusts and
duties set forth herein and in the Trust Agreement or the action or the
inaction of the Owner Trustee hereunder and under the Trust Agreement,
except to the extent that such cost, expense, loss, claim, damage or
liability: (i) shall be due to the willful misfeasance, bad faith or
negligence of the Owner Trustee, (ii) shall arise from any breach by the
Owner Trustee of its covenants under this Agreement or any of the Basic
Documents; or (iii) shall arise from the breach by the Owner Trustee of any
of its representations or warranties set forth in Section 7.3 of the Trust
Agreement. Such liability shall survive the termination of the Trust. In
the event of any claim, action or proceeding for which indemnity will be
sought pursuant to this paragraph, the Owner Trustee's choice of legal
counsel shall be subject to the approval of the Seller, which approval
shall not be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon all
or any part of the Trust Estate (other than those taxes expressly excluded
from the Seller's responsibilities pursuant to the parentheticals in
paragraph (a) above).
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Trustee and the termination of this Agreement or the
Indenture or the Trust Agreement, as applicable, and shall include reasonable
fees and expenses of counsel and other expenses of litigation. If the Seller
shall have made any indemnity payments pursuant to this Section and the Person
to or on behalf of whom such payments are made thereafter shall collect any of
such amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.
SECTION 5.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (a) into which the Seller may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Seller shall
be a party
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or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, shall be the successor to the Seller without the
execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that the Seller hereby covenants that it will
not consummate any of the foregoing transactions except upon satisfaction of the
following: (i) the surviving Seller if other than Delta Funding Corporation,
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, (ii) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 2.4 or 5.1 shall have
been breached, (iii) the Seller shall have delivered to the Owner Trustee and
the Trustee an Officers' Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, and that
the Rating Agency Condition shall have been satisfied with respect to such
transaction, (iv) the surviving Seller shall have a consolidated net worth at
least equal to that of the predecessor Seller, (v) such transaction will not
result in a material adverse federal or state tax consequence to the Issuer, the
Noteholders or the Certificateholders and (vi) unless Delta Funding Corporation,
is the surviving entity, the Seller shall have delivered to the Owner Trustee
and the Trustee an Opinion of Counsel either (A) stating that, in the opinion of
such counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and Trustee,
respectively, in the Home Equity Loans and reciting the details of such filings,
or (B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interests.
SECTION 5.5. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document (provided that such reliance shall not limit in any way
the Seller's obligations under Section 2.4(b)). The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action that shall not
be incidental to its obligations under this Agreement, and that in its opinion
may involve it in any expense or liability.
SECTION 5.6. Seller May Own Certificates or Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document.
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ARTICLE VI
The Servicer
SECTION 6.1. Representations of Servicer. The Servicer makes the following
representations on which the Issuer is deemed to have relied in acquiring the
Home Equity Loans. The representations speak as of the execution and delivery of
the Agreement and shall survive the sale of the Home Equity Loans to the Issuer
and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the State
of New York with the corporate power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the power,
authority and legal right to service the Home Equity Loans.
(b) Due Qualification. The Servicer is duly qualified to do business and
has obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of property or the conduct of its business (including the
servicing of the Home Equity Loans as required by this Agreement) shall require
such qualifications.
(c) Power and Authority of the Servicer. The Servicer has the corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder, and the execution, delivery and performance of this
Agreement have been duly authorized by the Servicer by all necessary corporate
action. All authorizations, consents, orders or approvals of or registrations or
declarations with any court, regulatory body, administrative agency or other
government instrumentality required to be obtained, effected or given by the
Servicer in connection with the execution and delivery by the Servicer of this
Agreement or any of the Basic Documents to which it is a party and the
performance by the Servicer of the transactions contemplated by this Agreement
or any of the Basic Documents to which it is a party, have been duly obtained,
effected or given and are in full force and effect, except where failure to
obtain the same would not have a material adverse effect upon the rights of the
Issuer, the Noteholders or the Certificateholders.
(d) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and similar laws now or hereafter in
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effect relating to creditors' rights generally, and subject to general
principles of equity (whether applied in a proceeding of law or in equity).
(e) No Violation. The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not result in any breach of
any of the terms and provisions of, nor constitute (with or without notice or
lapse of time or both) a default under the articles of association or by-laws of
the Servicer, or any material indenture, agreement or other instrument to which
the Servicer is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument (other than pursuant
to the Basic Documents); nor violate any law or, to the best of its knowledge,
any order, rule or regulation applicable to the Servicer of any court or of any
federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
(f) No Proceedings. There are no proceedings or investigations pending
against the Servicer, or, to its best knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Servicer of its obligations under, or
the validity or enforceability of this Agreement or any of the Basic Documents,
the Notes or the Certificates or (iv) seeking to affect adversely the Federal or
state income tax or ERISA attributes of the Issuer, the Notes or the
Certificates.
(g) No Amendment or Waiver. No provision of any Home Equity Loan has been
waived, altered or modified in any respect, except pursuant to a document,
instrument or writing included in the relevant Mortgage File, and no such
amendment, waiver, alteration or modification causes such Home Equity Loan not
to conform to the other warranties contained in this Section or those of the
Seller contained in Section 2.4.
SECTION 6.2. Indemnities of Servicer. (a) The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement.
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The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trustee, the Seller, the Certificateholders and the
Noteholders and any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee, the Trustee or the Seller from any and all costs,
expenses, losses, claims, damages and liabilities (including reasonable
attorneys' fees and expenses) to the extent arising out of, or imposed upon any
such Person through, the negligence, willful misfeasance or bad faith of the
Servicer in the performance of its obligations and duties under this Agreement
or in the performance of the obligations and duties of any subservicer under any
subservicing agreement or by reason of the reckless disregard of its obligations
and duties under this Agreement or by reason of the reckless disregard of the
obligations of any subservicer under any subservicing agreement, where the final
determination that any such cost, expense, loss, claim, damage or liability
arose out of, or was imposed upon any such Person through, any such negligence,
willful misfeasance, bad faith or recklessness on the part of the Servicer or
any subservicer, is established by a court of law, by an arbitrator or by way of
settlement agreed to by the Servicer. Notwithstanding the foregoing, if the
Servicer is rendered unable, in whole or in part, by virtue of an act of God,
act of war, fires, earthquake or other natural disasters, to satisfy its
obligations under this Agreement, the Servicer shall not be deemed to have
breached any such obligation upon the sending of written notice of such event to
the other parties hereto, for so long as the Servicer remains unable to perform
such obligation as a result of such event. This provision shall not be construed
to limit the Servicer's or any other party's rights, obligations, liabilities,
claims or defenses which arise as a matter of law or pursuant to any other
provision of this Agreement.
The Servicer shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trustee, the Seller, the Certificateholders and the
Noteholders or any of the officers, directors, employees and agents of the
Issuer, the Owner Trustee, the Trustee or the Seller from any and all costs,
expenses, losses, claims, damages and liabilities (including reasonable
attorneys' fees and expenses) to the extent arising out of or imposed upon any
such Person as a result of any compensation payable to any subservicer
(including any fees payable in connection with the termination of the servicing
activities of such subservicer with respect to any Home Equity Loan) whether
pursuant to the terms of any subservicing agreement or otherwise.
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SECTION 6.3. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Servicer shall be a party or (c) which may succeed to the properties and assets
of the Servicer, substantially as a whole, shall be the successor to the
Servicer without the execution or filing of any document or any further act by
any of the parties to this Agreement; provided, however, that the Servicer
hereby covenants that it will not consummate any of the foregoing transactions
except upon satisfaction of the following: (i) the surviving Servicer if other
than Delta Funding Corporation, executes an agreement of assumption to perform
every obligation of the Servicer under this Agreement, (ii) immediately after
giving effect to such transaction, no representation or warranty made pursuant
to Section 6.1 shall have been breached and no Servicer Default, and no event
that, after notice or lapse of time, or both, would become a Servicer Default
shall have occurred and be continuing, (iii) the Servicer shall have delivered
to the Owner Trustee and the Trustee an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and that the Rating Agency Condition shall have been
satisfied with respect to such transaction, (iv) the surviving Servicer shall
have a consolidated net worth at least equal to that of the predecessor
Servicer, and (v) such transaction will not result in a material adverse Federal
or state tax consequence to the Issuer, the Noteholders or the
Certificateholders.
SECTION 6.4. Limitation on Liability of Servicer and Others. Neither the
Servicer nor any of its directors, officers, employees or agents shall be under
any liability to the Issuer, the Noteholders or the Certificateholders, except
as provided under this Agreement, for any action taken or for refraining from
the taking of any action by the Servicer or any subservicer pursuant to this
Agreement or for errors in judgment; provided, however, that this provision
shall not protect the Servicer or any such person against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement. The Servicer or any subservicer and
any of their respective directors, officers, employees or agents may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
Except as provided in this Agreement the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that shall be
incidental to its duties to service the Home Equity Loans in accordance with
this Agreement,
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and that in its opinion may involve it in any expense or liability; provided,
however, that the Servicer, may (but shall not be required to) undertake any
reasonable action that it may deem necessary or desirable in respect of the
Basic Documents to protect the interests of the Certificateholders under this
Agreement and the Noteholders under the Indenture.
SECTION 6.5. Delta Funding Corporation Not To Resign as Servicer. Subject
to the provisions of Section 6.3, Delta Funding Corporation, hereby agrees not
to resign from the obligations and duties hereby imposed on it as Servicer under
this Agreement except upon determination that the performance of its duties
hereunder shall no longer be permissible under applicable law or if such
resignation is required by regulatory authorities. Notice of any such
determination permitting the resignation of Delta Funding Corporation, as
Servicer shall be communicated to the Owner Trustee and the Trustee at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Owner Trustee and the Trustee concurrently with or promptly
after such notice. No such resignation shall become effective until the earlier
of the Trustee or a Successor Servicer having assumed the responsibilities and
obligations of the resigning Servicer in accordance with Section 7.2 or the date
upon which any regulatory authority requires such resignation.
ARTICLE VII
Default
SECTION 7.1. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to deliver to the Trustee for deposit
in any of the Trust Accounts or the Certificate Distribution Account any
required payment or to direct the Trustee to make any required
distributions therefrom (other than a Monthly Advance required to be made
from its own funds) that shall continue unremedied for a period of five
Business Days after written notice of such failure is received by the
Servicer from the Owner Trustee or the Trustee or after discovery of such
failure by an Authorized Officer of the Servicer; or
(b) failure by the Servicer to make any required Servicing Advance
which failure continues unremedied for a period of 30 days, or failure on
the part of the Servicer duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer set forth in
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this Agreement or any other Basic Document, which failure shall (i)
materially and adversely affect the rights of either the Certificateholders
or Noteholders and (ii) continue unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given (A) to the Servicer by the Owner Trustee or
the Trustee or (B) to the Servicer and to the Owner Trustee and the Trustee
by the Holders of Notes evidencing not less than 25% of the Outstanding
Amount of the Notes or Holders of Certificates evidencing not less than 25%
of the outstanding Certificate Balance, as applicable (or for such longer
period, not in excess of 120 days, as may be reasonably necessary to remedy
such default; provided that such default is capable of remedy within 120
days and the Servicer delivers an Officers' Certificate to the Owner
Trustee and the Trustee to such effect and to the effect that the Servicer
has commenced or will promptly commence, and will diligently pursue, all
reasonable efforts to remedy such default); or
(c) any failure of the Servicer to pay any Monthly Advance required to
be made from its own funds pursuant to Section 3.15 that continues
unremedied for a period of one Business Day; or
(d) an Insolvency Event occurs with respect to the Servicer or any
successor;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Trustee, or the Holders of Notes evidencing not less
than 25% of the Outstanding Amount of the Notes, by notice then given in writing
to the Servicer and the Owner Trustee (and to the Trustee if given by the
Noteholders) may terminate all the rights and obligations (other than the
obligations set forth in Section 6.2) of the Servicer under this Agreement. On
or after the receipt by the Servicer of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Notes,
the Certificates or the Home Equity Loans or otherwise, shall, without further
action, pass to and be vested in the Trustee or such successor Servicer as may
be appointed under Section 7.2; and, without limitation, the Trustee and the
Owner Trustee are hereby authorized and empowered to execute and deliver, on
behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Home Equity
Loans and related documents, or otherwise. The predecessor Servicer shall
cooperate with the successor Servicer, the Trustee and the Owner Trustee in
effecting the termination of the responsibilities and rights of the predecessor
Servicer under this Agreement, including the
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transfer to the successor Servicer for administration by it of all cash amounts
that shall at the time be held by the predecessor Servicer for deposit, or shall
thereafter be received by it with respect to a Home Equity Loan. All reasonable
costs and expenses (including attorneys' fees) incurred in connection with
transferring the Mortgage Files to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. Upon receipt of notice of the
occurrence of a Servicer Default, the Owner Trustee shall give notice thereof to
the Rating Agencies.
SECTION 7.2. Appointment of Successor. (a) Upon the Servicer's receipt of
notice of termination, pursuant to Section 7.1 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in the case
of termination, only until the date specified in such termination notice or, if
no such date is specified in a notice of termination, until receipt of such
notice and, in the case of resignation, until the earlier of (x) the date 45
days from the delivery to the Owner Trustee and the Trustee of written notice of
such resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel. In the event of the Servicer's
termination hereunder, the Trustee shall appoint a successor Servicer, and the
successor Servicer shall accept its appointment by a written assumption in form
acceptable to the Owner Trustee and the Trustee. In the event that a successor
Servicer has not been appointed at the time when the predecessor Servicer has
ceased to act as Servicer in accordance with this Section, the Trustee without
further action shall automatically be appointed the successor Servicer and the
Trustee shall be entitled to the Servicing Fee. Notwithstanding the above, the
Trustee shall, if it shall be unwilling or unable so to act, appoint or petition
a court of competent jurisdiction to appoint, any established institution,
having a net worth of not less than $50,000,000 and whose regular business shall
include the servicing of Home Equity Loans and REO Property, as the successor to
the Servicer under this Agreement.
(b) Upon appointment, the successor Servicer (including the Trustee acting
as successor servicer) shall be the successor in all respects to the predecessor
Servicer and shall be subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed on the predecessor
Servicer and shall be entitled to the Servicing Fee and all the rights granted
to the predecessor Servicer by the terms and provisions of this Agreement. No
successor Servicer
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shall be liable for any acts or omissions of any predecessor Servicer.
(c) The Servicer may not resign unless it is prohibited from serving as
such by law or by requirement of any regulatory authority.
SECTION 7.3. Payment of Servicing Fee. If the Servicer shall change, the
predecessor Servicer shall be entitled to receive any accrued and unpaid
Servicing Fees through the date of the successor Servicer's acceptance hereunder
in accordance with Section 3.9.
SECTION 7.4. Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article VII, the Owner Trustee shall give prompt written notice thereof to
Certificateholders and the Trustee shall give prompt written notice thereof to
Noteholders subject to the Rating Agency Condition.
SECTION 7.5. Waiver of Past Defaults. The Holders of Notes evidencing not
less than a majority of the Outstanding Amount of the Notes (or the Holders (as
defined in the Trust Agreement) of Certificates evidencing not less than a
majority of the outstanding Certificate Balance, as applicable, in the case of
any default which does not adversely affect the Trustee or the Noteholders) may,
on behalf of all Noteholders and Certificateholders, waive in writing any
default by the Servicer in the performance of its obligations hereunder and its
consequences, except a default in making any required deposits to or payments
from any of the Trust Accounts in accordance with this Agreement. Upon any such
waiver of a past default, such default shall cease to exist, and any Servicer
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.
ARTICLE VIII
Termination
SECTION 8.1. Optional Purchase of All Home Equity Loans. (a) On the last
day of any Due Period immediately preceding a Determination Date as of which the
then outstanding Pool Balance is __% or less of the Original Pool Balance, the
Seller shall have the option to purchase the Owner Trust Estate, other than the
Trust Accounts and the Certificate Distribution Account. To exercise such
option, the Seller shall deposit pursuant to Section 4.4 in the Collection
Account an amount which, when added to the amounts on deposit in the Collection
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Account for such Distribution Date, equals the sum of (a) the unpaid principal
amount of the then outstanding Class A-__ Notes, plus accrued and unpaid
interest thereon, plus (b) the Certificate Balance plus accrued and unpaid
interest thereon. The Class A-__ Notes and the Certificates will be redeemed
concurrently therewith.
(b) Upon any sale of the assets of the Trust pursuant to Section 9.2 of the
Trust Agreement, the Servicer shall instruct the Trustee to deposit the proceeds
from such sale after all payments and reserves therefrom (including the expenses
of such sale) have been made (the "Insolvency Proceeds") in the Collection
Account. On the Distribution Date on which the Insolvency Proceeds are deposited
in the Collection Account (or, if such proceeds are not so deposited on a
Distribution Date, on the Distribution Date immediately following such deposit),
the Servicer shall instruct the Trustee to make, and the Trustee shall make, the
following deposits and distributions (after the application on such Distribution
Date of the Total Distribution Amount pursuant to Section 4.5) from the
Insolvency Proceeds and any funds remaining on deposit in the Reserve Account
(including the proceeds of any sale of investments therein):
(i) to the Note Distribution Account, any portion of the Noteholders'
Interest Distributable Amount not otherwise deposited into the Note
Distribution Account on such Distribution Date;
(ii) to the Note Distribution Account, the outstanding principal
balance of the Notes (after giving effect to the reduction in the
outstanding principal balance of the Notes to result from the deposits made
in the Note Distribution Account on such Distribution Date);
(iii) to the Owner Trustee for deposit in the Certificate Distribution
Account, any portion of the Certificateholders' Interest Distributable
Amount not otherwise deposited into the Certificate Distribution Account on
such Distribution Date; and
(iv) to the Owner Trustee for deposit in the Certificate Distribution
Account, the Certificate Balance and any Certificateholders' Principal
Carryover Shortfall Amount (after giving effect to the reduction in the
Certificate Balance to result from the deposits made in the Certificate
Distribution Account on such Distribution Date).
Any Insolvency Proceeds remaining after the deposits described above shall be
paid to the GP Holder.
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(c) Notice of any termination of the Trust shall be given by the Servicer
to the Owner Trustee, the Trustee and the Rating Agencies as soon as practicable
after the Servicer has received notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Trustee pursuant to this Agreement.
ARTICLE IX
Administrative Duties of the Servicer
SECTION 9.1. Administrative Duties.
(a) Duties with Respect to the Indenture and Depository Agreements. The
Servicer shall perform all its duties and the duties of the Issuer under the
Depository Agreements. In addition, the Servicer shall consult with the Owner
Trustee as the Servicer deems appropriate regarding the duties of the Issuer
under the Indenture and the Depository Agreements. The Servicer shall monitor
the performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture and the
Depository Agreements. The Servicer shall prepare for execution by the Issuer or
shall cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer to prepare, file or deliver pursuant to the Indenture and the
Depository Agreements. In furtherance of the foregoing, the Servicer shall take
all appropriate action that is the duty of the Issuer to take pursuant to the
Indenture.
(b) Duties with Respect to the Issuer. (i) In addition to the duties of the
Servicer set forth in this Agreement or any of the Basic Documents, the Servicer
shall perform such calculations and shall prepare for execution by the Issuer or
the Owner Trustee or shall cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to this Agreement or any of the Basic Documents, and at the
request of the Owner Trustee shall take all appropriate action that it is the
duty of the Issuer to take pursuant to this Agreement or any of the Basic
Documents. Subject to Section 9.4, and in accordance with the directions of the
Owner Trustee, the Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Basic Documents) as are not
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covered by any of the foregoing provisions and as are expressly requested by the
Owner Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the Basic
Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee in the event that any withholding tax is imposed on
the Issuer's payments (or allocations of income) to an Owner (as defined in the
Trust Agreement) as contemplated in Section 5.2(c) of the Trust Agreement. Any
such notice shall specify the amount of any withholding tax required to be
withheld by the Owner Trustee pursuant to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic Documents to
the contrary, the Servicer shall be responsible for performance of the duties of
the Owner Trustee and the holder of the GP Interest set forth in Section 5.6(a),
(b), (c) and (d) of the Trust Agreement with respect to, among other things,
accounting and reports to Owners (as defined in the Trust Agreement); provided,
however, that the Owner Trustee shall retain responsibility for the distribution
of the Schedule K-1s necessary to enable each Certificateholder to prepare its
federal and state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer specified in
Section 10.2 of the Trust Agreement required to be performed in connection with
the resignation or removal of the Owner Trustee, and any other duties expressly
required to be performed by the Servicer under this Agreement or any of the
Basic Documents.
(v) In carrying out the foregoing duties or any of its other obligations
under this Agreement, the Servicer may enter into transactions with or otherwise
deal with any of its Affiliates; provided, however, that the terms of any such
transactions or dealings shall be in accordance with any directions received
from the Issuer and shall be, in the Servicer's opinion, no less favorable to
the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf of the
holder of the GP Interest, all tax returns, tax elections, financial statements
and such annual or other reports of the Issuer as are necessary for preparation
of tax reports as provided in Article V of the Trust Agreement, including
without limitation forms 1099 and 1066. All tax returns will be signed by the
holder of the GP Interest.
(d) Non-Ministerial Matters. With respect to matters that in the reasonable
judgment of the Servicer are non-ministerial, the Servicer shall not take any
action pursuant to this Article X unless within a reasonable time before the
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taking of such action, the Servicer shall have notified the Owner Trustee and
the Trustee of the proposed action and the Owner Trustee and, with respect to
items (A), (B), (C) and (D) below, the Trustee shall not have withheld consent
or provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:
(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Home Equity Loans);
(C) the amendment, change or modification of this Agreement or any of
the Basic Documents;
(D) the appointment of successor Note Registrars, successor Paying
Agents and successor Trustees pursuant to the Indenture or the appointment
of Successor Servicers or the consent to the assignment by the Note
Registrar, Paying Agent or Trustee of its obligations under the Indenture;
and
(E) the removal of the Trustee.
(e) Exceptions. Notwithstanding anything to the contrary in this Agreement,
except as expressly provided herein or in the other Basic Documents, the
Servicer, in its capacity hereunder, shall not be obligated to, and shall not,
(1) make any payments to the Noteholders or Certificateholders under the Basic
Documents, (2) sell the Indenture Trust Estate pursuant to Section 5.4 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
SECTION 9.2. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer at
any time during normal business hours.
SECTION 9.3. Additional Information To Be Furnished to the Issuer. The
Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
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ARTICLE X
Miscellaneous Provisions
SECTION 10.1. Amendment. This Agreement may be amended by the Seller, the
Servicer and the Owner Trustee, with the consent of the Trustee (which consent
may not be unreasonably withheld), but without the consent of any of the
Noteholders or the Certificateholders, to cure any ambiguity or defect, to
correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions in this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee and
the Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Seller, the
Servicer and the Owner Trustee, with the consent of the Trustee, the consent of
the Holders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes and the consent of the Holders (as defined in the Trust
Agreement) of Certificates evidencing not less than a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Home Equity Loans or distributions that shall be required to be made
for the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance, the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all the outstanding Notes and the Holders
(as defined in the Trust Agreement) of all the outstanding Certificates of each
class affected thereby.
Prior to the execution of any such amendment or consent, the Owner Trustee
shall furnish written notification of the substance of such amendment or consent
to the Rating Agencies. Promptly after the execution of any such amendment or
consent, the Owner Trustee shall furnish written notification of the substance
of such amendment or consent to each Certificateholder and the Trustee.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or
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consent, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and that all conditions precedent to the execution and
delivery of such amendment have been satisfied and the Opinion of Counsel
referred to in Section 10.2(i)(1) has been delivered. The Owner Trustee and the
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's or the Trustee's, as applicable, own rights, duties
or immunities under this Agreement or otherwise.
SECTION 10.2. Protection of Title to Trust. (a) The Seller shall execute
and file such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Issuer and the interests of the Trustee in the Home Equity Loans and in the
proceeds thereof. The Seller shall deliver (or cause to be delivered) to the
Owner Trustee and the Trustee file-stamped copies of, or filing receipts for,
any document filed as provided above, as soon as available following such
filing.
(b) Neither the Seller nor the Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9-402(7) of the UCC, unless
it shall have given the Owner Trustee and the Trustee at least five days' prior
written notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements.
(c) Each of the Seller and the Servicer shall have an obligation to give
the Owner Trustee and the Trustee at least 60 days' prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall promptly file any such amendment. The Servicer
shall at all times maintain each office from which it shall service Home Equity
Loans, and its principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each Home Equity
Loan accurately and in sufficient detail to permit (i) the reader thereof to
know at any time the
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status of such Home Equity Loan, including payments and recoveries made and
payments owing (and the nature of each) and (ii) reconciliation between payments
or recoveries on (or with respect to) each Home Equity Loan and the amounts from
time to time deposited in the Collection Account in respect of such Home Equity
Loan.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Home Equity Loans, the
Servicer's master computer records (including any backup archives) that refer to
a Home Equity Loan shall indicate clearly the interest of the Issuer and the
Trustee in such Home Equity Loan and that such Home Equity Loan is owned by the
Issuer and has been pledged to the Trustee. Indication of the Issuer's and the
Trustee's interest in a Home Equity Loan shall be deleted from or modified on
the Servicer's computer systems when, and only when, the related Home Equity
Loan shall have been paid in full or repurchased by the Seller or purchased by
the Servicer.
(f) If at any time the Seller or the Servicer shall propose to sell, grant
a security interest in or otherwise transfer any interest in mortgage loans to
any prospective purchaser, lender or other transferee, the Servicer shall give
to such prospective purchaser, lender or other transferee computer tapes,
records or printouts (including any restored from backup archives) that, if they
shall refer in any manner whatsoever to any Home Equity Loan, shall indicate
clearly that such Home Equity Loan has been sold and is owned by the Issuer and
has been pledged to the Trustee.
(g) The Servicer shall permit the Trustee and its agents at any time during
normal business hours to inspect, audit and make copies of and abstracts from
the Servicer's records regarding any Home Equity Loan.
(h) Upon request at any time the Owner Trustee or the Trustee shall have
reasonable grounds to believe that such request is necessary in connection with
the performance of its duties under this Agreement or any of the Basic
Documents, the Servicer shall furnish to the Owner Trustee or to the Trustee,
within five Business Days, a list of all Home Equity Loans (by contract number
and name of Mortgagor) then held as part of the Trust, together with a
reconciliation of such list to the Home Equity Loan Schedule and to each of the
Servicer's Certificates furnished before such request indicating removal of Home
Equity Loans from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the Trustee:
(1) promptly after the execution and delivery of this Agreement and of
each amendment thereto, an Opinion of
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Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Owner Trustee and the Trustee in the Home Equity Loans, and reciting the
details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such
interest; and
(2) within 120 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of Counsel, dated as of a date during
such 120-day period, either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Trustee in the Home Equity Loans, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest.
Each Opinion of Counsel referred to in clause (l) or (2) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable law, cause the
Certificates and the Notes to be registered with the Commission pursuant to
Section 12(b) or Section 12(g) of the Exchange Act within the time periods
specified in such sections.
SECTION 10.3. Notices. All demands, notices and communications upon or to
the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating Agencies
under this Agreement shall be in writing, personally delivered, sent by
overnight courier or mailed by certified mail, return receipt requested, and
shall be deemed to have been duly given upon receipt (a) in the case of the
Seller or the Servicer to Delta Funding Corporation, 1000 Woodbury Road,
Woodbury, New York 11797, Attention: ________________, (b) in the case of the
Issuer or the Owner Trustee, at the Corporate Trust Office (as defined in the
Trust Agreement), (c) in the case of the Trustee, at the Corporate Trust Office,
[(d) in the case of Moody's, to Moody's Investors Service, Inc., to 99 Church
Street, New York, New York 10004, Attention of Asset Backed Securities Group,
(e) in the case of Standard & Poor's, to Standard & Poor's Ratings Group, 26
Broadway (15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department and (f) in the case of
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<PAGE>
Fitch, to Fitch Investors Service, L.P., One State Street Plaza, New York, New
York 10004 Attention of ____________________.]
SECTION 10.4. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.4 and 6.3 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer.
SECTION 10.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, the Servicer, the Issuer,
the Owner Trustee and for the benefit of the Certificateholders (including the
holder of the GP Interest), the Trustee and the Noteholders, as third-party
beneficiaries, and nothing in this Agreement, whether express or implied, shall
be construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 10.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.7. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 10.8. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 10.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF [NEW YORK], WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 10.10. Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trustee pursuant to the Indenture for the benefit of the
Noteholders of all right, title and interest of the Issuer in, to and under the
Home Equity Loans and/or the assignment of any
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<PAGE>
or all of the Issuer's rights and obligations hereunder to the Trustee.
SECTION 10.11. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, the Servicer and the Seller shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Issuer, acquiesce, petition or otherwise invoke or cause the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any Federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
SECTION 10.12. Limitation of Liability of Owner Trustee and Trustee. (a)
Notwithstanding anything contained herein to the contrary, this Agreement has
been countersigned by [Name of Owner Trustee] not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
[Name of Owner Trustee] in its individual capacity or, except as expressly
provided in the Trust Agreement, as Owner Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the Issuer. For all purposes of this Agreement, in the performance of its
duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by ___________________ not in its individual
capacity but solely as Trustee and in no event shall _____________________ have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.
SECTION 10.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Servicer shall have no
authority to act for or represent the Issuer or the
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Owner Trustee in any way and shall not otherwise be deemed an agent of the
Issuer or the Owner Trustee.
SECTION 10.14. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and year first above written.
DELTA FUNDING HOME EQUITY LOAN
TRUST 199__-__
By:_________________________________,
not in its individual capacity but
solely as Owner Trustee on behalf
of the Trust,
By:______________________________
Name:
Title:
DELTA FUNDING CORPORATION,
Seller and Servicer
By:____________________________________
Name:
Title:
Acknowledged and Accepted:
_____________________, not
in its individual capacity
but solely as Trustee,
By________________________________
Name:
Title:
Acknowledged and Accepted:
_________________________________,
not in its individual capacity
but solely as Owner Trustee,
By_________________________________
Name:
Title:
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<PAGE>
Acknowledged and Accepted:
______________________________
By____________________________
Name:
Title:
-79-
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------
FORM T-1
Statement of eligibility under the Trust
Indenture Act of 1939 of a corporation
designated to act as trustee
----------------------------
X Check if an application to determine eligibility
--- of a trustee pursuant to section 305(b)(2)
Bankers Trust Company of California, N.A.
(Exact name of trustee as specified in its charter)
13-3347003
(I.R.S. Employer
Identification No.)
300 South Grand Avenue
Los Angeles. California 90071
(Address of principal executive offices) (Zip Code)
________________________________________________________________________________
DELTA FUNDING CORPORATION
(Exact name of obligor as specified in its charter)
New York 11-2609517
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1000 Woodbury Road
Woodbury, New York 11797
(Address of principal executive offices) (Zip Code)
Home Equity Loan Asset-Backed Certificates, Series 1996-1
(Title of the indenture securities)
<PAGE>
EXHIBIT 1
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Name Address
---- -------
Office of the Comptroller 1114 Avenue of the Americas
of the Currency Suite 3900
New York, New York 10036
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
Item 16 List of Exhibits
Exhibit 1 -
Articles of Association as amended on July 29, 1994.
Exhibit 2 -
Certificate of the Comptroller of the Currency dated July
18, 1996.
Exhibit 3 -
Certification of Fiduciary Powers dated July 18, 1996.
Exhibit 4 -
Existing By-Laws of Bankers Trust Company of California,
N.A. as amended on April 19, 1996.
<PAGE>
Exhibit 5 -
Not Applicable.
Exhibit 6 -
Consent of Bankers Trust Company required by Section 321(b)
of the Act.
Exhibit 7 -
Reports of Condition of Bankers Trust Company of California,
N.A., dated as of March 31, 1996.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, Bankers Trust Company of California, N.A., a national banking
association, organized and existing under the laws of the United States, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the city of Irvine, and State of
California, on the 31st day of July, 1996.
Bankers Trust Company
of California, N.A.,
By:/s/Judy L. Gomez
----------------
Judy L. Gomez
Assistant Vice President
<PAGE>
BANKERS TRUST COMPANY OF CALIFORNIA, N.A,
CERTIFICATE
I, Sandra L. West, do hereby certify that:
1. I am the duly elected Assistant Secretary of Bankers Trust Company of
California, N.A. (the "Association").
2. Attached hereto as Exhibit A is a true and complete copy of the By-Laws
of the Association, adopted by the Board of Directors of the Association on May
14, 1986.
3. On August 10, 1988, at a regularly scheduled meeting of the Board of
Directors at which a quorum was present and voting, the following amendment to
Article II, Section 2.4 of the Association's By-Laws was duly:
Section 2.4. Regular Meetings. The regular meetings of the
Board of Directors shall be held, without notice, on the
second Wednesday of each month at the Main Office. When any
regular meeting of the Board falls on a holiday, the meeting
shall be held on the next banking business day unless the
Board shall designate some other day.
4. Attached hereto as Exhibit B is a true copy of the Articles of
Association of BT Trust Company of California, National Association as filed
with the Comptroller of the Currency, Northeastern District on February 13, 1986
(the "Articles of Association").
5. On March 16, 1987, at a special meeting of the Shareholders of BT Trust
Company of California, National Association, the following resolution and
amendment to Article FIRST of the Articles of Association was adopted:
RESOLVED, that the amendment of the First Article of
Association is hereby approved, shall be effective
immediately, and shall read as follows:
FIRST: The title of this Association shall be "Bankers
Trust Company of California, National Association".
The foregoing amendment to the Articles of Association was duly approved by
the Board of Directors of Bankers Trust Company of California, N.A. on March 16,
1987.
6. On January 17, 1992, at a special meeting of the Shareholders of Bankers
Trust Company of California, National Association, the following resolution and
amendment to Article FIFTH of the Articles of Association was adopted:
RESOLVED, that Bankers Trust Holdings, Inc., the sole
shareholder of Bankers Trust Company of California, N.A.
("BTCal"), hereby approves of the amendment to the first
paragraph of Article FIFTH of the Articles of Association of
BTCal, to read as follows:
<PAGE>
The authorized amount of capital stock of this Association
shall be 500,000 shares of common stock of the par value of
One Hundred Dollars and no cents ($100.00) each; but said
capital stock may be increased or decreased from time to
time, in accordance with the provisions of the laws of the
United States.
The foregoing amendment of the Articles of Association was duly approved by
the Board of Directors of Bankers Trust Company of California, N.A., on January
7, 1992.
7. Attached hereto as Exhibit C is a copy of the official certification of
the approval of the Office of the Comptroller of the Currency with respect to
said amendment to Article FIFTH of the Articles of Association.
8. The Association's By-Laws, as amended, and the Articles of Association,
as amended, have not been modified or rescinded and are in full force and effect
as of the date hereof
IN WITNESS WHEREOF, I have set my hand and the seal of this Association
this 29th day of July, 1994.
/s/Sandra L. West
-----------------
Sandra L. West
Assistant Secretary
[SEAL]
<PAGE>
BANKERS TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
BY-LAWS
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meeting. The regular annual meeting of the shareholders
for the election of directors and the transaction of whatever other business may
properly come before the meeting, shall be held at the Main Office of the
Association, 400 South Hope Street, Los Angeles, California or such other places
as the Board of Directors may designate, at 11 a.m. on the third Wednesday of
March of each year. Notice of such meeting shall be mailed, postage prepaid, at
least ten days prior to the date thereof, addressed to each shareholder at his
address appearing on the books of the Association. If, for any cause, an
election of directors is not made on the said day, the Board of Directors shall
order the election to be held on some subsequent day, as soon thereafter as
practicable, according to the provisions of law; and notice thereof shall be
given in the manner herein provided for the annual meeting.
Section 1.2. Special Meetings. Except as otherwise specifically provided by
statue, special meetings of the shareholders may be called for any purpose at
any time by the Board of Directors or by any one or more shareholders owning, in
the aggregate, not less than twenty five percent (25%) of the stock of the
Association. Every such special meeting, unless otherwise provided by law, shall
be called by mailing, postage prepaid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the Association a notice stating the purpose of the meeting.
Section 1.3. Nominations for Director. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any stockholder
of any outstanding class of capital stock of the Association entitled to vote
for the election of directors.
<PAGE>
Nominations, other than those made by or on behalf of the existing management of
the Association, shall be made in writing and shall be delivered or mailed to
the President of the Bank and to the Comptroller of the Currency, Washington,
D.C., not less than 14 days nor more than 50 days prior to any meeting of
shareholders called for the election of directors, provided however, that if
less than 21 days' notice of the meeting is given to shareholders, such
nomination shall be mailed or delivered to the President of the Bank and to the
Comptroller of the Currency not later than the close of business on the seventh
day following the day on which the notice of meeting was mailed. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Bank that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Bank owned by the notifying
shareholder. Nominations not made in accordance herewith may, in his/her
discretion, be disregarded by the Chairperson of the meeting, and upon his/her
instructions, the vote tellers may disregard all votes cast for each such
nominee.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this Association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and shall be filed with the records of the meeting.
Section 1.5 Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; and less than a quorum may
adjourn any meeting, from time to time, and the
2
<PAGE>
meeting may be held, as adjourned, without further notice. A majority of the
votes cast shall decide every question or matter submitted to the shareholders
at any meeting, unless otherwise provided by law or by the Articles of
Association.
ARTICLE II
Directors
Section 2.1. Board of Directors. The board of directors (hereinafter
referred to as the ("Board"), shall have power to manage and administer the
business and affairs of the Association. Except as expressly limited by law, all
corporate powers of the Association shall be vested in and may be exercised by
said Board.
Section 2.2. Number. The Board shall consist of not less than five nor more
than twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of the
shareholders at any meeting thereof; provided, however, that a majority of the
full Board of Directors may not increase the number of directors to a number
which; (i) exceeds by more than two the number of directors last elected by
shareholders where such number was fifteen or less; and (ii) to a number which
exceeds by more than four the number of directors last elected by shareholders
where such number was sixteen or more, but in no event shall the number of
directors exceed twenty-five.
Section 2.3 Organization Meeting. The Secretary, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the Main Office of the Association for the purpose of organizing the new
Board and electing and appointing officers of the Association for the succeeding
year. Such meeting shall be held on the day of the election or as soon
thereafter
3
<PAGE>
as practicable, and, in any event, within thirty days thereof. If, at any time
fixed for such meeting, there shall not be a quorum present, the directors
present may adjoum the meeting, from time to time, until a quorum is obtained.
Section 2.4. Reaular Meetings. Regular Meetings of the Board of Directors
shall be held from time to time, at such time as may be designated from time to
time by the Board of Directors and communicated to all directors. Such meetings
shall be held in the Main Office of the Association, subject to the provisions
of Section 2.6 below, and at least one such meeting shall be held during any two
consecutive calendar months.
Section 2.5 Special Meetings. Special meetings of the Board of Directors
may be called by the Chairperson or President of the Association, or at the
request of two or more directors. Each member of the Board of Directors shall be
given notice stating the time and place, by telegram, letter, or in person, of
each such special meeting.
Section 2.6 Quorum. A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a less number may
adjoum any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. Any one or more directors may participate in
a meeting of the Board by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting. The vote of a majority of the
directors present at the time of the vote, if a quorum is present at such time,
shall be the act of the Board except as may be otherwise provided by statute or
the By-Laws.
Section 2.7. Vacancies. When any vacancy occurs among the directors, the
remaining members of the Board, in accordance with the laws of the United
States, may
4
<PAGE>
appoint a director to fill such vacancy at any regular meeting of the Board, or
at a special meeting called for the purpose.
ARTICLE III
Committees of the Board
Section 3.1. Examining Committee. There shall be an Examining Committee
appointed annually by the Board which shall consist of two directors, who are
not also officers of the Association, one of whom shall be designated by the
Board as the Chairperson thereof. Such Committee shall conduct the annual
directors' examination of the Association as required by the Comptroller of the
Currency; shall review the reports of all examinations made of the Association
by public authorities and report thereon to the Board; and shall report to the
Board such other matters as it deems advisable with respect to the Association,
its various departments and the conduct of its operations.
In the performance of its duties, the Examining Committee may employ or
retain, from time to time, expert assistants, independent of the officers or
personnel of the Association, to make such studies of the Association's assets
and liabilities as the Committee may request and to make an examination of the
accounting and auditing methods of the Association and its system of internal
protective controls to the extent considered necessary or advisable in order to
determine that the operations of the Association, including its fiduciary
department, are being audited by the Auditor in such a manner as to provide
prudent and adequate protection. The Committee also may direct the Auditor to
make such investigation as it deems necessary or advisable with respect to the
Association, its various departments and
5
<PAGE>
the conduct of its operations. The Committee shall hold regular quarterly
meetings and during the intervals thereof shall meet at other times on call of
the Chairperson.
Section 3.2. Investment Committee. There shall be an investment committee
composed of two directors, appointed by the board annually or more often. The
investment committee shall have the power to insure adherence to the investment
policy, to recommend amendments thereto, to purchase and sell securities, to
exercise authority regarding investment and to exercise, when the board is not
In session, all other powers of the Board regarding investment securities that
may be lawfully delegated. The investment committee shall keep minutes of its
meetings, and such minutes shall be submitted at the next regular meeting of the
Board of Directors at which a quorum is present, and any action taken by the
board with respect thereto shall be entered in the minutes of the Board.
Section 3.3. Other Committees. The Board of Directors may appoint, from
time to time, from its own members, other committees of one or more persons, for
such purposes and with such powers as the Board may determine.
ARTICLE IV
Officers and Employees
Section 4.1. Chairperson of the Board. The Board of Directors shall appoint
one of its members to be Chairperson of the Board to serve at the pleasure of
the Board. Such person shall preside at all meetings of the Board of Directors.
The Chairperson of the Board shall supervise the carrying out of the policies
adopted or approved by the Board; shall have general executive powers, as well
as the specific powers conferred by these By-Laws; shall
6
<PAGE>
also have and may exercise such further powers and duties as from time to time
may be conferred upon, or assigned by the Board of Directors.
Section 4.2. President. The Board of Directors shall appoint one of its
members to be President of the Association. In the absence of the Chairperson,
the President shall preside at any meeting of the Board. (Y)The President shall
have general executive powers, and shall have and may exercise ahy and all other
powers and duties pertaining by law, regulation, or practice, to the Office of
the President, or imposed by these By-Laws. The President shall also have and
may exercise such further powers and duties as from time to time may be
conferred, or assigned by the Board of Directors.
Section 4.3. Vice President. The Board of Directors shall appoint one or
more Vice Presidents. Each Vice President shall have such powers and duties as
may be assigned by the Board of Directors. One Vice President shall be
designated by the Board of Directors, in the absence of the President, to
perform all the duties of the President.
Section 4.4. Secretary. The Board of Directors shall appoint a Secretary or
other designated officer who shall be Secretary of the Board and of the
Association, and shall keep accurate minutes of all meetings. The Secretary
shall attend to the giving of all notices required by these By-Laws to be given;
shall be custodian of the corporate seal, records, documents and papers of the
Association; shall provide for the keeping of proper records of all transactions
of the Association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the office of the
Secretary, or imposed by these By-Laws; and shall also perform such other duties
as may be assigned from time to time, by the Board of Directors.
Section 4.5. Other Officers. The Board of Directors may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
trust officers, one or
7
<PAGE>
more assistant secretaries, one or more assistant treasurers, and such other
officers and attorneys-in-fact as from time to time may appear to the Board of
Directors to be required or desirable to transact the business of the
Association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the Board of Directors, the Chairperson of the Board, or
the President.
Section 4.6. Tenure of Office. The President and all other officers shall
hold office for the current year for which the Board was elected, unless they
shall resign, become disqualified, or be removed; and any vacancy occurring in
the office of President shall be filled promptly by the Board of Directors.
ARTICLE V
Trust Department
Section 5.1. Trust Department. There shall be a department of the
Association known as the trust department which shall perform the fiduciary
responsibilities of the Association.
Section 5.2. Trust Officer. There shall be a trust officer of this
Association whose duties shall be to manage, supervise and direct all the
activities of the trust department. Such person shall do or cause to be done all
things necessary or proper in carrying on the business of the trust department
according to provisions of law and applicable regulations; and shall act
pursuant to opinion of counsel where such opinion is deemed necessary. Opinions
of counsel shall be retained on file in connection with all important matters
pertaining to fiduciary activities. The trust officer shall be responsible for
all assets and documents held by the
8
<PAGE>
Association in connection with fiduciary matters. The Board of Directors may
appoint other officers of the trust department as it may deem necessary, with
such duties as may be assigned.
Section 5.3. Trust Investment Committee. There shall be a trust investment
committee of this Association composed of two members, who shall be capable and
experienced officers and directors of the Association. All investments of funds
held in a fiduciary capacity shall be made, retained or disposed of only with
the approval of the trust investment committee; and the committee shall keep
minutes of all its meetings, showing the disposition of all matters considered
and passed upon by it. The committee shall, promptly after the acceptance of an
account for which the bank has investment responsibilities, review the assets
thereof, to determine the advisability of retaining or disposing of such assets.
The committee shall conduct a similar review at least once during each calendar
year thereafter and within 15 months of the last review. A report of all such
reviews, together with the action taken as a result thereof, shall be noted in
the minutes of the committee.
Section 5.4. Trust Audit Committee. The Board of Directors shall appoint a
committee of two Directors, exclusive of any active officer of the Association,
which shall, at least once during each calendar year within fifteen months of
the last such audit make suitable audits of the Trust Department or cause
suitable audits to be made by auditors responsible only to the Board of
Directors, and at such time shall ascertain whether the department has been
administered in accordance with law, 12 Code of Federal Regulations, Section 9,
and sound fiduciary principles.
Section 5.5. Trust Department Files. There shall be maintained in the Trust
Department files containing all fiduciary records necessary to assure that its
fiduciary responsibilities have been properly undertaken and discharged.
9
<PAGE>
Section 5.6. Trust Investments. Funds held in a fiduciary capacity shall be
invested in accordance with the instrument establishing the fiduciary
relationship and appropriate local law. Where such instrument does not specify
the character and class of investments to be made and does not vest in the bank
a discretion In the matter, funds held pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under
appropriate local law.
ARTICLE Vl
Stock and Stock Certificate
Section 6.1. Transfers. Shares of stock shall be transferable on the books
of the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his shares, succeed to all rights of the prior holder of
such shares.
Section 6.2. Stock Certificates. Certificates of stock shall bear the
signature of the President (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the Secretary, Assistant
Secretary, Cashier, Assistant Cashier, or any other officer appointed by the
Board of Directors for that purpose, to be known as an Authorized Officer, and
the seal of the Association shall be engraved thereon. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of the Association properly endorsed.
10
<PAGE>
ARTICLE VII
Corporate Seal
The President, the Cashier, the Secretary or any Assistant Cashier or
Assistant Secretary, or other officer thereunto designated by the Board of
Directors, shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be substantially in
the following form:
(Impression)
( of )
( Seal )
ARTICLE VIII
Miscellaneous Provisions
Section 8.1. Fiscal Year. The Fiscal Year of the Association shall be the
calendar year.
Section 8.2. Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
in behalf of the Association by the Chairperson of the Board, or the President,
or any Vice President, or the Secretary, or the Cashier, or, if in connection
with exercise of fiduciary powers of the Association, by any of said officers or
by any Trust Officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted in behalf of the Association in such other
manner and by such other officers as the Board of
11
<PAGE>
Directors may from time to time direct. The provisions of this Section 8.2. are
supplementary to any other provision of these By-Laws.
Section 8.3. Records. The Articles of Association, the By-Laws and the
proceedings of all meetings of the shareholders, the Board of Directors, and
standing committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary, or other officer appointed to act as Secretary of the meeting.
ARTICLE IX
By-Laws
Section 9.1. Inspection. A copy of the By-Laws, with all amendments
thereto, shall at all times be kept in a convenient place at the Main Office of
the Association, and shall be open for inspection to all shareholders, during
banking hours.
Section 9.2. Amendments. The By-Laws may be amended, altered or repealed,
at any regular meeting of the Board of Directors, by a vote of a majority of the
total number of the Directors.
12
<PAGE>
EXHIBIT B
Comptroller of The Currency
Northesstern District
Date FEB 13 1986
BT TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of a
limited purpose trust company under the laws of the United States, the
undersigned do enter into the following articles of association:
FIRST: The title of this Association shall be "BT Trust Company of
California, National Association".
SECOND: The main office of the Association shall be in the City of Los
Angeles, County of Los Angeles, State of California. The general business of the
Association shall be conducted at its main office and its branches.
THIRD: The Board of Directors of this Association shall consist of not less
than five nor more than twenty-five shareholders, the exact number of Directors
within such minimum and maximum limits to be fixed and determined from time to
time by resolution of a majority of the full Board of Directors or by resolution
of the shareholders at any annual or special meeting thereof. Each director,
during the full term of his or her directorship, shall own a minimum of ~1,000
aggregate par value of stock of this association or a minimum par market value
or equity interest of $1,000 of stock in the bank holding company controlling
this association. Unless otherwise provided by the laws of the United States,
any vacancy in the Board of Directors for any reason, including an increase in
the number thereof, may be filled by action of the Board of Directors.
FOURTH: The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office or such other place as the Board
of Directors may designate, on the day of each year specified therefor in the
Bylaws, but if no election is held on that day, it may be held on any subsequent
day according to the provisions of law; and all elections shall be held
according to such lawful regulations as may be prescribed by the Board of
Directors.
Nominations for election to the Board of Directors may be made by the Board
of Directors or by any shareholder of any outstanding class of capital stock of
the Association entitled to vote for election of directors. Nominations other
than those made by or on behalf of the existing management of the Association,
shall be made in writing and shall be delivered or mailed to the President of
the Association and to the Comptroller of the Currency, Washington, D.C., not
less than 14 days nor more than
<PAGE>
-2-
50 days prior to any meeting of shareholders called for the election of
directors;, provided, however, that if less than 21 days' notice of the meeting
is given to shareholders, such nomination shall be mailed or delivered to the
President of the Association and to the Comptroller of the Currency not later
than the close of business on the seventh day following the day on which the
notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capital stock of the Association that
will be voted for each proposed nominee; (d) the name and residence address of
the notifying shareholder; and (e) the number of shares of capital stock of the
Association owned by the notifying shareholder. Nominations not made in
accordance herewith may, in his/her discretion, be disregarded by the
chairperson of the meeting, and upon his/her instructions, the vote tellers may
disregard all votes cast for each such nominee.
FIFTH: The authorized amount of capital stock of this Association shall be
5,000 shares of common stock of the par value of One Hundred Dollars and no
cents ($100.00) each; but said capital stock may be increased or decreased from
time to time, in accordance with the provisions of the laws of the United
States.
No holder of shares of the capital stock of any class of the Association
shall have any pre-emptive or preferential right of subscription to any shares
of any class of stock of the Association, whether now or hereafter authorized,
or to any obligations convertible into stock of the Association, issued, or
sold, nor any right of subscription thereto other than such, if any, as the
Board of Directors, in its discretion may from time to time determine and at
such price as the Board of Directors may from time to time fix.
If the capital stock is increased by a stock dividend, each shareholder
shall be entitled to his/her proportionate amount of such increase in accordance
with the number of shares of capital stock owned by him/her at the time the
increase is authorized by the shareholders, unless another time subsequent to
the date of the shareholders' meeting is specified in a resolution adopted by
the shareholders at the time the increase is authorized.
The Association, at any time and from time to time, may authorize and issue
debt obligations, whether of not subordinated, without the approval of the
shareholders.
<PAGE>
-3-
SIXTH: The Board of Directors (a majority of whom shall be a quorum to do
business) shall appoint one of its members to be President of the Association
who shall hold office (unless he shall become disqualified or be sooner removed
by a two-thirds vote of the members of the Board) for the term for which he was
elected a Directors. The Board of Directors may appoint one of its members to be
Chairperson of the Board, who shall perform such duties as may be designated by
it. The Board of Directors shall have power to appoint one or more
Vice-Presidents; and to appoint a Cashier and such other officers and employees
as may be required to transact the business of the Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all by-laws that it may be lawful for them to make and
generally do and perform all acts that it may be legal for a board of directors
to do and perform.
SEVENTH: The Board of Directors shall have the power to change the location
of the main office of the Association to any other place within the limit of the
City of Los Angeles, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of the Association to
any other location, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency.
EIGHTH: The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH: The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 25 percent of the stock of
this Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time,
place, and purpose of every annual and special meeting of the shareholders shall
be given by first-class mail, postage prepaid, mailed at least ten days prior to
the date of such meeting to each shareholder of record at his/her address as
shown upon the books of this Association.
<PAGE>
-4-
TENTH: Any person, his/her heirs, executors or administrators, may be
indemnified or reimbursed by the Association for liability and reasonable
expenses (including amounts paid in settlement or in satisfaction of judgments
or as fines or penalties) actually incurred in connection with any claim,
action, suit, or proceeding, civil or criminal, whether or not by or in the
right of the Association, in which he/she or they shall be involved or
threatened to be involved by reason of his/her being or having been a director,
officer, or employee of the Association or of any firm, corporation, or
organization which he/she serves or has served in any such capacity at the
request of the Association (provided he/she so served at the specific request of
the Association in writing signed by the Chairperson of the Board or the
President and specifically referring to this Article Tenth); provided, however,
that no person shall be so indemnified or reimbursed (l) in relation to any
matter in an action, suit or proceeding as to which he/she shall finally be
adjudged to have been guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts in the performance of his/her duties to the
Association or such firm, corporation or organization; or (2) in relation to any
matter in a claim, action, suit or proceeding which has been made the subject of
a settlement except with the approval of (a) a court of competent jurisdiction,
(b) the Board of Directors, acting by vote of Directors not parties to the same
or substantially the same action, suit or proceeding, constituting a majority of
the whole number of the Directors, or (c) the shareholders, acting by vote of a
majority of the outstanding shares of capital stock; and provided further that,
in the case of persons serving another firm, corporation or organization at the
request of the Association, the indemnity provided in this Article Tenth shall
apply only if and to the extent that, after making such efforts as the Board of
Directors or shareholders shall deem adequate under the circumstances, such
person shall be unable to obtain indemnification from such firm, corporation or
organization. The foregoing provisions for indemnification or reimbursement
shall not be exclusive of other rights to which such person, his/her heirs,
executors or administrators, may be entitled by contract or otherwise. Unless
the context clearly requires otherwise, the term "the Association" as used in
this Article shall include any predecessor corporation.
The Association may, upon the affirmative vote of a majority of its Board
of Directors, purchase insurance for the purpose of indemnifying its directors,
officers and other employees to the extent that such indemnification is allowed
in the preceding paragraph. Such insurance may, but need not, be for the benefit
of all directors, officers, or employees.
<PAGE>
-5-
ELEVENTH: The powers of the Association shall be limited to conducting the
business of a trust company under a national bank charter, and no amendment to
such powers may be made without the prior approval of the Comptroller of the
Currency.
TWELFTH: These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, voting in person or by proxy, unless
the vote of the holders of a greater amount of stock is required by law, and in
that case by the vote of the holders of such greater amount.
IN WITNESS WHEREOF, we have hereunto set our hands this on the date
appearing opposite our names.
/s/Peter E. Lengyel 10/7/85
- ---------------------------------- ----------------------------------
Peter E. Lengyel date
/s/Harold K. Atkins 10/7/85
- ---------------------------------- ----------------------------------
Harold K. Atkins date
/s/John L. Murphy 10/7/85
- ---------------------------------- ----------------------------------
John L. Murphy date
/s/Allan C. Martin 10/7/85
- ---------------------------------- ----------------------------------
Allan C. Martin date
/s/Rein Lumi 10/7/85
- ---------------------------------- ----------------------------------
Rein Lumi date
/s/Gerard P. Horihan 10/7/85
- ---------------------------------- ----------------------------------
Gerard P. Horihan date
<PAGE>
State of New York
County of New York
Before the undersigned, a Notary Public of the State of New York personally
appeared Peter E. Lengyel, to me known, who acknowledged that he executed the
foregoing certificate for the purposes therein mentioned.
Witness my hand and seal of office this 7 day of October, 1985.
/s/DAVID ABRAMSON
----------------------------
Notary Public
DAVID ABRAMSON
Notary Public, State of New York
No. 60-0007765
Qualified In Westchester County
Commission Expires March 30, 1987
State of New York
County of New York
Before the undersigned, a Notary Public of the State of New York personally
appeared John L. Murphy, to me known, who acknowledged that he executed the
foregoing certificate for the purposes therein mentioned.
Witness my hand and seal of office this 7 day of October, 1985.
/s/DAVID ABRAMSON
----------------------------
Notary Public
DAVID ABRAMSON
Notary Public, State of New York
No. 60-0007765
Qualified In Westchester County
Commission Expires March 30, 1987
State of New York
County of New York
Before the undersigned, a Notary Public of the State of New York personally
appeared Harold K. Atkins known, who acknowledged that he executed the foregoing
certificate for the purposes therein mentioned.
Witness my hand and seal of office this 7 day of October, 1985.
/s/DAVID ABRAMSON
----------------------------
Notary Public
DAVID ABRAMSON
Notary Public, State of New York
No. 60-0007765
Qualified In Westchester County
Commission Expires March 30, 1987
<PAGE>
State of New York
County of New York
Before the undersigned, a Notary Public of the State of New York personally
appeared Allan C. Martin, to me known, who acknowledged that he executed the
foregoing certificate for the purposes therein mentioned.
Witness my hand and seal of office this 7 day of October, 1985.
/s/DAVID ABRAMSON
----------------------------
Notary Public
DAVID ABRAMSON
Notary Public, State of New York
No. 60-0007765
Qualified In Westchester County
Commission Expires March 30, 1987
State of New York
County of New York
Before the undersigned, a Notary Public of the State of New York personally
appeared Rein Lumi to me known, who acknowledged that he executed the foregoing
certificate for the purposes therein mentioned.
Witness my hand and seal of office this 7 day of October, 1985.
/s/DAVID ABRAMSON
----------------------------
Notary Public
DAVID ABRAMSON
Notary Public, State of New York
No. 60-0007765
Qualified In Westchester County
Commission Expires March 30, 1987
State of New York
County of New York
Before the undersigned, a Notary Public of the State of New York personally
appeared Gerard P. Hourihan to me known, who acknowledged that he executed the
foregoing certificate for the purposes therein mentioned.
Witness my hand and seal of office this 7 day of October, 1985.
/s/DAVID ABRAMSON
----------------------------
Notary Public
DAVID ABRAMSON
Notary Public, State of New York
No. 60-0007765
Qualified In Westchester County
Commission Expires March 30, 1987
<PAGE>
EXHIBIT C
[LOGO]
________________________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
________________________________________________________________________________
Western District Office
50 Fremont Street, Suite 3900
San Francisco, CA 94105-2292
(415) 545 5900
February 5, 1992 Charter No. 18608
Mr. David Abramson, Secretary
Bankers Trust Company of California, N.A.
280 Park Avenue
New York New York 10017
Re: Capital Change Control No. 92-WE-12-066
Dear Mr. Abramson:
This is in response to your letter of notification dated January 29, 1992,
concerning the issuance of $49,500,000.00 of common stock.
This letter is the official certification of the approval of the Office of the
Comptroller of the Currency given to Bankers Trust Company of California, N.A.,
Los Angeles, California, to increase its common stock from $500,000 to
$50,000,000. This issuance may be considered effective on January 22, 1992.
Very truly yours,
/s/JOHN C. BEERS
- ----------------------------
JOHN C. BEERS
Acting Director for Analysis
Western District
cc: Mr. R. Brent Faye
Lillick & Charles
Two Embarcadero Center
San Francisco, CA 94111-3996
<PAGE>
EXHIBIT 2
<PAGE>
[LOGO]
________________________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
________________________________________________________________________________
Washington, DC 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that:
l. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "Bankers Trust Company of California, National Association", Los Angeles,
California, (Charter No. 18608), is a National Banking Association formed under
the laws of the United States and is authorized thereunder to transact the
business of banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal
of office to be affixed to these
presents at the Treasury Department, in
the City of Washington and District of
Columbia, this 8th day of July, 1996.
[SEAL] /s/Eugene A. Ludwig
---------------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 3
<PAGE>
[LOGO]
________________________________________________________________________________
Comptroller of the Currency
Administrator of National Banks
________________________________________________________________________________
Washington, D.C. 20219
Certification of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify the records
in this Office evidence "Bankers Trust Company of California, National
Association", Los Angeles, California, (Charter No. 18608), was granted, under
the hand and seal of the Comptroller, the right to act in all fiduciary
capacities authorized under the provisions of The Act of Congress approved
September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a. I further certify the authority
so granted remains in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal
of Office of the Comptroller of the
Currency to be affixed to these
presents at the Treasury Department, in
the City of Washington and District of
Columbia, this 18th day of July, 1996.
[SEAL] /s/Eugene A. Ludwig
---------------------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
<PAGE>
CERTIFICATE
I, Sandra L. West, do hereby certify that:
1. I am Assistant Secretary of BANKERS TRUST COMPANY OF CALIFORNIA, N. A.
(formerly known as BT Trust Company of California, National Association), a
corporation duly organized and validly existing under the laws of the United
States of America (the "Company");
2. Attached hereto as Exhibit A is a true, correct and complete copy of the
By-Laws of the Company as in effect on the date hereof;
3. Attached hereto as Exhibit B is a true, correct and complete copy of the
Minutes of First Meeting of Organizers of the Company, which meeting was held on
October 7, l 985; and
4. Attached hereto as Exhibit C is a true, correct and complete copy of the
Minutes of First Meeting of Board of Directors of the Company, which meeting was
held on May 14, l986.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of BANKERS
TRUST COMPANY OF CALIFORNIA this l9th day of April, 1996.
[Seal] \s\Sandra L. West
--------------------------
Assistant Secretary
<PAGE>
EXHIBIT A
<PAGE>
BANKERS TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION
BY-LAWS
ARTICLE I
Meetings of Shareholders
Section 1.1. Annual Meeting. The regular annual meeting of the shareholders
for the election of directors and the transaction of whatever other business may
properly come before the meeting, shall be held at the Main Office of the
Association, 400 South Hope Street, Los Angeles, California or such other places
as the Board of Directors may designate, at 11 a.m. on the third Wednesday of
March of each year. Notice of such meeting shall be mailed, postage prepaid, at
least ten days prior to the date thereof, addressed to each shareholder at his
address appearing on the books of the Association. If, for any cause, an
election of directors is not made on the said day, the Board of Directors shall
order the election to be held on some subsequent day, as soon thereafter as
practicable, according to the provisions of law; and notice thereof shall be
given in the manner herein provided for the annual meeting.
Section 1.2. Special Meetings. Except as otherwise specifically provided by
statue, special meetings of the shareholders may be called for any purpose at
any time by the Board of Directors or by any one or more shareholders owning, in
the aggregate, not less than twenty five percent (25%) of the stock of the
Association. Every such special meeting, unless otherwise provided by law, shall
be called by mailing, postage prepaid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the Association a notice stating the purpose of the meeting.
Section 1.3. Nominations for Director. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any stockholder
of any outstanding class of capital stock of the Association entitled to vote
for the election of directors.
<PAGE>
Nominations, other than those made by or on behalf of the existing management of
the Association, shall be made in writing and shall be delivered or mailed to
the President of the Bank and to the Comptroller of the Currency, Washington,
D.C., not less than 14 days nor more than 50 days prior to any meeting of
shareholders called for the election of directors, provided however, that if
less than 21 days' notice of the meeting is given to shareholders, such
nomination shall be mailed or delivered to the President of the Bank and to the
Comptroller of the Currency not later than the close of business on the seventh
day following the day on which the notice of meeting was mailed. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Bank that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Bank owned by the notifying
shareholder. Nominations not made in accordance herewith may, in his/her
discretion, be disregarded by the Chairperson of the meeting, and upon his/
her instructions, the vote tellers may disregard all votes cast for each such
nominee.
Section 1.4. Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this Association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and shall be filed with the records of the meeting.
Section 1.5 Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; and less than a quorum may
adjourn any meeting, from time to time, and the
2
<PAGE>
meeting may be held, as adjourned, without further notice. A majority of the
votes cast shall decide every question or matter submitted to the shareholders
at any meeting, unless otherwise provided by law or by the Articles of
Association.
ARTICLE II
Directors
Section 2.1. Board of Directors. The board of directors (hereinafter
referred to as the "Board"), shall have power to manage and administer the
business and affairs of the Association. Except as expressly limited by law, all
corporate powers of the Association shall be vested in and may be exercised by
said Board.
Section 2.2. Number. The Board shall consist of not less than five nor more
than twenty-five shareholders, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of the
shareholders at any meeting thereof; provided, however, that a majority of the
full Board of Directors may not increase the number of directors to a number
which; (i) exceeds by more than two the number of directors last elected by
shareholders where such number was fifteen or less; and (ii) to a number which
exceeds by more than four the number of directors last elected by shareholders
where such number was sixteen or more, but in no event shall the number of
directors exceed twenty-five.
Section 2.3 Organization Meeting. The Secretary, upon receiving the
certificate of the judges, of the result of any election, shall notify the
directors-elect of their election and of the time at which they are required to
meet at the Main Office of the Association for the purpose of organizing the new
Board and electing and appointing officers of the Association for the succeeding
year. Such meeting shall be held on the day of the election or as soon
thereafter
3
<PAGE>
as practicable, and, in any event, within thirty days thereof. If, at any time
fixed for such meeting, there shall not be a quorum present, the directors
present may adjourn the meeting, from time to time, until a quorum is obtained.
Section 2.4. Regular Meetings. Regular Meetings of the Board of Directors
shall be held from time to time, at such time as may be designated from time to
time by the Board of Directors and communicated to all directors. Such meetings
shall be held in the Main Office of the Association, subject to the provisions
of Section 2.6 below, and at least one such meeting shall be held during any two
consecutive calendar months.
Section 2.5 Special Meetings. Special meetings of the Board of Directors
may be called by the Chairperson or President of the Association, or at the
request of two or more directors. Each member of the Board of Directors shall be
given notice stating the time and place, by telegram, letter, or in person, of
each such special meeting.
Section 2.6 Quorum. A majority of the directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a less number may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. Any one or more directors may participate in
a meeting of the Board by means of a conference telephone or similar
communications equipment which allows all persons participating in the meeting
to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting. The vote of a majority of the
directors present at the time of the vote, if a quorum is present at such time,
shall be the act of the Board except as may be otherwise provided by statute or
the By-Laws.
Section 2.7. Vacancies. When any vacancy occurs among the directors, the
remaining members of the Board, in accordance with the laws of the United
States, may
4
<PAGE>
appoint a director to fill such vacancy at any regular meeting of the Board, or
at a special meeting called for the purpose.
ARTICLE III
Committees of the Board
Section 3.1. Examining Committee. There shall be an Examining Committee
appointed annually by the Board which shall consist of two directors, who are
not also officers of the Association, one of whom shall be designated by the
Board as the Chairperson thereof. Such Committee shall conduct the annual
directors' examination of the Association as required by the Comptroller of the
Currency; shall review the reports of all examinations made of the Association
by public authorities and report thereon to the Board; and shall report to the
Board such other matters as it deems advisable with respect to the Association,
its various departments and the conduct of its operations.
In the performance of its duties, the Examining Committee may employ or
retain, from time to time, expert assistants, independent of the officers or
personnel of the Association, to make such studies of the Association's assets
and liabilities as the Committee may request and to make an examination of the
accounting and auditing methods of the Association and its system of internal
protective controls to the extent considered necessary or advisable in order to
determine that the operations of the Association, including its fiduciary
department, are being audited by the Auditor in such a manner as to provide
prudent and adequate protection. The Committee also may direct the Auditor to
make such investigation as it deems necessary or advisable with respect to the
Association, its various departments and
5
<PAGE>
the conduct of its operations. The Committee shall hold regular quarterly
meetings and during the intervals thereof shall meet at other times on call of
the Chairperson.
Section 3.2. Investment Committee. There shall be an investment committee
composed of two directors, appointed by the board annually or more often. The
investment committee shall have the power to insure adherence to the investment
policy, to recommend amendments thereto, to purchase and sell securities, to
exercise authority regarding investment and to exercise, when the board is not
In session, all other powers of the Board regarding investment securities that
may be lawfully delegated. The investment committee shall keep minutes of its
meetings, and such minutes shall be submitted at the next regular meeting of the
Board of Directors at which a quorum is present, and any action taken by the
board with respect thereto shall be entered in the minutes of the Board.
Section 3.3. Other Committees. The Board of Directors may appoint, from
time to time, from its own members, other committees of one or more persons,
for such purposes and with such powers as the Board may determine.
ARTICLE IV
Officers and Employees
Section 4.1. Chairperson of the Board. The Board of Directors shall appoint
one of its members to be Chairperson of the Board to serve at the pleasure of
the Board. Such person shall preside at all meetings of the Board of Directors.
The Chairperson of the Board shall supervise the carrying out of the policies
adopted or approved by the Board; shall have general executive powers, as well
as the specific powers conferred by these By-Laws; shall
6
<PAGE>
also have and may exercise such further powers and duties as from time to time
may be conferred upon, or assigned by the Board of Directors.
Section 4.2. President. The Board of Directors shall appoint one of its
members to be President of the Association. In the absence of the Chairperson,
the President shall preside at any meeting of the Board. The President shall
have general executive powers, and shall have and may exercise any and all other
powers and duties pertaining by law, regulation, or practice, to the Office of
the Preside-t, or imposed by these By-Laws. The President shall also have and
may exercise such further powers and duties as from time to time may be
conferred, or assigned by the Board of Directors.
Section 4.3. Vice President. The Board of Directors shall appoint one or
more Vice Presidents. Each Vice President shall have such powers and duties as
may be assigned by the Board of Directors. One Vice President shall be
designated by the Board of Directors, in the absence of the President, to
perform all the duties of the President.
Section 4.4. Secretary. The Board of Directors shall appoint a Secretary or
other designated officer who shall be Secretary of the Board and of the
Association, and shall keep accurate minutes of all meetings. The Secretary
shall attend to the giving of all notices required by these By-Laws to be given;
shall be custodian of the corporate seal, records, documents and papers of the
Association; shall provide for the keeping of proper records of all transactions
of the Association; shall have and may exercise any and all other powers and
duties pertaining by law, regulation or practice, to the office of the
Secretary, or imposed by these By-Laws; and shall also perform such other duties
as may be assigned from time to time, by the Board of Directors.
Section 4.5. Other Officers. The Board of Directors may appoint one or more
assistant vice presidents, one or more trust officers, one or more assistant
trust officers, one or
7
<PAGE>
more assistant secretaries, one or more assistant treasurers, and such other
officers and attorneys-in-fact as from time to time may appear to the Board of
Directors to be required or desirable to transact the business of the
Association. Such officers shall respectively exercise such powers and perform
such duties as pertain to their several offices, or as may be conferred upon, or
assigned to, them by the Board of Directors, the Chairperson of the Board, or
the President.
Section 4.6. Tenure of Office. The President and all other officers shall
hold office for the current year for which the Board was elected, unless they
shall resign, become disqualified, or be removed; and any vacancy occurring in
the office of President shall be filled promptly by the Board of Directors.
ARTICLE V
Trust Department
Section 5.1. Trust Department. There shall be a department of the
Association known as the trust department which shall perform the fiduciary
responsibilities of the Association.
Section 5.2. Trust Officer. There shall be a trust officer of this
Association whose duties shall be to manage, supervise and direct all the
activities of the trust department. Such person shall do or cause to be done all
things necessary or proper in carrying on the business of the trust department
according to provisions of law and applicable regulations; and shall act
pursuant to opinion of counsel where such opinion is deemed necessary. Opinions
of counsel shall be retained on file in connection with all important matters
pertaining to fiduciary activities. The trust officer shall be responsible for
all assets and documents held by the
8
<PAGE>
Association in connection with fiduciary matters. The Board of Directors may
appoint other officers of the trust department as it may deem necessary, with
such duties as may be assigned.
Section 5.3. Trust Investment Committee. There shall be a trust investment
committee of this Association composed of two members, who shall be capable and
experienced officers and directors of the Association. All investments of funds
held in a fiduciary capacity shall be made, retained or disposed of only with
the approval of the trust investment committee; and the committee shall keep
minutes of all its meetings, showing the disposition of all matters considered
and passed upon by it. The committee shall, promptly after the acceptance of an
account for which the bank has investment responsibilities, review the assets
thereof, to determine the advisability of retaining or disposing of such assets.
The committee shall conduct a similar review at least once during each calendar
year thereafter and within 15 months of the last review. A report of all such
reviews, together with the action taken as a result thereof, shall be noted in
the minutes of the committee.
Section 5.4. Trust Audit Committee. The Board of Directors shall appoint a
committee of two Directors, exclusive of any active officer of the Association,
which shall, at least once during each calendar year within fifteen months of
the last such audit make suitable audits of the Trust Department or cause
suitable audits to be made by auditors responsible only to the Board of
Directors, and at such time shall ascertain whether the department has been
administered in accordance with law, 12 Code of Federal Regulations, Section 9,
and sound fiduciary principles.
Section 5.5. Trust Department Files. There shall be maintained in the Trust
Department files containing all fiduciary records necessary to assure that its
fiduciary responsibilities have been properly undertaken and discharged.
9
<PAGE>
Section 5.6. Trust Investments. Funds held in a fiduciary capacity shall be
invested in accordance with the instrument establishing the fiduciary
relationship and appropriate local law. Where such instrument does not specify
the character and class of investments to be made and does not vest in the bank
a discretion In the matter, funds held pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest under
appropriate local law.
ARTICLE VI
Stock and Stock Certificate
Section 6.1. Transfers. Shares of stock shall be transferable on the books
of the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his shares, succeed to all rights of the prior holder of
such shares.
Section 6.2. Stock Certificates. Certificates of stock shall bear the
signature of the President (which may be engraved, printed or impressed), and
shall be signed manually or by facsimile process by the Secretary, Assistant
Secretary, Cashier, Assistant Cashier, or any other officer appointed by the
Board of Directors for that purpose, to be known as an Authorized Officer, and
the seal of the Association shall be engraved thereon. Each certificate shall
recite on its face that the stock represented thereby is transferable only upon
the books of the Association properlv endorsed.
10
<PAGE>
ARTICLE VII
Corporate Seal
The President, the Cashier, the Secretary or any Assistant Cashier or
Assistant Secretary, or other officer thereunto designated by the Board of
Directors, shall have authority to affix the corporate seal to any document
requiring such seal, and to attest the same. Such seal shall be substantially in
the following form:
(Impression)
( of )
( Seal )
ARTICLE VIII
Miscellaneous Provisions
Section 8.1. Fiscal Year. The Fiscal Year of the Association shall be the
calendar year.
Section 8.2. Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
in behalf of the Association by the Chairperson of the Board, or the President,
or any Vice President, or the Secretary, or the Cashier, or, if in connection
with exercise of fiduciary powers of the Association, by any of said officers or
by any Trust Officer. Any such instruments may also be executed, acknowledged,
verified, delivered or accepted in behalf of the Association in such other
manner and by such other officers as the Board of
11
<PAGE>
Directors may from time to time direct. The provisions of this Section 8.2. are
supplementary to any other provision of these By-Laws.
Section 8.3. Records. The Articles of Association, the By-Laws and the
proceedings of all meetings of the shareholders, the Board of Directors, and
standing committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary, or other officer appointed to act as Secretary of the meeting.
ARTICLE IX
By-Laws
Section 9.1. Inspection. A copy of the By-Laws, with all amendments
thereto, shall at all times be kept in a convenient place at the Main Office of
the Association, and shall be open for inspection to all shareholders, during
banking hours.
Section 9.2. Amendments. The By-Laws may be amended, altered or repealed,
at any regular meeting of the Board of Directors, by a vote of a majority of the
total number of the Directors.
12
<PAGE>
EXHIBIT B
<PAGE>
Minutes of Meeting of Organizers
of
BT Trust Company of California,
National Association
The meeting of the Organizers of BT Trust Company of California, a National
Banking Association, duly created and existing under and by virtue of the laws
of the United States, was held at 12:00 noon, in the City of New York, State of
New York, 7th day of October, 1985, pursuant to call and waiver of notice by all
the organizers.
Upon motion duly made, seconded, and carried, Peter E. Lengyel was chosen
as Chairperson of the meeting and Allan C. Martin was chosen as Secretary of the
meeting.
The roll of the organizers was called and the following organizers
representing a majority of the organizers, were present in person:
Names
Peter E. Lengyel
John L. Murphy
Allan C. Martin
Rein Lumi
Gerard P. Hourihan
<PAGE>
The following organizer was not in attendance:
H. Kent Atkins
The Chairperson presented the Articles of Association and Organization
Certificate of BT Trust Company of California, National Association to the
meeting, copies of which are made a part of these minutes. On motion duly made,
seconded and carried, the following resolution was duly adopted:
RESOLVED, that the Articles of Association and Organization
Certificate of this Association be and the same are hereby approved.
The Chairperson of the meeting announced that the Articles of Association
provide that the number of directors shall be fixed by resolution at the first
meeting of shareholders but that such number may not be less than five nor more
than twenty-five.
On motion made, seconded and carried, the following resolution was duly
adopted:
RESOLVED, that the number of interim directors until the first meeting
of shareholders of the Association be fixed at six (6).
The Chairperson thereupon called for the nomination of interim directors.
The following persons were nominated for the office of interim director of the
Assocation to serve until the first meeting of shareholders and until their
respective successors shall have been duly elected and qualified:
<PAGE>
Names
John L. Murphy
Allan C. Martin
Ronald P. Badie
Frederick J. Burmeister
James H. Greene, Jr.
Christopher M. Levy
No further nominations having been made, the nominations were closed and
the organizers proceeded to vote on the nominees. The vote having been taken and
counted, the nominees were found to have been duly elected interim directors of
the Association to serve until the first meeting of shareholders and until their
respective successors are duly elected and shall have qualified.
There being no further business to come before the meeting, the same was on
motion duly made and seconded, adjourned.
\s\Peter E. Lengyel
--------------------------
Chairperson of the Meeting
\s\Allan C. Martin
--------------------------
Secretary of the Meeting
<PAGE>
EXHIBIT C
<PAGE>
Minutes of First Meeting of
Board of Directors of
BT Trust Company of California, National Association
The first meeting of the board of directors of BT Trust Company of
California, National Association, a national banking association, was held at
the office of the association at 400 South Hope Street, Los Angeles, California,
on the 14th day of May, 1986, pursuant to written waiver of notice signed by all
of the directors of the association, a copy of which is attached.
Present: Allan C. Martin, John L. Murphy, Ronald P. Badie, Frederick J.
Burmeister and Christopher M. Levy, constituting a majority of the board of
directors, and David Abramson of Bankers Trust Company.
Mr. Burmeister was chosen temporary chairperson of the meeting and Mr.
Abramson was appointed temporary secretary of the meetinq and kept the minutes.
The temporary secretary presented to the meeting a waiver of notice of
meeting signed by all the directors of the association.
The temporary chairperson announced that the first order of business was
the election of officers. Nominations having been made, the following persons
were elected as officers of the association to serve at the pleasure of the
board of directors:
Chairperson of the Board - Allan C. Martin
President - Allan C. Martin
Vice President - Ronald P. Badie
Secretary - John L. Murphy
Cashier (Treasurer) - John L. Murphy
The temporary chairperson announced the bylaws to be in order and thereupon
the temporary secretary presented a copy of the bylaws as previously adopted by
the interim board and moved that it be ratified, which motion was duly seconded
and carried.
The temporary chairperson stated that officers of Bankers Trust Company at
280 Park Avenue, New York, New York, had been consulted relative to using the
bank as the depository of the funds of the association. Discussion followed and
it was agreed that Bankers Trust Company of New York, New York be named as the
association's depository and that Laura A. Ahto, Paul F. Grimm, Allan C. Martin,
John L. Murphy, William E. Smith, Ronald P. Badie, Christopher M. Levy,
Frederick J. Burmeister, Thomas V. Bressan and David Abramson be authorized to
sign checks, drafts, and other similar instruments. It was further provided that
any two of the signatures of such persons would be necessary to validate a
check, draft or similar instrument.
<PAGE>
The temporary secretary presented a form of resolution requested by Bankers
Trust Company to authorize the account, and the resolution was unanimously
adopted. The form of the resolution is set forth in Exhibit A, attached hereto.
The temporary secretary presented a form of resolution requested by the
Federal Reserve Bank of San Francisco in connection with the required purchase
of shares in the Federal Reserve Bank by member banks. The form of resolution,
set forth in Exhibit B, attached hereto, was unanimously adopted.
The temporary secretary presented a form of Safekeeping Agreement to be
entered with the Treasurer of the State of California and sankers Trust Company,
providing for pledge of the Association's assets for the faithful performance of
its duties, and reported that the sum of $200,000 would be required to be held
pursuant thereto. The Agreement, as set forth in Exhibit C, attached hereto, was
approved unanimously by the Board. The Board also unanimously approved the
pledge of $200,000 thereunder.
The temporary secretary presented various policy memoranda, copies of which
are set forth in Exhibit D, attached hereto, for review by the Board. The policy
memoranda were unanimously approved by the Board.
The temporary chairperson announced that the next order of business was the
appointment of standing committees pursuant to section three of the bylaws.
Motion having been made, seconded and carried, the following persons were
appointed as the investment committee and the trust investment committee to
carry out the functions described in section three of the bylaws:
Allan C. Martin
John L. Murphy
Motion having been made, seconded and carried, the following persons were
appointed as the examining committee and the trust audit committee to carry out
the functions described in section three of the bylaws:
Ronald P. Badie, Chairman
Frederick J. Burmeister
There being no further business to come before the meeting the same was, by
motion duly made and seconded, adjourned.
\s\John L. Murphy
--------------------------
Secretary
<PAGE>
EXHIBIT 6
<PAGE>
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 in connection with the proposed issue by Delta Funding Corporation of Home
Equity Loan Asset-Backed Certificates, Series 1996-1, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
Bankers Trust Company
of California, N.A.
By: \s\Judy L. Gomez
-----------------------------
Judy L. Gomez
Assistant Vice President
Dated: July 31, 1996
<PAGE>
EXHIBIT 7
<PAGE>
Board of Governors of the Federal Reserve System
DMB Number: 7100-0036
Federal Deposit Insurance Corporation
DMB Number: 3064-0052
Office of the Comptroller of the Company
DMB Number: 1557-0081
Federal Financial Institutions Examination Council Expires March 31, 1999
- --------------------------------------------------------------------------------
[Federal symbol] Please refer to page 1, |1|
Table of Contents, for the required
disclosure of estimated burden.
- --------------------------------------------------------------------------------
Consolidated Reports of Condition and Income for
A Bank With Domestic Offices Only and Total Assets of
$100 Million or More But Less Than $300 Million--FFIEC 033
Report at the close of business March 31, 1996 960331
----------
(RCRI 8999)
This report is required by law: 12 U.S.C. Section 324 (State member banks);
12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with domestic offices only. Banks
with branches and consolidated subsidiaries in U.S. territories and possessions,
Edge or Agreement subsidiaries, foreign branches, consolidated foreign
subsidiaries, or International Banking Facilities must file FFIEC 031.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, ___________________________________________________
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
/s/Jeana Cuoccucella
- ----------------------------------------------------------
Signature of Officer Authorized to Sign Report
4/25/96
- -----------------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the bet of our knowledge and belief has been prepared
in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/Fred [ILLEGIBLE]
- ------------------------------------------------------------
Director (Trustee)
/s/Nell Cady
- -------------------------------------------------------------
Director (Trustee)
/s/Susan R[ILLEGIBLE] Simovitz
- -------------------------------------------------------------
Director (Trustee)
- --------------------------------------------------------------------------------
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- --------------------------------------------------------------------------------
FDIC Certificate Number |_|_|_|_|_|_|
(NCR 9050)
CALL NO. 195 33 03-31-96
STBK: 06-0647 00063 STCERT: 06-26732
BANKERS TRUST COMPANY OF CALIFORNIA
300 SOUTH GRAND AVENUE
LOS ANGELES, CA 90071
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
FFIEC 033
Page 1
|2|
Consolidated Reports of Condition and Income for
A Bank With Domestic Offices Only and Total
Assets of $100 Million or More But Less Than $300 Million
- --------------------------------------------------------------------------------
Table of Contents
Signature Page Cover
Report of Income
Schedule RI--Income Statement .................................. RI-1, 2, 3
Schedule RI-A--Changes in Equity Capital ....................... RI-3
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses ..................................................... RI-4, 5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority ........................................... RI-5
Schedule RI-E--Explanations .................................... RI-5, 6
Disclosures of Estimated Burden
The estimated average burden associated with this information collection is 32.2
hours per respondent and is estimated to vary from 15 to 230 hours per
responses, depending on individual circumstances. Burden estimates include the
time of reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in a normal course of a respondent's
activities. Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be directed to the Office of
Information of Regulatory Affairs, Office of Management and Budget, Washington,
D.C. 20503, and to one of the following:
Secretary
Board of Governors of this Federal Reserve System
Washington, D.C. 20551
Legislatives and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
Report of Condition
Schedule RC--Balance Sheet ........................... RC-1, 2
Schedule RC-A--Cash and Balances Due
From Depository Institutions .................... RC-3
Schedule RC-B--Securities ............................ RC-4, 5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I, Loans and Leases ........................ RC-6, 7
Part II, Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only) .............................. RC-7a, 7b
Schedule RC-E--Deposit Liabilities ................... RC-8, 9
Schedule RC-F--Other Assets .......................... RC-10
Schedule RC-G--Other Liabilities ..................... RC-10
Schedule RC-K--Quarterly Averages .................... RC-11
Schedule RC-L--Off-Balance Sheet
Items ........................................... RC-12, 13
Schedule RC-M--Memoranda ............................. RC-14, 15
Schedule RC-N--Past Due and Nonaccrual
Loans, Leases, and Other Asset .................. RC-16
Schedule RC-O--Other Data for Deposit
Insurance Assessments ........................... RC-17, 18
Schedule RC-R--Regulatory Capital .................... RC-19, 20
Optional Narrative Statement Concerning
the Amounts Reported in the Reports
of Condition and Income ......................... RC-21
Special Report (to be completed by all banks)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
For information or assistance, national and state nonmember banks should contact
the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C.
20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00
a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RI-1
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Consolidated Report of Income
for the period January 1, 1996-March 31, 1996
All Report of Income schedules are to be reported on a calendar
year-to-date basis in thousands of dollars.
Schedule RI--Income Statement
----
1280 <-
----------------
Dollar Amounts in Thousands RIAD Mil Thou
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Interest income: ////////////
a. Interest and fee income on loans(1): ////////////
(1) Real estate loans ................... 4246 0 1.a.(1)
(2) Installment loans ................... 4247 0 1.a.(2)
(3) Credit cards and related plans ...... 4248 0 1.a.(3)
(4) Commercial (time and demand) ////////////
and all other loans ................. 4249 0 1.a.(4)
b. Income from lease financing receivables: ////////////
(1) Taxable leases ...................... 4505 0 1.b.(1)
(2) Tax-exempt leases ................... 4307 0 1.b.(2)
c. Interest income on balances due from ////////////
depository institutions(2) .............. 4115 390 1.c.
d. Interest and dividend income on securities: ////////////
(1) U.S. Treasury securities and U.S. ////////////
Government agency and corporation /////////////
obligations ....................... 4027 ? 1.d.(1)
(2) Securities issued by states and ////////////
political subdivisions in the U.S.: ////////////
(a) Taxable securities ............. 4506 0 1.d.(2)(a)
(b) Tax-exempt securities .......... 4507 0 1.d.(2)(b)
(3) Other domestic debt securities ...... 3657 1,502 1.d.(3)
(4) Foreign debt securities ............. 3658 0 1.d.(4)
(5) Equity securities (including ////////////
investments in mutual funds) ...... 3659 45 1.d.(5)
e. Interest income from trading assets ....... 4069 0 1.e.
f. Interest income on federal funds sold and ////////////
securities purchased under agreements to ////////////
resell .................................. 4020 0 1.f.
g. Total interest income (sum of items 1.a ////////////
through 1.f) ............................ 4107 1,944 1.g.
----------------
</TABLE>
- -----
(1) See instructions for loan classifications used in this schedule.
(2) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RI-2
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RI--Continued
<TABLE>
<CAPTION>
-----------------
Year-to-date
-----------------
Dollar Amounts in Thousands RIAD Mil Thou
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
2. Interest expense: //////////////
a. Interest on deposits: //////////////
(1) Transaction accounts (NOW accounts, //////////////
ATS accounts, and telephone and //////////////
preauthorized transfer //////////////
accounts) ............................. 4508 0 2.a.(1)
(2) Nontransaction accounts: //////////////
(a) Money market deposit accounts ..... 4509 0 2.a.(2)(a)
(b) Other savings deposits ............ 4511 0 2.a.(2)(b)
(c) Time certificates of deposit of //////////////
$100,000 or more .................. 4174 0 2.a.(2)(c)
(d) All other time deposits ........... 4512 0 2.a.(2)(d)
b. Expense of federal funds purchased and //////////////
securities sold under agreements to //////////////
repurchase ................................ 4180 0 2.b.
c. Interest on demand notes issued to the //////////////
U.S. Treasury, trading liabilities, and //////////////
other borrowed money ...................... 4185 0 2.c.
d. Interest on mortgage indebtedness and //////////////
obligations under capitalized leases 4072 0 2.d.
e. Interest on subordinated notes and //////////////
debentures ................................ 4200 0 2.e.
f. Total interest expense (sum of items 2.a //////////////
through 2.e) .............................. 4073 0 2.f.
------------------------
3. Net interest income (item 1.g minus 2.f) ////////////// RIAD 4074 1,944 3.
------------------------
4. Provisions: //////////////
------------------------
a. Provision for loan and lease losses ////////////// RIAD 4230 0 4.a.
b. Provision for allocated transfer risk ////////////// RIAD 4243 0 4.b.
------------------------
5. Noninterest income: //////////////
a. Income from fiduciary activities .......... 4070 12,114 5.a.
b. Service charges on deposit accounts ....... 4080 0 5.b.
c. Trading revenue (must equal Schedule RI, //////////////
sum of Memorandum items 8.a through 8.d) .. A220 0 5.c.
d. Other foreign transaction gains (losses) .. 4076 0 5.d.
e. Not applicable //////////////
f. Other noninterest income: //////////////
(1) Other fee income ...................... 5407 1,959 5.f.(1)
(2) All other noninterest income* ......... 5408 0 5.f.(2)
g. Total noninterest income (sum of items //////////////
------------------------
5.a through 5.f) ////////////// RIAD 4079 14,073 5.g.
6. a. Realized gains (losses) on held-to-maturity //////////////
securities ////////////// RIAD 3521 0 6.a.
b. Realized gains (losses) on available-for-sale//////////////
securities ////////////// RIAD 3196 0 6.b.
------------------------
7. Noninterest expense: //////////////
a. Salaries and employee benefits ............ 4135 3,504 7.a.
b. Expenses of premises and fixed assets //////////////
(net of rental income) (excluding salaries //////////////
and employee benefits and mortgage interest) 4217 650 7.b.
c. Other noninterest expense* ................ 4092 3,692 7.c.
d. Total noninterest expense (sum of items //////////////
------------------------
7.a through 7.c) ////////////// RIAD 4093 7,846 7.d.
------------------------
8. Income (loss) before income taxes and //////////////
extraordinary items and other adjustments //////////////
(item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, //////////////
------------------------
6.b, 7.d) ////////////// RIAD 4301 8,171 8.
9. Applicable income taxes (on item 8) ////////////// RIAD 4302 2,997 9.
10. Income (loss) before extraordinary items and //////////////
other adjustments (items 8 minus 9) ////////////// RIAD 4300 5,174 10.
------------------------
11. Extraordinary items and other adjustments: //////////////
a. Extraordinary items and other adjustments, //////////////
gross of income taxes* .................... 4310 0 11.a.
b. Applicable income taxes (on items 11.a)* .. 4315 0 11.b.
c. Extraordinary items and other adjustments, ///////////// ------------------------
net of income taxes (item 11.a minus 11.b) ///////////// RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ///////////// RIAD 4340 5,174 12.
------------------------
</TABLE>
- ----------
*Describe on Schedule RI-E--Explanations.
4
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RI-3
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RI--Continued
<TABLE>
<CAPTION>
----
I281 <-
----
Memoranda Year-to-date
------------
Dollar Amounts in Thousands RIAD Mil Thou
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt ////////////////
securities, loans, and leases acquired after ////////////////
August 7, 1986, that is not deductible for ////////////////
federal income tax purposes ................. 4513 0 M.1.
2. Income from the sale and servicing of mutual ////////////////
funds and annuities (included in Schedule RI, ////////////////
item 8) ..................................... 8431 0 M.2.
3. Not applicable ////////////////
4. Number of full-time equivalent employees on ////////////////
payroll at end of current period (round to //// Number
nearest whole number) ....................... 4150 240 M.4.
5. Interest and fee income on tax-exempt ////////////////
obligations (other than securities and ////////////////
leases) of states and political subdivisions ////////////////
in the U.S. (reportable in Schedule RC-C, ////////////////
part I, item 8) included in Schedule RI, item //// Mil Thou
1.a above) .................................. 4504 0 M.5.
6. To be completed by banks with loans to finance ////////////////
agricultural production and other loans to ////////////////
farmers (Schedule RC-C, part I, item 3) ////////////////
exceeding five percent of total loans, ////////////////
interest and fee income on agricultural loans ////////////////
included in item 1.a above .................. 4251 N/A M.6.
7. If the reporting bank has restated its balance ////////////////
sheet as a result of applying push down ////////////////
accounting this calendar year, report the date //// MM DD YY
of the bank's acquisition ................... 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and ////////////////
off-balance sheet derivative instruments) ////////////////
(sum of Memorandum items 8.a through 8.d must ////////////////
equal Schedule RI, item 5.c): //// Mil Thou
a. Interest rate exposures .................. 8757 0 M.8.a.
b. Foreign exchange exposures ............... 8758 0 M.8.b.
c. Equity security and index exposures ...... 8759 0 M.8.c.
d. Commodity and other exposures ............ 8760 0 M.8.d.
9. Impact on income of off-balance sheet ////////////////
derivatives held for purposes other than ////////////////
trading: ////////////////
a. Net increase (decrease) to interest income 8761 0 M.9.a.
b. Net (increase) decrease to interest expense 8762 0 M.9.b.
c. Other (noninterest) allocations .......... 8763 0 M.9.c.
Schedule RI-A--Changes in Equity Capital
</TABLE>
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
-----
I283 <-
----------------
Dollar Amounts in Thousands RIAD Mil Thou
- --------------------------------------------------------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in ///////////////
the December 31, 1995, Reports of Condition ///////////////
and Income ................................... 3215 174,520 1.
2. Equity capital adjustments from amended ///////////////
Reports of Income, net* ...................... 3216 0 2.
3. Amended balance end of previous calendar ///////////////
year (sum of items 1 and 2) .................. 3217 174,250 3.
4. Net income (loss) (must equal Schedule RI, ///////////////
item 12) ..................................... 4340 5,174 4.
5. Sale, conversion, acquisition, or retirement ///////////////
of capital stock, net ........................ 4346 0 5.
6. Changes incident to business combinations, ///////////////
net .......................................... 4356 0 6.
7. LESS: Cash dividends declared on preferred ///////////////
stock ........................................ 4470 0 7.
8. LESS: Cash dividends declared on common stock 4460 0 8.
9. Cumulative effect of changes in accounting ///////////////
principles from prior years* (see instructions ///////////////
for this schedule) ........................... 4411 0 9.
10. Corrections of material accounting errors from ///////////////
prior years* (see instructions for this ///////////////
schedule) .................................... 4412 0 10.
11. Change in net unrealized holding gains (losses) ///////////////
on available-for-sale securities ............. 8433 (45) 11.
12. Other transactions with parent holding ///////////////
company* (not included in items 5, 7, or 8 ///////////////
above) ....................................... 4415 0 12.
13. Total equity capital end of current period (sum ///////////////
of items 3 through 12) (must equal Schedule RC, ///////////////
item 28) ..................................... 3210 179,649 13.
----------------
</TABLE>
- ----------
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RI-4
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RI-B--Charge-offs and Recoveries and Changes in Allowance
for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases(1)
<TABLE>
<CAPTION>
----
1286 <-
----
(Column A) (Column B)
Charge-offs Recoveries
Part I excludes charge-offs ---------------------------------
and recoveries through the Calendar year-to-date
allocated transfer risk reserve. ---------------------------------
Dollar Amounts in Thousands RIAD Mil Thou RIAD Mil Thou
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Real estate loans .......................................... 4256 0 4257 0 1.
2. Installment loans .......................................... 4258 0 4259 0 2.
3. Credit cards and related plans ............................. 4262 0 4263 0 3.
4. Commercial (time and demand) and all other loans ........... 4264 0 4265 0 4.
5. Less financing receivables ................................. 4266 0 4267 0 5.
6. Total (sum of items 1 through 5) ........................... 4635 0 4605 0 6.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
---------------------------------
Dollar Amounts in Thousands RIAD Mil Thou RIAD Mil Thou
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans to foreign governments and official institutions /////////////// ///////////////
included in part I, items 1 through 4 above ................ 4643 0 4627 0 M.1.
2. To be completed by banks with loans to finance agricultural /////////////// ///////////////
production and other loans to farmers (Schedule RC-C, part I, /////////////// ///////////////
item 3) exceeding five percent of total loans. /////////////// ///////////////
Agricultural loans included in part I, items 1 through 4 /////////////// ///////////////
above 4268 N/A 4269 N/A M.2.
3. Not applicable /////////////// ///////////////
4. Loans to finance commercial real estate, construction, and /////////////// ///////////////
land development activities (not secured by real estate) /////////////// ///////////////
included in Schedule RI-B, part I, items 2 through 4, above 5443 0 5444 0 M.4.
5. Real estate loans (sum of Memorandum items 5.a through 5.e /////////////// ///////////////
must equal Schedule RI-B, part I, item 1, above): /////////////// ///////////////
a. Construction and land development ....................... 5445 0 5446 0 M.5.a.
b. Secured by farmland ..................................... 5447 0 5448 0 M.5.b.
c. Secured by 1-4 family residential properties: /////////////// ///////////////
(1) Revolving, open-end loans secured by 1-4 family /////////////// ///////////////
residential properties and extended under lines of /////////////// ///////////////
credit .............................................. 5449 0 5450 0 M.5.c.(1)
(2) All other loans secured by 1-4 family residential /////////////// ///////////////
properties .......................................... 5451 0 5452 0 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties 5453 0 5454 0 M.5.d.
e. Secured by nonfarm nonresidential properties ............ 5455 0 5456 0 M.5.e
---------------------------------
</TABLE>
- ----------
(1) See instructions for loan classifications used in this schedule.
6
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RI-5
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RI-B--Continued
Part II. Changes in Allowance for Loan and Lease Losses
<TABLE>
<CAPTION>
-----------------------
Dollar Amounts in Thousands RIAD Mil Thou
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1995,
Reports of Condition and Income ........................... 3124 0 1.
2. Recoveries (must equal part I, item 6, column B above) .... 4605 0 2.
3. LESS: Charge-offs (must equal part I, item 6, column A
above) .................................................... 4635 0 3.
4. Provision for loan and lease losses (must equal
Schedule RI, item 4.a) .................................... 4230 0 4.
5. Adjustments* (see instructions for this schedule) ......... 4815 0 5.
6. Balance end of current period (sum of items 1 through 5)
(must equal Schedule RC, item 4.b) ........................ 3123 0 6.
-----------------------
</TABLE>
________
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
----
I289 <-
---------------
Dollar Amounts in Thousands RIAD Mil Thou
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
1. Federal ............................................... 4780 N/A 1.
2. State and local ....................................... 4790 N/A 2.
3. Foreign ............................................... 4795 N/A 3.
4. Total (sum of items 1 through 5) (must equal sum of
Schedule RI, iems 9 and 11.b) ......................... 4770 N/A 4.
------------------
5. Deferred portion of item 4 RIAD 4772 N/A /////////////// 5.
------------------
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
----
I295 <-
----
Dollar Amounts in Thousands RIAD Mil Thou
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item /////////////////
5.f.(2)) Report amounts that exceed 10% of Schedule RI, /////////////////
item 5.f.(2): /////////////////
a. Net gains on other real estate owned ............... 5415 0 1.a.
b. Net gains on sales of loans ........................ 5416 0 1.b.
c. Net gains on sales of premises and fixed assets .... 5417 0 1.c.
Itemize and describe the three largest other amounts /////////////////
that exceed 10% of Schedule RI, item 5.f.(2): /////////////////
---------
d. TEXT 4461 4461 1.d.
----------------------------------------------------
e. TEXT 4462 4462 1.e.
----------------------------------------------------
f. TEXT 4463 4463 1.f.
----------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c): /////////////////
a. Amortization expense of intangible assets .......... 4531 0 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: /////////////////
b. Net losses on other real estate owned .............. 5418 0 2.b.
c. Net losses on sales of loans ....................... 5419 0 2.c.
d. Net losses on sales of premises and fixed assets ... 5420 0 2.d.
Itemize and describe the three larget other amounts /////////////////
that exceed 10% of Schedule RI, item 7.c: /////////////////
---------
e. TEXT 4464 Intercompany Non-Interest Service Expense 4464 1,482 2.e.
----------------------------------------------------
f. TEXT 4467 Indirect Expense due from BTCo. 4467 505 2.f.
----------------------------------------------------
g. TEXT 4468 Serv Bur Fees 4468 601 2.g.
-----------------------------------------------------------------------
</TABLE>
7
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RI-6
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RI-E--Continued
<TABLE>
<CAPTION>
---------------
Year-to-date
---------------
Dollar Amounts in Thousands RIAD Mil Thou
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
3. Extraordinary items and other adjustments (from Schedule RI, /////////////////
item 11.a) and applicable income tax effect (from Schedule /////////////////
RI, item 11.b) (itemize and describe all extraordinary items /////////////////
and other adjustments: /////////////////
---------
a. (1) TEXT 4469 4469 3.a.(1)
-----------------------------------------------------
(2) Applicable income tax effect RIAD 4486 ///////////////// 3.a.(2)
-----------------------------------------------------
b. (1) TEXT 4487 4487 3.b.(1)
-----------------------------------------------------
(2) Applicable income tax effect RIAD 4488 ///////////////// 3.b.(2)
---------
c. (1) TEXT 4489 4489 3.c.(1)
-----------------------------------------------------
(2) Applicable income tax effect RIAD 4491 ///////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income /////////////////
(from Schedule RI-A, item 2) (itemize and describe all /////////////////
adjustments): /////////////////
---------
a. TEXT 4492 4492 4.a.
---------------------------------------------------------
b. TEXT 4493 4493 4.b.
---------------------------------------------------------
5. Cumulative effect of changes in accounting principles /////////////////
from prior years (from Schedule RI-A, item 9) (itemize and /////////////////
describe all changes in accounting principles): /////////////////
---------
a. TEXT 4494 4494 5.a.
---------------------------------------------------------
b. TEXT 4495 4495 5.b.
---------------------------------------------------------
6. Corrections of material accounting errors from prior years /////////////////
(from Schedule RI-A, item 10) (itemize and describe all /////////////////
corrections: /////////////////
---------
a. TEXT 4496 4496 6.a.
---------------------------------------------------------
b. TEXT 4497 4497 6.b.
---------------------------------------------------------
7. Other transactions with parent holding company (from /////////////////
Schedule RI-A, item 12) (itemize and describe all such /////////////////
transactions): /////////////////
---------
a. TEXT 4498 4498 7.a.
---------------------------------------------------------
b. TEXT 4499 4499 7.b.
---------------------------------------------------------
8. Adjustments to allowance for loan and lease losses (from /////////////////
Schedule RI-B, part II, item 5) (itemize and describe all /////////////////
adjustments): /////////////////
---------
a. TEXT 4521 4521 8.a.
---------------------------------------------------------
b. TEXT 4522 4522 8.b.
---------------------------------------------------------
9. Other explanations (the space below is provided for the I298 I299
bank to briefly describe, at its option, any other significant
items affecting the Report of Income):
No comment [x] (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
8
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RC-1
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
----
C200 <-
---------------
Dollar Amounts in Thousands RCON Mil Thou
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from ////////////////
Schedule RC-A): ////////////////
a. Noninterest-bearing balances and currency and coin(1) .. 0081 382 1.a.
b. Interest-bearing balances(2) ........................... 0071 28,100 1.b.
2. Securities: ////////////////
a. Held-to-maturity securities (from Schedule RC-B, ////////////////
column A) .............................................. 1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, ////////////////
column D) .............................................. 1773 103,171 2.b.
3. Federal funds sold and securities purchased under agreements ////////////////
to resell: ////////////////
a. Federal funds sold ..................................... 0276 0 3.a
b. Securities purchased under agreements to resell ........ 0277 0 3.b.
4. Loans and lease financing receivables: ////////////////
a. Loans and leases, net of unearned income (from ////////////////
--------------
Schedule RC-C) ...................... RCON 2122 0 //////////////// 4.a.
b. LESS: Allowance for loan and lease ////////////////
losses .............................. RCON 3123 0 //////////////// 4.b.
c. LESS: Allocated transfer risk ////////////////
reserve ............................. RCON 3128 0 //////////////// 4.c.
--------------
d. Loans and leases, net of unearned income, allowance, and ////////////////
reserve (item 4.a minus 4.b and 4.c) ................... 2125 0 4.d.
5. Trading assets ............................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases) .. 2145 4,319 6.
7. Other real estate owned (from Schedule RC-M) .............. 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated ////////////////
companies (from Schedule RC-M) ............................ 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding 2155 0 9.
10. Intangible assets (from Schedule RC-M) .................... 2143 0 10.
11. Other assets (from Schedule RC-F) ......................... 2160 53,578 11.
12. Total assets (sum of items 1 through 11) .................. 2170 189,550 12.
---------------
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
9
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 060647 FFIEC 033
Address: 300 South Grand Avenue Page RC-2
City, State, Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC--Continued
<TABLE>
<CAPTION>
---------------
Dollar Amounts in Thousands RCON Mil Thou
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES //////////////
13. Deposits:
a. In domestic offices (sum of totals of columns A and C //////////////
from Schedule RC-E) .................................... 2200 0 13.a.
-------------
(1) Noninterest-bearing(1) ............... RCON 6631 0 ////////////// 13.a.(1)
(2) Interest-bearing ..................... RCON 6636 0 ////////////// 13.a.(2)
-------------
b. In foreign offices, Edge and Agreement subsidiaries, //////////////
and IBFs ............................................... //////////////
(1) Noninterest-bearing ................................ //////////////
(2) Interest-bearing ................................... //////////////
14. Federal funds purchased and securities sold under agreements //////////////
to repurchase: //////////////
a. Federal funds purchased ................................ 0278 0 14.a.
b. Securities sold under agreements to repurchase ......... 0279 0 14.b.
15. a. Demand notes issued to the U.S. Treasury ............... 2840 0 15.a.
b. Trading liabilities .................................... 3548 0 15.b.
16. Other borrowed money: //////////////
a. With a remaining maturity of one year or less .......... 2332 0 16.a.
b. With a remaining maturity of more than one year ........ 2333 0 16.b.
17. Mortgage indebtedness and obligations under capitalized //////////////
leases .................................................... 2910 0 17.
18. Bank's liability on acceptances executed and outstanding .. 2920 0 18.
19. Subordinated notes and debentures ......................... 3200 0 19.
20. Other liabilities (from Schedule RC-G) .................... 2930 9,901 20.
21. Total liabilities (sum of items 13 through 20) ............ 2948 9,901 21.
//////////////
22. Limited-life preferred stock and related surplus .......... 3282 0 22.
EQUITY CAPITAL //////////////
23. Perpetual preferred stock and related surplus ............. 3838 0 23.
24. Common stock .............................................. 3230 50,000 24.
25. Surplus (exclude all surplus related to preferred stock) .. 3839 50,000 25.
26. a. Undivided profits and capital reserves ................. 3632 79,696 26.a.
b. Net unrealized holding gains (losses) on available-for- //////////////
sale securities) ....................................... 8434 (47) 26.b.
27. Cumulative foreign currency translation adjustments //////////////
28. Total equity capital (sum of items 23 through 27) ......... 3210 179,649 28.
29. Total liabilities, limited-life preferred stock, equity //////////////
capital, (sum of items 21, 22 and 28) ..................... 3300 189,550 29.
--------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
<S> <C> <C> <C>
1. Indicate in the box at the right the number of the
statement below that best describes the most
comprehensive level of auditing work performed Number
for the bank by independent external ----------------
auditors as of any date during 1995 .................... RCON 6724 2 M.1.
----------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
10
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-3
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
----
C205 <-
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and coin: /////////////
a. Cash items in process of collection and unposted debits ......................................... 0020 0 1.a.
b. Currency and coin ............................................................................... 0080 0 1.b.
2. Balances due from depository institutions in the U.S.: /////////////
a. U.S. branches and agencies of foreign banks ..................................................... 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository institutions in the U.S. ................ 0085 20 2.b.
3. Balances due from banks in foreign countries and foreign central banks: /////////////
a. Foreign branches of other U.S. banks ............................................................ 0073 0 3.a.
b. Other banks in foreign countries and foreign central banks ...................................... 0074 28,100 3.b.
4. Balances due from Federal Reserve Banks ............................................................ 0090 362 4.
5. Total (sum of items 1 through 4) (must equal Schedule RC, sum of items 1.a and 1.b) ................ 0010 28,482 5.
-------------
</TABLE>
<TABLE>
<CAPTION>
Memorandum
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in items 2.a /////////////
and 2.b above...................................................................................... 0050 20 M.1.
-------------
</TABLE>
11
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-4
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-B--Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
----
C210 <-
----
Held to Maturity Available-for-sale
------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value
------------------------------------------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou RCON Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities ........................ 0211 0 0213 0 1286 675 1287 672 1.
2. U.S. Government agency and corporation ///////////// ///////////// ///////////// /////////////
obligations (exclude mortgage-backed ///////////// ///////////// ///////////// /////////////
securities): ///////////// ///////////// ///////////// /////////////
a. Issued by U.S. Government agencies(2)......... 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Government-sponsored ////////////////////////// ///////////// /////////////
agencies(3) .................................. 1294 0 1295 0 1297 0 1298 0 2.b.
3. Securities issued by states and political ///////////// ///////////// ///////////// /////////////
subdivisions in the U.S.: ///////////// ///////////// ///////////// /////////////
a. General obligations .......................... 1676 0 1677 0 1678 0 1679 0 3.a.
b. Revenue obligations .......................... 1681 0 1686 0 1690 0 1691 0 3.b.
c. Industrial development and similar obligations 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed securities (MBS): ///////////// ///////////// ///////////// /////////////
a. Pass-through securities: ///////////// ///////////// ///////////// /////////////
(1) Guaranteed by GNMA ....................... 1698 0 1699 0 1701 0 1702 0 4.a.(1)
(2) Issued by FNMA and FHLMC ................. 1703 0 1705 0 1706 0 1707 0 4.a.(2)
(3) Other pass-through securities ............ 1709 0 1710 0 1711 0 1713 0 4.a.(3)
b. Other mortgage-backed securities (include ///////////// ///////////// ///////////// /////////////
CMOs, REMICs, and stripped MBS): ///////////// ///////////// ///////////// /////////////
(1) Issued or guaranteed by FNMA, ///////////// ///////////// ///////////// /////////////
FHLMC, or GNMA ........................... 1714 0 1715 0 1716 0 1717 0 4.b.(1)
(2) Collateralized by MBS issued or guaranteed ///////////// ///////////// ///////////// /////////////
by FNMA, FHLMC, or GNMA .................. 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other mortgage-backed securities ..... 1733 0 1734 0 1735 0 1736 0 4.b.(3)
5. Other debt securities: ///////////// ///////////// ///////////// /////////////
a. Other domestic debt securities ............... 1737 0 1738 0 1739 99,568 1741 99,499 5.a.
b. Foreign debt securities ...................... 1742 0 1743 0 1744 0 1746 0 5.b.
6. Equity securities ............................... ///////////// ///////////// ///////////// /////////////
a. Investments in mutual funds .................. ///////////// ///////////// 1747 0 1748 0 6.a.
b. Other equity securities with readily ///////////// ///////////// ///////////// /////////////
determinable fair values ..................... ///////////// ///////////// 1749 0 1751 0 6.b.
c. All other equity securities(1) ............... ///////////// ///////////// 1752 3,000 1753 3,000 6.c.
7. Total (sum of items 1 through 6) (total of ///////////// ///////////// ///////////// /////////////
column A must equal Schedule RC, item 2.a) ///////////// ///////////// ///////////// /////////////
(total of column D must equal Schedule RC, ///////////// ///////////// ///////////// /////////////
item 2.b) ....................................... 1754 0 1771 0 1772 103,243 1773 103,171 7.
------------------------------------------------------------------
</TABLE>
- ----------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennesse Valley Authority.
12
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-5
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-B--Continued
<TABLE>
<CAPTION>
----
C212 <-
-------------
Memoranda Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Pledged securities.................................................................................. 0416 672 M.1.
2. Maturity and repricing data for debt securities(1), (2), (3) (excluding those in nonaccrual status): /////////////
a. Fixed rate debt securities with a remaining maturity of: /////////////
(1) Three months or less ........................................................................ 0343 0 M.2.a.(1)
(2) Over three months through 12 months ......................................................... 0344 672 M.2.a.(2)
(3) Over one year through five years ............................................................ 0345 99,499 M.2.a.(3)
(4) Over five years ............................................................................. 0346 0 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4)) .......... 0347 100,171 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: /////////////
(1) Quarterly or more frequently ................................................................ 4544 0 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ............................. 4545 0 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually ...................... 4551 0 M.2.b.(3)
(4) Less frequently than every five years ....................................................... 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4)) ....... 4553 0 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total /////////////
debt securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus /////////////
nonaccrual debt securities included in Schedule RC-N, item 6, column C) ......................... 0393 100,171 M.2.c.
3. Not applicable /////////////
4. Held-to-maturity debt securities restructured and in compliance with modified terms (included /////////////
in Schedule RC-B, items 3 through 5, column A, above) .............................................. 5365 0 M.4.
5. Not applicable /////////////
6. Floating rate debt securities with a remaining maturity of one year or less(1), (3) (included in /////////////
Memorandum items 2.b(1) through 2.b(4) above) ...................................................... 5519 0 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or /////////////
trading securities during the calendar year-to-date (report the amortized cost at date of sale /////////////
or transfer) ....................................................................................... 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale /////////////
accounts in Schedule RC-B, item 4.b): /////////////
a. Amortized cost .................................................................................. 8780 0 M.8.a.
b. Fair value ...................................................................................... 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in /////////////
Schedule RC-B, items 2, 3, and 5): /////////////
a. Amortized cost .................................................................................. 8782 0 M.9.a.
b. Fair value ...................................................................................... 8783 0 M.9.b.
-------------
</TABLE>
- ----------
(1) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(2) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(3) Memorandum items 2 and 6 and not applicable to savings banks that must
complete supplemental Schedule RC-J.
13
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-6
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading.
<TABLE>
<CAPTION>
----
C215 <-
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Loans secured by real estate /////////////
a. Construction and land development .............................................................. 1415 0 1.a.
b. Secured by farmland (including farm residential and other improvments) ......................... 1420 0 1.b.
c. Secured by 1-4 family residential properties: /////////////
(1) Revolving, open-end loans secured by 1-4 family residential properties and extended /////////////
under lines of credit ...................................................................... 1797 0 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: /////////////
(a) Secured by first liens ................................................................. 5367 0 1.c.(2)(a)
(b) Secured by junior liens ................................................................ 5368 0 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties ...................................... 1460 0 1.d.
e. Secured by nonfarm nonresidential properties ................................................... 1480 0 1.e.
2. Loans to depository institutions: /////////////
a. To commercial banks in the U.S.: /////////////
(1) To U.S. branches and agencies of foreign banks ............................................. 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. ...................................................... 1507 0 2.a.(2)
b. To other depository institutions in the U.S. ................................................... 1517 0 2.b.
c. To banks in foreign countries: /////////////
(1) To foreign branches of other U.S. banks .................................................... 1513 0 2.c.(1)
(2) To other banks in foreign countries ........................................................ 1516 0 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers ............................... 1590 0 3.
4. Commercial and industrial loans: /////////////
a. To U.S. addresses (domicile) ................................................................... 1763 0 4.a.
b. To non-U.S. addresses (domicile) ............................................................... 1764 0 4.b.
5. Acceptances of other banks ........................................................................ 1755 0 5.
6. Loans to individuals for household, family, and other personal expenditures (i.e., consumer /////////////
loans) (includes purchased paper): /////////////
a. Credit cards and related plans (includes check credit and other revolving credit plans) ........ 2008 0 6.a.
b. Other (includes single payment, installment, and all student loans) ............................ 2011 0 6.b.
7. Loans to foreign governments and official institutions (including foreign central banks) .......... 2081 0 7.
8. Obligations (other than securities and leases) of states and political subdivisions in the U.S. /////////////
(includes nonrated industrial development obligations) ............................................ 2107 0 8.
9. Other loans: /////////////
a. Loans for purchasing or carrying securities (secured and unsecured) ............................ 1545 0 9.a.
b. All other loans (exclude consumer loans) ....................................................... 1564 0 9.b.
10. Lease financing receivables (net of unearned income) .............................................. 2165 0 10.
11. LESS: Any unearned income on loans reflected in items 1-9 above .................................. 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 through 10 minus item 11) /////////////
(must equal Schedule RC, item 4.a) ................................................................ 2122 0 12.
-------------
</TABLE>
14
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-7
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
Memoranda -------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Commercial paper included in Schedule RC-C, part I, above .......................................... 1496 0 M.1.
2. Loans(1) and leases restructured and in compliance with modified terms (included in /////////////
Schedule RC-C, part I, above and not reported as past due or nonaccrual in Schedule RC-N, /////////////
Memorandum item 1): /////////////
a. Real estate loans ............................................................................... 1617 0 M.2.a.
b. All other loans and all lease financing receivables (exclude loans to individuals for /////////////
household, family, and other personal expenditures) ............................................. 8691 0 M.2.b.
3. Maturity and repricing data for loans and leases(2) (excluding those in nonaccrual status): /////////////
a. Fixed rate loans and leases with a remaining maturity of: /////////////
(1) Three months or less ........................................................................ 0348 0 M.3.a.(1)
(2) Over three months through 12 months ......................................................... 0349 0 M.3.a.(2)
(3) Over one year through five years ............................................................ 0356 0 M.3.a.(3)
(4) Over five years ............................................................................. 0357 0 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum items 3.a.(1) through 3.a.(4)) ......... 0358 0 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: /////////////
(1) Quarterly or more frequently ................................................................ 4554 0 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ............................. 4555 0 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than annually ...................... 4561 0 M.3.b.(3)
(4) Less frequently than every five years ....................................................... 4564 0 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) through 3.b.(4)) ................. 4567 0 M.3.b.(5)
c. Total income and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) (must equal /////////////
the sum of total loans and leases, net, from Schedule RC-C, part I, item 12, /////////////
and leases from Schedule RC-C, part I, item 11, minus total nonaccrual loans /////////////
and leases from Schedule RC-N, sum of items 1 through 5, column C) .............................. 1479 0 M.3.c.
d. Floating rate loans with a remaining maturity of one year or less (included in Memorandum /////////////
items 3.b.(1) through 3.b.(4) above) ............................................................ A246 0 M.3.d.
4. Loans to finance commercial real estate, construction, and land development activities /////////////
(not secured by real estate) included in Schedule RC-C, part I, items 4 and 9.b, page RC-6(3) ...... 2746 0 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) .......................... 5369 0 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family residential properties /////////////
(included in Schedule RC-C, part I, item 1.c.(2)(a), page RC-6) .................................... 5370 0 M.6.
-------------
</TABLE>
- ----------
(1) See instructions for loan classifications used in Memorandum item 2.
(2) Memorandum item 3 is not applicable to savings bank that must complete
supplemental Schedule RC-J.
(3) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, items 1.a. through 1.e.
15
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-8
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-E--Deposit Liabilities
<TABLE>
<CAPTION>
----
C225 <-
Nontransaction
Transaction Accounts Accounts
------------------------------------------------------
(Column A) (Column B) (Column C)
Total Memo: Total Total
transaction demand nontransaction
accounts accounts accounts
(including (included in (including
total demand column A) MMDAs)
deposits)
------------------------------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits of: ////////////// ////////////// /////////////
1. Individuals, partnership, and corporations ................ 2201 0 2240 0 2346 0 1.
2. U.S. Government ........................................... 2202 0 2280 0 2520 0 2.
3. States and political subdivisions in the U.S. ............. 2203 0 2290 0 2530 0 3.
4. Commercial banks in the U.S. .............................. 2206 0 2310 0 2550 0 4.
5. Other depository institutions in the U.S. ................. 2207 0 2312 0 2349 0 5.
6. Banks in foreign countries ................................ 2213 0 2320 0 2236 0 6.
7. Foreign governments and official institutions (including ////////////// ////////////// /////////////
foreign central banks) .................................... 2216 0 2300 0 2377 0 7.
8. Certified and official checks ............................. 2330 0 2330 0 ///////////// 8.
9. Total (sum of items 1 through 8) (sum of columns A and C ////////////// ////////////// /////////////
must equal Schedule RC, item 13.a) ........................ 2215 0 2210 0 2385 0 9.
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda -------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): /////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts ............................. 6835 0 M.1.a
b. Total brokered deposits ......................................................................... 2365 0 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): /////////////
(1) Issued in denominations of less than $100,000 ............................................... 2343 0 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than /////////////
$100,000 and participated out by the broker in shares of $100,000 or less ................... 2344 0 M.1.c.(2)
d. Maturity data for brokered deposits: /////////////
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining /////////////
maturity of one year or less (included in Memorandum item 1.c.(1) above) .................... A243 0 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining /////////////
maturity of one year or less (included in Memorandum item 1.b. above) ....................... A244 0 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S. /////////////
reported in item 3 above which are secured or collateralized as required under state law) ....... 5590 0 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d /////////////
must equal item 9, column C, above): /////////////
a. Savings deposits: /////////////
(1) Money market deposit accounts (MMDAs) ....................................................... 6810 0 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) ..................................................... 0352 0 M.2.a.(2)
b. Total time deposits of less than $100,000 ....................................................... 6648 0 M.2.b.
c. Time certificates of deposit of $100,000 or more ................................................ 6645 0 M.2.c.
d. Open-account time deposits of $100,000 or more .................................................. 6646 0 M.2.d.
3. All NOW accounts (included in column A above) ...................................................... 6646 0 M.3.
4. Not applicable -------------
</TABLE>
16
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-9
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-E--Continued
<TABLE>
<CAPTION>
Memoranda (Continued) -------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of Memorandum /////////////
items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) /////////////
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: /////////////
(1) Three months or less ........................................................................ A225 0 M.5.a.(1)
(2) Over three month through 12 months .......................................................... A226 0 M.5.a.(2)
(3) Over one year ............................................................................... A227 0 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: /////////////
(1) Quarterly or more frequently ................................................................ A228 0 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ............................. A229 0 M.5.b.(2)
(3) Less frequently than annually ............................................................... A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of one year /////////////
or less (included in Memorandum items 5.b.(1) though 5.b.(3) above) ............................. A231 0 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates /////////////
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) /////////////
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum /////////////
items 2.c and 2.d above):(1) /////////////
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: /////////////
(1) Three months or less ........................................................................ A232 0 M.6.a.(1)
(2) Over three month through 12 months .......................................................... A233 0 M.6.a.(2)
(3) Over one year through five years ............................................................ A234 0 M.6.a.(3)
(4) Over five years ............................................................................. A235 0 M.6.a.(4)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: /////////////
(1) Quarterly or more frequently ................................................................ A236 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ............................. A237 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually ...................... A238 0 M.6.b.(3)
(3) Less frequently than every five years ....................................................... A239 0 M.6.b.(4)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of one year or /////////////
less (included in Memorandum items 6.b.(1) though 6.b.(4) above) ................................ A240 0 M.6.c.
-------------
</TABLE>
- ----------
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
17
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-10
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
----
C230 <-
----
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Income earned, not collected on loans .............................................................. 2164 0 1.
2. Net deferred tax assets(1) ......................................................................... 2148 676 2.
3. Excess residential mortgage servicing fees receivable .............................................. 5371 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item) .................................. 2168 52,902 4.
--------- ---------------------
a. TEXT 3549 Accounts Receivable RCON 3549 29,365 ///////////// 4.a.
--------------------------------------------------------------------------
b. TEXT 3550 Intercompany Accounts Receivable RCON 3550 23,537 ///////////// 4.b.
--------------------------------------------------------------------------
c. TEXT 3551 RCON 3551 ///////////// 4.c.
-------------------------------------------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 1) .................................. 2160 53,578 5.
-------------
Memorandum
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
1. Deferred tax assets disallowed for regulatory capital purposes ..................................... 5610 0 M.1.
-------------
Schedule RC-G--Other Liabilities
----
C235 <-
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
1. a. Interest accrued and unpaid on deposits(2)....................................................... 3645 0 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) ....................... 3646 3,204 1.b.
2. Net deferred tax liabilities(1) .................................................................... 3049 0 2.
3. Minority interest in consolidated subsidiariess .................................................... 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item) .................................. 2938 6,697 4.
--------- ---------------------
a. TEXT 3552 Intercompany Accounts Payable RCON 3552 6,269 ///////////// 4.a.
--------------------------------------------------------------------------
b. TEXT 3553 RCON 3553 ///////////// 4.b.
--------------------------------------------------------------------------
c. TEXT 3554 RCON 3554 ///////////// 4.c.
-------------------------------------------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) ................................. 2930 9,901 5.
-------------
</TABLE>
- ----------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings bank, includes "dividends" accrued and unpaid on deposits.
18
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-11
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-K--Quarterly Averages(1)
<TABLE>
<CAPTION>
----
C255 <-
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS /////////////
1. Interest-bearing balances due from depository institutions ......................................... 3381 30,124 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(3) ................. 3382 682 2.
3. Securities issued by states and political subdivisions in the U.S.(3) .............................. 3383 0 3.
4. a. Other debt securities(3) ........................................................................ 3647 100,265 4.a.
b. Equity securities(4) (includes investments in mutual funds and Federal Reserve stock) ........... 3648 3,000 4.b.
5. Federal funds sold and securities purchased under agreements to resell ............................. 3365 0 5.
6. Total Loans(2): /////////////
a. Real estate loans ............................................................................... 3286 0 6.a.
b. Installment loans ............................................................................... 3287 0 6.b.
c. Credit cards and related plans .................................................................. 3288 0 6.c.
d. Commercial (time and demand) and all other loans ................................................ 3289 0 6.d.
7. Trading assets ..................................................................................... 3401 0 7.
8. Lease financing receivables (net of unearned income) ............................................... 3484 0 8.
9. Total assets(5) .................................................................................... 3368 186,065 9.
LIABILITIES /////////////
10. Interest-bearing transaction accounts (NOW accounts, ATS accounts, and telephone and /////////////
preauthorized transfer accounts) (exclude demand deposits) ......................................... 3485 0 10.
11. Nontransaction accounts: /////////////
a. Money market deposit accounts (MMDAs) ........................................................... 3486 0 11.a.
b. Other savings accounts .......................................................................... 3487 0 11.b.
c. Time certificates of deposit of $100,000 or more ................................................ 3345 0 11.c.
d. All other time deposits ......................................................................... 3469 0 11.d.
12. Federal funds purchased and securities sold under agreements to repurchase ......................... 3353 0 12.
13. Other borrowed money ............................................................................... 3355 0 13.
-------------
Memorandum
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
1. To be completed by banks with loans to finance agricultural production and other loans /////////////
to farmers (Schedule RC-C, part I, item 3) exceeding five percent of total loans. /////////////
Agricultural loans(2) included in items 6.a through 6.d above ...................................... 3379 N/A M.1.
-------------
</TABLE>
- ----------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) See instructions for loan classifications used in this schedule.
(3) Quarterly averages for all debt securities should be based on amortized
cost.
(4) Quarterly averages for all equity securities should be based on historical
cost.
(5) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
19
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-12
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
----
C260 <-
-----------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Unused commitments: ////////////////
a. Revolving, open-end lines secured by 1-4 family residential properties ////////////////
e.g., home equity lines ..................................................................... 3814 0 1.a.
b. Credit card lines ........................................................................... 3815 0 1.b.
c. Commercial real estate, construction, and land development: ////////////////
(1) Commitments to fund loans secured by real estate ........................................ 3816 0 1.c.(1)
(2) Commitments to fund loans not secured by real estate .................................... 6550 0 1.c.(2)
d. Securities underwriting ..................................................................... 3817 0 1.d.
e. Other unused commitments .................................................................... 3818 0 1.e.
-----------------
RCON Mil Thou
--------------
2. Financial standby letters of credit ............................................................... 3819 0 2.
----------------
a. Amount of financial standby letters of credit conveyed to others ............ RCON 3820 0 ///////////// 2.a.
----------------
3. Performance standy letters of credit .............................................................. 3821 0 3.
----------------
a. Amount of performance standby letters of credit conveyed to others .......... RCON 3822 0 ///////////// 3.a.
----------------
4. Commercial and similar letters of credit .......................................................... 3411 0 4.
5. Participations in acceptances (as described in the instructions) conveyed to others /////////////
by the reporting bank ............................................................................. 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting /////////////
(nonaccepting) bank ............................................................................... 3429 0 6.
7. Securities borrowed ............................................................................... 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified against /////////////
loss by the reporting bank) ....................................................................... 3433 874,730 8.
9. Loan transferred (i.e., sold or swapped) with recourse that have been treated as sold for /////////////
Call Report purposes: /////////////
a. FNMA and FHLMC residential mortgage loan pools: /////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ............... 3650 0 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ....................... 3651 0 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: /////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ............... 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ....................... 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: /////////////
(1) Outstanding principal balance of mortgages transferred as of the report date ............... 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date ....................... 3655 0 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the /////////////
Riegle Community Development and Regulatory Improvement Act of 1994: /////////////
(1) Outstanding principal balance of small business obligations transferred as of /////////////
the report date ............................................................................ A249 0 9.d.(1)
(2) Amount of retained recourse on these mortgages as of the report date ....................... A250 0 9.d.(2)
10. When-issued securities: /////////////
a. Gross commitments to purchase .................................................................. 3434 0 10.a.
b. Gross commitments to sell ...................................................................... 3435 0 10.b.
11. Spot foreign exchange contracts ................................................................... 8765 0 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and /////////////
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") .... 3430 0 12.
/////////////
--------- -----------------------
a. TEXT 3555 RCON 3555 ///////////// 12.a.
------------------------------------------------------------------------
b. TEXT 3556 RCON 3556 ///////////// 12.b.
------------------------------------------------------------------------
c. TEXT 3557 RCON 3557 ///////////// 12.c.
------------------------------------------------------------------------
d. TEXT 3558 RCON 3558 ///////////// 12.d.
----------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-13
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-L--Continued
<TABLE>
<CAPTION>
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and describe /////////////
each component of this item over 25% of Schedule RC, item 28, "Total equity capital") ............. 5591 0 13.
/////////////
--------- -----------------------
a. TEXT 5592 RCON 5592 ///////////// 13.a.
-----------------------------------------------------------------------
b. TEXT 5593 RCON 5593 ///////////// 13.b.
-----------------------------------------------------------------------
c. TEXT 5594 RCON 5594 ///////////// 13.c.
-----------------------------------------------------------------------
d. TEXT 5595 RCON 5595 ///////////// 13.d.
----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----
C210 <-
-----------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Interest Foreign Equity Commodity
Dollar Amounts in Thousands Rate Exchange Derivative and Other
- ----------------------------------------------------- Contracts Contracts Contracts Contracts
Off-balance Sheet Derivatives -----------------------------------------------------------------
Position Indicators RCON Mil Thou RCON Mil Thou RCON Mil Thou RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
14. Gross amounts (e.g., notional amounts) (for each ///////////// ///////////// ///////////// /////////////
column, sum of items 14.a through 14.e ///////////// ///////////// ///////////// /////////////
must equal sum of items 15, 16.a, and 16.b): ///////////// ///////////// ///////////// /////////////
a. Futures contracts ........................... 8693 0 8694 0 8695 0 8696 0 14.a.
b. Forward contracts ........................... 8697 0 8698 0 8699 0 8700 0 14.b.
c. Exchange-traded option contracts: ///////////// ///////////// ///////////// /////////////
(1) Written options ......................... 8701 0 8702 0 8703 0 8704 0 14.c.(1)
(2) Purchased options ....................... 8705 0 8706 0 8707 0 8708 0 14.c.(2)
d. Over-the-counter option contracts: ///////////// ///////////// ///////////// /////////////
(1) Written options ......................... 8709 0 8710 0 8711 0 8712 0 14.d.(1)
(2) Purchased options ....................... 8713 0 8714 0 8715 0 8716 0 14.d.(2)
e. Swaps ....................................... 3450 0 3826 0 8719 0 8720 0 14.e.
15. Total gross notional amount of derivative ///////////// ///////////// ///////////// /////////////
contracts held for trading ..................... A126 0 A127 0 8723 0 8724 0 15.
16. Total gross notional amount of derivative ///////////// ///////////// ///////////// /////////////
contracts held for purposes other than trading: ///////////// ///////////// ///////////// /////////////
a. Contracts marked to market .................. 8725 0 8726 0 8727 0 8728 0 16.a.
b. Contracts not marked to market .............. 8729 0 8730 0 8731 0 8732 0 16.b.
17. Gross fair values of derivative contracts: ///////////// ///////////// ///////////// /////////////
a. Contracts held for trading: ///////////// ///////////// ///////////// /////////////
(1) Gross positive fair value ............... 8733 0 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative fair value ............... 8737 0 8738 0 8739 0 8740 0 17.a.(2)
b. Contracts held for purposes other than ///////////// ///////////// ///////////// /////////////
trading that are marked to market: ///////////// ///////////// ///////////// /////////////
(1) Gross positive fair value ............... 8741 0 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative fair value ............... 8745 0 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for purposes other than ///////////// ///////////// ///////////// /////////////
trading that are not marked to market: ///////////// ///////////// ///////////// /////////////
(1) Gross positive fair value ............... 8749 0 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative fair value ............... 8753 0 8754 0 8755 0 8756 0 17.c.(2)
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Memoranda
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.- 2. Not applicable /////////////
13. Unused commitments with an original maturity exceeding one year that are reported in /////////////
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments /////////////
that are fee paid or otherwise legally binding) ................................................... 3833 0 M.3.
a. Participations in commitments with an original maturity exceeding one year /////////////
-----------------------
conveyed to others ................................................... RCON 3834 ///////////// M.3.a.
---------------------------------------
</TABLE>
21
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-14
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
----
C265
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal /////////////
shareholders, and their related interests as of the report dates: /////////////
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal /////////////
shareholders, and their related interests ....................................................... 6164 0 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the /////////////
amount of all extensions of credit by the reportin bank (including extensions of /////////////
credit to related interests) equals or exceeds the lesser of $500,000 or 5 percent Number /////////////
------------------
of total capital as defined for this purpose in agency regulations .......... RCON 6165 0 ///////////// 1.b.
------------------
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches and /////////////
agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) .......................... 3405 0 2.
3. Not applicable /////////////
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others /////////////
(include both retained servicing and purchased servicing): /////////////
a. Mortgages serviced under a GNMA contract ........................................................ 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract: /////////////
(1) Serviced with recourse to servicer .......................................................... 5501 0 4.b.(1)
(2) Serviced without recourse to servicer ....................................................... 5502 0 4.b.(2)
c. Mortgages serviced under a FNMA contract: /////////////
(1) Serviced under a regular option contract .................................................... 5503 0 4.c.(1)
(2) Serviced under a special option contract .................................................... 5504 0 4.c.(2)
d. Mortgages serviced under other servicing contracts .............................................. 5505 0 4.d.
5. Not applicable /////////////
6. Intangible assets: /////////////
a. Mortgage servicing rights ....................................................................... 3164 0 6.a.
b. Other identifiable intangible assets: /////////////
(1) Purchased credit card relationships ......................................................... 5506 0 6.b.(1)
(2) All other identifiable intangible assets .................................................... 5507 0 6.b.(2)
c. Goodwill ........................................................................................ 3163 0 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) .......................... 2143 0 6.d.
e. Amount of intangible assets (included in item 6.b(2) above) that have been grandfathered or are /////////////
otherwise qualifying for regulatory capital purposes ............................................ 6442 0 6.a.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to /////////////
redeem the debt .................................................................................... 3295 0 7.
-------------
</TABLE>
- ----------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
22
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-15
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
<TABLE>
<CAPTION>
Schedule RC-M--Continued
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
8. a. Other real estate owned: /////////////
(1) Direct and indirect investments in real estate ventures .................................... 5372 0 8.a.(1)
(2) All other real estate owned: /////////////
(a) Construction and land development ...................................................... 5508 0 8.a.(2)(a)
(b) Farmland ............................................................................... 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties ...................................................... 5510 0 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties ......................................... 5511 0 8.a.(2)(d)
(e) Nonfarm nonresidential properties ...................................................... 5512 0 8.a.(2)(e)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) .................. 2150 0 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: /////////////
(1) Direct and indirect investments in real estate ventures .................................... 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies .............. 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2) (must equal Schedule RC, item 8) ................... 2130 0 8.b.
c. Total assets of unconsolidated subsidiaries and associated companies ........................... 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, /////////////
item 23, "Perpetual preferred stock and related surplus" .......................................... 3778 0 9.
10. Mutual fund and annuity sales during the quarter (include proprietary, private label, and third /////////////
party products): /////////////
a. Money market funds ............................................................................. 6441 0 10.a.
b. Equity securities funds ........................................................................ 8427 0 10.b.
c. Debt securities funds .......................................................................... 8428 0 10.c.
d. Other mutual funds ............................................................................. 8429 0 10.d.
e. Annuities ...................................................................................... 8430 0 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through 10.e above) .... 8784 0 10.f.
-------------
- -----------------------------------------------------------------------------------------------------------------------------------
-------------
Memorandum Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
1. Interbank holdings of capital instruments (to be completed for the December report only): /////////////
a. Reciprocal holdings of banking organizations' capital instruments .............................. 3836 N/A M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments ........................... 3837 N/A M.1.b.
-------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-16
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
<TABLE>
<CAPTION>
Schedule RC-N--Past Due and Nonaccrual Loans(1), Leases, and Other Assets
----
The FFIEC regards the information reported in all of C270 <-
Memorandum item 1, in items 1 through 7, column A, --------------------------------------------------
and in Memorandum items 2 through 4, column A, (Column A) (Column B) (Column C)
as confidential. Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
-------------------------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
1. Real estate loans ............................................. 1210 0 1211 0 1212 0 1.
2. Installment loans ............................................. 1214 0 1215 0 1216 0 2.
3. Credit card and related plans ................................. 1218 0 1219 0 1220 0 3.
4. Commercial (time and demand) and all other loans .............. 1222 0 1223 0 1224 0 4.
5. Lease financing receivables ................................... 1226 0 1227 0 1228 0 5.
6. Debt securities and other assets (exclude other real estate ///////////// ///////////// /////////////
owned and other repossessed assets) ........................... 3505 0 3506 0 3507 0 6.
-------------------------------------------------
====================================================================================================================================
Amounts reported in items 1 through 5 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 7 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 5.
-------------------------------------------------
RCON Mil Thou RCON Mil Thou RCON Mil Thou
7. Loans and leases reported in items 1 through 5 above which -------------------------------------------------
are wholly or partially guaranteed by the U.S. Government ..... 5612 0 5613 0 5614 0 7.
a. Guaranteed portion of loans and leases included in item 7 ///////////// ///////////// /////////////
above ...................................................... 5615 0 5616 0 5617 0 7.a.
-------------------------------------------------
----
Memoranda C273 <-
-------------------------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
1. Restructured loans and leases included in Schedule RC-N ///////////// ///////////// /////////////
items 1 through 5, above (and not reported in Schedule RC-C, ///////////// ///////////// /////////////
part I, Memorandum item 2) .................................... 1658 0 1659 0 1661 0 M.1.
2. To be completed by banks with loans to finance agricultural ///////////// ///////////// /////////////
production and other loans to farmers (Schedule RC-C, part I, ///////////// ///////////// /////////////
item 3) exceeding five percent of total loans: ///////////// ///////////// /////////////
Agricultural loans included in Schedule RC-N, items 1 ///////////// ///////////// /////////////
through 4, above .............................................. 1230 N/A 1231 N/A 1232 N/A M.2.
3. Loans to finance commercial real estate, construction, and ///////////// ///////////// /////////////
land development activities (not secured by real estate) ///////////// ///////////// /////////////
included in Schedule RC-N, items 2 through 4, above ........... 5421 0 5422 0 5423 0 M.3.
4. Real estate loans (sum of Memorandum items 4.a through 4.e ///////////// ///////////// /////////////
must equal Schedule RC-N, item 1, above): ///////////// ///////////// /////////////
a. Construction and land development .......................... 5424 0 5425 0 5426 0 M.4.a.
b. Secured by farmland ........................................ 5427 0 5428 0 5429 0 M.4.b.
c. Secured by 1-4 family residential properties: ///////////// ///////////// /////////////
(1) Revolving, open-end loans secured by 1-4 family ///////////// ///////////// /////////////
residential properties and extendd under lines of credit 5430 0 5431 0 5432 0 M.4.c.(1)
(2) All other loans secured by 1-4 family residential ///////////// ///////////// /////////////
properties ............................................. 5433 0 5434 0 5435 0 M.4.c.(2)
d. Secured by multifamily (5 or more) residential properties .. 5436 0 5437 0 5438 0 M.4.d.
e. Secured by nonfarm nonresidential properties ............... 5439 0 5440 0 5441 0 M.4.e.
-------------------------------------------------
</TABLE>
- ----------
(1) See instructions for loan classifications used in this schedule.
24
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-17
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-O--Other Data for Deposit Insurance Assessments
<TABLE>
<CAPTION>
----
C275 <-
-------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Unposted debits (see instructions): /////////////
a. Actual amount of all unposted debits ........................................................... 0030 N/A 1.a.
OR /////////////
b. Separate amount of unposted debits: /////////////
(1) Actual amount of unposted debits to demand deposits ........................................ 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ........................... 0032 0 1.b.(2)
2. Unposted credits (see instructions): /////////////
a. Actual amount of all unposted credits .......................................................... 3510 N/A 2.a.
OR /////////////
b. Separate amount of unposted credits: /////////////
(1) Actual amount of unposted credits to demand deposits ....................................... 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) .......................... 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total deposits) 3520 0 3.
4. Deposits of consolidated subsidiaries (not included in total deposits): /////////////
a. Demand deposits of consolidated subsidiaries ................................................... 2211 0 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ...................................... 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ........................... 5514 0 4.c.
5. Not applicable -------------
Item 6 is not applicable to state nonmember banks that have not been authorized by the
Federal Reserve to act as pass-through correspondents.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on /////////////
behalf of its respondent depository institutions that are also reflected as deposit liabilities /////////////
of the reporting bank: /////////////
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5, column B) ......... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, item 4 or 5, /////////////
column A or C, but not column B) ............................................................... 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) /////////////
a. Unamortized premiums ........................................................................... 5516 0 7.a.
b. Unamortized discounts .......................................................................... 5517 0 7.b.
-------------
- -----------------------------------------------------------------------------------------------------------------------------
-------------
8. To be completed by banks with "Oakar deposits." /////////////
Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of the /////////////
Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)) .............. 5518 N/A 8.
-------------
- -----------------------------------------------------------------------------------------------------------------------------
-------------
9. Deposits in lifeline accounts ..................................................................... 5596 //////// 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total deposits) ..... 8432 0 10.
-------------
</TABLE>
- ----------
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
25
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-18
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-O--Continued
<TABLE>
<CAPTION>
-------------
Dollar Amounts in Thousands RCON Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
11. Adjustments to demand deposits reported in Schedule RC-E for certain reciprocal demand /////////////
balances: /////////////
a. Amount by which demand deposits would be reduced if reciprocal demand balances between /////////////
the reporting bank and savings associations were reported on a net basis rather than a gross /////////////
basis in Schedule RC-E ....................................................................... 8785 0 11.a.
b. Amount by which demand deposits would be reduced if reciprocal demand balances /////////////
between the reporting bank and U.S. branches and agencies of foreign banks were reported /////////////
on a gross basis rather than a net basis in Schedule RC-e .................................... A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of collection /////////////
were included in the calculation of net reciprocal demand balances between the reporting /////////////
bank and the domestic offices of U.S. banks and savings associations in Schedule RC-E......... A182 0 11.c.
Memoranda (to be completed each quarter except as noted)
-------------
Dollar Amounts in Thousands RCON Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
1. Total deposits of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) must equal /////////////
Schedule RC, item 13.a): /////////////
a. Deposit accounts of $100,000 or less: /////////////
(1) Amount of deposit accounts of $100,000 or less ........................................... 2702 0 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number /////////////
---------------------
completed for the June report only) ................................ RCON 3779 N/A ///////////// M.1.a.(2)
---------------------
b. Deposit accounts of more than $100,000: /////////////
(1) Amount of deposit accounts of more than $100,000 2710 0 M.1.b.(1)
Number /////////////
---------------------
(2) Number of deposit accounts of more than $100,000 ................... RCON 2772 0 ///////////// M.1.b.(2)
---------------------
2. Estimated amount of uninsured deposits of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying the
number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2)
above by $100,000 and subtracting the result from the amount of deposit accounts of
more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or procedure YES NO
-------------
for determining a better estimate of uninsured deposits than the estimate described abaove ... 6681 X M.2.a.
-------------
b. If the box marked YES has been checked, report the estimate of uninsured deposits RCON Mil Thou
-------------
determined by using your bank's method or procedure .......................................... 5597 N/A M.2.b.
-------------
- --------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed: C277 <-
----
Diana Cucciniello, Controller (201) 860-2184
- ---------------------------------------------------------------------------- ---------------------------------------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
</TABLE>
26
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-19
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-R--Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<CAPTION>
----
C280 <-
<S> <C> <C> <C>
1. Test for determining the extent to which Schedule RC-R must be completed. To be --------------
completed only by banks with total assets of less than $1 billion. Indicate in the YES NO
appropriate box at the right whether the bank has total capital greater than or -------------------------
equal to eight percent of adjusted total assets .................................. RCON 6056 X //// 1.
-------------------------
</TABLE>
For purposes of this test, adjusted total assets equals total assets less cash,
U.S. Treasuries, U.S. Government agency obligations, and 80 percent of U.S.
Government-sponsored agency obligations plus the allowances for loan and lease
losses and selected off-balance sheet items as reported on Schedule RC-L (see
instructions).
If the box marked YES has been checked, then the bank only has to complete items
2 and 3 below. If the box marked NO has been checked, the bank must complete
the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not in
compliance with the risk-based capital guidelines.
<TABLE>
<CAPTION>
---------------------------------
(Column A) (Column B)
Subordinated Other
Debt(1) and Limited-
Intermediate Life
Dollar Amounts in Thousands Term Preferred Capital
- ------------------------------------------------------------------------------------- Stock Instruments
---------------------------------
RCON Mil Thou RCON Mil Thou
---------------------------------
<S> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments (original weighte
average maturity of at least five years) with a remaining maturity of:
a. One year or less .............................................................. 3780 0 3786 0 2.a.
b. Over one year through two years ............................................... 3781 0 3787 0 2.b.
c. Over two years through three years ............................................ 3782 0 3788 0 2.c.
d. Over three years through four years ........................................... 3783 0 3789 0 2.d.
e. Over four years through five years ............................................ 3784 0 3790 0 2.e.
f. Over five years ............................................................... 3785 0 3791 0 2.f.
3. Amounts used in calculating regulatory capital ratios (report amounts ///////////// /////////////
determined by the bank for its own internal regulatory capital analyses): ///////////// -------------
///////////// RCON Mil Thou
-------------
a. Tier 1 capital ................................................................ ///////////// 8274 179,696 3.a.
b. Tier 2 capital ................................................................ ///////////// 8275 0 3.b.
c. Total risk-based capital ...................................................... ///////////// 3792 179,696 3.c.
d. Excess allowance for loan and lease losses .................................... ///////////// A222 0 3.d.
e. Risk-weighted assets .......................................................... ///////////// A223 0 3.e.
f. "Average total assets" ........................................................ ///////////// A224 184,981 3.f.
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
(Column A) (Column B)
Items 4-9 and Memoranda items 1 and 2 are to be completed Assets Credit Equiv-
by banks that answered NO to item 1 above and Recorded alent Amount
by banks with total assets of $1 billion or more. on the of Off-Balance
Balance Sheet Sheet Items(2)
--------------------------------
RCON Mil Thou RCON Mil Thou
<S> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned to --------------------------------
the Zero percent risk category: ///////////// /////////////
a. Assets recorded on the balance sheet: ///////////// /////////////
(1) Securities issued by, other claims on, and claims unconditionally ///////////// /////////////
guaranteed by, the U.S. Government and its agencies and other OECD ///////////// /////////////
central governments ....................................................... 3794 N/A ///////////// 4.a.(1)
(2) All other ................................................................. 3795 N/A ///////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ........................... ///////////// 3796 N/A 4.b.
-------------------------------
</TABLE>
- ----------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not report in column B the risk-weighted amount of assets reported in
column A.
27
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue Page RC-20
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Schedule RC-R--Continued
<TABLE>
<CAPTION>
--------------------------------
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(2)
--------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items assigned to the ///////////// /////////////
20 percent risk category: ///////////// /////////////
a. Assets recorded on the balance sheet: ///////////// /////////////
(1) Claims conditionally guaranteed by the U.S. Government and its agencies ///////////// /////////////
agencies and other OECD central governments; by securities issued by ///////////// /////////////
U.S. Government-sponsored agencies; and by cash on deposit ............... 3798 N/A ///////////// 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Goverment and its ///////////// /////////////
agencies and other OECD central governments; by securities issued by ///////////// /////////////
U.S. Government-sponsored agencies; and by cash on deposit ............... 3799 N/A ///////////// 5.a.(2)
(3) All other ................................................................ 3800 N/A ///////////// 5.a.(3)
b. Credit equivalent amount of off-balance sheet items .......................... ///////////// 3801 N/A 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items assigned to the ///////////// /////////////
50 percent risk category: ///////////// /////////////
a. Assets recorded on the balance sheet ......................................... 3802 N/A ///////////// 6.a.
b. Credit equivalent amount of off-balance sheet items .......................... ///////////// 3803 N/A 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items assigned to the ///////////// /////////////
100 percent risk category: ///////////// /////////////
a. Assets recorded on the balance sheet ......................................... 3804 N/A ///////////// 7.a.
b. Credit equivalent amount of off-balance sheet items .......................... ///////////// 3805 N/A 7.b.
8. On-balance sheet asset values excluded from the calculation of the risk-based ///////////// /////////////
capital ratio(2) ................................................................ 3806 N/A ///////////// 8.
9. Total assets recorded on the balance sheet (sum of items 4.a, 5.a, 6.a, 7.a, and 8, ///////////// /////////////
column A) (must equal Schedule RC, item 12 plus items 4.b and 4.c) .............. 3807 N/A ///////////// 9.
--------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda -------------
Dollar Amounts in Thousands RCON Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Current credit exposure across off-balance sheet derivative contracts covered by the /////////////
risk-based capital standards ........................................................................ 8764 N/A M.1.
-------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------
With the remaining maturity of
----------------------------------------------------
(Column A) (Column B) (Column C)
One year Over Over
or less one year five years
through
five years
2. Notional principal amounts of off-balance ----------------------------------------------------
sheet derivative contracts:(3) RCON Mil Thou RCON Mil Thou RCON Mil Thou
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
a. Interest rate contracts ................................... 3809 N/A 8766 N/A 8767 N/A M.2.a.
b. Foreign exchange contracts ................................ 3812 N/A 8769 N/A 8770 N/A M.2.b.
c. Gold contracts ............................................ 8771 N/A 8772 N/A 8773 N/A M.2.c.
d. Other precious metals contracts............................ 8774 N/A 8775 N/A 8776 N/A M.2.d.
e. Other commodity contracts.................................. 8777 N/A 8778 N/A 8779 N/A M.2.e.
b. Equity derivative contracts ............................... A000 N/A A001 N/A A002 N/A M.2.f.
----------------------------------------------------
</TABLE>
- ----------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes
on-balance sheet asset values (or portions thereof) of off-balance sheet
interest rate, foreign exchange rate, and commodity contracts and those
contracts (e.g., future contracts) not subject to risk-based capital.
Exclude from item 8 margin accounts and accrued receivables as well as any
portion of the allowance for loan and lease losses in excess of the amount
that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
28
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647 FFIEC 033
Address: 300 South Grand Avenue
Page RC-21
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on March 31, 1996
Bankers Trust Company of California, National Association
- ------------------------------------------------------------
Legal Title of Bank
Los Angeles , California
- ------------------- --------------------------
City State
The management of the reporting bank may, if it wishes, submit a brief narrative
statement on the amount reported in the Reports of Condition and Income. This
optional statement will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in response to any
request for individual bank report data, however, the information reported in
column A and in all of Memorandum item 1 of Schedule RC-N is regarded as
confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT
THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE
NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE
AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER
INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a
statement may check the "No comment" box below and should make no entries of any
kind in th space provided for the narrative statement; i.e., DO NOT enter in
this space such phrases as "No statement," "Not applicable," "N/A," "No
comment," and "None."
The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement must
not exceed 700 characters, including punctuation, indentation, and standard
spacing between words and sentences. If any submission should exceed 750
characters, as defined, it will be truncated at 750 characters with no notice to
the submitting bank and the truncated statement will appear as the bank's
statement both on agency computerized records and in computer file releases to
the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who thereby
attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing narrative
statement will be deleted from the files, and from disclosure; the bank, at its
option, may replace it with a statement, under signature, appropriate to the
amended data.
The optional narrative statement will appear in agency records and in release to
the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- --------------------------------------------------------------------------------
No comment |X| (RCON 6979) C271 C272 <-
- --------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/ Diana Cucciniello 4/26/96
- ---------------------------------------- ---------------------------
Signature of Executive Officer of Bank Date of Signature
29
<PAGE>
Legal Title of Bank: Bankers Trust Company of California, National Association
Call Date: 3/31/96 ST-BK: 06-0647
Address: 300 South Grand Avenue
City, State Zip: Los Angeles, CA 90071
FDIC Certificate No.: |2|6|7|3|2|
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- --------------------------------------------------------------------------------
NAME AND ADDRESS OF BANK OMB No. for OCC: 1557-0081
OMB No. for FDIC 3064-0052
OMB No. For Federal Reserve: 7100-0036
Expiration Date: 3/31/96
PLACE LABEL HERE SPECIAL REPORT
(Dollar Amounts in Thousands)
-----------------------------------------------
CLOSE OF BUSINESS FDIC Certificate Number
DATE C-700 <-
3/31/96 2/6/7/3/2
- --------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- --------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does
not constitute a part of the Report of Condition. With each Report of Condition,
these laws require all banks to furnish a report of all loans or other
extensions of credit to their executive officers made since the date of the
previous Report of Condition. Data regarding individual loans or other
extensions of credit are not required. If no such loans or other extensions of
credit were made during the period, insert "none" against subitem (a). (Exclude
the first $15,000 of indebtedness of each executive officer under bank credit
card plan.) See Sections 215.2 and 215.3 of Title 12 of the Code of Federal
Regulations (Federal Reserve Board Regulation O) for the definitions of
"executive officer" and "extension of credit," respectively. Exclude loans and
other extensions of credit to directors and principal shareholders who are not
executive officers.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
---------------------
o Number of loans made to executive officers since the previous Call Report date ........... RCON 3561 0 a.
---------------------
o Total dollar amount of above loans (in thousands of dollars) ............................. RCON 3562 0 b.
---------------------
o Range of interest charged on above loans ------------------------------------------------
(example: 9 3/4% = 9.75) ........................................ RCON 7701 0.00 % to RCON 7702 0.00 % c.
------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
/s/ Diana Cucciniello, Controller 4/26/96
- ----------------------------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER/EXTENSION
(TEXT 8904)
Diana Cucciniello, Controller (201) 860-2184
- ----------------------------------------------------------------------------------------------------------------------
[ILLEGIBLE] 8040/53 (6/95)
</TABLE>
30
