<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 30, 1997
-------------------
Fund America Investors Corporation II
-------------------------------------
(Exact name of registrant as specified in charter)
Delaware 33-73748 84-1218906
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6400 S. Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 290-6025
===============================================================================
(Former name or former address, if changed since last report.)
<PAGE> 2
Item 1. Changes in Control of Registrant.
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Not Applicable.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
Fund America Investors Trust 1997-NMC1 (the "Issuer") was formed
pursuant to a Deposit Trust Agreement, dated as of September 1, 1997 (the
"Trust Agreement"), by and between the Registrant and Wilmington Trust
Company, as owner trustee (the "Owner Trustee").
On September 30, 1997, the Issuer issued $121,765,000 original
principal amount of its Collateralized Mortgage Obligations, Series
1997-NMC1 (the "Bonds") pursuant to an Indenture, dated as of September
1, 1997 (the "Indenture"), between the Registrant and Norwest Bank
Minnesota, National Association, as trustee (the "Indenture Trustee").
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Indenture.
The financial guaranty insurance policy (the "MBIA Insurance
Policy") issued by MBIA Insurance Corporation provides an unconditional
and irrevocable guarantee as to payment of Insured Payments, subject to
the terms of the MBIA Insurance Policy.
As security for the Bonds, the Issuer pledged to the Indenture
Trustee pursuant to the Indenture a pool of adjustable rate Mortgage
Loans secured by first liens on one- to four-family residential
properties. The Mortgage Loans were purchased by the Registrant in a
privately negotiated transaction with National Mortgage Corporation
("NMC") pursuant to a Mortgage Loan Sale Agreement, dated as of September
1, 1997, between the Registrant and NMC and subsequently transferred to
the Issuer pursuant to a Mortgage Loan Contribution Agreement, dated as
of September 1, 1997, by and between the Registrant, as transferor, and
the Issuer, as transferee.
The Bonds have been sold by the Registrant to Greenwich Capital
Markets, Inc. and ContiFinancial Services Corporation (the
"Underwriters") pursuant to an Underwriting Agreement, dated as of
September 17, 1997, among the Underwriters and the Registrant.
Certain characteristics of the Mortgage Loans pledged to the
Indenture Trustee pursuant to the Indenture are set forth below,
beginning on the following page.
2
<PAGE> 3
10/07/97
FUND AMERICA INVESTORS TRUST 1997-NMC1 - COMBINED PORTFOLIO (THE MORTGAGE LOANS)
09/01/97 Scheduled Balances
<TABLE>
<S> <C>
TOTAL CURRENT BALANCE: $123,620,068.92
NUMBER OF LOANS: 972
AVERAGE CURRENT BALANCE: $ 127,181.14
WEIGHTED AVERAGE GROSS COUPON: 9.90329 %
WEIGHTED AVERAGE GROSS MARGIN: 5.9384 %
WEIGHTED AVERAGE MAX INT RATE: 15.9336 %
WEIGHTED AVERAGE NEXT RESET: 17.52 months
WEIGHTED AVERAGE ORIGINAL LOAN TO VALUE: 79.80 %
WEIGHTED AVERAGE ORIGINAL TERM: 360.00 months
WEIGHTED AVERAGE REMAINING TERM: 358.80 months
WEIGHTED AVERAGE SEASONING: 1.20 months
TOP STATE CONCENTRATIONS ($): 31.52 % Colorado, 13.74 % Georgia, 9.06 % California
MAXIMUM ZIP CODE CONCENTRATION ($): 1.59 % 80123 (LITTLETON, CO)
</TABLE>
<TABLE>
<CAPTION>
CURRENT
PRINCIPAL BALANCE PCT($) # OF LOANS
----------------- ------ ----------
<S> <C> <C> <C> <C>
LOAN STATUS: Additional Mortgage Loans 12,694,759.42 10.27 108
Initial Mortgage Loans 110,925,309.50 89.73 864
FIXED/ARM: ARM 123,620,068.92 100.00 972
PRODUCT: 2/28 6 Mo LIBOR 84,339,603.76 68.22 703
3/27 6 Mo LIBOR 1,526,949.79 1.24 9
6 Mo LIBOR 37,753,515.37 30.54 260
INDEX: 6 Mo LIBOR 123,620,068.92 100.00 972
CURRENT BALANCE: 24,000 - 50,000 1,978,096.15 1.60 47
50,001 - 100,000 31,146,022.51 25.19 408
100,001 - 150,000 31,651,160.89 25.60 261
150,001 - 200,000 22,479,188.34 18.18 132
200,001 - 250,000 12,703,777.27 10.28 56
250,001 - 300,000 7,285,796.86 5.89 27
300,001 - 350,000 6,291,997.03 5.09 19
350,001 - 400,000 2,693,587.27 2.18 7
400,001 - 450,000 3,018,504.39 2.44 7
450,001 - 500,000 1,924,034.43 1.56 4
500,001 - 550,000 543,352.72 0.44 1
550,001 - 600,000 576,318.47 0.47 1
600,001 - 650,000 623,613.69 0.50 1
700,001 - 704,619 704,618.90 0.57 1
GROSS COUPON: 7.55000 - 8.00000 2,404,307.66 1.94 10
8.00001 - 8.50000 3,639,597.21 2.94 30
8.50001 - 9.00000 7,856,880.94 6.36 58
9.00001 - 9.50000 21,726,926.71 17.58 154
9.50001 - 10.00000 33,045,421.04 26.73 252
10.00001 - 10.50000 29,435,622.35 23.81 242
10.50001 - 11.00000 20,606,799.02 16.67 173
11.00001 - 11.50000 3,141,115.59 2.54 32
11.50001 - 12.00000 1,002,380.55 0.81 12
12.00001 - 12.50000 643,442.46 0.52 6
12.50001 - 13.00000 92,575.39 0.07 2
13.00001 - 13.10000 25,000.00 0.02 1
</TABLE>
3
<PAGE> 4
10/07/97
FUND AMERICA INVESTORS TRUST 1997-NMC1 - COMBINED PORTFOLIO (THE MORTGAGE LOANS)
09/01/97 Scheduled Balances
<TABLE>
<CAPTION>
CURRENT
PRINCIPAL BALANCE PCT($) # OF LOANS
----------------- ------ ----------
<S> <C> <C> <C> <C>
ORIGINAL LTV: 25.58 - 30.00 94,953.88 0.08 2
30.01 - 35.00 443,849.13 0.36 6
35.01 - 40.00 310,553.07 0.25 6
40.01 - 45.00 790,544.08 0.64 5
45.01 - 50.00 314,614.82 0.25 5
50.01 - 55.00 1,338,334.78 1.08 12
55.01 - 60.00 3,014,118.79 2.44 23
60.01 - 65.00 6,053,049.51 4.90 51
65.01 - 70.00 7,333,764.79 5.93 59
70.01 - 75.00 15,144,033.94 12.25 116
75.01 - 80.00 33,257,093.56 26.90 255
80.01 - 85.00 22,654,080.70 18.33 175
85.01 - 90.00 32,871,077.87 26.59 257
STATE: Colorado 38,968,556.46 31.52 295
Georgia 16,984,589.80 13.74 141
California 11,194,662.96 9.06 67
Connecticut 10,085,991.34 8.16 76
Massachusetts 9,184,214.86 7.43 75
Maryland 6,038,676.18 4.88 38
Virginia 4,964,717.26 4.02 31
Utah 4,318,119.99 3.49 36
Rhode Island 3,016,435.92 2.44 34
Illinois 2,577,019.84 2.08 19
North Carolina 2,184,666.26 1.77 22
Arizona 1,869,867.88 1.51 21
Florida 1,307,656.57 1.06 15
New Mexico 1,248,134.73 1.01 4
Oklahoma 1,217,619.89 0.98 8
Wyoming 834,261.77 0.67 11
Oregon 825,146.48 0.67 9
Minnesota 739,703.79 0.60 8
New Hampshire 680,786.73 0.55 7
Texas 679,627.30 0.55 9
South Dakota 605,050.00 0.49 8
Tennessee 554,253.70 0.45 6
Ohio 535,943.21 0.43 2
District of Columbia 534,192.19 0.43 5
Montana 503,046.75 0.41 6
New York 440,100.50 0.36 4
Idaho 342,642.39 0.28 3
South Carolina 305,323.39 0.25 4
Washington 291,021.71 0.24 2
Nevada 249,628.17 0.20 1
Indiana 92,165.55 0.07 1
Nebraska 91,963.82 0.07 1
Michigan 63,171.73 0.05 1
Kansas 55,109.80 0.04 1
Missouri 36,000.00 0.03 1
PURPOSE: Purchase 63,556,356.60 51.41 518
Cash Out Refinance 38,540,925.97 31.18 288
Rate/Term Refinance 13,765,314.20 11.14 105
Debt Consolidation 7,757,472.15 6.28 61
DOCUMENTATION: Full Documentation 77,568,687.47 62.75 646
Stated Documentation 36,816,342.80 29.78 272
Fast Documentation 9,235,038.65 7.47 54
OCCUPANCY: Primary 120,419,596.23 97.41 934
Investor 2,253,271.40 1.82 25
Second Home 947,201.29 0.77 13
</TABLE>
4
<PAGE> 5
10/07/97
FUND AMERICA INVESTORS TRUST 1997-NMC1 - COMBINED PORTFOLIO (THE MORTGAGE LOANS)
09/01/97 Scheduled Balances
<TABLE>
<CAPTION>
CURRENT
PRINCIPAL BALANCE PCT($) # OF LOANS
----------------- ------ ----------
<S> <C> <C> <C> <C>
PREPAY: 1 YR PREPAYMENT PENALTY 36,341,450.79 29.40 272
2 YR PREPAYMENT PENALTY 41,144,877.91 33.28 350
3 YR PREPAYMENT PENALTY 15,009,128.99 12.14 134
5 YR PREPAYMENT PENALTY 484,532.53 0.39 3
NO PREPAYMENT PENALTY 30,640,078.70 24.79 213
PROPERTY TYPE: Single Family 112,100,093.58 90.68 868
2-4 Units 4,297,694.57 3.48 40
Condominium 4,090,410.40 3.31 41
PUD 2,333,080.72 1.89 13
Manufactured Housing 722,289.65 0.58 9
Mid Rise Condo 76,500.00 0.06 1
SELLER ASSIGNED
RISK CATEGORIES: A 81,645,433.77 66.05 605
A- 21,008,214.79 16.99 169
B 12,950,074.55 10.48 114
C 5,271,561.10 4.26 52
D 2,744,784.71 2.22 32
SEASONING: 0 38,803,178.00 31.39 315
1 37,909,288.26 30.67 306
2 33,254,318.38 26.90 257
3 11,726,264.02 9.49 83
4 1,547,208.61 1.25 7
6 94,137.57 0.08 1
7 160,077.80 0.13 2
11 125,596.28 0.10 1
REMAINING TERM: 349 125,596.28 0.10 1
353 160,077.80 0.13 2
354 94,137.57 0.08 1
356 1,547,208.61 1.25 7
357 11,726,264.02 9.49 83
358 33,254,318.38 26.90 257
359 37,909,288.26 30.67 306
360 38,803,178.00 31.39 315
GROSS MARGIN: 4.250 - 4.500 748,526.08 0.61 6
4.501 - 5.000 7,361,061.65 5.95 50
5.001 - 5.500 23,826,003.72 19.27 181
5.501 - 6.000 45,714,637.79 36.98 346
6.001 - 6.500 33,617,093.26 27.19 283
6.501 - 7.000 6,225,366.74 5.04 47
7.001 - 7.500 3,631,319.42 2.94 30
7.501 - 8.000 1,985,644.75 1.61 21
8.001 - 8.500 375,615.51 0.30 5
8.501 - 8.800 134,800.00 0.11 13
MAX INT RATE: 13.550 - 14.000 2,404,307.66 1.94 10
14.001 - 14.500 3,428,828.38 2.77 28
14.501 - 15.000 7,206,455.88 5.83 54
15.001 - 15.500 21,206,437.94 17.15 152
15.501 - 16.000 32,493,551.89 26.29 249
16.001 - 16.500 29,572,063.76 23.92 241
16.501 - 17.000 21,522,482.77 17.41 177
17.001 - 17.500 3,664,105.24 2.96 36
17.501 - 18.000 1,288,991.01 1.04 15
18.001 - 18.500 715,269.00 0.58 7
18.501 - 19.000 92,575.39 0.07 2
19.001 - 19.100 25,000.00 0.02 1
</TABLE>
5
<PAGE> 6
10/07/97
FUND AMERICA INVESTORS TRUST 1997-NMC1 - COMBINED PORTFOLIO (THE MORTGAGE LOANS)
09/01/97 Scheduled Balances
<TABLE>
<CAPTION>
CURRENT
PRINCIPAL BALANCE PCT($) # OF LOANS
----------------- ------ ----------
<S> <C> <C> <C> <C>
NEXT RATE ADJ DATE: 10/01/97 125,596.28 0.10 1
11/01/97 439,362.66 0.36 2
12/01/97 3,531,512.73 2.86 19
01/01/98 9,920,116.00 8.02 75
02/01/98 11,191,403.04 9.05 78
03/01/98 10,572,103.66 8.55 68
04/01/98 1,973,421.00 1.60 17
02/01/99 160,077.80 0.13 2
03/01/99 94,137.57 0.08 1
05/01/99 1,107,845.95 0.90 5
06/01/99 8,194,751.29 6.63 64
07/01/99 22,857,625.08 18.49 179
08/01/99 25,850,803.07 20.91 225
09/01/99 20,367,343.00 16.48 177
10/01/99 5,707,020.00 4.62 50
07/01/00 509,501.60 0.41 3
08/01/00 744,948.19 0.60 2
09/01/00 272,500.00 0.22 4
</TABLE>
6
<PAGE> 7
FUND AMERICA INVESTORS TRUST 1997-NMC1
<TABLE>
<CAPTION>
Product Count Balance Gross Rate Gross Margin Max Rate Months To Roll
<C> <C> <C> <C> <C> <C> <C>
2/28 6 Mo LIBOR 703 84,339,603.76 10.1154 6.0226 16.1577 23
3/27 6 Mo LIBOR 9 1,526,949.79 9.3986 5.6231 15.3986 35
6 Mo LIBOR 260 37,753,515.37 9.4498 5.7629 15.4546 5
972 123,620,068.92
</TABLE>
7
<PAGE> 8
Item 6. Resignations of Registrant's Directors.
Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Exhibits
1.1 Copy of the Underwriting Agreement, dated as of September 17,
1997, by and among the Registrant, Greenwich Capital Markets,
Inc. and ContiFinancial Services Corporation.
4.1 Copy of the Indenture, dated as of September 1, 1997, by and
between the Registrant and Norwest Bank Minnesota, National
Association, as Indenture Trustee (related exhibits available
upon request of the Indenture Trustee).
10.1 Copy of the Mortgage Loan Sale Agreement, dated as of September
1, 1997, by and between National Mortgage Corporation and the
Registrant.
10.2 Copy of the Deposit Trust Agreement, dated as of September 1,
1997, by and between the Registrant and Wilmington Trust Company,
as Owner Trustee.
10.3 Copy of the Servicing Agreement, dated as of September 1, 1997,
by and among National Mortgage Corporation, as Servicer, Norwest
Bank Minnesota, National Association, as Indenture Trustee, and
the Registrant.
99.1 Copy of the Financial Guaranty Insurance Policy issued by MBIA
Insurance Corporation.
8
<PAGE> 9
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
October 14, 1997 FUND AMERICA INVESTORS CORPORATION II
By:/s/ Steven B. Chotin
-----------------------------------
Name: Steven B. Chotin
Title: President
9
<PAGE> 10
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1.1 Copy of the Underwriting Agreement, dated as of
September 17, 1997, by and among the Registrant,
Greenwich Capital Markets, Inc. and ContiFinancial
Services Corporation............................................................................
4.1 Copy of the Indenture, dated as of September 1, 1997, by and
between the Registrant and Norwest Bank Minnesota, National
Association, as Indenture Trustee (related
exhibits available upon request of the Indenture Trustee)........................................
10.1 Copy of the Mortgage Loan Sale Agreement,
dated as of September 1, 1997, by and between
National Mortgage Corporation and the Registrant.................................................
10.2 Copy of the Deposit Trust Agreement, dated as
of September 1, 1997, by and between the
Registrant and Wilmington Trust Company,
as Owner Trustee.................................................................................
10.3 Copy of the Servicing Agreement, dated as
of September 1, 1997, by and among National
Mortgage Corporation, as Servicer, Norwest Bank
Minnesota, National Association, as Indenture Trustee,
and the Registrant...............................................................................
99.1 Copy of the Financial Guaranty Insurance Policy
issued by MBIA Insurance Corporation.............................................................
</TABLE>
10
<PAGE> 1
EXHIBIT 1.1
FUND AMERICA INVESTORS CORPORATION II
AND
THE UNDERWRITERS
UNDERWRITING AGREEMENT
FOR
FUND AMERICA INVESTORS TRUST 1997 - NMC1
COLLATERALIZED MORTGAGE OBLIGATIONS,
SERIES 1997 - NMC1
September 17, 1997
<PAGE> 2
[Underwriting Agent]
September 17, 1997
Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
ContiFinancial Services Corporation
277 Park Avenue
New York, New York 10172
Fund America Investors Corporation II (the "Company") hereby enters
into this Underwriting Agreement (the "Agreement") and, subject to the terms and
conditions stated herein, proposes to cause Fund America Investors Trust
1997-NMC1 (the "Issuer") to issue and sell to Greenwich Capital Markets, Inc.
collateralized mortgage obligations (the "Obligations") issued pursuant to an
Indenture (the "Indenture") to be dated as of September 1, 1997, between the
Issuer and Norwest Bank Minnesota, National Association, as indenture trustee
(the "Trustee"). Greenwich Capital Markets, Inc. and ContiFinancial Services
Corporation will act as underwriters (collectively the "Underwriters"). The
Obligations will be secured by a pool (the "Pool") of mortgage loans (the
"Mortgage Loans") listed in an attachment to the Indenture. The Obligations will
be issued in a single class. The Obligations will be described more fully in the
Basic Prospectus and the related Prospectus Supplement (each of which terms is
defined below) which the Company will furnish to the Underwriters.
On or prior to the date of issuance of the Obligations, the Company
will obtain a financial guaranty insurance policy (the "Policy") issued by MBIA
Insurance Corp. (the "Insurer") which, subject to the terms of the Policy, will
unconditionally and irrevocably guarantee for the benefit of the holders of the
Obligations to be purchased pursuant to this Agreement, full and complete
payment of the amounts payable on the Obligations other than such amounts as are
excluded by the Policy.
1
<PAGE> 3
As used herein, the term "Execution Time" shall mean the date and time
that this Agreement is executed and delivered by the parties hereto; the term
"Agreement," "this Agreement" and terms of similar import shall mean this
Underwriting Agreement and the term "Closing Date" shall mean September 30,
1997. All capitalized terms used but not otherwise defined herein have the
respective meanings set forth in the form of the Prospectus (as defined below).
1. Representations and Warranties of the Company. The Company
represents and warrants to, and covenants with, each Underwriter that:
A. A registration statement on Form S-3 (Registration No.
33-73748), including a prospectus and a form of prospectus supplement
that contemplates the offering of collateralized mortgage obligations
from time to time, has been filed by the Company with the Securities
and Exchange Commission (the "Commission"), pursuant to the Securities
Act of 1933, as amended and the rules and regulations of the Commission
thereunder (collectively, the "1933 Act"), and as amended from time to
time by one or more amendments, including post-effective amendments,
has been declared effective by the Commission. The Company will cause
to be filed with the Commission, after effectiveness of such
registration statement (and any such post-effective amendments), a
final prospectus in accordance with Rules 415 and 424(b)(2) under the
1933 Act, relating to the Obligations.
As used herein, the term "Effective Date" shall mean the
date that the Registration Statement (including the most recently
filed post-effective amendment, if any) became effective
"Registration Statement" shall mean the registration statement
referred to in the preceding paragraph, including the exhibits thereto
and any documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the 1933 Act specifically relating to the terms
of the Obligations or the Mortgage Loans securing the Obligations and
filed with the Commission pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), except that if the Registration
Statement is amended by the filing with the Commission of a
post-effective amendment thereto, the term "Registration Statement"
shall mean collectively the Registration Statement, as amended by the
most recently filed post-effective amendment thereto, in the form in
which it was declared effective by the Commission. The prospectus
dated September 17, 1997, which constitutes a part of the Registration
Statement, together with the prospectus supplement dated the date
hereof (the "Prospectus Supplement"), relating to the offering of the
Obligations, including any documents incorporated therein by reference
pursuant to the Exchange Act, are hereinafter referred to collectively
as the "Prospectus," except that if the Prospectus is thereafter
amended or supplemented pursuant to Rule 424(b), the term "Prospectus"
shall mean the prospectus, as so amended or supplemented pursuant to
Rule 424(b), from and after the date on which such amended prospectus
or supplement is filed with the Commission. Any preliminary form of
the Prospectus Supplement which has heretofore been filed pursuant to
Rule 402(a) or Rule 424 is hereinafter called a "Preliminary
Prospectus Supplement." Any reference herein to the terms "amend,"
"amendment" or "supplement" with respect to the Registration
Statement, the Prospectus or the Prospectus Supplement shall be deemed
to refer to and include the filing of any document under the Exchange
Act after the effective date of the Registration Statement or
2
<PAGE> 4
the issue date of the Prospectus or Prospectus Supplement, as the case may be,
incorporated therein by reference.
B. As of the date hereof, and as of the dates when the
Registration Statement became effective, when the Prospectus Supplement is first
filed pursuant to Rule 424(b) under the 1933 Act, when, prior to the Closing
Date, any other amendment to the Registration Statement becomes effective, and
when any supplement to the Prospectus is filed with the Commission, and at the
Closing Date, (i) the Registration Statement, as amended, as of any such time,
and the Prospectus, as amended or supplemented as of any such time, complied or
will comply in all material respects with the applicable requirements of the
1933 Act, (ii) the Registration Statement, as amended, as of any such time, did
not and will not contain any untrue statement of a material fact and did not and
will not omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) the
Prospectus, as amended or supplemented as of any such time, did not and will not
contain an untrue statement of a material fact and did not and will not omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to (a) the
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information furnished
to the Company by or on behalf of the Underwriters as set forth in this
Agreement specifically for use in connection with the preparation of the
Registration Statement or the Prospectus or (b) calculations made by the
Underwriters and contained in any "Computational Materials" or "Structural Term
Sheets" (each as defined below) provided by the Underwriters to the Company
pursuant to Section 4 except to the extent that the information set forth
therein is based on errors or mistakes in the "Pool Information". Pool
Information means information with respect to the characteristics of the
Mortgage Loans as provided by or on behalf of the Company to the Underwriters.
C. The Company is duly organized, validly existing and in
good standing under the laws of the State of Delaware, has full power and
authority (corporate and other) to own its properties and conduct its business
as now conducted by it, and as described in the Prospectus, and is duly
qualified to do business in each jurisdiction in which it owns or leases real
property (to the extent such qualification is required by applicable law) or in
which the conduct of its business requires such qualification except where the
failure to be so qualified does not involve (i) a material risk to, or a
material adverse effect on, the business, properties, financial position,
operation or results of operations of the Company or (ii) any risk whatsoever as
to the enforceability of any Mortgage Loan.
D. There are no actions, proceedings or investigations
pending, or, to the knowledge of the Company, threatened, before any court,
governmental agency or body or other tribunal (i) asserting the invalidity of
this Agreement, the Obligations, the Insurance Agreement dated as of September
1, 1997 (the "Insurance Agreement") among the Company, National Mortgage
Corporation, the Insurer, the Trustee and the Underwriters, the Sales Agreement
(as defined in the Prospectus Supplement), or the
3
<PAGE> 5
Trust Agreement (as defined in the Prospectus Supplement), (ii) seeking
to prevent the issuance of the Obligations or the consummation of any
of the transactions contemplated by this Agreement or the Indenture,
(iii) which may, individually or in the aggregate, materially and
adversely affect the validity or enforceability of, this Agreement, the
Obligations or the Trust Agreement, or the performance by the Company
of its obligations under this Agreement or the Trust Agreement, or (iv)
which may affect adversely the federal income tax attributes of the
Obligations as described in the Prospectus.
E. The execution and delivery by the Company of this
Agreement, the Insurance Agreement and the Trust Agreement, the
formation by the Company of the Issuer and the direction by the Company
on behalf of the Issuer to the Trustee to execute, countersign,
authenticate and deliver the Obligations and the transfer and delivery
of the Mortgage Loans to the Issuer by the Company are within the
corporate power of the Company and have been, or will be, prior to the
Closing Date duly authorized by all necessary corporate action on the
part of the Company and the execution and delivery of such instruments,
the consummation of the transactions therein contemplated and
compliance with the provisions thereof will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any statute or any agreement or instrument to which the
Company is a party or by which it is bound or to which any of the
property of the Company is subject, the Company's articles of
incorporation or bylaws, or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over
the Company or any of its properties; and no consent, approval,
authorization or order of, or filing with, any court or governmental
agency or body or other tribunal is required for the consummation of
the transactions contemplated by this Agreement or the Prospectus in
connection with the sale of the Obligations by the Company. The Company
is not a party to, bound by or in breach or violation of any indenture
or other agreement or instrument, or subject to or in violation of any
statute, order, rule or regulation of any court, governmental agency or
body or other tribunal having jurisdiction over the Company, which
materially and adversely affects, or may in the future materially and
adversely affect, (i) the ability of the Company to perform its
obligations under this Agreement or the Insurance Agreement or (ii) the
business, operations, results of operations, financial position,
income, properties or assets of the Company.
F. This Agreement and the Insurance Agreement have been duly
and validly authorized, executed and delivered by the Company. Assuming
the due execution and delivery by the parties thereto, the Indenture
will constitute the legal, valid and binding obligation of the Issuer
enforceable in accordance with its terms, except as enforceability may
be limited by (i) bankruptcy, insolvency, liquidation, receivership,
moratorium, reorganization or other similar laws affecting the
enforcement of the rights of creditors, and (ii) general principles of
equity, whether enforcement is sought in a proceeding at law or in
equity.
4
<PAGE> 6
G. The Obligations will conform in all material respects to
the description thereof contained in the Prospectus, and the direction
by the Company on behalf of the Issuer to the Trustee to execute,
countersign, authenticate and deliver the Obligations will be duly and
validly authorized and, when the Obligations have been duly and validly
executed, authenticated, issued and delivered in accordance with the
Indenture and sold to the Underwriters as provided herein, the
Obligations have been validly issued and outstanding and entitled to
the benefits of the Indenture.
H. At the Closing Date, the Mortgage Loans will conform in all
material respects to the description thereof contained in the
Prospectus and the representations and warranties contained in this
Agreement will be true and correct in all material respects.
I. The transfer of the Mortgage Loans to the Issuer at the
Closing Date will be treated by the Company for financial accounting
and reporting purposes as a sale of assets and not as a pledge of
assets to secure debt.
J. The Company possesses all material licenses, certificates,
permits or other authorizations issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct
the business now operated by it and as described in the Prospectus and
there are no proceedings, pending or, to the best knowledge of the
Company, threatened, relating to the revocation or modification of any
such license, certificate, permit or other authorization which singly
or in the aggregate, if the subject of an unfavorable decision, ruling
or finding, would materially and adversely affect the performance by
the Company of its obligations under this Agreement or the validity or
enforceability of the obligations.
K. Any taxes, fees and other governmental charges in
connection with the execution and delivery of this Agreement, the
Insurance Agreement and the Indenture, or the execution and issuance of
the Obligations have been or will be paid at or prior to the Closing
Date.
L. The Indenture will conform in all material respects to the
description thereof contained in the Prospectus.
M. The Company is not aware of (i) any request by the
Commission for any further amendment of the Registration Statement or
the Prospectus or for any additional information with respect to the
offering of the Obligations, (ii) the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement
or the institution or threatening of any proceeding for that purpose or
(iii) any notification with respect to the suspension of the
qualification of the Obligations for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
N. Each assignment of Mortgage required to be prepared
pursuant to the Indenture is based on forms recently utilized by the
Company with respect to mortgaged properties located in the appropriate
jurisdiction and used in the regular course of the
5
<PAGE> 7
Company's business. Based on the Company's experience with such matters
it is reasonable to believe that upon execution each such assignment
will be in recordable form and will be sufficient to effect the
assignment of the Mortgage to which it relates as provided in the
Indenture.
O. No commission or other fee is owed by the Company to any
broker, arranger or other similar person in connection with the sale of
the Mortgage Loans or the Obligations.
Any certificate signed by any officer of the Company and delivered to
the Underwriters in connection with the sale of the Obligations to such
Underwriters shall be deemed a representation and warranty as to the matters
covered thereby by the Company to each person to whom the representations and
warranties in this Section 1 are made.
2. Agreements of the Underwriters.
A. The several Underwriters agree with the Company that upon
the execution of this Agreement and authorization by the Underwriters
of the release of the Obligations, the Underwriters shall offer such
Obligations for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
B. Each Underwriter represents and agrees that:
(i) it has not offered or sold and will
not offer or sell, prior to the date six months after
their date of issuance, any Obligations to persons in
the United Kingdom, except to persons whose
activities involve them in acquiring, holding,
managing or disposing of investments (as principal or
agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted in
and will not result in an offer to the public in the
United Kingdom within the meaning of the Public
Offers of Securities Regulations of 1995;
(ii) it has complied and will comply with
all applicable provisions of the Financial Services
Act of 1986 with respect to anything done by it in
relation to the Obligations in, from or otherwise
involving the United Kingdom;
(iii) it has only issued or passed on and
will only issue or pass on to any person in the
United Kingdom any document received by it in
connection with the issuance of the Obligations only
if that person is of a kind described in Article
11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exceptions) Order 1995,
as amended, or such person is one to whom the
document can lawfully be issued or passed on;
6
<PAGE> 8
(iv) no action has been or will be taken by
such Underwriter that would permit a public offering
of the Obligations or distribution of the Prospectus
or Prospectus Supplement or any Computational
Materials or ABS Term Sheets or any other offering
material in relation to the Obligations in any
non-U.S. jurisdiction where action for that purpose
is required unless the Company has agreed to such
actions and such actions have been taken; and
(v) it understands that, in connection with
the issuance, offer and sale of the Obligations and
with the distribution of the Prospectus or Prospectus
Supplement or any Computational Materials or ABS
Terms Sheets or any other offering material in
relation to the Obligations in, to or from any
non-U.S. jurisdiction, the Company has not taken and
will not take any action, and such Underwriter will
not offer, sell or deliver any Obligations or
distribute the Prospectus or Prospectus Supplement or
any Computational Materials or ABS Term Sheets or any
other offering material relating to the Obligations
in, to or from any non-U.S. jurisdiction except under
circumstances which will result in compliance with
applicable laws and regulations and which will not
impose any liability, obligation or responsibility on
the Company or the other Underwriters.
C. Each Underwriter represents and warrants to, and agrees
with, the Company as of the date hereof that the Underwriter has
complied and will comply with all of its obligations arising under
Sections 4I and 4J and, with respect to the Computational Materials and
ABS Term Sheets, provided by the Underwriters to the Company pursuant
to Sections 4I and 4J, in the calculations made by the Underwriters in
such Computation Materials and ABS Term Sheets are accurate in all
material respects (taking into account the assumptions explicitly set
forth in such Computational Materials and ABS Term Sheets, except for
any errors therein attributable to errors or mistakes in the Pool
Information). The Computational Materials and ABS Term Sheets provided
by the Underwriters to the Company constitutes a complete set of the
Computational Materials and ABS Term Sheets required to be filed with
the Commission pursuant to the No-Action Letters. Such Computational
Materials and ABS Term Sheets comply with the requirements of the
Kidder Letters and the PSA Letters referred to in Sections 4I and 4J.
3. Purchase, Sale and Delivery of the Obligations. The Company hereby
agrees, subject to the terms and conditions hereof, to sell the Obligations to
the Underwriters, who, upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, hereby
agree, severally and not jointly, to purchase the entire aggregate principal
amount of the Obligations in the amounts and at the purchase price percentage
set forth in Schedule I to this Agreement. At the time of issuance of the
Obligations, the Mortgage Loans will be sold by National Mortgage Corporation to
the Company pursuant to the Mortgage Loan Sales Agreement and by the Company to
the Issuer pursuant to the Mortgage Loan Contribution Agreement and pledged by
the Issuer to the Indenture Trustee pursuant to the Indenture. National Mortgage
Corporation
7
<PAGE> 9
will be obligated, under the Servicing Agreement, to service the Mortgage Loans
either directly or through subservicers.
The Obligations to be purchased by the Underwriters will be delivered
by the Company to the Underwriters (which delivery shall be made through the
facilities of The Depository Trust Company ("DTC") or Cedel Bank, societe
anonyme or the Euroclear System) against payment of the purchase price therefor,
in an amount equal to the percentage of the aggregate original principal amount
thereof as specified in the Schedule I to this Agreement, plus interest accrued,
if any, at the rate on the aggregate original principal amount thereof from the
date specified therein to, but not including, the Closing Date, by a same day
federal funds wire payable to the order of the Company.
Settlement shall take place at the specified offices of Hunton &
Williams, at 10:00 a.m., New York City time, on September 30, 1997, or at such
other place and at such other time thereafter (such time being herein referred
to as the "Closing Date"), in each case as the Underwriters and the Company
shall determine. The Obligations will be prepared in definitive form and in such
authorized denominations as the Underwriters may request, registered in the name
of Cede & Co., as nominee of DTC.
The Company agrees to have the Obligations available for inspection and
review by the Underwriters in New York City not later than 11:00 a.m. New York
City time on the business day prior to the Closing Date.
4. Covenants of the Company. The Company covenants and agrees with each
Underwriter that:
A. The Company will promptly advise the Underwriters and
counsel to the Underwriters (i) when any amendment to the Registration
Statement relating to the offering of the Obligations shall have become
effective, (ii) of any request by the Commission for any amendment to
the Registration Statement or the Prospectus or for any additional
information to the extent applicable to the offering of the
Obligations, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (iv)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Obligations for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company will not file any amendment to the
Registration Statement or supplement to the Prospectus after the date
of this Agreement and prior to the Closing Date for the Obligations
unless the Company has furnished the Underwriters and counsel to the
Underwriters copies of such amendment or supplement for their review
prior to filing and will not file any such proposed amendment or
supplement to which the Underwriters reasonably and promptly objects,
unless such filing is required by law. The Company will use its best
efforts to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if issued, to obtain
as soon as possible the withdrawal thereof.
8
<PAGE> 10
B. If, at any time during the period in which the Prospectus
is required by law to be delivered, any event occurs as a result of
which the Prospectus as then amended or supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
shall be necessary to amend or supplement the Prospectus to comply with
the 1933 Act or the rules under the 1933 Act, the Company will promptly
prepare and file with the Commission, subject to Paragraph A of this
Section 4, an amendment or supplement that will correct such statement
or omission or an amendment that will effect such compliance and, if
such amendment or supplement is required to be contained in a
post-effective amendment to the Registration Statement, will use its
best efforts to cause such post-effective amendment of the Registration
Statement to become effective as soon as possible.
C. The Company will furnish to the Underwriters, without charge,
copies of the Registration Statement (including exhibits thereto), any
documents incorporated therein by reference, and, so long as delivery
of a prospectus by the Underwriters or a dealer may be required by the
1933 Act, as many copies of the Prospectus, as amended or
supplemented, and any amendments and supplements thereto as the
Underwriters may reasonably request. The Company will pay the expenses
of printing all offering documents relating to the offering of the
Obligations.
D. As soon as practicable, but not later than eighteen months
after the effective date of the Registration Statement, the Company
will cause the Issuer to make generally available to holders of
Obligations an earnings statement of the Issuer (which need not be
audited) complying with Section 11 (a) of the 1933 Act and the rules
and Regulations of the Commission thereunder. Such statement will be
filed with the Commission pursuant to the provisions of the Exchange
Act.
E. So long as any of the Obligations are outstanding, the
Company will cause to be delivered to the Underwriters, (i) all
documents required to be distributed to the holders of the
Obligations, (ii) from time to time, any other information concerning
the Issuer filed with any government or regulatory authority that is
otherwise publicly available, as the Underwriters may reasonably
request, (iii) the annual statement as to compliance delivered to the
Trustee pursuant to the Indenture, (iv) the annual statement of a firm
of independent public accountants furnished to the Trustee pursuant to
the Indenture and (v) any information required to be delivered by the
Company or the Servicer to the Trustee to be distributed to holders of
the Obligations pursuant to the Indenture.
F. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is consummated, will pay
all expenses in connection with the transactions contemplated herein,
including but not limited to (i) the expenses of printing (or
otherwise reproducing) all documents relating to the offering and the
fees and disbursements of its counsel incurred in connection with the
issuance and delivery of the Obligations, (ii) the preparation of all
documents specified in this Agreement, (iii) any
9
<PAGE> 11
fees and expenses of the Trustee, the Insurer and any other credit
support provider (including reasonable legal fees) that are not payable
by or from the Issuer or any other party, (iv) any accounting fees and
disbursements relating to the offering of the Obligations, (v) any fees
charged by rating agencies for rating the Obligations, (vi) any
reasonable fees and disbursements of counsel to the Underwriters
relating to Blue Sky undertakings, and (vii) the fees and charges
related to the filing with the Commission of such Current Reports on
Form 8-K and such other materials as are contemplated hereby, whether
pursuant to EDGAR or otherwise.
G. The Company will endeavor to qualify the Obligations for
sale to the extent necessary under any state securities or Blue Sky
laws in any jurisdictions as may be reasonably requested by the
Underwriters, if any, and will pay all expenses (including reasonable
fees and disbursements of counsel to the Underwriters) in connection
with such qualification and in connection with the determination of the
eligibility of the Obligations for investment under the laws of such
jurisdictions as the Underwriters may reasonably designate, if any.
H. The Company will file with the Commission within fifteen
days of the Closing Date, a Current Report on Form 8-K setting forth
specific information concerning the description of the Mortgage Pool
(the "Form 8-K -- Mortgage Pool"). Without limiting the generality of
any other provision hereof, such Form 8-K -- Mortgage Pool shall be
deemed to be a part of the Registration Statement and Prospectus from
and after the date it is first filed with the Commission.
I. The Company will cause any Computational Materials (as
defined below) with respect to the Obligations which are delivered by
any Underwriter to the Company hereunder to be filed with the
Commission on a Current Report on Form 8-K (the "Form 8-K --
Computational Materials") at or before the time of filing of the
Prospectus pursuant to Rule 424(b) under the 1933 Act. Each Underwriter
shall deliver to the Company (or counsel to the Company) prior to the
distribution thereof a complete copy of all materials (which, if
reasonably requested by the Company, shall be on computer compatible
disk or such other acceptable electronic form) proposed to be provided
by such Underwriter to prospective investors in such Obligations which
constitute or are deemed to constitute Computational Materials or ABS
Term Sheets. The Company shall promptly, and in any event within one
business day of the receipt thereof either approve such materials or
communicate corrections, additions and/or deletions to the Underwriters
and the Underwriters shall submit revised materials to the Company.
Each Underwriter shall deliver the final form of any such materials to
the Company within one business day of the date or dates on which the
related Form 8-K -- Computational Materials or Form 8-K -- ABS Term
Sheets (as defined herein) relating to the Obligations are required to
be filed by the Company with the Commission pursuant to Sections 4I or
4J hereof. The parties hereto agree that the Company shall have no
liability for any failure to file such Computational Materials on such
date if the related Underwriter has not delivered such materials to the
Company one business day prior to the date such filing is to be made.
"Computational Materials" shall mean those materials
10
<PAGE> 12
delivered by an Underwriter to the Company within the meaning of the
no-action letter dated May 20, 1994 issued by the Division of
Corporation Finance of the Commission to Kidder, Peabody Acceptance
Corporation I, Kidder, Peabody & Co. Incorporated, and Kidder
Structured Asset Corporation and the no-action letter dated May 27,
1994 issued by the Division of Corporation Finance of the Commission to
the Public Securities Association (together, the "Kidder Letters") for
which the filing of such material is a condition of the relief granted
in such letters.
J. The Company will cause any ABS Term Sheets (as defined
below) with respect to the Obligations which are delivered by any
Underwriter to the Company pursuant to Section 9 hereof to be filed
with the Commission on one or more Current Reports on Form 8-K
(collectively, the "Form 8-K -- ABS Term Sheets") (i) at or before the
time of filing of the Prospectus pursuant to Rule 424(b) under the 1933
Act, in the case of Structural Term Sheets and (ii) within two business
days of first use in the case of Collateral Term Sheets. Each
Underwriter shall deliver to the Company (or counsel to the Company)
prior to the distribution thereof a complete copy of all materials
(which, if reasonably requested by the Company, shall be on computer
compatible disk or such other acceptable electronic form) proposed to
be provided by such Underwriter to prospective investors in such
Obligations which constitute or are deemed to constitute Computational
Materials or ABS Term Sheets. The Company shall promptly, and in any
event within one business day of the receipt thereof either approve
such materials or communicate corrections, additions and/or deletions
to the Underwriters and the Underwriters shall submit revised materials
to the Company. The parties hereto agree that the Company shall have no
liability for any failure to file such ABS Term Sheets on such dates if
the related Underwriter has not delivered such materials to the Company
one business day prior to the date such filing is to be made. "ABS Term
Sheet" shall mean those materials delivered by an Underwriter to the
Company in the form of "Structural Term Sheets" or "Collateral Term
Sheets", in each case within the meaning of the no-action letter dated
February 13, 1995 issued by the Division of Corporation Finance of the
Commission to the Public Securities Association (the "PSA Letter") for
which the filing of such material is a condition of the relief granted
in such letter.
5. Conditions of the Underwriters' Obligation. The obligation of the
Underwriters to purchase and pay for the Obligations as provided herein shall be
subject to the accuracy as of the date hereof, the Execution Time and the
Closing Date (as if made at such Closing Date) of the representations and
warranties of the Company contained herein, to the accuracy of the statements of
the Company made in any certificate or other document delivered pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
A. The Registration Statement shall have become effective no
later than the date hereof, and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been instituted or
threatened, and the Prospectus shall have been filed pursuant to Rule
424(b) of the 1933 Act as shall be required pursuant to such Rule.
11
<PAGE> 13
B. The Underwriters shall have received the Indenture and the
Obligations in form and substance satisfactory to the Underwriters,
duly executed by all signatories required pursuant to the respective
terms thereof.
C. (1) The Underwriters shall have received the favorable
opinion of Hunton & Williams, special counsel to the Company, or of
such other counsel to the Company as shall be acceptable to the
Underwriters
(2) The Underwriters shall have received the
favorable opinion of Dewey Ballantine, special counsel to the
Underwriters, dated the Closing Date, with respect to the Indenture,
the Obligations, the due authorization, execution and delivery of this
Agreement, and such other matters as the Underwriters may reasonably
request.
In rendering their opinions, the counsel described in
this Paragraph C may rely, as to matters of fact, on certificates of
responsible officers of the Company, National Mortgage Corporation, the
Owner Trustee, the Trustee and public officials. Such opinions may also
assume the due authorization, execution and delivery of the instruments
and documents referred to therein by the parties thereto other than the
Company.
D. The Underwriters shall have received a letter from Deloitte
& Touche dated the date of the Prospectus Supplement, in form and
substance satisfactory to the Underwriters, to the effect that they
have performed certain specified procedures requested by the
Underwriters with respect to the information set forth in the
Prospectus, the Computational Materials and the ABS Term Sheets and
certain matters relating to National Mortgage Corporation.
E. The Obligations shall have been rated in the highest rating
category by Standard & Poor's, a division of the McGraw-Hill Companies,
Inc. and Moody's Investors Service, Inc., and such ratings shall not
have been rescinded. The Underwriters and counsel for the Underwriters
shall have received copies, addressed to the Underwriters and upon
which they may rely, of any opinions of counsel supplied to the rating
organizations relating to any matters with respect to the Obligations.
Any such opinions shall be dated the Closing Date.
F. The Underwriters shall have received from the Company a
certificate, signed by the president, an executive vice president or a
vice president of the Company, dated the Closing Date, to the effect
that the signer of such certificate has carefully examined the
Registration Statement, the Indenture and this Agreement and that, to
the best of his or her knowledge based upon reasonable investigation,
the representations and warranties of the Company in this Agreement, as
of the Closing Date, are true and correct, and the Company has complied
with all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to the Closing Date.
The Company shall attach to such certificate an incumbency
certificate and shall
12
<PAGE> 14
certify in an officer's certificate a true and correct copy of its
articles of incorporation and bylaws which are in full force and effect
as of each relevant date and on the date of such certificate and a
certified true copy of the resolutions of its Board of Directors with
respect to the transactions contemplated herein.
G. The Underwriters shall have received a favorable opinion of
counsel to the Trustee, dated the Closing Date, in form and substance
satisfactory to the Underwriters.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Company, the Trustee and public officials. Such opinion may also assume
the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the
Issuer.
H. The Underwriters shall have received a favorable opinion of
counsel to the Insurer, dated the Closing Date, in form and substance
satisfactory to the Underwriters.
In rendering such opinion, such counsel may rely, as to
matters of fact, on certificates of responsible officers of the
Company, the Insurer and public officials. Such opinion may also assume
the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the
Issuer.
I. The Underwriters shall have received from the Trustee a
certificate, signed by an authorized officer or representative of the
Trustee, dated the Closing Date, to the effect that each person who, as
an officer or representative of the Trustee, signed or signs the
Obligations, the Indenture or any other document delivered pursuant
hereto, on the Execution Time or on the Closing Date, in connection
with the transactions described in the Indenture was, at the respective
times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and
the signatures of such persons appearing on such documents are their
genuine signatures.
J. The Underwriters shall have received from the Issuer a
certificate, signed by the president, a senior vice president or a vice
president of the Issuer, dated the Closing Date, to the effect that
each person who, as an officer or representative of the Issuer, signed
or signs the Obligations, the Indenture or any other document delivered
pursuant hereto, on the Execution Time or on the Closing Date, in
connection with the transactions described in the Indenture was, at the
respective times of such signing and delivery, and is now, duly elected
or appointed, qualified and acting as such officer or representative,
and the signatures of such persons appearing on such documents are
their genuine signatures. The Policy shall have been duly executed and
issued at or prior to the Closing Date and shall conform in all
material respects to the description thereof in the Prospectus.
K. On or prior to the Closing Date, there has been no
downgrading, nor has any notice been given of any intended or potential
downgrading.
13
<PAGE> 15
L. On or prior to the Closing Date there shall not have
occurred any downgrading, nor shall any notice have been given of (i)
any intended or potential downgrading or (ii) any review or possible
change in rating the direction of which has not been indicated, in the
rating accorded the Insurer's claims paying ability by any "nationally
recognized statistical rating organization" (as such term is defined
for purposes of the Exchange Act).
M. There has not occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations, since the Date
of this Agreement, of (i) the Company, or (ii) the Insurer, that is in
the Underwriters' judgment material and adverse or that makes it in the
Underwriters' judgment impracticable to market the Obligations on the
terms and in the manner contemplated in the Prospectus.
N. The Underwriters and counsel for the Underwriters shall
have received copies of any separate opinions of counsel to the
Company, the Insurer or the Issuer supplied to the Trustee relating to
matters with respect to the Obligations or the Policy, and such
opinions shall be dated the Closing Date.
O. The Underwriters shall have received such further
information, certificates and documents as the Underwriters may
reasonably have requested not less than one (1) full business day prior
to the Closing Date.
P. There shall have been executed and delivered by National
Mortgage Corporation a letter agreement with the Underwriters, pursuant
to which National Mortgage Corporation agrees to become jointly and
severally liable with the Company for the payment of the Joint and
Several Obligations (as defined in such letter agreement). Such letter
agreement with the Underwriters is substantially in the form of Exhibit
A hereto.
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all material respects, as determined by the Underwriters and
counsel to the Underwriters, when and as provided in this Agreement, this
Agreement and all obligations of the Underwriters hereunder, may be canceled on,
or at any time prior to, the Closing Date by the Underwriters. Notice of such
cancellation shall be given to the Company in writing, or by telephone or
telegraph confirmed in writing.
6. Expenses. If the sale of the Obligations provided for herein is not
consummated by reason of a default by the Company (not resulting from a default
by the Underwriters) in its obligations hereunder, then the Company will
reimburse the Underwriters, upon demand, for all reasonable out-of-pocket
expenses that shall have been incurred by them in connection with their
investigation with regard to the Company and the Obligations and the proposed
purchase and sale of the Obligations.
7. Indemnification and Contribution.
14
<PAGE> 16
A. The Company will indemnify and hold harmless each
Underwriter, each of their respective officers and directors and each
person who controls any Underwriter within the meaning of the 1933 Act
or the Exchange Act, against any and all losses, claims, damages, or
liabilities (including the cost of any investigation, legal and other
expenses reasonably incurred in connection with and amounts paid in
settlement of any action, suit, proceeding or claim asserted), joint or
several, to which they or any of them may become subject, under the
1933 Act, the Exchange Act or other federal or state law or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained (i) in the Registration Statement or arise out of or are
based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein not misleading, (ii) in
the Prospectus or arise out of or are based upon the omission or
alleged omission to state there in a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading or (iii) in the Computational Materials or
ABS Terms Sheets or arise out of or are based upon the omission or
alleged omission to state there in a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, and will reimburse each such indemnified
party for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim,
damage, liability or action; provided, however, that (a) the Company
shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made (i) therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of an Underwriter,
as described (and to the extent described) in Section 8 of this
Agreement or (ii) in any Computational Materials or ABS Term Sheets
provided by the Underwriters to the Company pursuant to Sections 4I and
4J (except to the extent that any untrue statements or errors contained
therein are based on or constitute Pool Information provided by the
Company), and (b) such indemnity with respect to any Corrected
Statement (as defined below) in such Prospectus (or supplement thereto)
shall not inure to the benefit of such Underwriter (or any person
controlling such Underwriter) from whom the person asserting any loss,
claim, damage or liability purchased the Obligations that are the
subject thereof if such person did not receive a copy of a supplement
to such Prospectus at or prior to the confirmation of the sale of such
Obligations and the untrue statement or omission of a material fact
contained in such Prospectus (or supplement thereto) was corrected (a
"Corrected Statement") in such other supplement and such supplement
timely was furnished by the Company to such Underwriter within a
reasonable time prior to the delivery of such confirmation. This
indemnity agreement will be in addition to any liability which the
Company may otherwise have.
B. Each Underwriter, will severally indemnify and hold
harmless the Company, each of its officers and directors and each
person, if any, who controls the Company within the meaning of the 1933
Act or the Exchange Act against any losses, claims, damages or
liabilities to which they or any of them become subject under the 1933
Act,
15
<PAGE> 17
the Exchange Act or other federal or state law or regulation, at common
law or otherwise, to the same extent as the foregoing indemnity,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in (i) the
Registration Statement or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make
the statements therein not misleading or in (ii) the Prospectus or
arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was made therein in reliance upon and in conformity
with written information relating to such Underwriter furnished to the
Company by or on behalf of such Underwriter, as described in Section 8
of this Agreement or in (iii) any calculations made by the Underwriters
contained in Computational Materials or ABS Terms Sheets provided by
the Underwriters pursuant to Sections 4I and 4J (except to the extent
that any untrue statements or errors contained therein attributable to
errors or mistakes in the Pool Information provided by the Company),
and such Underwriter or the Underwriters, as the case may be, will
reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending
against such loss, claim, damage, liability or action.
C. In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Paragraphs A and B above,
such person (hereinafter called the indemnified party) shall promptly
notify the person against whom such indemnity may be sought
(hereinafter called the indemnifying party) in writing thereof; but the
omission to notify the indemnifying party shall not relieve such
indemnifying party from any liability which it may have to any
indemnified party otherwise than under such Paragraph. The indemnifying
party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate
in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding any
indemnified party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, or
(ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them or because different defenses are available to such parties. It is
understood that the indemnifying party shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all such indemnified parties, and
that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by the Underwriters
in the case of parties
16
<PAGE> 18
indemnified pursuant to Paragraph A and by the Company in the case of
parties indemnified pursuant to Paragraph B. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.. No indemnifying
party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in
respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such proceeding.
D. If the indemnification provided for in this 7 is
unavailable to an indemnified party in respect of any losses, claims,
damages or liabilities referred to herein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute
to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative benefits received by the Company
and the Underwriters from the sale of the Obligations.
The relative benefits received by the Company and the
Underwriters shall be deemed to be in such proportion so that the
Underwriters are responsible for that portion determined by multiplying
the total amount of such losses, claims, damages and liabilities,
including legal and other expenses, by a fraction, the numerator of
which is (x) the excess of the Aggregate Resale Price of the
Obligations over the aggregate purchase price of the Obligations
specified in Schedule I and the denominator of which is (y) the
Aggregate Resale Price of such Obligations, and the Company is
responsible for the balance, provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. For purposes of the
immediately preceding sentence, the "Aggregate Resale Price" of the
Obligations at the time of any determination shall be the weighted
average of the purchase prices (in each case expressed as a percentage
of the aggregate principal amount of the Obligations so purchased),
determined on the basis of such principal amounts, paid to the
Underwriters by all initial purchasers of the Obligations from the
Underwriters.
E. The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to
in Paragraph D. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in
Paragraph D shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of Section 8D, the
Underwriters shall not be required to contribute any amount by which
the difference between the Aggregate Resale Price and the aggregate
purchase price of the Obligations specified in Schedule I exceeds the
amount of any damages that the
17
<PAGE> 19
Underwriters have otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission.
F. The Company and the Underwriters each expressly waive, and
agree not to assert, any defense to their respective indemnification
and contribution obligations under this Section 7 which they might
otherwise assert based upon any claim that such obligations are
unenforceable under federal or state securities laws or by reasons of
public policy.
G. The obligations of the Company under this Section 7 shall
be in addition to any liability which the Company may otherwise have
and shall extend, upon the same terms and conditions, to each person,
if any, who controls the Underwriters within the meaning of the 1933
Act or the Exchange Act; and the obligations of the Underwriters under
this Section 7 shall be in addition to any liability that the
Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company and to each person, if
any, who controls the Company within the meaning of the 1933 Act or the
Exchange Act; provided, however, that in no event shall the Company or
the Underwriters be liable for double indemnification.
8. Information. Supplied by Underwriters; Representations and
Warranties of the Underwriters. The Underwriters and the Company agree that the
following constitute the only information furnished by the Underwriters to the
Company for the purposes of Sections 1B and 7A hereof:
(i) the statements set forth in the last
paragraph on the front cover page of the Prospectus
Supplement regarding market making, and information
under the heading "Underwriting" in the Prospectus
Supplement, to the extent such information relates to
all of the Underwriters and not to any particular
Underwriter or affiliate of any particular
Underwriter, have been supplied by or on behalf of
all of the Underwriters jointly;
(ii) the information under the heading
"Underwriting" in the Prospectus Supplement, to the
extent such information relates to a particular
Underwriter or affiliate of such Underwriter.
9. Default by either of the Underwriters. If either of the Underwriters
participating in the offering of Obligations shall fail at the applicable
Closing Time to purchase the Obligations which it is obligated to purchase
hereunder (the "Defaulted Obligations"), then the Company shall have the right,
within 24 hours thereafter, to make arrangements for the non-defaulting
Underwriter, or any other Underwriter, to purchase all, but not less than all,
of the Defaulted Obligations in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, the Company has not completed such
arrangements within such 24-hour period, then:
(i) if the aggregate principal amount of
Defaulted Obligations
18
<PAGE> 20
does not exceed 10% of the aggregate principal amount
of the Obligations to be purchased pursuant hereto,
the non-defaulting Underwriter shall be obligated to
purchase the full amount thereof, or
(ii) if the aggregate principal amount of
Defaulted Obligations exceeds 10% of the aggregate
principal amount of the Obligations to be purchased
pursuant hereto , this Agreement shall terminate,
without any liability of the non-defaulting
Underwriter.
No action taken pursuant to this Section shall relieve the Defaulting
Underwriter from liability with respect to any default of such Underwriter under
this Agreement
In the event of a default by either Underwriter as set forth in this
Section, the Company shall have the right to postpone the applicable Closing
Time for a period of time not exceeding seven days in order that any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements may be effected.
10. Notices. All communications hereunder shall be in writing and, if
sent to any Underwriter, shall be mailed or delivered or telecopied and
confirmed in writing to such Underwriter and, if sent to the Company, shall be
mailed, delivered or telegraphed and confirmed in writing to the Company at Fund
America Investors Corporation II , 6400 South Fiddler's Green Circle, Suite 1200
B, Englewood, CO 80111, Attention: Steven B.
Chotin, President.
11. Survival. All representations, warranties, covenants and agreements
of the Company contained herein or in agreements or certificates delivered
pursuant hereto, the agreements of the Underwriters and the Company contained in
Section 7 hereof, and the representations, warranties and agreements of the
Underwriters contained in Section 2 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriters or any controlling persons, or any subsequent purchaser or the
Company or any of its officers, directors or any controlling persons, and shall
survive delivery of and payment for the Obligations. The provisions of Sections
4, 6 and 7 hereof shall survive the termination or cancellation of this
Agreement.
12. Termination. The Underwriters shall have the right to terminate
this Agreement by giving notice as hereinafter specified at any time at or prior
to the applicable Closing Date if (a) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the Nasdaq National Market,
the Chicago Board Options Exchange, the Chicago Board of Trade or the London
Stock Exchange Limited, (b) a general moratorium on commercial banking
activities shall have been declared by any of the federal or New York State
authorities, (c) there shall have occurred any outbreak or escalation of
hostilities or any change in the national or international financial markets or
any calamity or crisis which, in the Underwriters' reasonable judgment, is
material and adverse, and, in the case of any of the events specified in clauses
(a) through (c), such event singly or together with any other such event makes
it in the Underwriters' reasonable judgment
19
<PAGE> 21
impractical to market the Obligations. Any such termination shall be without
liability of any other party except that the provisions of Paragraph G of
Section 4 (except with respect to expenses of the Underwriters) and Section 7
hereof shall at all times be effective. If the Underwriters elect to terminate
this Agreement as provided in this Section 12, the Company shall be notified
promptly by the Underwriters by telephone, telegram or facsimile transmission,
in any case, confirmed by letter.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person purchasing any of the
Obligations from the Underwriters), and the officers and directors and
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, and no other persons will have any right or obligations
hereunder.
14. Applicable Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of forum non conveniens they may have with respect to any such action or
proceeding brought.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
20
<PAGE> 22
16. Amendments and Waivers. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
Very truly yours,
FUND AMERICA INVESTORS
CORPORATION II
By:
-----------------------------------
Name:
Title:
GREENWICH CAPITAL MARKETS, INC.
By:
----------------------------
Name:
Title:
CONTIFINANCIAL SERVICES CORPORATION
By:
----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
21
<PAGE> 1
EXHIBIT 4.1
INDENTURE
BETWEEN
FUND AMERICA INVESTORS TRUST 1997-NMC1,
AS ISSUER,
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE
Dated as of September 1, 1997
Relating to
FUND AMERICA INVESTORS TRUST 1997-NMC1
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1997-NMC1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................2
Section 1.01. General Definitions.......................................................................2
ARTICLE II THE BONDS.............................................................................................20
Section 2.01. Forms Generally..........................................................................20
Section 2.02. Forms of Certificate of Authentication...................................................20
Section 2.03. General Provisions With Respect to Principal and Interest Payments.......................20
Section 2.04. Denominations............................................................................21
Section 2.05. Execution, Authentication, Delivery and Dating...........................................21
Section 2.06. Registration, Registration of Transfer and Exchange......................................21
Section 2.07. Mutilated, Destroyed, Lost or Stolen Bonds...............................................22
Section 2.08. Payments of Principal and Interest.......................................................23
Section 2.09. Persons Deemed Owners....................................................................24
Section 2.10. Cancellation.............................................................................24
Section 2.11. Authentication and Delivery of Bonds.....................................................24
Section 2.12. Book-Entry Bonds.........................................................................26
Section 2.13. Termination of Book Entry System.........................................................26
ARTICLE III COVENANTS............................................................................................27
Section 3.01. Payment of Bonds.........................................................................27
Section 3.02. Maintenance of Office or Agency..........................................................27
Section 3.03. Money for Bond Payments to Be Held In Trust..............................................27
Section 3.04. Existence of Issuer......................................................................28
Section 3.05. Protection of Trust Estate...............................................................29
Section 3.06. Opinions as to Trust Estate..............................................................30
Section 3.07. Performance of Obligations; Servicing Agreement..........................................30
Section 3.08. Investment Company Act...................................................................30
Section 3.09. Negative Covenants.......................................................................30
Section 3.10. Annual Statement as to Compliance........................................................31
Section 3.11. Restricted Payments......................................................................31
Section 3.12. Treatment of Bonds as Debt for Tax Purposes..............................................31
Section 3.13. Notice of Events of Default..............................................................32
Section 3.14. Further Instruments and Acts.............................................................32
ARTICLE IV SATISFACTION AND DISCHARGE............................................................................32
Section 4.01. Satisfaction and Discharge of Indenture..................................................32
Section 4.02. Application of Trust Money...............................................................33
ARTICLE V DEFAULTS AND REMEDIES..................................................................................33
Section 5.01. Event of Default.........................................................................33
Section 5.02. Acceleration of Maturity; Rescission and Annulment.......................................34
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee................35
Section 5.04. Remedies.................................................................................35
Section 5.05. Indenture Trustee May File Proofs of Claim...............................................36
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Bonds.........................36
Section 5.07. Application of Money Collected...........................................................36
Section 5.08. Limitation on Suits......................................................................37
Section 5.09. Unconditional Rights of Bondholders to Receive Principal and Interest....................38
Section 5.10. Restoration of Rights and Remedies.......................................................38
Section 5.11. Rights and Remedies Cumulative...........................................................38
Section 5.12. Delay or Omission Not Waiver.............................................................38
Section 5.13. Control by Bondholders...................................................................38
Section 5.14. Waiver of Past Defaults..................................................................39
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 5.15. Undertaking for Costs....................................................................39
Section 5.16. Waiver of Stay or Extension Laws.........................................................39
Section 5.17. Sale of Trust Estate.....................................................................39
Section 5.18. Action on Bonds..........................................................................41
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the Issuer.........................41
Section 5.20. Application of the Trust Indenture Act...................................................41
ARTICLE VI THE INDENTURE TRUSTEE.................................................................................41
Section 6.01. Duties of Indenture Trustee..............................................................41
Section 6.02. Notice of Default........................................................................42
Section 6.03. Rights of Indenture Trustee..............................................................42
Section 6.04. Not Responsible for Recitals or Issuance of Bonds........................................43
Section 6.05. May Hold Bonds...........................................................................43
Section 6.06. Money Held in Trust......................................................................43
Section 6.07. Eligibility; Disqualification............................................................43
Section 6.08. Indenture Trustee's Capital and Surplus..................................................43
Section 6.09. Resignation and Removal; Appointment of Successor........................................44
Section 6.10. Acceptance of Appointment by Successor...................................................45
Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee.........45
Section 6.12. Preferential Collection of Claims Against Issuer.........................................45
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees....................................45
Section 6.14. Authenticating Agents....................................................................46
Section 6.15. Review of Mortgage Files.................................................................47
Section 6.16. Indenture Trustee Fees and Expenses......................................................49
ARTICLE VII BONDHOLDERS' LISTS AND REPORTS.......................................................................49
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Bondholders...................49
Section 7.02. Preservation of Information; Communications to Bondholders...............................49
Section 7.03. Reports by Indenture Trustee.............................................................49
Section 7.04. Reports by Issuer........................................................................50
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES..........................................50
Section 8.01. Collection of Moneys.....................................................................50
Section 8.02. Bond Account.............................................................................51
Section 8.03. Claims against the MBIA Insurance Policy..................................................52
Section 8.04. General Provisions Regarding the Indenture Accounts and Mortgage Loans...................53
Section 8.05. Releases of Defective Mortgage Loans.....................................................54
Section 8.06. Reports by Indenture Trustee to Bondholders; Access to Certain Information...............54
Section 8.07. Trust Estate Mortgage Files..............................................................55
Section 8.08. Amendment to Servicing Agreement.........................................................55
Section 8.09. Delivery of the Mortgage Files Pursuant to Servicing Agreement...........................55
Section 8.10. Servicer as Agent........................................................................55
Section 8.11. Termination of Servicer..................................................................55
Section 8.12. Opinion of Counsel.......................................................................56
Section 8.13. Appointment of Custodians................................................................56
Section 8.14. Rights of the Bond Insurer to Exercise Rights of Bondholders.............................56
Section 8.15. Trust Estate and Accounts Held for Benefit of the Bond Insurer...........................57
ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................57
Section 9.01. Supplemental Indentures Without Consent of Bondholders...................................57
Section 9.02. Supplemental Indentures With Consent of Bondholders......................................58
Section 9.03. Execution of Supplemental Indentures.....................................................59
Section 9.04. Effect of Supplemental Indentures........................................................59
Section 9.05. Conformity With Trust Indenture Act......................................................59
Section 9.06. Reference in Bonds to Supplemental Indentures............................................59
Section 9.07. Amendments to Governing Documents........................................................59
ARTICLE X REDEMPTION OF BONDS....................................................................................60
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
Section 10.01. Redemption..............................................................................60
Section 10.02. Form of Redemption Notice...............................................................60
Section 10.03. Bonds Payable on Optional Redemption....................................................61
ARTICLE XI MISCELLANEOUS.........................................................................................61
Section 11.01. Compliance Certificates and Opinions....................................................61
Section 11.02. Form of Documents Delivered to Indenture Trustee........................................61
Section 11.03. Acts of Bondholders.....................................................................62
Section 11.04. Notices, etc. to Indenture Trustee, the Bond Insurer and Issuer.........................63
Section 11.05. Notices and Reports to Bondholders; Waiver of Notices...................................64
Section 11.06. Rules by Indenture Trustee..............................................................64
Section 11.07. Conflict With Trust Indenture Act.......................................................64
Section 11.08. Effect of Headings and Table of Contents................................................64
Section 11.09. Successors and Assigns..................................................................64
Section 11.10. Separability............................................................................64
Section 11.11. Benefits of Indenture...................................................................64
Section 11.12. Legal Holidays..........................................................................65
Section 11.13. Governing Law...........................................................................65
Section 11.14. Counterparts............................................................................65
Section 11.15. Recording of Indenture..................................................................65
Section 11.16. Issuer Obligation.......................................................................65
Section 11.17 No Petition.............................................................................65
Section 11.18. Inspection..............................................................................66
Section 11.19. Usury...................................................................................66
Section 11.20. Third Party Beneficiary.................................................................66
</TABLE>
-iii-
<PAGE> 5
SCHEDULES AND EXHIBITS
Schedule I Mortgage Loan Schedule
Exhibit A Form of Bond
Exhibit B Mortgage Loan Sale Agreement
Exhibit C Mortgage Loan Contribution Agreement
Exhibit D Letter of Representations to The Depository Trust Company
Exhibit E-1 Form of Indenture Trustee's Initial Certification
Exhibit E-2 Form of Indenture Trustee's Final Certification
Exhibit F MBIA Insurance Policy
Exhibit G Form of Notice of Claim
Exhibit H Servicing Agreement
-iv-
<PAGE> 6
CROSS-REFERENCE TABLE
Cross-reference sheet showing the location in the Indenture of the
provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.*
<TABLE>
<CAPTION>
Trust Indenture Act of 1939 Indenture Section
--------------------------- -----------------
<S> <C>
Section 310
(a)(1)................................................................... 6.07
(a)(2)................................................................... 6.07, 6.08
(a)(3)................................................................... 6.13
(a)(4)................................................................... Not Applicable
(a)(5)................................................................... 6.07
(b)...................................................................... 6.07, 6.09
(c)...................................................................... Not Applicable
Section 311
(a)...................................................................... 6.12
(b)...................................................................... 6.12
(c)...................................................................... Not Applicable
Section 312
(a)...................................................................... 7.01(a), 7.02(a)
(b)...................................................................... 7.02(b)
(c)...................................................................... 7.02(c)
Section 313
(a)...................................................................... 7.03(a)
(b)...................................................................... 7.03(a)
(c)...................................................................... 11.05
(d)...................................................................... 7.03(b)
Section 314
(a)(1)................................................................... 7.04
(a)(2)................................................................... 7.04
(a)(3)................................................................... 7.04
(a)(4)................................................................... 7.04
(b)(1)................................................................... 2.11(c), 11.01
(b)(2)................................................................... 3.06
(c)(1)................................................................... 2.11(d), 4.01,
8.02(d), 11.01
(c)(2)................................................................... 2.11(c), 4.01,
8.02(d), 11.01
(c)(3)................................................................... 8.02(d)
(d)(1)................................................................... 11.01(a)
(d)(2)................................................................... 11.01(a)
(d)(3)................................................................... 11.01(a)
(e)...................................................................... 11.01(b)
Section 315
(a)...................................................................... 6.01(b), 6.01(c)(1)
(b)...................................................................... 6.02, 11.05
(c)...................................................................... 6.01(a)
(d)(1)................................................................... 6.01(b), 6.01(c)
(d)(2)................................................................... 6.01(c)(2)
</TABLE>
- -------------------------
*This Cross-Reference Table is not part of the Indebture.
<PAGE> 7
<TABLE>
<S> <C> <C>
(d)(3)................................................................... 6.01(c)(3)
(e)...................................................................... 5.15
Section 316
(a)...................................................................... 5.20
(b)...................................................................... 5.09
(c)...................................................................... 5.20
Section 317
(a)(1)................................................................... 5.03
(a)(2)................................................................... 5.05
(b)...................................................................... 3.03
Section 318
(a)...................................................................... 11.07
</TABLE>
<PAGE> 8
THIS INDENTURE, dated as of September 1, 1997 (as amended or
supplemented from time to time as permitted hereby, this "Indenture"), is
between FUND AMERICA INVESTORS TRUST 1997-NMC1, a Delaware business trust
(together with its permitted successors and assigns, the "Issuer") and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as trustee
(together with its permitted successors in the trusts hereunder, the "Indenture
Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Collateralized Mortgage Obligations, Series
1997-NMC1 (the "Bonds"), issuable as provided in this Indenture. All covenants
and agreements made by the Issuer herein are for the benefit and security of the
Holders of the Bonds and the Bond Insurer. The Issuer is entering into this
Indenture, and the Indenture Trustee is accepting the trusts created hereby, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Bonds and the Bond Insurer, all of the Issuer's
right, title and interest in and to (a) the Mortgage Loans listed in Schedule I
to this Indenture (including property that secures a Mortgage Loan that becomes
an REO Property), including the related Mortgage Files delivered or to be
delivered to the Indenture Trustee pursuant to the Mortgage Loan Sale Agreement,
all payments of principal received, collected or otherwise recovered after the
applicable Cut-off Date for each Mortgage Loan, all payments of interest
accruing on each Mortgage Loan after the applicable Cut-off Date therefor
whenever received and all other proceeds received in respect of such Mortgage
Loans, and any Qualified Replacement Mortgage Loan, (b) the MBIA Insurance
Policy, (c) the Servicing Agreement, (d) the Mortgage Loan Sale Agreement, (e)
the Mortgage Loan Contribution Agreement, (f) the Management Agreement, (g) the
Insurance Policies, (h) all cash, instruments or other property held or required
to be deposited in the Collection Account and the Bond Account, including all
investments made with funds in such accounts (but not including any income on
funds deposited in, or investments made with funds deposited in, the Collection
Account, which income shall belong to and be for the account of the Servicer,
and not including any income on funds deposited in, or investments made with
funds deposited in the Bond Account, which income shall belong to and be for the
account of the Indenture Trustee), (i) all proceeds of the conversion, voluntary
or involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all insurance proceeds and condemnation awards.
Such Grants are made, however, in trust, to secure the Bonds equally and ratably
without prejudice, priority or distinction between any Bond and any other Bond
by reason of difference in time of issuance or otherwise, and for the benefit of
the Bond Insurer to secure (x) the payment of all amounts due on the Bonds in
accordance with their terms, (y) the payment of all other sums payable under
this Indenture and (z) compliance with the provisions of this Indenture, all as
provided in this Indenture. All terms used in the foregoing granting clauses
that are defined in Section 1.01 are used with the meanings given in said
Section.
The Indenture Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions of this Indenture and agrees to
perform the duties herein required to the end that the interests of the Holders
of the Bonds may be adequately and effectively protected. The Indenture Trustee
agrees that it will hold the MBIA Insurance Policy in trust and that it will
hold any proceeds of any claim upon the MBIA Insurance Policy, solely for the
use and benefit of the Bondholders in accordance with the terms hereof and the
MBIA Insurance Policy.
<PAGE> 9
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL DEFINITIONS.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Indenture, and the definitions of such terms are applicable to
the singular as well as to the plural forms of such terms and to the masculine
as well as to the feminine genders of such terms. Whenever reference is made
herein to an Event of Default or a Default known to the Indenture Trustee or of
which the Indenture Trustee has notice or knowledge, such reference shall be
construed to refer only to an Event of Default or Default of which the Indenture
Trustee is deemed to have notice or knowledge pursuant to Section 6.01(d). All
other terms used herein that are defined in the Trust Indenture Act (as
hereinafter defined), either directly or by reference therein, have the meanings
assigned to them therein.
"ACCOUNTANT": A Person engaged in the practice of accounting who
(except when this Indenture provides that an Accountant must be Independent) may
be employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"ACT": With respect to any Bondholder, as defined in Section 11.03.
"ADMINISTRATIVE FEE AMOUNT": For any Payment Date, the sum of the
Monthly Servicing Fee, the Indenture Trustee's Fee and the Bond Insurer Premium,
each relating to such Payment Date.
"AFFILIATE": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract, relation to individuals or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AGENT": Any Bond Registrar, Paying Agent, Authenticating Agent or
Custodian.
"AGGREGATE PRINCIPAL BALANCE": With respect to any Payment Date, the
aggregate of the Principal Balances of the Mortgage Loans as of the related
Determination Date (or other specified date).
"ASSIGNMENTS": Collectively (i) the original instrument of assignment
of a Mortgage, including any interim assignments, from the originator or any
other holder of any Mortgage Loan to the Indenture Trustee (that in each case
may, to the extent permitted by the laws of the state in which the related
Mortgaged Property is located, be a blanket instrument of assignment covering
other Mortgages and Mortgage Notes as well and that may also be an instrument of
assignment running directly from the mortgagee of record under the related
Mortgage to the Indenture Trustee).
"AUTHENTICATING AGENT": The Person, if any, appointed as Authenticating
Agent by the Issuer pursuant to Section 6.14, until any successor Authenticating
Agent for the Bonds is named, and thereafter "Authenticating Agent" shall mean
such successor. The initial Authenticating Agent shall be the Indenture Trustee.
Any Authenticating Agent other than the Indenture Trustee shall sign an
instrument under which it agrees to be bound by all of the terms of this
Indenture applicable to the Authenticating Agent.
"AUTHORIZED OFFICER": With respect to the Indenture Trustee, any
Responsible Officer and with respect to any other Person, the Chairman, Chief
Operating Officer, President or any Vice President of such Person.
-2-
<PAGE> 10
"AVAILABLE FUNDS": With respect to the Bonds and any Payment Date, the
sum of the amounts described in clauses (a) through (g) below, less (i) the
Administrative Fee Amount in respect of such Payment Date, (ii)Monthly Advances
and Servicing Advances previously made that are reimbursable to the Servicer
(other than those included in liquidation expenses for any Liquidated Mortgage
Loan and reimbursed from the related Liquidation Proceeds) with respect to the
related Collection Period to the extent permitted by the Servicing Agreement and
(iii) the aggregate amounts (A)deposited into the Collection Account or Bond
Account that may not be withdrawn therefrom pursuant to a final and
nonappealable order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the Bankruptcy Code and
that would otherwise have been included in Available Funds on such Payment Date
and (B) received by the Indenture Trustee that are recoverable and sought to be
recovered from the Issuer as a voidable preference by a trustee in bankruptcy
pursuant to the Bankruptcy Code in accordance with a final nonappealable order
of a court of competent jurisdiction:
(a) all scheduled payments of interest received with
respect to the Mortgage Loans and due during the related Due Period and
all other interest payments on or in respect of the Mortgage Loans
received by or on behalf of the Servicer during the related Collection
Period (including Payments Ahead that are allocable to interest for the
related Due Period), net of amounts representing interest accrued on
such Mortgage Loans in respect of any period prior to the applicable
Cut-off Dates, plus any Compensating Interest payments made by the
Servicer in respect of the related Mortgage Loans and any net income
from related REO Properties for such Collection Period;
(b) all scheduled payments of principal received with
respect to the Mortgage Loans and due during the related Due Period and
all other principal payments (including Principal Prepayments, but
excluding amounts described elsewhere in this definition) received or
deemed to be received during the related Collection Period (including
Payments Ahead that are allocable as principal for the related Due
Period) in respect of the Mortgage Loans;
(c) the aggregate of any Trust Insurance Proceeds
collected by the Servicer during the related Collection Period;
(d) the aggregate of any Net Liquidation Proceeds
collected by the Servicer during the related Collection Period;
(e) the aggregate of the Purchase Prices received in
respect of any Mortgage Loans that are required or permitted to be
repurchased, released, removed or substituted by the Mortgage Loan
Seller during or in respect of the related Collection Period, to the
extent such amounts are received by the Indenture Trustee on or before
the related Deposit Date;
(f) the amount of any Monthly Advances made by the
Servicer for such Payment Date; and
(g) the aggregate of amounts deposited in the Bond
Account during such Collection Period in connection with redemption of
the Bonds pursuant to Article X.
"AVAILABLE FUNDS CAP": The annualized weighted average of the Mortgage
Interest Rates on the Mortgage Loans as of the first day of the related Due
Period less the sum of (i) 0.50% plus one-twelfth of a per annum rate equal to
the percentage equivalent of the fraction obtained by dividing the
Administrative Fee Amount by the Aggregate Principal Balance of the Mortgage
Loans as of the first day of the related Due Period and (ii) if applicable, the
Relief Act Percentage.
"AVAILABLE FUNDS CAP CARRY FORWARD AMOUNT": For any Payment Date for
which the Bond Interest Rate was equal to the Available Funds Cap, the
difference between the amount of Bond Interest that would have accrued had the
Bond Interest Rate equaled the Bond Formula Rate, minus the amount of Bond
Interest that did accrue for such Payment Date, plus interest accrued on such
difference from such Payment Date at the Bond
-3-
<PAGE> 11
Interest Rate for each successive Interest Period to but excluding the Payment
Date on which such amount, with interest, is paid in full.
"BANKRUPTCY CODE": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"BASIC DOCUMENTS": This Agreement, the Trust Agreement, the Servicing
Agreement, the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement, the Management Agreement, the Insurance Agreement and the
Indemnification Agreement.
"BENEFICIAL OWNER": With respect to a Book-Entry Bond, the Person who
is the beneficial owner of such Bond as reflected on the books of the Clearing
Agency for the Bonds or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
"BEST EFFORTS": Efforts determined to be in good faith and reasonably
diligent by the Person performing such efforts, specifically the Issuer or the
Servicer, as the case may be, in its reasonable discretion. Such efforts do not
require the Issuer or the Servicer, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Issuer or the Servicer, as the case may be, to advance or expend
fees or sums of money in addition to those specifically set forth in this
Indenture and the Servicing Agreement.
"BOND ACCOUNT": The segregated trust account, which shall be an
Eligible Account, established and maintained pursuant to Section 8.02 and
entitled "Norwest Bank Minnesota, National Association, as Indenture Trustee for
Fund America Investors Trust 1997-NMC1 Collateralized Mortgage Obligations,
Series 1997-NMC1, Bond Account" on behalf of the Bondholders and the Bond
Insurer.
"BOND BALANCE": With respect to all of the Bonds, the aggregate of the
Current Bond Balances of all Bonds Outstanding at the time of determination.
"BONDHOLDER" or "HOLDER": The Person in whose name a Bond is registered
in the Bond Register, except that, solely for the purpose of taking any action
under Section 5.02 or giving of any consent pursuant to this Indenture, any Bond
registered in the name of the Issuer, the Mortgage Loan Seller, the Servicer or
the Transferor or any Persons actually known by a Responsible Officer of the
Indenture Trustee to be an Affiliate of the Issuer, the Mortgage Loan Seller,
the Servicer or the Transferor shall be deemed not to be Outstanding and the
percentage interest evidenced thereby shall not be taken into account in
determining whether Holders of the requisite percentage interests necessary to
take any such action or effect any such consent have acted or consented unless
the Issuer, the Mortgage Loan Seller, the Servicer, the Transferor or any such
Person is an owner of record of all of the Bonds.
"BOND FORMULA RATE": For any Payment Date prior to the Redemption Date,
a per annum rate equal to LIBOR plus 0.21% and, for any Payment Date thereafter,
a per annum rate equal to LIBOR plus 0.42%.
"BOND INSURER": MBIA Insurance Corporation, a New York stock insurance
company, and any successors thereto.
"BOND INSURER COMMITMENT LETTER": The commitment letter dated September
29, 1997, from the Bond Insurer to the Mortgage Loan Seller regarding the
issuance of a financial guaranty insurance policy,
"BOND INSURER DEFAULT": The existence and continuance of any of the
following:
(a) a MBIA Payment Default;
-4-
<PAGE> 12
(b) the entry by a court having jurisdiction in the
premises of (i) a final and nonappealable decree or order for relief in
respect of the Bond Insurer in an involuntary case or proceeding under
any applicable United States federal or state bankruptcy, insolvency,
rehabilitation, reorganization or other similar law of (ii) a final and
nonappealable decree or order adjudging the Bond Insurer bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, rehabilitation, arrangement, adjustment or composition
of or in respect of the Bond 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 Bond 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
(c) the commencement by the Bond Insurer of a voluntary
case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated bankrupt or insolvent, or
the consent of the Bond Insurer to the entry of a decree or order for
relief in respect of the Bond Insurer in an involuntary case or
proceeding under any applicable United States federal or state
bankruptcy, insolvency case or proceeding against the Bond Insurer, or
the filing by the Bond 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 Bond 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 Bond Insurer or of any substantial part of its
property, or the failure by the Bond Insurer to pay debts generally as
they become due, or the admission by the Bond Insurer in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Bond Insurer in furtherance of any such
action.
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Bond Insurer Default, the consent by the Bond
Insurer shall not be required to any action or inaction hereunder and the Bond
Insurer shall not have any rights with respect thereto.
"BOND INSURER PREMIUM": On the Closing Date, the premium due to the
Bond Insurer in paragraph 1(a)(i) of the Bond Insurer Commitment Letter and
thereafter the premium due to the Bond Insurer on each Payment Date, which
amount shall be equal to the Bond Insurer Premium Rate and the Bond Balance
immediately prior to such Payment Date.
"BOND INSURER PREMIUM RATE": On the Closing Date, the Premium
Percentage specified in paragraph 1(a)(i) of the Bond Insurer Commitment Letter
and beginning on October 27, 1997 and on each Payment Date thereafter, the
Premium Percentage specified in paragraph 1(b) thereof.
"BOND INTEREST": As to any Payment Date, the amount of interest payable
to Holders of the Bonds on such Payment Date, which amount shall be equal to (a)
with respect to the initial Interest Period, interest for the number of days in
the period commencing on the Closing Date and ending on the day prior to such
Payment Date at the Bond Interest Rate on the Original Bond Balance, and (b)
with respect to any subsequent Interest Period, interest for the number of days
in such Interest Period at the Bond Interest Rate on the Bond Balance as of the
preceding Payment Date (after giving effect to the payment, if any, in reduction
of principal made on the Bonds on such preceding Payment Date). All calculations
of interest on the Bonds will be computed on the basis of the actual number of
days elapsed in the related Interest Period and in a year of 360 days.
"BOND INTEREST RATE": With respect to the Interest Period relating to
the October 1997 Payment Date, 5.86625% per annum. With respect to each Interest
Period thereafter, a per annum rate equal to the lesser of (a)the Bond Formula
Rate and (b) the Available Funds Cap.
"BOND REGISTER": As defined in Section 2.06.
"BOND REGISTRAR": As defined in Section 2.06.
-5-
<PAGE> 13
"BONDS": Any bonds authorized by, and authenticated and delivered
under, this Indenture.
"BOOK-ENTRY BONDS": Any Bonds registered in the name of the Clearing
Agency or its nominee, ownership of which is reflected on the books of the
Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (directly or as an indirect participant in accordance with the
rules of such Clearing Agency).
"BOOK-ENTRY TERMINATION": The time at which the book-entry registration
of the Book-Entry Bonds shall terminate, as specified in Section 2.13.
"BUSINESS DAY": Any day other than (i) a Saturday or Sunday or (ii) a
day that is either a legal holiday or a day on which banking institutions in the
State of Colorado, the State of New York, the State of Minnesota, or the State
of Delaware or the principal office of the Bond Insurer are authorized or
obligated by law, regulation or executive order to be closed.
"CERTIFICATE": As defined in the Trust Agreement.
"CERTIFICATE DISTRIBUTION ACCOUNT": As defined in the Trust Agreement.
"CERTIFICATEHOLDERS": As defined in the Trust Agreement.
"CLEAN-UP CALL DATE": The first Payment Date on which the Aggregate
Principal Balance of the Mortgage Loans is less than 10% of the Aggregate
Principal Balance as of the Cut-Off Date.
"CLEARING AGENCY": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities and Exchange Act of 1934, as amended,
and the regulations of the Commission thereunder and shall initially be The
Depository Trust Company of New York, the nominee for which is Cede & Co.
"CLEARING AGENCY PARTICIPANTS": The entities for whom the Clearing
Agency will maintain book-entry records of ownership and transfer of Book-Entry
Bonds, which may include securities brokers and dealers, banks and trust
companies and clearing corporations and certain other organizations.
"CLOSING DATE": September 30, 1997, the date of initial issuance of the
Bonds.
"CODE": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, as successor statutes thereto, and applicable
U.S. Department of Treasury regulations issued pursuant thereto in temporary or
final form and proposed regulations thereunder to the extent that, by reason of
their proposed effective date, such proposed regulations would apply.
"COLLECTION ACCOUNT": The segregated trust account established by the
Servicer and maintained pursuant to Section 2.02(b) of the Servicing Agreement.
"COLLECTION PERIOD": As to any Payment Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Payment Date occurs (except that, in the case of the first Payment Date,
the related Collection Period will commence on the applicable Cut-off Date for
each Mortgage Loan) and ending on the last day of such calendar month.
"COMMISSION": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing such duties at
such time under the Trust Indenture Act or similar legislation replacing the
Trust Indenture Act.
"COMPENSATING INTEREST". As defined in the Servicing Agreement.
-6-
<PAGE> 14
"CORPORATE TRUST OFFICE": The principal office of the Indenture Trustee
at which at any particular time its corporate trust business with respect to
this Indenture shall be principally administered, which office at the date of
the execution of this Indenture is located at Sixth Street and Marquette Avenue,
Minneapolis, MN 55479, Attention: Fund America Investors Trust 1997-NMC1, Series
1997-NMC1, with a copy to the Indenture Trustee at 11000 Broken Land Parkway,
Columbia, Maryland 21044, Attention: Fund America Investors Trust 1997-NMC1,
Series 1997-NMC1.
"CURRENT BOND BALANCE": With respect to any Bond as of any date of
determination, the original principal amount of such Bond, reduced by all prior
payments (including Insured Payments), if any, made with respect to principal of
such Bond.
"CUSTODIAN": A Person who is at any time appointed by the Indenture
Trustee pursuant to Section 8.14 as a document custodian for the Mortgage Files,
which Person shall not be the Issuer or an Affiliate of the Issuer.
"CUT-OFF DATE": For any Mortgage Loan, the later of September1, 1997
or the date of funding of such Mortgage Loan by the Mortgage Loan Seller (which
date has occurred prior to the Closing Date).
"DEFAULT": Any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"DEFECTIVE MORTGAGE LOAN": Any Mortgage Loan that is required to be
repurchased or substituted by the Mortgage Loan Seller pursuant to the Mortgage
Loan Sale Agreement.
"DEFINITIVE BONDS": Bonds other than Book-Entry Bonds.
"DELETED MORTGAGE LOAN": A Mortgage Loan replaced or to be replaced by
a Qualified Replacement Mortgage Loan.
"DELINQUENCY AMOUNT": As of any Payment Date, the product of the
Delinquency Percentage for such Payment Date and the Aggregate Principal Balance
of the Mortgage Loans as of the Determination Date relating to such Payment
Date.
"DELINQUENCY PERCENTAGE": For any Payment Date, the rolling three month
average of the fraction, expressed as a percentage, (i) the numerator of which
is the aggregate of the Principal Balances as of the related Determination Date
of all Mortgage Loans that were 90 or more days contractually delinquent, in
foreclosure, REO Property or for which the related Mortgagor was in a bankruptcy
proceeding or paying a reduced Monthly Payment as a result of a bankruptcy
workout and (ii) the denominator of which is the Aggregate Principal Balance of
all Mortgage Loans as of the related Determination Date.
"DEPOSIT DATE": The date each month on which funds on deposit in the
Collection Account are remitted by the Servicer to the Indenture Trustee for
deposit into the Bond Account, which date shall be with respect to any Payment
Date, the 18th day of the month in which such Payment Date occurs, or the next
succeeding Business Day, if such 18th day is not a Business Day.
"DETERMINATION DATE": As to any Payment Date, the last day of the Due
Period relating to such Payment Date.
"DUE PERIOD": With respect to any Payment Date, the period commencing
on the second day of the calendar month immediately preceding the calendar month
in which such Payment Date occurs (or, with respect to the first Payment Date,
commencing the day following the applicable Cut-off Date for each Mortgage Loan)
and ending on the first day of the calendar month in which such Payment Date
occurs.
-7-
<PAGE> 15
"ELIGIBLE ACCOUNT": Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by Standard & Poor's and "Aa2" or better by Moody's and in the highest
short term rating category by Standard & Poor's and Moody's, and that is either
(i) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, and (v) approved in writing by the Bond
Insurer or (B) a trust account maintained with the trust department of a federal
or state chartered depository institution or trust company, having capital and
surplus of not less than $100,000,000, acting in its fiduciary capacity, the
unsecured and uncollateralized debt obligations of which shall be rated "Baa3"
or better by Moody's. Any Eligible Accounts maintained with the Indenture
Trustee shall conform to the preceding clause (B).
"EVENT OF DEFAULT": As defined in Section 5.01.
"EXCESS CASH": With respect to any Payment Date, the amount, if any, by
which Available Funds for such Payment Date exceed the sum of (i) any amounts
payable to the Bond Insurer for Insured Payments paid on prior Payment Dates and
not yet reimbursed and for any unpaid Bond Insurer Premiums for prior Payment
Dates (in each case with interest thereon at the "Late Payment Rate" (as defined
in the Insurance Agreement)), (ii) the Bond Interest for the related Payment
Date, and (iii) the Monthly Principal for the related Payment Date.
"EXCESS CASH PAYMENT". As defined in clause fourth of Section 8.02(c).
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"FINAL CERTIFICATION": A certification as to the completeness of each
Mortgage File provided by the Indenture Trustee on or before the first
anniversary of the Closing Date pursuant to Section 6.15(b).
"FINAL MATURITY DATE": The Payment Date in April 2029.
"FULL PREPAYMENT": With respect to any Mortgage Loan, when any one of
the following occurs: (i) payment is made by the Mortgagor to the Servicer of
100% of the outstanding principal balance of such Mortgage Loan, together with
all accrued and unpaid interest thereon at the Mortgage Interest Rate on such
Mortgage Loan, (ii) payment is made to the Indenture Trustee of the Purchase
Price of such Mortgage Loan in connection with the purchase of such Mortgage
Loan by the Mortgage Loan Seller or the Servicer or (iii) payment is made to the
Servicer of all Insurance Proceeds and Liquidation Proceeds, and other payments,
if any, that have been determined by the Servicer in accordance with the
provisions of the Servicing Agreement to be finally recoverable, in the
Servicer's reasonable judgment, in respect of such Mortgage Loan.
"GRANT": To assign, transfer, mortgage, pledge, create and grant a
security interest in, deposit, set-over and confirm. A Grant of a Mortgage Loan
and related Mortgage Files, a Permitted Investment, the Servicing Agreement, the
Mortgage Loan Sale Agreement, the Mortgage Loan Contribution Agreement, an
Insurance Policy or any other instrument shall include all rights, powers and
options (but none of the obligations) of the Granting party thereunder,
including without limitation the immediate and continuing right to claim for,
collect, receive and give receipts for principal and interest payments
thereunder, insurance proceeds, Purchase Prices and all other moneys payable
thereunder and all proceeds thereof, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring Proceedings in the name of the Granting party or otherwise,
and generally to do and receive anything that the Granting party is or may be
entitled to do or receive thereunder or with respect thereto.
"GROSS MARGIN": As defined in the Servicing Agreement.
-8-
<PAGE> 16
"HIGHEST LAWFUL RATE": As defined in Section 11.18.
"INDENTURE": This instrument as originally executed and, if from time
to time supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, as so supplemented or
amended. All references in this instrument to designated "Articles", "Sections",
"Subsections" and other subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this instrument as originally executed.
The words "herein", "hereof", "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision.
"INDENTURE TRUSTEE": Norwest Bank Minnesota, National Association, a
national banking association, and any Person resulting from or surviving any
consolidation or merger to which it may be a party until a successor Person
shall have become the Indenture Trustee pursuant to the applicable provisions of
this Indenture, and thereafter "Indenture Trustee" shall mean such successor
Person.
"INDENTURE TRUSTEE'S FEE": The Indenture Trustee's monthly fee, equal
to 1/12th of 0.0125% of the Aggregate Principal Balance of the Mortgage Loans as
of the first day of the related Due Period.
"INDEPENDENT": When used with respect to any specified Person means
such a Person who (i) is in fact independent of the Issuer and any other obligor
upon the Bonds, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (iii) is not connected with
the Issuer or any such other obligor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Indenture Trustee, such Person shall be
appointed by an Issuer Order and such opinion or certificate shall state that
the signer has read this definition and that the signer is Independent within
the meaning hereof.
"INDIVIDUAL BOND": A Bond of an original principal amount of $1,000
(provided, however, one Bond may be less than that amount); a Bond of an
original principal amount in excess of $1,000 shall be deemed to be a number of
Individual Bonds equal to the quotient obtained by dividing such original
principal amount by $1,000.
"INITIAL CERTIFICATION": A certification as to the completeness of each
Mortgage File provided by the Indenture Trustee on the Closing Date pursuant to
Section 6.15(a).
"INDEMNIFICATION AGREEMENT": As defined in the Insurance Agreement.
"INSURANCE AGREEMENT": The Insurance Agreement, dated as of September
1, 1997, among the Bond Insurer, the Issuer, the Servicer, the Mortgage Loan
Seller, the Transferor, and the Indenture Trustee.
"INSURANCE POLICIES": All insurance policies insuring any Mortgage Loan
or Mortgaged Property, to the extent the Issuer or the Indenture Trustee has any
interest therein.
"INSURED PAYMENTS": As to any Payment Date, the amount required to be
paid by the Bond Insurer under the MBIA Insurance Policy pursuant to a Notice of
Claim presented by the Indenture Trustee (in the manner described in Section
8.03). The Insured Payment is (a) for any Payment Date, the sum of (i) the Bond
Interest for such Payment Date minus the Available Funds for such Payment Date
and (ii) the then existing Overcollateralization Deficit, if any (after
application of Available Funds for such Payment Date to reduce the Bond Balance
on such Payment Date) and (b)any shortfall in the amount required to pay a
Preference Amount from any source other than the MBIA Insurance Policy.
"INSURANCE PROCEEDS": As defined in the Servicing Agreement.
"INTEREST PERIOD": With respect to the first Payment Date, the period
beginning on the Closing Date and ending on the day preceding the Payment Date
in October 1997 and, as to any subsequent Payment Date, the
-9-
<PAGE> 17
period beginning on the immediately preceding Payment Date and ending on the day
prior to the related Payment Date.
"ISSUER": Fund America Investors Trust 1997-NMC1, a Delaware business
trust.
"ISSUER ORDER" and "ISSUER REQUEST": A written order or request of the
Issuer signed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or, in the case of such order or request required by Section 2.11, by an
Authorized Officer of the holder of the Residual Certificate and delivered to
the Indenture Trustee or the Authenticating Agent, as applicable.
"LETTER AGREEMENT": The Letter of Representations to The Depository
Trust Company from the Indenture Trustee and the Issuer dated September 30,
1997, attached hereto as Exhibit D.
"LIBOR": With respect to any Payment Date (other than the first Payment
Date), the per annum rate determined by the Indenture Trustee on the related
LIBOR Determination Date on the basis of the offered rates of the Reference
Banks for one-month U.S. dollar deposits as such rates appear on the Reuters
Screen LIBO Page as of 11:00 a.m. (London time) on such LIBOR Determination
Date. On each LIBOR Determination Date, LIBOR will be established by the
Indenture Trustee as follows:
(a) if on such LIBOR Determination Date two or more
Reference Banks provide such offered quotations, LIBOR shall be the
arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 0.0625%) of such offered quotations; or
(b) if on such LIBOR Determination Date, fewer than two
Reference Banks provide such offered quotations, LIBOR shall be the
greater of (x) LIBOR as determined on the previous LIBOR Determination
Date or (y) the Reserve Interest Rate.
"LIBOR DETERMINATION DATE": With respect to any Interest Period after
the first Interest Period, the second London Business Day immediately preceding
the first day of such Interest Period.
"LIQUIDATED MORTGAGE LOAN": As defined in the Servicing Agreement.
"LIQUIDATION DATE": With respect to any Mortgage Loan, the date of the
final receipt of all Liquidation Proceeds, Insurance Proceeds or other payments
with respect to such Mortgage Loan.
"LIQUIDATION PROCEEDS": As defined in the Servicing Agreement.
"LOAN-TO-VALUE RATIO": As defined in the Mortgage Loan Sale Agreement.
"LONDON BUSINESS DAY": A Business Day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
"MATURITY": With respect to any Bond, the date on which the entire
unpaid principal amount of such Bond becomes due and payable as therein or
herein provided, whether at the Final Maturity Date or by declaration of
acceleration, call for redemption or otherwise.
"MANAGEMENT AGREEMENT": That certain agreement, dated as of September
1, 1997, between the Issuer and the Indenture Trustee pursuant to which the
Indenture Trustee, as manager, will perform certain obligations of the Issuer
hereunder.
-10-
<PAGE> 18
"MBIA INSURANCE POLICY": The financial guaranty insurance policy (No.
24873), dated September 30, 1997, issued by the Bond Insurer to the Indenture
Trustee for the benefit of the Bondholders, pursuant to which the Bond Insurer
guarantees payment of Insured Payments. A specimen of the MBIA Insurance Policy
is attached hereto as Exhibit F.
"MBIA PAYMENT DEFAULT": Failure and continued failure by the Bond
Insurer to make an Insured Payment required under the MBIA Insurance Policy in
accordance with its terms.
"MINIMUM RATE": As defined in the Servicing Agreement.
"MONTHLY ADVANCE": As defined the Servicing Agreement.
"MONTHLY PAYMENT": With respect to any Mortgage Note, the amount of
each monthly payment payable under such Mortgage Note by the Mortgagor in
accordance with its terms, including one month's accrued interest on the related
Principal Balance at the then applicable Mortgage Interest Rate, but net of any
portion of such monthly payment that represents late payment charges, prepayment
or extension fees or collections allocable to payments to be made by Mortgagors
for payment of insurance premiums or similar items.
"MONTHLY PRINCIPAL": For any Payment Date, an amount equal to (a) the
aggregate of (i) all scheduled payments of principal received (or advanced or to
be advanced on the related Deposit Date) with respect to the Mortgage Loans and
due during the related Due Period and all other amounts collected, received or
otherwise recovered in respect of principal on the Mortgage Loans (including
Principal Prepayments, but not including Payments Ahead that are not allocable
to principal for the related Due Period) during or in respect of the related
Collection Period, and (ii) the aggregate of the amounts allocable to principal
deposited in the Bond Account on the related Deposit Date by the Issuer, the
Transferor, the Servicer or the Bond Insurer in connection with a repurchase,
release, removal or substitution of any Mortgage Loans pursuant to this
Indenture, reduced by (b) the amount of any Overcollateralization Surplus with
respect to such Payment Date.
"MONTHLY SERVICING FEE": As defined in the Servicing Agreement.
"MOODY'S": Moody's Investors Service, Inc. and its successors in
interest.
"MORTGAGE": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
"MORTGAGE FILE": As defined in the Mortgage Loan Sale Agreement.
"MORTGAGE INTEREST RATE": With respect to each Mortgage Loan, the
adjustable rate per annum set forth in the related Mortgage Note from time to
time at which interest accrues on such Mortgage Loan as of the most recent
interest rate adjustment pursuant to the related Mortgage Note, in each case
after giving effect to any modification of a Mortgage Loan for any period in
connection with a bankruptcy or similar proceeding involving the related
Mortgagor or a modification, waiver or amendment of such Mortgage Loan granted
or agreed to by the Servicer in accordance with the Servicing Agreement.
"MORTGAGE LOAN": Each of the mortgage loans Granted to the Indenture
Trustee under this Indenture as security for the Bonds and that from time to
time comprise part of the Trust Estate, including any property that secures a
Mortgage that becomes REO Property. The Mortgage Loans are listed on the
Mortgage Loan Schedule annexed hereto as Schedule I.
"MORTGAGE LOAN CONTRIBUTION AGREEMENT": That certain agreement, dated
as of September 1, 1997, between the Transferor and the Issuer pursuant to which
the Mortgage Loans will be acquired from the Transferor by the Issuer for
inclusion in the Trust Estate, a copy of which agreement is attached hereto as
Exhibit C.
-11-
<PAGE> 19
"MORTGAGE LOAN SALE AGREEMENT": That certain agreement, dated as of
September 1, 1997, between the Mortgage Loan Seller and the Transferor pursuant
to which the Mortgage Loans will be acquired from the Mortgage Loan Seller by
the Transferor, a copy of which agreement is attached hereto as Exhibit B.
"MORTGAGE LOAN SCHEDULE": As of any date, the schedule of mortgage
loans included in the Trust Estate. Schedule I hereto identifies the Mortgage
Loans being Granted to the Indenture Trustee on the Closing Date. The Mortgage
Loan Schedule shall be amended by the Servicer as appropriate from time to time
to reflect the deletion and substitution of Mortgage Loans in accordance with
the terms of the Basic Documents. The Mortgage Loan Schedule shall identify each
Mortgage Loan by the Servicer's loan number and address (including the state) of
the related Mortgaged Property and shall set forth as to each Mortgage Loan the
initial Loan-to-Value Ratio, the Principal Balance as of the Cut-off Date, the
Index, the Gross Margin, the currently Monthly Payment amount and the stated
maturity date of the related Mortgage Note. The Issuer shall cause the initial
Mortgage Loan Schedule to be delivered by the Mortgage Loan Seller to the
Indenture Trustee in both physical and computer-readable form.
"MORTGAGE LOAN SELLER": National Mortgage Corporation, a Colorado
corporation.
"MORTGAGE NOTE": The note or other instrument evidencing the
indebtedness of a Mortgagor under the related Mortgage Loan.
"MORTGAGED PROPERTY": The underlying property securing a Mortgage Note.
"MORTGAGOR": The obligor under a Mortgage Note.
"NET LIQUIDATION PROCEEDS": As defined in the Servicing Agreement.
"NONRECOVERABLE ADVANCE": As defined in the Servicing Agreement.
"NOTICE OF CLAIM": The notice required to be furnished by the Indenture
Trustee to the Bond Insurer in the event an Insured Payment is required to be
paid under the MBIA Insurance Policy with respect to any Payment Date, in the
form set forth as Exhibit G hereto.
"OFFICERS' CERTIFICATE": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Mortgage Loan Seller, the Transferor, the Servicer or,
in the case of the Issuer, an authorized signatory of the Owner Trustee, as the
case may be, and delivered to the Indenture Trustee, Bond Insurer or each Rating
Agency, as the case may be.
"OPINION OF COUNSEL": A written opinion of counsel reasonably
acceptable to the Indenture Trustee and, in the case of opinions delivered to
the Bond Insurer, reasonably acceptable to it. Any expense related to obtaining
an Opinion of Counsel for an action requested by a party shall be borne by the
party required to obtain such opinion or seeking to effect the action that
requires the delivery of such Opinion of Counsel, except in such instances where
such opinion is at the request of the Indenture Trustee, in which case such
expense shall be an expense of the Issuer.
"ORIGINAL BOND BALANCE": The principal balance of the Bonds at the
issue date thereof, equal to $121,765,000.
"OUTSTANDING": As of the date of determination, all Bonds theretofore
authenticated and delivered under this Indenture except:
(i) Definitive Bonds theretofore canceled by the Bond
Registrar or delivered to the Bond Registrar for cancellation;
-12-
<PAGE> 20
(ii) Bonds or portions thereof for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Indenture Trustee or any Paying Agent (other than the Issuer)
in trust for the Holders of such Bonds; provided, however, that if such
Bonds are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor, satisfactory to the
Indenture Trustee, has been made;
(iii) Bonds in exchange for or in lieu of which other Bonds
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Bonds are held by a bona fide purchaser (as defined by the Uniform
Commercial Code of the applicable jurisdiction); and
(iv) Bonds alleged to have been destroyed, lost or stolen
that have been paid as provided for in Section 2.07;
provided, however, that in determining whether the Holders of the requisite
percentage of the Bond Balance of the Outstanding Bonds have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Bonds
owned by the Issuer, any other obligor upon the Bonds or any Affiliate of the
Issuer, the Mortgage Loan Seller, the Servicer or the Transferor or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Bonds that the Indenture Trustee knows to be so owned shall be so disregarded.
Bonds so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee the pledgee's right so to act with respect to such Bonds and that the
pledgee is not the Issuer, any other obligor upon the Bonds or any Affiliate of
the Issuer, the Mortgage Loan Seller, the Servicer or the Transferor or such
other obligor; provided, further, however, that Bonds that have been paid with
the proceeds of the MBIA Insurance Policy shall be deemed to be Outstanding for
the purposes of this Indenture, such payment to be evidenced by written notice
from the Bond Insurer to the Indenture Trustee, and the Bond Insurer shall be
deemed to the Holder thereof to the extent of any payments thereon made by the
Bond Insurer.
"OVERCOLLATERALIZATION AMOUNT": As to any Payment Date, the amount, if
any, by which (x) the Aggregate Principal Balance of the Mortgage Loans as of
the end of the related Due Period exceeds (y) the Bond Balance for such Payment
Date, after taking into account the Monthly Principal (disregarding any
permitted reduction thereof in Monthly Principal due to an Overcollateralization
Surplus made on such Payment Date) to be applied in reduction of the Bond
Balance on such Payment Date. If the Aggregate Principal Balance of the Mortgage
Loans is less than the Bond Balance for such Payment Date, determined as
provided above, the Overcollateralization Amount for such Payment Date shall be
zero.
"OVERCOLLATERALIZATION DEFICIT": As to any Payment Date, the amount, if
any, by which the Bond Balance on such Payment Date (after taking into account
any payments to be paid on such Payment Date in reduction of the Bond Balance)
exceeds the Aggregate Principal Balance of the Mortgage Loans as of the end of
the related Due Period. If the Aggregate Principal Balance of the Mortgage Loans
as determined pursuant to the preceding sentence is greater than the Bond
Balance for such Payment Date determined as provided above, the
Overcollateralization Deficit for such Payment Date shall be zero.
"OVERCOLLATERALIZATION SURPLUS": As to any Payment Date, the amount, if
any, by which (x) the Overcollateralization Amount on such Payment Date exceeds
(y) the Required Overcollateralization Amount on such Payment Date.
"OWNER TRUSTEE": Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity, but solely as owner trustee under
the Trust Agreement, and any successor owner trustee thereunder.
"OWNER TRUSTEE FEE": As defined in the Trust Agreement.
-13-
<PAGE> 21
"PAYING AGENT": The Indenture Trustee or any other depository
institution or trust company that is authorized by the Issuer pursuant to
Section 3.03 to pay the principal of, or interest on, any Bonds on behalf of the
Issuer, which agent, if not the Indenture Trustee, shall have signed an
instrument agreeing to be bound by the terms of this Indenture applicable to the
Paying Agent.
"PAYMENT AHEAD": As defined in the Servicing Agreement.
"PAYMENT DATE": The 25th day of each month or, if any such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
October 27, 1997.
"PAYMENT DATE STATEMENT": The statement prepared pursuant to Section
2.08(d) with respect to collection on or in respect of the Mortgage Loans and
other assets of the Trust Estate and payments on or in respect of the Bonds,
based upon the information contained in the Servicer Remittance Report prepared
pursuant to the Servicing Agreement and setting forth the following information
with respect to each Payment Date (to the extent the Servicer has made such
information (other than the information described in clause (ii), (iii), (iv),
(v) and (xiv) below) available to the Indenture Trustee):
(i) the amount of such payment to Bondholders allocable
to (x) Monthly Principal (separately setting forth Principal
Prepayments) and (y) any Excess Cash Payment;
(ii) the amount of such payment to Bondholders allocable
to (x) Bond Interest and (y) Available Funds Cap Carry Forward Amount;
(iii) the Bond Balance, after giving effect to the payment
of Monthly Principal and any Excess Cash Payment applied to reduce the
Bond Balance on such Payment Date;
(iv) the amount of any Insured Payments for such Payment
Date;
(v) the Overcollateralization Amount, the then applicable
Required Overcollateralization Amount, the Overcollateralization
Surplus, if any, and the Overcollateralization Deficit, if any, with
respect to such Payment Date;
(vi) the Aggregate Principal Balance of the Mortgage Loans
as of the end of the related Due Period;
(vii) the amount of Monthly Advances made with respect to
such Payment Date, if any;
(viii) the number and aggregate of the Principal Balances of
Mortgage Loans (including the Principal Balances of all Mortgage Loans
in foreclosure) contractually delinquent (i) one month, (ii) two months
and (iii) three or more months, as of the end of the related Collection
Period;
(ix) the number and aggregate of the Principal Balances of
the Mortgage Loans in foreclosure or subject to other similar
proceedings, and the number and aggregate of the Principal Balance of
Mortgage Loans, the Mortgagor of which is known by the Servicer to be
in bankruptcy as of the end of the related Collection Period and the
book value of any real estate acquired through foreclosure, grant of a
deed in lieu of foreclosure or other similar proceedings during the
related Collection Period;
(x) the aggregate of the Principal Balances of the
Mortgage Loans repurchased by the Mortgage Loan Seller or purchased by
the Servicer, separately setting forth the aggregate of the Principal
Balances of Mortgage Loans delinquent for three consecutive monthly
installments purchased by the Servicer at its option pursuant to the
Servicing Agreement;
-14-
<PAGE> 22
(xi) the aggregate amount of the Monthly Servicing Fee
paid to or retained by the Servicer for the related Collection Period;
(xii) the aggregate Principal Balance of the three largest
outstanding Mortgage Loans subject to this Indenture as of the related
Determination Date;
(xiii) the aggregate amount of Realized Losses incurred
during the related Collection Period and the cumulative amount of
Realized Losses since the respective Cut-off Dates; and
(xiv) the Delinquency Percentage and the Rolling Loss
Percentage (as defined in the Servicing Agreement) relating to such
Payment Date.
In the case of information furnished pursuant to subclauses (i) and
(ii) above, the amounts shall be expressed as a dollar amount per
Individual Bond.
"PERCENTAGE INTEREST": With respect to a Bond, the undivided percentage
interest (carried to eight places rounded down) obtained by dividing the
original principal balance of such Bond by the Original Bond Balance and
multiplying the result by 100.
"PERMITTED INVESTMENTS": One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully
guaranteed by, the United States of America, the Federal Home Loan
Mortgage Corporation, Federal National Mortgage Corporation, the
Federal Home Loan Banks or any agency or instrumentality of the United
States of America rated Aa3 or higher by Moody's, the obligations of
which are backed by the full faith and credit of the United States of
America;
(b) (i) demand and time deposits in, certificates of
deposit of, banker's acceptances issued by, or federal funds sold by
any depository institution or trust company (including the Indenture
Trustee or its agent acting in their respective commercial capacities)
incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal
and/or state authorities, so long as, at the time of such investment or
contractual commitment providing for such investment, such depository
institution or trust company or its ultimate parent has a short-term
uninsured debt rating in one of the two highest available rating
categories of Standard & Poor's and of Moody's and provided that each
such investment has an original maturity of no more than 365 days and
(ii) any other demand or time deposit or deposit which is fully insured
by the FDIC;
(c) repurchase obligations with a term not to exceed 30
days with respect to any security described in clause (a) above and
entered into with a depository institution or trust company (acting as
a principal) rated A or higher by S&P and rated A2 or higher by
Moody's; provided, however, that collateral transferred pursuant to
such repurchase obligation must be of the type described in clause (a)
above and must (i) be valued daily at current market price plus accrued
interest, (ii) pursuant to such valuation, be equal, at all times, to
105% of the cash transferred by the Indenture Trustee in exchange for
such collateral and (iii) be delivered to the Indenture Trustee or, if
the Indenture Trustee is supplying the collateral, an agent for the
Indenture Trustee, in such a manner as to accomplish perfection of a
security interest in the collateral by possession of certified
securities.
(d) securities bearing interest or sold at a discount
issued by any corporation incorporated under the laws of the United
States of America or any state thereof which has a long-term unsecured
debt rating in the highest available rating category of each of the
Rating Agencies at the time of such investment;
-15-
<PAGE> 23
(e) commercial paper having an original maturity of less
than 365 days and issued by an institution having a short-term
unsecured debt rating in the highest available rating category of each
of the Rating Agencies at the time of such investment;
(f) a guaranteed investment contract approved by each of
the Rating Agencies and the Bond Insurer and issued by an insurance
company or other corporation having a long-term unsecured debt rating
in the highest available rating category of each of the Rating Agencies
at the time of such investment;
(g) money market funds having ratings in the highest
available rating category of Moody's and one of the two highest
available rating categories of S&P at the time of such investment which
invest only in other Permitted Investments (any such money market funds
which provide for demand withdrawals being conclusively deemed to
satisfy any maturity requirements for Permitted Investments set forth
herein) including money market funds of the Indenture Trustee and any
such funds that are managed by the Indenture Trustee or its affiliates
or which Indenture Trustee or any affiliate acts as advisor as long as
such money market funds satisfy the criteria of this subparagraph (g);
and
(h) any investment approved in writing by the Bond
Insurer and written evidence that any such investment will not result
in a downgrading or withdrawal of the rating by each Rating Agency on
the Bonds.
The Indenture Trustee may purchase from or sell to itself or an
affiliate, as principal or agent, the Permitted Investments listed above. All
Permitted Investments in a trust account under the Indenture shall be made in
the name of the Indenture Trustee for the benefit of the Bondholders and the
Bond Insurer.
"PERSON": Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"PREDECESSOR BONDS": With respect to any particular Bond, every
previous Bond evidencing all or a portion of the same debt as that evidenced by
such particular Bond; and, for the purpose of this definition, any Bond
authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or
stolen Bond shall be deemed to evidence the same debt as the lost, destroyed or
stolen Bond.
"PREFERENCE AMOUNT": Any amount previously distributed to a Bondholder
that is recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with a final
nonappealable order of a court having competent jurisdiction.
"PRINCIPAL BALANCE": As to any Mortgage Loan and any Determination
Date, the actual outstanding principal amount thereof as of the close of
business on the Determination Date in the preceding month (or, in the case of
the first Payment Date, as of the applicable Cut-off Date) less (i) all
scheduled payments of principal received or advanced (or to be advanced on the
related Deposit Date) with respect to the Mortgage Loans and due during the
related Due Period and all other amounts collected, received or otherwise
recovered in respect of principal on the Mortgage Loans (including Principal
Prepayments, but not including Payments Ahead that are not allocable to
principal for the related Due Period) during or in respect of the related
Collection Period, Net Liquidation Proceeds and Insurance Proceeds allocable to
principal recovered or collected in respect of such Mortgage Loan during the
related Collection Period, (ii) the portion of the Purchase Price allocable to
principal to be remitted by the Mortgage Loan Seller or the Servicer to the
Indenture Trustee on or prior to the related Deposit Date in connection with a
repurchase of such Mortgage Loan pursuant to the Mortgage Loan Sale Agreement,
the Servicing Agreement or Section 8.05 hereof, to the extent such amount is
actually remitted on or prior to such Deposit Date, and (iii) the amount to be
remitted by the Mortgage Loan Seller to the Indenture Trustee on the related
Deposit Date in connection with a substitution of a Qualified Replacement
Mortgage Loan for such Mortgage Loan pursuant to the Mortgage Loan Sales
Agreement and Section 8.05 hereof, to the extent such
-16-
<PAGE> 24
amount is actually remitted on or prior to such Deposit Date; provided, however
that Mortgage Loans that have become Liquidated Mortgage Loans since the end of
the preceding Determination Date (or, in the case of the first Determination
Date, since the applicable Cut-off Date) will be deemed to have a Principal
Balance of zero on the current Determination Date.
"PRINCIPAL PREPAYMENT": As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
Mortgage Loan (including Net Liquidation Proceeds and Trust Insurance Proceeds)
that, in the case of a payment by a Mortgagor, is received in advance of its
scheduled due date and is not a Payment Ahead.
"PROCEEDING": Any suit in equity, action at law or other judicial or
administrative proceeding.
"PURCHASE PRICE": With respect to any Defective Mortgage Loan, an
amount equal to (i) the sum of (A) the Principal Balance of such Defective
Mortgage Loan as of the beginning of the Due Period next preceding the Deposit
Date on which such repurchase or purchase is required to occur, (B) interest
computed at the applicable Mortgage Interest Rate on such Principal Balance from
the date to which interest was last paid by the Mortgagor to the last day of the
Due Period immediately preceding the Deposit Date on which such repurchase
occurs and (C) any previously unreimbursed Servicing Advances made on or in
respect of such Defective Mortgage Loan, less (ii) any payments of principal and
interest in respect of such Defective Mortgage Loan made by or on behalf of the
related Mortgagor during such Due Period. With respect to any Qualified
Replacement Mortgage Loan, the amount remitted by the Mortgage Loan Seller to
the Indenture Trustee on or prior to the Deposit Date relating to a Payment Date
in connection with a substitution of such Qualified Replacement Mortgage Loan
for a Mortgage Loan pursuant to the Mortgage Loan Sales Agreement or Section
8.05 hereof.
"QUALIFIED REPLACEMENT MORTGAGE LOAN": A Mortgage Loan that is
substituted for a Deleted Mortgage Loan pursuant to Section 8.05 that must, at
the end of the Due Period preceding the date of such substitution, (i) have an
outstanding principal balance (when taken together with any other Qualified
Replacement Mortgage Loan being substituted for such Deleted Mortgage Loan), not
in excess of and not substantially less than the unpaid principal balance of the
Deleted Mortgage Loan at the end of the Due Period preceding the date of
substitution, (ii) have the Mortgage Interest Rate computed on substantially the
same basis as the Mortgage Interest Rate on the related Mortgage Loan, utilizing
the same Index and having a Gross Margin or Minimum Rate not less than (and not
more than one percentage point in excess of) the Gross Margin and Minimum Rate
applicable to the Deleted Mortgage Loan, (iii) have a remaining term to maturity
not greater than (and not more than one year less than) that of the Deleted
Mortgage Loan, (iv) have a Loan-to-Value Ratio equal to or lower than the
Loan-to- Value Ratio of the Deleted Mortgage Loan, (v) have a first lien
priority, (vi) comply as of the date of substitution with each representation
and warranty set forth in Section 4(b) and Exhibit B of the Mortgage Loan Sale
Agreement, (vii) have the same or better property type as the Deleted Mortgage
Loan and (viii) have the same or better occupancy status. In the event that one
or more mortgage loans are proposed to be substituted for one or more Deleted
Mortgage Loans, the foregoing tests may be met on a weighted average basis or
other aggregate basis acceptable to the Bond Insurer, except that the
requirements of clauses (v), (vi), (vii) and (viii) hereof must be satisfied as
to each Qualified Replacement Mortgage Loan.
"RATING AGENCIES": Standard & Poor's and Moody's (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Servicer, notice of which
designation shall be given to the Indenture Trustee.
"REALIZED LOSS": As defined in the Servicing Agreement.
"RECORD DATE": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any Bonds
(or notice of a payment in full of principal) due and payable on such Payment
Date are determined; such date shall be the last Business Day preceding such
Payment Date or, with respect to Definitive Bonds, the last Business Day of the
month preceding the month of such Payment Date. With
-17-
<PAGE> 25
respect to a vote of Bondholders required or allowed hereunder, the Record Date
shall be the later of (i) 30 days prior to the first solicitation of consents or
(ii) the date of the most recent list of Bondholders furnished to the Indenture
Trustee pursuant to Section 7.01(a) prior to such solicitation.
"REDEMPTION DATE": The Payment Date, if any, on which the Bonds are
redeemed pursuant to Article X hereof which date may occur on or after the
Payment Date on which the Aggregate Principal Balance of the Mortgage Loans as
of the related Determination Date is less than 10% of the Aggregate Principal
Balances of the Mortgage Loans as of their respective Cut-off Dates.
"REDEMPTION PRICE": With respect to any Bond to be redeemed in whole or
in part, an amount equal to 100% of the Current Bond Balance of the Bond to be
so redeemed, together with accrued and unpaid interest on such amount at the
Bond Interest Rate, plus any unpaid Available Funds Cap Carry Forward Amount,
through the end of the Interest Period immediately preceding the Redemption
Date.
"REFERENCE BANKS": Bankers Trust Company, Barclay's Bank PLC and
National Westminster Bank PLC; provided that, if any of the foregoing banks are
deemed by the Servicer (as indicated in writing to the Indenture Trustee) not
suitable to serve as a Reference Bank, then any leading banks selected by the
Indenture Trustee and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) whose quotations appear on the Reuters Screen LIBO Page on the
LIBOR Determination Date in question, (iii) that have been designated as such by
the Indenture Trustee and (iv) not controlling, controlled by, or under common
control with the Issuer, the Mortgage Loan Seller, the Transferor, the Servicer
or any originator.
"RELIEF ACT PERCENTAGE": For any Payment Date, the amount, converted to
a percentage of the Aggregate Principal Balance of the Mortgage Loans as of the
end of the related Determination Date, of any interest shortfalls resulting from
the application of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"). In computing the Relief Act Percentage, only those
shortfalls that would reduce Available Funds to an amount less than the sum of
(i) amounts owed to the Bond Insurer, (ii) Bond Interest (calculated assuming
the Relief Act Percentage is zero) and (iii) Monthly Principal on the related
Payment Date will be taken into account for purposes of such calculation.
"REMITTABLE FUNDS": As defined in the Servicing Agreement.
"REO PROPERTY": As defined in the Servicing Agreement.
"REQUIRED OVERCOLLATERALIZATION AMOUNT" means:
(a) for any Payment Date occurring during the period
commencing on the Closing Date and ending on the later of the thirtieth
Payment Date following the Closing Date and the date upon which
principal of the Bonds in the amount of one-half of the Aggregate
Principal Balance of the Mortgage Loans as of the respective Cut-off
Dates has been received by the Bondholders, the greater of: (i) 3.70%
of the Aggregate Principal Balance of the Mortgage Loans as of the
respective Cut-off Dates, and (ii) 60% of the Delinquency Amount.
(b) for any Payment Date occurring after the end of the
period described in clause (a) above, the greatest of (i) 7.40% of the
Aggregate Principal Balance of the Mortgage Loans as of the
Determination Date relating to such Payment Date, (ii) 60% of the
Delinquency Amount, (iii) 0.75% of the Aggregate Principal Balance of
the Mortgage Loans as of the respective Cut-off Dates, and (iv) the sum
of the Principal Balances of the three largest Mortgage Loans then
outstanding.
(c) Provided, however, for any Payment Date occurring
after the end of the period described in clause (a) above, if 70% of
the Delinquency Amount exceeds the amount calculated in clause (b)(i)
-18-
<PAGE> 26
above, the Required Overcollateralization Amount shall be no less than
the Required Overcollateralization Amount as of the previous Payment
Date.
The Bond Insurer may, in its sole discretion, at the request
of the holders of 50% or more of the ownership interests of the Issuer,
modify clause (a)(ii) or (b)(ii) above for the purpose of reducing or
eliminating, in whole or in part, the application of clause (a)(ii) or
(b)(ii) above, if the Indenture Trustee and each Rating Agency shall
have been notified in writing of such modification prior to the related
Payment Date and each Rating Agency shall have confirmed that such
modification shall not result in a downgrading of the then-current
implied ratings on the Bonds (without regard to the MBIA Insurance
Policy).
"REQUIRED PAYMENT AMOUNT": With respect to any Payment Date, the Bond
Interest for such Payment Date plus the amount of any Overcollateralization
Deficit for such Payment Date.
"RESERVE INTEREST RATE": With respect to any LIBOR Determination Date,
the rate per annum that the Indenture Trustee determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
0.0625%) of the one-month U.S. dollar lending rates that New York City banks
selected by the Indenture Trustee are quoting on the relevant LIBOR
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest one-month U.S. dollar lending rate
that New York City banks selected by the Indenture Trustee are quoting on such
LIBOR Determination Dates to leading European banks.
"RESPONSIBLE OFFICER": With respect to the Indenture Trustee, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, any assistant vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
trust officer or assistant trust officer, the controller, any assistant
controller or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"REUTERS SCREEN LIBO PAGE": The display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that servicer for the purpose of displaying London interbank
offered rates of major banks).
"SALE": The meaning specified in Section 5.17.
"SERVICER": With respect to any Mortgage Loan, National Mortgage
Corporation, a Colorado corporation, as Servicer under the Servicing Agreement,
and its permitted successors and assigns thereunder, including any successor
servicers appointed pursuant to Section 6.02 of the Servicing Agreement.
"SERVICER REMITTANCE REPORT": As defined in the Servicing Agreement.
"SERVICING ADVANCE": As defined in the Servicing Agreement.
"SERVICING AGREEMENT": The servicing agreement, dated as of September
1, 1997, among the Issuer, the Servicer and the Indenture Trustee, as indenture
trustee and backup servicer, providing, among other things, for the servicing of
the Mortgage Loans, as such agreement may be amended or supplemented from time
to time as permitted hereby and thereby. Such term shall also include any
servicing agreement entered into with a successor servicer. A copy of the
Servicing Agreement as in effect as of the date hereof is attached hereto as
Exhibit H.
"SERVICING FEE RATE": 0.50% per annum.
-19-
<PAGE> 27
"STANDARD & POOR'S": Standard & Poor's Rating Services, a Division of
The McGraw-Hill Companies, Inc., and its successors in interest.
"TRANSFEROR": Fund America Investors Corporation II.
"TRUST AGREEMENT": That certain Deposit Trust Agreement, dated as of
September 1, 1997, among the Transferor, as Depositor (as such term is defined
therein) and the Owner Trustee.
"TRUST ESTATE": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Bondholders and the Bond Insurer as of any particular time (including, without
limitation, all property and interests Granted to the Indenture Trustee,
including all proceeds thereof).
"TRUST INDENTURE ACT" or "TIA": The Trust Indenture Act of 1939 as it
may be amended from time to time.
"TRUST INSURANCE PROCEEDS": As defined in the Servicing Agreement.
"TRUST PAYING AGENT": The entity appointed to act as paying agent
pursuant to the Trust Agreement with respect to amounts on deposit from time to
time in the Certificate Distribution Account and distributions thereof to
Certificateholders. The initial Trust Paying Agent is Norwest Bank Minnesota,
National Association.
"U.S. BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, 11
U.S.C. Sections 101, et seq., as amended or supplemented from time to time.
"VICE PRESIDENT": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
ARTICLE II
THE BONDS
SECTION 2.01. FORMS GENERALLY.
The Bonds shall be in substantially the form set forth on Exhibit A
attached hereto. Each Bond may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the Bonds
may be listed, or as may, consistently herewith, be determined by the Authorized
Officers of the Owner Trustee executing such Bonds on behalf of the Issuer, as
evidenced by their execution thereof. Any portion of the text of any Bond may be
set forth on the reverse thereof with an appropriate reference on the face of
the Bond.
The Definitive Bonds may be produced in any manner determined by the
Authorized Officers of the Owner Trustee executing such Bonds, as evidenced by
their execution thereof.
SECTION 2.02. FORMS OF CERTIFICATE OF AUTHENTICATION.
The form of the Authenticating Agent's certificate of authentication is
as follows:
-20-
<PAGE> 28
This is one of the Bonds referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Authenticating Agent
By:
-------------------------------------------
Authorized Signatory
SECTION 2.03. GENERAL PROVISIONS WITH RESPECT TO PRINCIPAL AND INTEREST
PAYMENTS.
The Bonds shall be designated generally as the "Collateralized Mortgage
Obligations, Series 1997-NMC1" of the Issuer.
The aggregate principal amount of Bonds that may be authenticated and
delivered under the Indenture is limited to $121,765,000, except for the Bonds
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Bonds pursuant to Sections 2.06, 2.07, or 9.06 of this
Indenture. The Bonds shall consist of one and only one class having an Original
Bond Balance, Bond Interest Rate for the initial Interest Period and Final
Maturity Date as follows:
<TABLE>
<CAPTION>
Bond Interest
Original Bond Rate for the initial Final
Designation Balance Interest Period Maturity Date
------------- -------------- -------------------- --------------
<S> <C> <C> <C>
Series 1997-1 $121,765,000 5.86625% April 25, 2029
</TABLE>
The Bonds shall be issued in the form specified in Section 2.01.
Subject to the provisions of Section 3.01, Section 5.07, Section 5.09
and Section 8.02(d), the principal of the Bonds shall be payable in installments
ending no later than the Final Maturity Date unless the unpaid principal of such
Bonds become due and payable at an earlier date by declaration of acceleration
or call for redemption or otherwise.
All payments made with respect to any Bond shall be applied first to
the interest then due and payable on such Bond and then to the principal
thereof. All computations of interest accrued on any Bond shall be made on the
basis of the actual number of days elapsed in the related Interest Period in a
year of 360 days.
Interest on the Bonds shall accrue at the Bond Interest Rate during
each Interest Period on the Current Bond Balance of each Outstanding Bond at the
end of such Interest Period. Interest accrued during an Interest Period shall be
payable on the next following Payment Date.
All payments of principal of and interest on any Bond shall be made in
the manner specified in Section 2.08.
Notwithstanding any of the foregoing provisions with respect to
payments of principal of and interest on the Bonds, if the Bonds have become or
been declared due and payable following an Event of Default and such
acceleration of maturity and its consequences have not been rescinded and
annulled, then payments of principal of and interest on the Bonds shall be made
in accordance with Section 5.07.
SECTION 2.04. DENOMINATIONS.
The Bonds shall be issuable only as registered Bonds in the minimum
denomination of $1,000 and integral multiples in excess thereof, with the
exception of one Bond which may be issued in a lesser amount.
-21-
<PAGE> 29
SECTION 2.05. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Bonds shall be executed on behalf of the Issuer by an Authorized
Officer of the Owner Trustee. The signature of such Authorized Officer of the
Owner Trustee on the Bonds may be manual or by facsimile.
Bonds bearing the manual or facsimile signature of an individual who
was at any time an Authorized Officer of the Owner Trustee shall bind the
Issuer, notwithstanding that such individual has ceased to be an Authorized
Officer of the Owner Trustee prior to the authentication and delivery of such
Bonds or was not an Authorized Officer of the Owner Trustee at the date of such
Bonds.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Bonds executed on behalf of the Issuer to
the Authenticating Agent for authentication; and the Authenticating Agent shall
authenticate and deliver such Bonds as in this Indenture provided and not
otherwise.
Each Bond authenticated on the Closing Date shall be dated the Closing
Date. All other Bonds that are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by the Authenticating Agent by the manual signature of one of its
authorized officers or employees, and such certificate upon any Bond shall be
conclusive evidence, and the only evidence, that such Bond has been duly
authenticated and delivered hereunder.
SECTION 2.06. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Issuer shall cause to be kept a register (the "Bond Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Bonds and the registration of transfers of
Bonds. The Indenture Trustee is hereby initially appointed "Bond Registrar" for
the purpose of registering Bonds and transfers of Bonds as herein provided. The
Indenture Trustee shall remain the Bond Registrar throughout the term hereof.
Upon any resignation of the Indenture Trustee, the Issuer shall promptly appoint
a successor, with the approval of the Bond Insurer, or, in the absence of such
appointment, shall assume the duties of Bond Registrar.
Upon surrender for registration of transfer of any Bond at the office
or agency of the Issuer to be maintained as provided in Section 3.02, the Owner
Trustee on behalf of the Issuer, shall execute, and the Authenticating Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Bonds of any authorized denominations and of a like
aggregate principal amount.
At the option of the Holder, Bonds may be exchanged for other Bonds of
any authorized denominations, and of a like aggregate initial principal amount,
upon surrender of the Bonds to be exchanged at such office or agency. Whenever
any Bonds are so surrendered for exchange, the Owner Trustee shall execute, and
the Authenticating Agent shall authenticate and deliver, the Bonds that the
Bondholder making the exchange is entitled to receive.
All Bonds issued upon any registration of transfer or exchange of Bonds
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Bonds surrendered
upon such registration of transfer or exchange.
Every Bond presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Bond Registrar duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Bonds, but the Issuer and the Bond Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge as may
-22-
<PAGE> 30
be imposed in connection with any registration of transfer or exchange of Bonds,
other than exchanges pursuant to Section 2.07 not involving any transfer or any
exchange made by the Bond Insurer.
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN BONDS.
If (1) any mutilated Bond is surrendered to the Bond Registrar or the
Bond Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Bond, and (2) there is delivered to the Bond Registrar such
security or indemnity as may be required by the Bond Registrar to save each of
the Issuer, the Bond Insurer and the Bond Registrar harmless, then, in the
absence of notice to the Issuer or the Bond Registrar that such Bond has been
acquired by a bona fide purchaser, the Owner Trustee shall execute and upon its
request the Bond Registrar shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Bond, a new Bond or Bonds
of the same tenor and aggregate initial principal amount bearing a number not
contemporaneously outstanding. If, after the delivery of such new Bond, a bona
fide purchaser of the original Bond in lieu of which such new Bond was issued
presents for payment such original Bond, the Issuer and the Bond Registrar shall
be entitled to recover such new Bond from the person to whom it was delivered or
any person taking therefrom, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expenses incurred by the Issuer or the Bond Registrar in
connection therewith. If any such mutilated, destroyed, lost or stolen Bond
shall have become or shall be about to become due and payable, or shall have
become subject to redemption in full, instead of issuing a new Bond, the Issuer
may pay such Bond without surrender thereof, except that any mutilated Bond
shall be surrendered.
Upon the issuance of any new Bond under this Section, the Issuer or the
Bond Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Indenture Trustee or
the Bond Registrar) connected therewith.
Every new Bond issued pursuant to this Section in lieu of any
destroyed, lost or stolen Bond shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Bond 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 Bonds duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Bonds.
SECTION 2.08. PAYMENTS OF PRINCIPAL AND INTEREST.
(a) Payments on Bonds issued as Book-Entry Bonds will be
made by or on behalf of the Indenture Trustee to the Clearing Agency or
its nominee. Any installment of interest or principal payable on any
Definitive Bonds that is punctually paid or duly provided for by the
Issuer on the applicable Payment Date shall be paid to the Person in
whose name such Bond (or one or more Predecessor Bonds) is registered
at the close of business on the Record Date for such Payment Date by
either (i) check mailed to such Person's address as it appears in the
Bond Register on such Record Date, or (ii) by wire transfer of
immediately available funds to the account of a Bondholder, if such
Bondholder (A) is the registered holder of Definitive Bonds having an
initial principal amount of at least $1,000,000 and (B) has provided
the Indenture Trustee with wiring instructions in writing by five
Business Days prior to the related Record Date or has provided the
Indenture Trustee with such instructions for any previous Payment Date,
except for the final installment of principal payable with respect to
such Bond (or the Redemption Price for any Bond called for redemption,
if such redemption will result in payment of the then entire unpaid
principal amount of such Bond), which shall be payable as provided in
subsection (b) below of this Section 2.08. A fee may be charged by the
Indenture Trustee to a Bondholder of Definitive Bonds for any payment
made by wire transfer. Any installment of interest or principal not
punctually paid or duly provided for shall be payable as soon as funds
are available to the Indenture Trustee for payment thereof, or if
Section 5.07 applies, pursuant to Section 5.07.
-23-
<PAGE> 31
(b) All reductions in the principal amount of a Bond (or
one or more Predecessor Bonds) effected by payments of installments of
principal made on any Payment Date shall be binding upon all Holders of
such Bond and of any Bond issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, whether or not such
payment is noted on such Bond. The final installment of principal of
each Bond (including the Redemption Price of any Bond called for
optional redemption, if such optional redemption will result in payment
of the entire unpaid principal amount of such Bond) shall be payable
only upon presentation and surrender thereof on or after the Payment
Date therefor at the Indenture Trustee's presenting office located
within the United States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire remaining
unpaid principal amount of any Bond will become due and payable on the next
Payment Date other than pursuant to a redemption pursuant to Article X, it
shall, no later than two days prior to such Payment Date, telecopy or hand
deliver to each Person in whose name a Bond to be so retired is registered at
the close of business on such otherwise applicable Record Date a notice to the
effect that:
(i) the Indenture Trustee expects that funds sufficient
to pay such final installment will be available in the Bond Account on
such Payment Date; and
(ii) if such funds are available, (A) such final
installment will be payable on such Payment Date, but only upon
presentation and surrender of such Bond at the office or agency of the
Bond Registrar maintained for such purpose pursuant to Section 3.02
(the address of which shall be set forth in such notice) and (B) no
interest shall accrue on such Bond after such Payment Date.
A copy of such form of notice shall be sent to the Bond
Insurer by the Indenture Trustee.
Notices in connection with redemptions of Bonds shall be
mailed to Bondholders in accordance with Section 10.02.
(c) Subject to the foregoing provisions of this Section,
each Bond delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Bond shall carry the
rights to unpaid principal and interest that were carried by such other
Bond. Any checks mailed pursuant to subsection (a) of this Section 2.08
and returned undelivered shall be held in accordance with Section 3.03.
(d) Each Payment Date Statement, prepared by the
Indenture Trustee based on the Servicer Remittance Report delivered to
the Indenture Trustee pursuant to the Servicing Agreement, shall be
delivered by the Indenture Trustee to the Bond Insurer, the Rating
Agencies, the Owner Trustee, the Underwriters (as defined in the
Insurance Agreement) and each Bondholder as the statement required
pursuant to Section 8.06. In addition, on each Payment Date the
Indenture Trustee shall forward to the Underwriters and Bloomberg the
electromagnetic tape or disk containing certain Mortgage Loan
information required to be delivered to the Indenture Trustee by the
Servicer pursuant to Section 3.01 of the Servicing Agreement; provided,
however, that the Indenture Trustee shall not forward any such tape or
disk that separately sets forth the Bond Insurer Premium or the Bond
Insurer Premium Rate. Neither the Indenture Trustee (in its capacity as
Indenture Trustee or as Back-Up Servicer) nor the Paying Agent shall
have any responsibility to recalculate, verify or recompute information
contained in any such tape or disk or any such Servicer Remittance
Report except to the extent necessary to satisfy all obligations under
this Section 2.08(d) and in its capacity as Back-Up Servicer under
Article III of the Servicing Agreement.
Within 90 days after the end of each calendar year, the Indenture
Trustee will be required to furnish to each person who at any time
during the calendar year was a Bondholder, if requested in writing by
such person, a statement containing the information set forth in
subclauses (i) and (ii) in the definition of "Payment Date Statement,"
aggregated for such calendar year or the applicable portion thereof
during which such person was a Bondholder. Such obligation will be
deemed to have been satisfied to the extent
-24-
<PAGE> 32
that substantially comparable information is provided pursuant to any
requirements of the Code as are from time to time in force.
SECTION 2.09. PERSONS DEEMED OWNERS.
Prior to due presentment for registration of transfer of any Bond, the
Issuer, the Indenture Trustee, any Paying Agent and any other agent of the
Issuer, the Bond Insurer or the Indenture Trustee may treat the Person in whose
name any Bond is registered as the owner of such Bond (a) on the applicable
Record Date for the purpose of receiving payments of the principal of and
interest on such Bond and (b) on any other date for all other purposes
whatsoever, and neither the Issuer, the Indenture Trustee, any Paying Agent nor
any other agent of the Issuer, the Bond Insurer or the Indenture Trustee shall
be affected by notice to the contrary.
SECTION 2.10. CANCELLATION.
All Bonds surrendered for payment, registration of transfer, exchange
or redemption shall, if surrendered to any Person other than the Bond Registrar,
be delivered to the Bond Registrar and shall be promptly canceled by it. The
Issuer may at any time deliver to the Bond Registrar for cancellation any Bond
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Bonds so delivered shall be promptly
canceled by the Bond Registrar. No Bonds shall be authenticated in lieu of or in
exchange for any Bonds canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Bonds held by the Bond Registrar shall
be held by the Bond Registrar in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.
SECTION 2.11. AUTHENTICATION AND DELIVERY OF BONDS.
The Bonds may be executed by an Authorized Officer of the Owner Trustee
and delivered to the Authenticating Agent for authentication, and thereupon the
same shall be authenticated and delivered by the Authenticating Agent, upon
Issuer Request and upon receipt by the Authenticating Agent of all of the
following:
(a) An Issuer Order authorizing the execution,
authentication and delivery of the Bonds and specifying the Final
Maturity Date, the principal amount and the Bond Interest Rate (or the
manner in which such Bond Interest Rate is to be determined) of such
Bonds to be authenticated and delivered.
(b) An Issuer Order authorizing the execution and
delivery of this Indenture.
(c) One or more Opinions of Counsel addressed to the
Authenticating Agent and the Bond Insurer or upon which the
Authenticating Agent and the Bond Insurer is expressly permitted to
rely, complying with the requirements of Section 11.01, reasonably
satisfactory in form and substance to the Authenticating Agent and the
Bond Insurer.
In rendering the opinions set forth above, such counsel may
rely upon officer's certificates of the Issuer, the Owner Trustee, the
Servicer and the Indenture Trustee, without independent confirmation or
verification with respect to factual matters relevant to such opinions.
In rendering the opinions set forth above, such counsel need express no
opinion as to (A) the existence of, or the priority of the security
interest created by the Indenture against, any liens or other interests
that arise by operation of law and that do not require any filing or
similar action in order to take priority over a perfected security
interest or (B) the priority of the security interest created by this
Indenture with respect to any claim or lien in favor of the United
States or any agency or instrumentality thereof (including federal tax
liens and liens arising under Title IV of the Employee Retirement
Income Security Act of 1974).
The acceptability to the Bond Insurer of the Opinion of
Counsel delivered to the Indenture Trustee and the Bond Insurer at the
Closing Date shall be conclusively evidenced by the delivery on the
Closing Date of the MBIA Insurance Policy.
-25-
<PAGE> 33
(d) An Officers' Certificate of the Issuer complying with
the requirements of Section 11.01 and stating that:
(i) the Issuer is not in Default under this Indenture and
the issuance of the Bonds will not result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, the
Issuer's Certificate of Trust or any indenture, mortgage, deed of trust
or other agreement or instrument to which the Issuer is a party or by
which it is bound, or any order of any court or administrative agency
entered in any proceeding to which the Issuer is a party or by which it
may be bound or to which it may be subject, and that all conditions
precedent provided in this Indenture relating to the authentication and
delivery of the Bonds have been complied with;
(ii) the Issuer is the owner of each Mortgage Loan, free
and clear of any lien, security interest or charge, has not assigned
any interest or participation in any such Mortgage Loan (or, if any
such interest or participation has been assigned, it has been released)
and has the right to Grant each such Mortgage Loan to the Indenture
Trustee;
(iii) the information set forth in the Mortgage Loan
Schedule attached as Schedule I to this Indenture is correct;
(iv) the Issuer has Granted to the Indenture Trustee all
of its right, title and interest in each Mortgage Loan;
(v) as of the Closing Date, no lien in favor of the
United States described in Section 6321 of the Code, or lien in favor
of the Pension Benefit Guaranty Corporation described in Section
4068(a) of the Employee Retirement Income Security Act of 1974, as
amended, has been filed as described in subsections 6323(f) and 6323(g)
of the Code upon any property belonging to the Issuer; and
(vi) attached thereto is a true and correct copy of
letters signed by each Rating Agency confirming that the Bonds have
been rated in the highest rating category of such Rating Agency.
(e) An executed counterpart of the Servicing Agreement.
(f) An executed counterpart of the Mortgage Loan Sale
Agreement.
(g) An executed counterpart of the Mortgage Loan
Contribution Agreement.
SECTION 2.12. BOOK-ENTRY BONDS.
The Bonds will be issued initially as one or more certificates in the
name of the Cede & Co., as nominee for the Clearing Agency maintaining
book-entry records with respect to ownership and transfer of such Bonds, and
registration of the Bonds may not be transferred by the Bond Registrar except
upon Book-Entry Termination. In such case, the Bond Registrar shall deal with
the Clearing Agency as representatives of the Beneficial Owners of such Bonds
for purposes of exercising the rights of Bondholders hereunder. Each payment of
principal of and interest on a Book-Entry Bond shall be paid to the Clearing
Agency, which shall credit the amount of such payments to the accounts of its
Clearing Agency Participants in accordance with its normal procedures. Each
Clearing Agency Participant shall be responsible for disbursing such payments to
the Beneficial Owners of the Book-Entry Bonds that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Beneficial Owners of the Book-Entry
Bonds that it represents. All such credits and disbursements are to be made by
the Clearing Agency and the Clearing Agency Participants in accordance with the
provisions of the Bonds. None of the Indenture Trustee, the Bond Registrar, if
any, the Issuer, or any Paying Agent or the Bond Insurer shall have any
responsibility therefor except as otherwise provided by applicable law. Requests
and directions from, and votes of, such representatives shall not be deemed to
be inconsistent if they are made with respect to different Beneficial Owners.
-26-
<PAGE> 34
SECTION 2.13. TERMINATION OF BOOK ENTRY SYSTEM.
(a) The book-entry system through the Clearing Agency
with respect to the Book-Entry Bonds may be terminated upon the
happening of any of the following:
(i) The Clearing Agency advises the Indenture Trustee
that the Clearing Agency is no longer willing or able to discharge
properly its responsibilities as nominee and depositary with respect to
the Bonds and the Indenture Trustee is unable to locate a qualified
successor clearing agency satisfactory to the Issuer;
(ii) The Issuer, in its sole discretion, elects to
terminate the book-entry system by notice to the Clearing Agency and
the Indenture Trustee; or
(iii) After the occurrence of an Event of Default (at which
time the Indenture Trustee shall use all reasonable efforts to promptly
notify each Beneficial Owner through the Clearing Agency of such Event
of Default), the Beneficial Owners of no less than 51% of the Bond
Balance of the Book-Entry Bonds advise the Indenture Trustee in
writing, through the related Clearing Agency Participants and the
Clearing Agency, that the continuation of a book-entry system through
the Clearing Agency to the exclusion of any Definitive Bonds being
issued to any person other than the Clearing Agency or its nominee is
no longer in the best interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in
subsection (a) above, the Indenture Trustee shall use all reasonable
efforts to notify all Beneficial Owners, through the Clearing Agency,
of the occurrence of such event and of the availability of Definitive
Bonds to Beneficial Owners requesting the same, in an aggregate Current
Bond Balance representing the interest of each, making such adjustments
and allowances as it may find necessary or appropriate as to accrued
interest and previous calls for redemption. Definitive Bonds shall be
issued only upon surrender to the Indenture Trustee of the global Bond
by the Clearing Agency, accompanied by registration instructions for
the Definitive Bonds. Neither the Issuer nor the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such
instructions. Upon issuance of the Definitive Bonds, all references
herein to obligations imposed upon or to be performed by the Clearing
Agency shall cease to be applicable and the provisions relating to
Definitive Bonds shall be applicable.
ARTICLE III
COVENANTS
SECTION 3.01. PAYMENT OF BONDS.
The Issuer will pay or cause to be duly and punctually paid the
principal of, and interest on, the Bonds in accordance with the terms of the
Bonds and this Indenture. The Bonds shall be non-recourse obligations of the
Issuer and shall be limited in right of payment to amounts available from the
Trust Estate as provided in this Indenture and the Issuer shall not otherwise be
liable for payments on the Bonds. No person shall be personally liable for any
amounts payable under the Bonds. If any other provision of this Indenture
conflicts or is deemed to conflict with the provisions of this Section 3.01, the
provisions of this Section 3.01 shall control.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer will cause the Bond Registrar to maintain its corporate
trust office at a location where Bonds may be surrendered for registration of
transfer or exchange, and where notices and demands to or upon the Issuer in
respect of the Bonds and this Indenture may be served.
-27-
<PAGE> 35
The Issuer may also from time to time at its own expense designate one
or more other offices or agencies within the United States of America where the
Bonds may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations; provided, however, any designation of an
office or agency for payment of Bonds shall be subject to Section 3.03. The
Issuer will give prompt written notice to the Indenture Trustee and the Bond
Insurer of any such designation or rescission and of any change in the location
of any such other office or agency.
SECTION 3.03. MONEY FOR BOND PAYMENTS TO BE HELD IN TRUST.
All payments of amounts due and payable with respect to any Bonds that
are to be made from amounts withdrawn from the Bond Account pursuant to Section
8.02(c) or Section 5.07 shall be made on behalf of the Issuer by the Paying
Agent, and no amounts so withdrawn from the Bond Account for payments of Bonds
shall be paid over to the Issuer under any circumstances except as provided in
this Section 3.03 or in Section 5.07 or Section 8.02.
With respect to Definitive Bonds, if the Issuer shall have a Paying
Agent that is not also the Bond Registrar, such Bond Registrar shall furnish, no
later than the fifth calendar day after each Record Date, a list, in such form
as such Paying Agent may reasonably require, of the names and addresses of the
Holders of Bonds and of the number of Individual Bonds held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Indenture
Trustee, it will, on or before the Business Day next preceding each Payment Date
direct the Indenture Trustee to deposit with such Paying Agent an aggregate sum
sufficient to pay the amounts then becoming due (to the extent funds are then
available for such purpose in the Bond Account), such sum to be held in trust
for the benefit of the Persons entitled thereto. Any moneys deposited with a
Paying Agent in excess of an amount sufficient to pay the amounts then becoming
due on the Bonds with respect to which such deposit was made shall, upon Issuer
Order, be paid over by such Paying Agent to the Indenture Trustee for
application in accordance with Article VIII.
Subject to the prior consent of the Bond Insurer, any Paying Agent
other than the Indenture Trustee shall be appointed by Issuer Order and at the
expense of the Issuer. The Issuer shall not appoint any Paying Agent (other than
the Indenture Trustee) that is not, at the time of such appointment, a
depository institution or trust company whose obligations would be Permitted
Investments pursuant to clause (c) of the definition of the term Permitted
Investments. The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(1) allocate all sums received for payment to the Holders
of Bonds on each Payment Date among such Holders in the proportion
specified in the applicable Payment Date Statement, in each case to the
extent permitted by applicable law;
(2) hold all sums held by it for the payment of amounts
due with respect to the Bonds in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(3) if such Paying Agent is not the Indenture Trustee,
immediately resign as a Paying Agent and forthwith pay to the Indenture
Trustee all sums held by it in trust for the payment of the Bonds if at
any time the Paying Agent ceases to meet the standards set forth above
required to be met by a Paying Agent at the time of its appointment;
(4) if such Paying Agent is not the Indenture Trustee,
give the Indenture Trustee notice of any Default by the Issuer (or any
other obligor upon the Bonds) in the making of any payment required to
be made with respect to any Bonds for which it is acting as Paying
Agent;
-28-
<PAGE> 36
(5) if such Paying Agent is not the Indenture Trustee, at
any time during the continuance of any such Default, upon the written
request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent; and
(6) comply with all requirements of the Code, and all
regulations thereunder, with respect to withholding from any payments
made by it on any Bonds of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting requirements in
connection therewith; provided, however, that with respect to
withholding and reporting requirements applicable to original issue
discount (if any) on any of the Bonds, the Issuer has provided the
calculations pertaining thereto to the Indenture Trustee and the Paying
Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or any other purpose, by Issuer
Order direct any Paying Agent, if other than the Indenture Trustee, to pay to
the Indenture Trustee all sums held in trust by such Paying Agent, such sums to
be held by the Indenture Trustee upon the same trusts as those upon which such
sums were held by such Paying Agent; and upon such payment by any Paying Agent
to the Indenture Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money held by the Indenture Trustee or any Paying Agent in trust
for the payment of any amount due with respect to any Bond and remaining
unclaimed for two and one-half years after such amount has become due and
payable to the Holder of such Bond (or if earlier, three months before the date
on which such amount would escheat to a governmental entity under applicable
law) shall be discharged from such trust and paid to the Issuer; and the Holder
of such Bond shall thereafter, as an unsecured general creditor, look only to
the Issuer for payment thereof (but only to the extent of the amounts so paid to
the Issuer), and all liability of the Indenture Trustee or such Paying Agent
with respect to such trust money shall thereupon cease. The Indenture Trustee
may adopt and employ, at the expense of the Issuer, any reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Bonds have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or any Agent, at the last address of record for each such Holder).
SECTION 3.04. EXISTENCE OF ISSUER.
(a) Subject to Sections 3.04(b) and (c), the Issuer will
keep in full effect its existence, rights and franchises as a business
trust under the laws of the State of Delaware or under the laws of any
other state or the United States of America, and will obtain and
preserve its qualification to do business in each jurisdiction in which
such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Bonds, the Servicing Agreement,
the Insurance Agreement and the Mortgage Loan Contribution Agreement.
(b) Subject to Section 3.09(vii) and the prior written
consent of the Bond Insurer, any entity into which the Issuer may be
merged or with which it may be consolidated, or any entity resulting
from any merger or consolidation to which the Issuer shall be a party,
shall be the successor Issuer under this Indenture without the
execution or filing of any paper, instrument or further act to be done
on the part of the parties hereto, anything in any agreement relating
to such merger or consolidation, by which any such Issuer may seek to
retain certain powers, rights and privileges therefore obtaining for
any period of time following such merger or consolidation to the
contrary notwithstanding (other than Section 3.09(vii)).
(c) Upon any consolidation or merger of or other
succession to the Issuer in accordance with this Section 3.04, the
Person formed by or surviving such consolidation or merger (if other
than the Issuer) may exercise every right and power of, and shall have
all of the obligations of, the Issuer under this Indenture with the
same effect as if such Person had been named as the Issuer herein.
-29-
<PAGE> 37
SECTION 3.05. PROTECTION OF TRUST ESTATE.
(a) The Issuer will from time to time execute and deliver
all such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action as may be
necessary or advisable to:
(i) Grant more effectively all or any portion of the
Trust Estate;
(ii) maintain or preserve the lien of this Indenture or
carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Mortgage Loans, the Servicing
Agreement, the Mortgage Loan Sale Agreement or the Mortgage Loan
Contribution Agreement; or
(v) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee, and of the Bondholders, in the
Mortgage Loans and the other property held as part of the Trust Estate
against the claims of all Persons and parties.
(b) The Indenture Trustee shall not remove any portion of
the Trust Estate that consists of money or is evidenced by an
instrument, certificate or other writing from the jurisdiction in which
it was held at the date of the most recent Opinion of Counsel delivered
pursuant to Section 3.06 (or from the jurisdiction in which it was
held, or to which it is intended to be removed, as described in the
Opinion of Counsel delivered at the Closing Date pursuant to Section
2.11(c), if no Opinion of Counsel has yet been delivered pursuant to
Section 3.06) or cause or permit ownership or the pledge of any portion
of the Trust Estate that consists of book-entry securities to be
recorded on the books of a Person located in a different jurisdiction
from the jurisdiction in which such ownership or pledge was recorded at
such time unless the Indenture Trustee shall have first received an
Opinion of Counsel to the effect that the lien and security interest
created by this Indenture with respect to such property will continue
to be maintained after giving effect to such action or actions.
SECTION 3.06. OPINIONS AS TO TRUST ESTATE.
On or before April 30th in each calendar year, beginning with the first
calendar year commencing after the Closing Date, the Issuer shall furnish to the
Indenture Trustee and the Bond Insurer an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee and the Bond Insurer
either stating that, in the opinion of such counsel, such action has been taken
as is necessary to maintain the lien and security interest created by this
Indenture and reciting the details of such action or stating that in the opinion
of such counsel no such action is necessary to maintain such lien and security
interest. Such Opinion of Counsel shall also describe all such action, if any,
that will, in the opinion of such counsel, be required to be taken to maintain
the lien and security interest of this Indenture with respect to the Trust
Estate until May 1st in the following calendar year.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT.
(a) The Issuer shall punctually perform and observe all
of its obligations under this Indenture and the Servicing Agreement.
(b) The Issuer shall not take any action and will use its
Best Efforts not to permit any action to be taken by others that would
release any Person from any of such Person's covenants or obligations
under any of the Mortgage Files or under any instrument included in the
Trust Estate, or that would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any of the documents or instruments contained in the
Mortgage Files, except as expressly
-30-
<PAGE> 38
permitted in this Indenture, the Servicing Agreement or such document
included in the Mortgage File or other instrument or unless such action
will not adversely affect the interests of the Holders of the Bonds.
(c) If the Issuer shall have knowledge of the occurrence
of a default under the Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee, the Bond Insurer and the Rating Agencies
thereof, and shall specify in such notice the action, if any, the
Issuer is taking with respect to such default.
(d) Upon any termination of the Servicer's rights and
powers pursuant to the Servicing Agreement, the Indenture Trustee shall
promptly notify the Rating Agencies. As soon as any successor Servicer
is appointed, the Indenture Trustee shall notify the Rating Agencies,
specifying in such notice the name and address of such successor
Servicer.
SECTION 3.08. INVESTMENT COMPANY ACT.
The Issuer shall at all times conduct its operations so as not to be
subject to, or shall comply with, the requirements of the Investment Company Act
of 1940, as amended (or any successor statute), and the rules and regulations
thereunder.
SECTION 3.09. NEGATIVE COVENANTS.
The Issuer shall not:
(i) sell, transfer, exchange or otherwise dispose of any
portion of the Trust Estate except as expressly permitted by this
Indenture or the Servicing Agreement;
(ii) claim any credit on, or make any deduction from, the
principal of, or interest on, any of the Bonds by reason of the payment
of any taxes levied or assessed upon any portion of the Trust Estate;
(iii) engage in any business or activity other than as
permitted by the Trust Agreement or other than in connection with, or
relating to, the issuance of the Bonds pursuant to this Indenture or
amend the Trust Agreement, as in effect on the Closing Date, other than
in accordance with Section 11.01;
(iv) incur, issue, assume or otherwise become liable for
any indebtedness other than the Bonds;
(v) incur, assume, guaranty or agree to indemnify any
Person with respect to any indebtedness of any Person, except for such
indebtedness as may be incurred by the Issuer in connection with the
issuance of the Bonds pursuant to this Indenture;
(vi dissolve or liquidate in whole or in part (until the
Bonds are paid in full);
(vii)(1) permit the validity or effectiveness of this
Indenture or any Grant to be impaired, or permit the lien of this
Indenture to be impaired, amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations under this Indenture, except as may be
expressly permitted hereby, (2) permit any lien, charge, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture or any Permitted Encumbrance) to be created on or extend to
or otherwise arise upon or burden the Trust Estate or any part thereof
or any interest therein or the proceeds thereof, or (3) permit the lien
of this Indenture not to constitute a valid perfected first priority
security interest in the Trust Estate; or
(viii) take any other action that should reasonably be
expected to, or fail to take any action if such failure should
reasonably be expected to, cause the Issuer to be taxable as (a) an
association pursuant to Section 7701 of the Code or (b) a taxable
mortgage pool pursuant to Section 7701(i) of the Code.
-31-
<PAGE> 39
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.
On or before March 31, 1998, and each March 31st thereafter, the Issuer
shall deliver to the Indenture Trustee, the Bond Insurer and the Underwriters a
written statement, signed by an Authorized Officer of the Owner Trustee, stating
that:
(1) a review of the fulfillment by the Issuer during such
year of its obligations under this Indenture has been made under such
Authorized Officer's supervision; and
(2) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a Default in the fulfillment of any such covenant or condition,
specifying each such Default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.11. RESTRICTED PAYMENTS.
The Issuer shall not, directly or indirectly, (i) pay any dividend or
make any distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, to the Owner Trustee or any owner
of a beneficial interest in the Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Issuer or to the Servicer,
(ii) redeem, purchase, retire or otherwise acquire for value any such ownership
or equity interest or security or (iii) set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
cause to be made, distributions to the Servicer, the Indenture Trustee, the
Owner Trustee, the Bond Insurer and the Certificateholders as contemplated by,
and to the extent funds are available for such purpose under, the Servicing
Agreement or the Trust Agreement and the Issuer will not, directly or
indirectly, make or cause to be made payments to or distributions from the Bond
Account except in accordance with this Indenture.
SECTION 3.12. TREATMENT OF BONDS AS DEBT FOR TAX PURPOSES.
The Issuer shall treat the Bonds as indebtedness for all federal and
state tax purposes.
SECTION 3.13. NOTICE OF EVENTS OF DEFAULT.
The Issuer shall give the Indenture Trustee, the Bond Insurer, the
Rating Agencies and the Underwriters prompt written notice of each Event of
Default hereunder, each default on the part of the Servicer of its obligations
under the Servicing Agreement and each default on the part of the Mortgage Loan
Seller of its obligations under the Mortgage Loan Sale Agreement.
SECTION 3.14. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Indenture Trustee or the Bond Insurer, the Issuer
will execute and deliver such further instruments and do such further acts as
may be reasonably necessary or proper to carry out more effectively the purpose
of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE.
Whenever the following conditions shall have been satisfied:
(1) either
-32-
<PAGE> 40
(A) all Bonds theretofore authenticated and
delivered (other than (i) Bonds that have been destroyed, lost
or stolen and that have been replaced or paid as provided in
Section 2.07, and (ii) Bonds for whose payment money has
theretofore been deposited in trust and thereafter repaid to
the Issuer, as provided in Section 3.03) have been delivered
to the Bond Registrar for cancellation; or
(B) all Bonds not theretofore delivered to the
Bond Registrar for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the
Final Maturity Date within one year, or
(iii) are to be called for redemption
within one year under irrevocable arrangements
satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in
the name, and at the expense, of the Issuer or the
Servicer,
and the Issuer or the Servicer, in the case of clauses (B)(i),
(B)(ii) or (B)(iii) above, has irrevocably deposited or caused
to be deposited with the Indenture Trustee, in trust for such
purpose, an amount sufficient to pay and discharge the entire
indebtedness on such Bonds not theretofore delivered to the
Indenture Trustee for cancellation, for principal and interest
to the Final Maturity Date or to the applicable Redemption
Date, as the case may be, and in the case of Bonds that were
not paid at the Final Maturity Date of their entire unpaid
principal amount, for all overdue principal and all interest
payable on such Bonds to the next succeeding Payment Date
therefor;
(2) the Issuer has paid or caused to be paid all other
sums payable hereunder by the Issuer (including, without limitation,
any amounts due the Bond Insurer hereunder); and
(3) the Issuer has delivered to the Indenture Trustee and
the Bond Insurer an Officers' Certificate and an Opinion of Counsel
satisfactory in form and substance to the Indenture Trustee and the
Bond Insurer each stating that all conditions precedent herein
providing for the satisfaction and discharge of this Indenture have
been complied with;
then, upon Issuer Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then acting
as such hereunder shall, at the expense of the Issuer (or of the Servicer in the
case of a redemption by the Servicer), execute and deliver all such instruments
as may be necessary to acknowledge the satisfaction and discharge of this
Indenture and shall pay, or assign or transfer and deliver, to the Issuer or
upon Issuer Order all cash, securities and other property held by it as part of
the Trust Estate remaining after satisfaction of the conditions set forth in
clauses (1) and (2) above.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Indenture Trustee and the Paying Agent to the Issuer and the
Holders of Bonds under Section 3.03, the obligations of the Indenture Trustee to
the Holders of Bonds under Section 4.02 and the provisions of Section 2.07 with
respect to lost, stolen, destroyed or mutilated Bonds, registration of transfers
of Bonds and rights to receive payments of principal of and interest on the
Bonds shall survive.
SECTION 4.02. APPLICATION OF TRUST MONEY.
All money deposited with the Indenture Trustee pursuant to Sections
3.03 and 4.01 shall be held in trust and applied by it, in accordance with the
provisions of the Bonds and this Indenture, to the payment, either directly or
through any Paying Agent, as the Indenture Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Indenture Trustee.
-33-
<PAGE> 41
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. EVENT OF DEFAULT.
"Event of Default", wherever used herein, means, with respect to Bonds
issued hereunder, any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) if the Issuer, after payment of any Insured Payment
in respect of such Payment Date, shall default in the payment on any
Payment Date of any Required Payment Amount or fail to pay the Bonds in
full on or before the Final Maturity Date (and in the case of any such
default, such default or failure shall continue for a period of 5 days
unremedied);
(2) if the Issuer shall breach or default in the due
observance of any one or more of the covenants set forth in clauses (i)
through (viii) of Section 3.09;
(3) if the Issuer shall breach, or default in the due
observance or performance of, any other of its covenants in this
Indenture, and such Default shall continue for a period of 30 days
after there shall have been given, by registered or certified mail, to
the Issuer and the Bond Insurer by the Indenture Trustee at the
direction of the Bond Insurer, or to the Issuer and the Indenture
Trustee by the Holders of Bonds representing at least 25% of the Bond
Balance of the Outstanding Bonds, with the prior written consent of the
Bond Insurer, a written notice specifying such Default and requiring it
to be remedied and stating that such notice is a "Notice of Default"
hereunder;
(4) if any representation or warranty of the Issuer made
in this Indenture or any certificate or other writing delivered by the
Issuer pursuant hereto or in connection herewith shall prove to be
incorrect in any material respect as of the time when the same shall
have been made and, within 30 days after there shall have been given,
by registered or certified mail, written notice thereof to the Issuer
and the Bond Insurer by the Indenture Trustee at the direction of the
Bond Insurer, or to the Issuer and the Indenture Trustee by the Holders
of Bonds representing at least 25% of the Bond Balance of the
Outstanding Bonds, with the prior written consent of the Bond Insurer,
the circumstance or condition in respect of which such representation
or warranty was incorrect shall not have been eliminated or otherwise
cured; provided, however, that in the event that there exists a remedy
with respect to any such breach that consists of a purchase obligation,
repurchase obligation or right to substitute under the Basic Documents,
then such purchase obligation, repurchase obligation or right to
substitute shall be the sole remedy with respect to such breach and
shall not constitute an Event of Default hereunder;
(5) the entry of a decree or order for relief by a court
having jurisdiction in respect of the Issuer in an involuntary case
under the federal bankruptcy laws, as now or hereafter in effect, or
any other present or future federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or of
any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days; or
(6) the commencement by the Issuer of a voluntary case
under the federal bankruptcy laws, as now or hereafter in effect, or
any other present or future federal or state bankruptcy, insolvency or
similar law, or the consent by the Issuer to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or of
any substantial part of its property or the making by the Issuer of an
assignment for the benefit of creditors or
-34-
<PAGE> 42
the failure by the Issuer generally to pay its debts as such debts
become due or the taking of corporate action by the Issuer in
furtherance of any of the foregoing.
The payment by the Bond Insurer of any Insured Payment in an amount
sufficient to cover the related Required Payment Amount pursuant to the MBIA
Insurance Policy in respect of any Payment Date shall not constitute an Event of
Default with respect to the Bonds.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every such
case, but with the consent of the Bond Insurer in the absence of a Bond Insurer
Default, the Indenture Trustee may, and on request of the Holders of Bonds
representing not less than 50% of the Bond Balance of the Outstanding Bonds,
shall, declare all the Bonds to be immediately due and payable by a notice in
writing to the Issuer (and to the Indenture Trustee if given by Bondholders),
and upon any such declaration such Bonds, in an amount equal to the Bond Balance
of such Bonds, together with accrued and unpaid interest thereon to the date of
such acceleration, shall become immediately due and payable, all subject to the
prior written consent of the Bond Insurer in the absence of a Bond Insurer
Default.
At any time after such a declaration of acceleration of maturity of the
Bonds has been made and before a judgment or decree for payment of the money due
has been obtained by the Indenture Trustee as hereinafter in this Article
provided the Bond Insurer or the Holders of Bonds representing more than 50% of
the Bond Balance of the Outstanding Bonds, with the prior written consent of the
Bond Insurer, by written notice to the Issuer and the Indenture Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of, and interest
on, all Bonds and all other amounts that would then be due
hereunder or upon such Bonds if the Event of Default giving
rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its
agents and counsel; and
(2) all Events of Default, other than the nonpayment of
the principal of Bonds that have become due solely by such
acceleration, have been cured or waived as provided in Section 5.14.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
-35-
<PAGE> 43
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE.
Subject to the provisions of Section 3.01 and the following sentence,
if an Event of Default occurs and is continuing, the Indenture Trustee may, with
the prior written consent of the Bond Insurer, proceed to protect and enforce
its rights and the rights of the Bondholders and the Bond Insurer by any
Proceedings the Indenture Trustee deems appropriate to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein, or
enforce any other proper remedy. Any proceedings brought by the Indenture
Trustee on behalf of the Bondholders and the Bond Insurer or any Bondholder
against the Issuer shall be limited to the preservation, enforcement and
foreclosure of the liens, assignments, rights and security interests under the
Indenture and no attachment, execution or other unit or process shall be sought,
issued or levied upon any assets, properties or funds of the Issuer, other than
the Trust Estate relative to the Bonds in respect of which such Event of Default
has occurred. If there is a foreclosure of any such liens, assignments, rights
and security interests under this Indenture, by private power of sale or
otherwise, no judgment for any deficiency upon the indebtedness represented by
the Bonds may be sought or obtained by the Indenture Trustee or any Bondholder
against the Issuer. The Indenture Trustee shall be entitled to recover the costs
and expenses expended by it pursuant to this Article V including reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel.
SECTION 5.04. REMEDIES.
If an Event of Default shall have occurred and be continuing and the
Bonds have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Indenture Trustee, at the
direction of the Bond Insurer (subject to Section 5.17, to the extent
applicable) may, for the benefit of the Bondholders and the Bond Insurer, do one
or more of the following:
(a) institute Proceedings for the collection of all
amounts then payable on the Bonds, or under this Indenture, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer moneys adjudged due, subject in all cases to the
provisions of Sections 3.01 and 5.03;
(b) in accordance with Section 5.17, sell the Trust
Estate or any portion thereof or rights or interest therein, at one or
more public or private Sales called and conducted in any manner
permitted by law;
(c) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Trust Estate;
(d) exercise any remedies of a secured party under the
Uniform Commercial Code and take any other appropriate action to
protect and enforce the rights and remedies of the Indenture Trustee or
the Holders of the Bonds and the Bond Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all
Remittable Funds pursuant to Section 5.07.
SECTION 5.05. INDENTURE TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Bonds or
the property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the Bonds shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Indenture Trustee shall have made any demand on the Issuer for the
payment of any overdue principal or interest) shall, with the prior written
consent of the Bond Insurer, be entitled and empowered, by intervention in such
Proceeding or otherwise to:
-36-
<PAGE> 44
(i) file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of the Bonds and
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee, its agents and counsel) and of the
Bondholders and the Bond Insurer allowed in such Proceeding, and
(ii) collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, or sequestrator (or
other similar official) in any such Proceeding is hereby authorized by
each Bondholder and the Bond Insurer to make such payments to the
Indenture Trustee and, in the event that the Indenture Trustee shall
consent to the making of such payments directly to the Bondholders and
the Bond Insurer, to pay to the Indenture Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances
of the Indenture Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Bondholder or the Bond Insurer any plan of reorganization, arrangement,
adjustment or composition affecting any of the Bonds or the rights of any Holder
thereof, or the Bond Insurer, or to authorize the Indenture Trustee to vote in
respect of the claim of any Bondholder or the Bond Insurer in any such
Proceeding.
SECTION 5.06. INDENTURE TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION
OF BONDS.
All rights of action and claims under this Indenture or any of the
Bonds may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Bonds or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Indenture Trustee,
at the direction of the Bond Insurer, shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall be for the
ratable benefit of the Holders of the Bonds and the Bond Insurer in respect of
which such judgment has been recovered after payment of amounts required to be
paid pursuant to clause (i) of Section 5.07.
SECTION 5.07. APPLICATION OF MONEY COLLECTED.
If the Bonds have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Indenture Trustee with respect to such
Bonds pursuant to this Article or otherwise and any other monies that may then
be held or thereafter received by the Indenture Trustee as security for such
Bonds shall be applied in the following order, at the date or dates fixed by the
Indenture Trustee and, in case of the payment of the entire amount due on
account of principal of, and interest on, such Bonds, upon presentation and
surrender thereof:
(i) first, to the Indenture Trustee, any unpaid Indenture
Trustee's Fees then due and any other amounts payable and due to the
Indenture Trustee under this Indenture, including any costs or expenses
incurred by it in connection with the enforcement of the remedies
provided for in this Article V;
(ii) second, to the Servicer, any amounts required to pay
the Servicer for any unpaid Servicing Fees then due and to reimburse
the Servicer for Monthly Advances previously made by, and not
previously reimbursed or retained by, the Services and, upon the final
liquidation of the related Mortgage Loan or the final liquidation of
the Trust Estate, Servicing Advances previously made by, and not
previously reimbursed or retained by, the Servicer;
(iii) third, to the payment of Bond Interest then due and
unpaid upon the Outstanding Bonds through the day preceding the date on
which such payment is made;
(iv) fourth, to the payment of the Bond Balance of the
Outstanding Bonds, up to the amount of their respective Current Bond
Balances, ratably, without preference or priority of any kind;
-37-
<PAGE> 45
(v) fifth, to the payment to the Bond Insurer, as
subrogee to the rights of the Bondholders, (A) the aggregate amount
necessary to reimburse the Bond Insurer for any unreimbursed Insured
Payments paid by the Bond Insurer on prior Payment Dates, together with
interest thereon at the "Late Payment Rate" specified in the Insurance
Agreement from the date such Insured Payments were paid by the Bond
Insurer to such Payment Date, (B) the amount of any unpaid Bond Insurer
Premium then due, together with interest thereon at the "Late Payment
Rate" specified in the Insurance Agreement from the date such amounts
were due and (C) any other amounts due and owing to the Bond Insurer
under the Insurance Agreement;
(vi) sixth, to the payment of the entire outstanding
Available Funds Cap Carry Forward Amount then due and unpaid upon the
Outstanding Bonds through the day preceding the date on which such
payment is made; and
(vii) seventh, to the payment of the remainder, if any, to
the Issuer or any other Person legally entitled thereto.
SECTION 5.08. LIMITATION ON SUITS.
No Holder of a Bond shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to
the Indenture Trustee and the Bond Insurer of a continuing Event of
Default;
(2) the Holders of Bonds representing not less than 25%
of the Bond Balance of the Outstanding Bonds shall have made written
request to the Indenture Trustee to institute Proceedings in respect of
such Event of Default in its own name as Indenture Trustee hereunder;
(3) such Holder or Holders have offered to the Indenture
Trustee indemnity in full against the costs, expenses and liabilities
to be incurred in compliance with such request;
(4) the Indenture Trustee for 60 days after its receipt
of such notice, request and offer of indemnity has failed to institute
any such Proceeding;
(5) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Holders of Bonds representing more than 50% of the Bond Balance of
the Outstanding Bonds; and
(6) the consent of the Bond Insurer shall have been
obtained; it being understood and intended that no one or more Holders
of Bonds 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 Bonds or to obtain or to
seek to obtain priority or preference over any other Holders or to
enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders of
Bonds.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Bonds,
each representing less than 50% of the Bond Balances of the Outstanding Bonds,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken notwithstanding any other provision herein to the contrary.
SECTION 5.09. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST.
Subject to the provisions in this Indenture (including Sections 3.01
and 5.03) limiting the right to recover amounts due on a Bond to recovery from
amounts in the Trust Estate, the Holder of any Bond shall have the right,
-38-
<PAGE> 46
to the extent permitted by applicable law, which right is absolute and
unconditional, to receive payment of each installment of interest on such Bond
on the respective Payment Date for such installments of interest, to receive
payment of each installment of principal of such Bond when due (or, in the case
of any Bond called for redemption, on the date fixed for such redemption) and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
SECTION 5.10. RESTORATION OF RIGHTS AND REMEDIES.
If the Indenture Trustee, the Bond Insurer or any Bondholder has
instituted any Proceeding to enforce any right or remedy under this Indenture
and such Proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Indenture Trustee, the Bond Insurer or to such
Bondholder, then and in every such case the Issuer, the Indenture Trustee, the
Bond Insurer and the Bondholders shall, subject to any determination in such
Proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Indenture Trustee, the
Bond Insurer and the Bondholders shall continue as though no such Proceeding had
been instituted.
SECTION 5.11. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee, the Bond Insurer or to the Bondholders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.12. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Indenture Trustee, the Bond Insurer or of
any Holder of any Bond to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article or by law to the Indenture Trustee, the Bond Insurer or to the
Bondholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Bond Insurer or by the Bondholders with
the prior consent of the Bond Insurer, as the case may be.
SECTION 5.13. CONTROL BY BONDHOLDERS.
The Holders of Bonds representing more than 50% of the Bond Balance of
the Outstanding Bonds on the applicable Record Date shall, with the consent of
the Bond Insurer, have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Indenture Trustee or
exercising any trust or power conferred on the Indenture Trustee; provided that:
(1) such direction shall not be in conflict with any rule
of law or with this Indenture;
(2) any direction to the Indenture Trustee to undertake a
Sale of the Trust Estate shall be by the Holders of Bonds representing
the percentage of the Bond Balance of the Outstanding Bonds specified
in Section 5.17(b) (1), unless Section 5.17(b) (2) is applicable; and
(3) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction; provided, however, that, subject to Section 6.01, the
Indenture Trustee need not take any action that it determines might
involve it in liability or be unjustly prejudicial to the Bondholders
not consenting.
-39-
<PAGE> 47
SECTION 5.14. WAIVER OF PAST DEFAULTS.
The Holders of Bonds representing more than 50% of the Bond Balance of
the Outstanding Bonds on the applicable Record Date may on behalf of the Holders
of all the Bonds, and with the consent of the Bond Insurer, waive any past
Default hereunder and its consequences, except a Default:
(1) in the payment of principal or any installment of
interest on any Bond; or
(2) in respect of a covenant or provision hereof that
under Section 9.02 cannot be modified or amended without the consent of
the Holder of each Outstanding Bond affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 5.15. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Bond by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Indenture Trustee for any action
taken, suffered or omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section shall not apply to any suit instituted by the
Indenture Trustee, to any suit instituted by any Bondholder, or group of
Bondholders, holding in the aggregate Bonds representing more than 10% of the
Bond Balance of the Outstanding Bonds, or to any suit instituted by any
Bondholder for the enforcement of the payment of any Required Payment Amount on
any Bond on or after the related Payment Date or for the enforcement of the
payment of principal of any Bond on or after the Final Maturity Date (or, in the
case of any Bond called for redemption, on or after the applicable Redemption
Date).
SECTION 5.16. WAIVER OF STAY OR EXTENSION LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension of law wherever enacted,
now or at any time hereafter in force, that may affect the covenants in, or the
performance of, this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Indenture Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
SECTION 5.17. SALE OF TRUST ESTATE.
(a) The power to effect any sale (a "Sale") of any
portion of the Trust Estate pursuant to Section 5.04 shall not be
exhausted by any one or more Sales as to any portion of the Trust
Estate remaining unsold, but shall continue unimpaired until the entire
Trust Estate shall have been sold or all amounts payable on the Bonds
and under this Indenture with respect thereto shall have been paid. The
Indenture Trustee may from time to time postpone any public Sale by
public announcement made at the time and place of such Sale.
(b) To the extent permitted by law, the Indenture Trustee
shall not in any private Sale sell or otherwise dispose of the Trust
Estate, or any portion thereof, unless:
(1) the Holders of Bonds representing not less
than 50% of the Bond Balance of the Bonds then Outstanding
consent to or direct the Indenture Trustee to make such Sale;
or
-40-
<PAGE> 48
(2) the proceeds of such Sale would be not less
than the entire amount that would be payable to the Holders of
the Bonds, in full payment thereof in accordance with Section
5.07, on the Payment Date next succeeding the date of such
Sale.
The purchase by the Indenture Trustee of all or any portion of
the Trust Estate at a private Sale shall not be deemed a Sale or
disposition thereof for purposes of this Section 5.17(b). In the
absence of a Bond Insurer Default, no sale hereunder shall be effective
without the consent of the Bond Insurer.
(c) Unless the Holders of all Outstanding Bonds have
otherwise consented or directed the Indenture Trustee, at any public
Sale of all or any portion of the Trust Estate at which a minimum bid
equal to or greater than the amount described in paragraph (2) of
subsection (b) of this Section 5.17 has not been established by the
Indenture Trustee and no Person bids an amount equal to or greater than
such amount, the Indenture Trustee, acting in its capacity as Indenture
Trustee on behalf of the Bondholders, shall prevent such sale and bid
an amount (which shall include the Indenture Trustee's right, in its
capacity as Indenture Trustee, to credit bid) at least $1.00 more than
the highest other bid in order to preserve the Trust Estate on behalf
of the Bondholders.
(d) In connection with a Sale of all or any portion of
the Trust Estate:
(1) any Holder or Holders of Bonds may bid for
and purchase the property offered for Sale, and upon
compliance with the terms of sale may hold, retain and possess
and dispose of such property, without further accountability,
and may, in paying the purchase money therefor, deliver any
Outstanding Bonds or claims for interest thereon in lieu of
cash up to the amount that shall, upon distribution of the net
proceeds of such Sale, be payable thereon, and such Bonds, in
case the amounts so payable thereon shall be less than the
amount due thereon, shall be returned to the Holders thereof
after being appropriately stamped to show such partial
payment;
(2) the Indenture Trustee may bid for and
acquire the property offered for Sale in connection with any
public Sale thereof, and, in lieu of paying cash therefor, may
make settlement for the purchase price by crediting the gross
Sale price against the sum of (A) the amount that would be
payable to the Holders of the Bonds as a result of such Sale
in accordance with Section 5.07 on the Payment Date next
succeeding the date of such Sale and (B) the expenses of the
Sale and of any Proceedings in connection therewith which are
reimbursable to it, without being required to produce the
Bonds in order to complete any such Sale or in order for the
net Sale price to be credited against such Bonds, and any
property so acquired by the Indenture Trustee shall be held
and dealt with by it in accordance with the provisions of this
Indenture;
(3) the Indenture Trustee shall execute and
deliver an appropriate instrument of conveyance transferring
its interest in any portion of the Trust Estate in connection
with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably
appointed the agent and attorney-in-fact of the Issuer to
transfer and convey its interest in any portion of the Trust
Estate in connection with a Sale thereof, and to take all
action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale
shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or
see to the application of any moneys.
SECTION 5.18. ACTION ON BONDS.
The Indenture Trustee's right to seek and recover judgment under this
Indenture shall not be affected by the seeking, obtaining or application of any
other relief under or with respect to this Indenture. Neither the lien of
-41-
<PAGE> 49
this Indenture nor any rights or remedies of the Indenture Trustee, the Bond
Insurer or the Holders of Bonds shall be impaired by the recovery of any
judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate.
SECTION 5.19. NO RECOURSE TO OTHER TRUST ESTATES OR OTHER ASSETS OF
THE ISSUER.
The Trust Estate Granted to the Indenture Trustee as security for the
Bonds serves as security only for the Bonds. Holders of the Bonds shall have no
recourse against the trust estate granted as security for any other series of
bonds issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Bonds may be enforced against either the trust estate
securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
SECTION 5.20. APPLICATION OF THE TRUST INDENTURE ACT.
Pursuant to Section 316(a) of the TIA, all provisions automatically
provided for in Section 316(a) are hereby expressly excluded.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.01. DUTIES OF INDENTURE TRUSTEE.
(a) If an Event of Default has occurred and is
continuing, the Indenture Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care
and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Indenture Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others and no implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee; and
(2) In the absence of bad faith on its part, the
Indenture Trustee may request and conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture. The Indenture Trustee
shall, however, examine such certificates and opinions to determine
whether they conform on their face to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to
act or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of
subsection (b) of this Section 6.01;
(2) The Indenture Trustee shall not be liable
for any error of judgment made in good faith by a Responsible Officer,
unless it is proved that the Indenture Trustee was negligent in
ascertaining the pertinent facts; and
(3) The Indenture Trustee shall not be liable
with respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.13 or
5.17 or exercising any trust or power conferred upon the Indenture
Trustee under this Indenture.
-42-
<PAGE> 50
(d) Except with respect to duties of the Indenture
Trustee prescribed by the TIA, as to which this Section 6.01(d) shall
not apply, for all purposes under this Indenture, the Indenture Trustee
shall not be deemed to have notice or knowledge of any Event of Default
described in Section 5.01(2), 5.01(5) or 5.01(6) or any Default
described in Section 5.01(3) or 5.01(4) or of any event described in
Section 3.05 unless a Responsible Officer assigned to and working in
the Indenture Trustee's corporate trust department has actual knowledge
thereof or unless written notice of any event that is in fact such an
Event of Default or Default is received by the Indenture Trustee at the
Corporate Trust Office, and such notice references the Bonds generally,
the Issuer, the Trust Estate or this Indenture.
(e) No provision of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it under the Servicing Agreement or otherwise.
(f) Every provision of this Indenture that in any way
relates to the Indenture Trustee is subject to the provisions of this
Section.
(g) Notwithstanding any extinguishment of all right,
title and interest of the Issuer in and to the Trust Estate following
an Event of Default and a consequent declaration of acceleration of the
Maturity of the Bonds, whether such extinguishment occurs through a
Sale of the Trust Estate to another Person, the acquisition of the
Trust Estate by the Indenture Trustee or otherwise, the rights, powers
and duties of the Indenture Trustee with respect to the Trust Estate
(or the proceeds thereof) and the Bondholders and the Bond Insurer and
the rights of Bondholders and the Bond Insurer shall continue to be
governed by the terms of this Indenture.
(h) The Indenture Trustee or any Custodian appointed
pursuant to Section 8.13 shall at all times retain possession of the
Mortgage Files in the State of Minnesota, except for those Mortgage
Files or portions thereof released to the Servicer pursuant to this
Indenture or the Servicing Agreement.
SECTION 6.02. NOTICE OF DEFAULT.
Immediately after the occurrence of any Default known to the Indenture
Trustee, the Indenture Trustee shall transmit by mail to the Bond Insurer and
the Underwriters notice of each such Default and, within 90 days after the
occurrence of any Default known to the Indenture Trustee, the Indenture Trustee
shall transmit by mail to all Holders of Bonds notice of each such Default,
unless such Default shall have been cured or waived; provided, however, that in
no event shall the Indenture Trustee provide notice, or fail to provide notice
of a Default known to the Indenture Trustee in a manner contrary to the
requirements of the Trust Indenture Act. Concurrently with the mailing of any
such notice to the Holders of the Bonds, the Indenture Trustee shall transmit by
mail a copy of such notice to the Rating Agencies.
SECTION 6.03. RIGHTS OF INDENTURE TRUSTEE.
(a) Except as otherwise provided in Section 6.01, the
Indenture Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The
Indenture Trustee need not investigate any fact or matter stated in any
such document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of
Counsel reasonably satisfactory in form and substance to the Indenture
Trustee. The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on any such Officer's
Certificate or Opinion of Counsel.
-43-
<PAGE> 51
(c) With the consent of the Bond Insurer, which consent
shall not be unreasonably withheld, the Indenture Trustee may act
through agents and shall not be responsible for the misconduct or
negligence of any agent appointed with due care.
(d) The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith that it believes to be
authorized or within its rights or powers.
SECTION 6.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF BONDS.
The recitals contained herein and in the Bonds, except the certificates
of authentication on the Bonds, shall be taken as the statements of the Issuer,
and the Indenture Trustee and the Authenticating Agent assume no responsibility
for their correctness. The Indenture Trustee makes no representations with
respect to the Trust Estate or as to the validity or sufficiency of this
Indenture or of the Bonds. The Indenture Trustee shall not be accountable for
the use or application by the Issuer of the Bonds or the proceeds thereof or any
money paid to the Issuer or upon Issuer Order pursuant to the provisions hereof.
SECTION 6.05. MAY HOLD BONDS.
The Indenture Trustee, any Agent, or any other agent of the Issuer, in
its individual or any other capacity, may become the owner or pledgee of Bonds
and, subject to Sections 6.07 and 6.13, may otherwise deal with the Issuer or
any Affiliate of the Issuer with the same rights it would have if it were not
Indenture Trustee, Agent or such other agent.
SECTION 6.06. MONEY HELD IN TRUST.
Money held by the Indenture Trustee in trust hereunder need not be
segregated from other funds except to the extent required by this Indenture or
by law. The Indenture Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Issuer and
except to the extent of income or other gain on investments that are obligations
of the Indenture Trustee, in its commercial capacity, and income or other gain
actually received by the Indenture Trustee on investments, which are obligations
of others.
SECTION 6.07. ELIGIBILITY; DISQUALIFICATION.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a Indenture Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). The Indenture Trustee shall always have
a combined capital and surplus as stated in Section 6.08. The Indenture Trustee
shall be subject to TIA Section 310(b).
SECTION 6.08. INDENTURE TRUSTEE'S CAPITAL AND SURPLUS.
The Indenture Trustee shall at all times have a combined capital and
surplus of at least $100,000,000 or shall be a member of a bank holding company
system, the aggregate combined capital and surplus of which is at least
$100,000,000 and shall at all times be rated "BBB" or better by Standard &
Poor's and "Baa2" by Moody's; provided, however, that the Indenture Trustee's
separate capital and surplus shall at all times be at least the amount required
by TIA Section 310(a)(2). If the Indenture Trustee publishes annual reports of
condition of the type described in TIA Section 310(a)(1), its combined capital
and surplus for purposes of this Section 6.08 shall be as set forth in the
latest such report. If at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.08 and TIA Section
310(a)(2), it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
-44-
<PAGE> 52
SECTION 6.09. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Indenture Trustee
and no appointment of a successor Indenture Trustee pursuant to this
Article shall become effective until the acceptance of appointment by
the successor Indenture Trustee under Section 6.10.
(b) The Indenture Trustee may resign at any time by
giving written notice thereof to the Issuer, the Bond Insurer and each
Rating Agency. If an instrument of acceptance by a successor Indenture
Trustee shall not have been delivered to the Indenture Trustee within
30 days after the giving of such notice of resignation, the resigning
Indenture Trustee may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
(c) The Indenture Trustee may be removed at any time by
the Bond Insurer or, with the consent of the Bond Insurer, by Act of
the Holders representing more than 50% of the Bond Balance of the
Outstanding Bonds, delivered to the Indenture Trustee and to the
Issuer.
(d) If at any time:
(1) the Indenture Trustee shall have a
conflicting interest prohibited by Section 6.07 and shall fail
to resign or eliminate such conflicting interest in accordance
with Section 6.07 after written request therefor by the Issuer
or by any Bondholder; or
(2) the Indenture Trustee shall cease to be
eligible under Section 6.08 or shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a
receiver of the Indenture Trustee or of its property shall be
appointed, or any public officer shall take charge or control
of the Indenture Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation;
then, in any such case, (i) the Issuer by an Issuer Order, with the
consent of the Bond Insurer, may remove the Indenture Trustee, and the
Issuer shall join with the Indenture Trustee in the execution, delivery
and performance of all instruments and agreements necessary or proper
to appoint a successor Indenture Trustee acceptable to the Bond Insurer
and to vest in such successor Indenture Trustee any property, title,
right or power deemed necessary or desirable, subject to the other
provisions of this Indenture; provided, however, if the Issuer and the
Bond Insurer do not join in such appointment within fifteen (15) days
after the receipt by it of a request to do so, or in case an Event of
Default has occurred and is continuing, the Indenture Trustee may
petition a court of competent jurisdiction to make such appointment, or
(ii) subject to Section 5.15, and, in the case of a conflicting
interest as described in clause (1) above, unless the Indenture
Trustee's duty to resign has been stayed as provided in TIA Section
310(b), the Bond Insurer or any Bondholder who has been a bona fide
Holder of a Bond for at least six months may, on behalf of himself and
all others similarly situated, with the consent of the Bond Insurer,
petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or
become incapable of acting, or if a vacancy shall occur in the office
of the Indenture Trustee for any cause, the Issuer, by an Issuer Order
shall promptly appoint a successor Indenture Trustee acceptable to the
Bond Insurer. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy a successor Indenture
Trustee shall be appointed by the Bond Insurer or, with the consent of
the Bond Insurer, by Act of the Holders of Bonds representing more than
50% of the Bond Balance of the Outstanding Bonds delivered to the
Issuer and the retiring Indenture Trustee, the successor Indenture
Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Indenture Trustee and supersede the
successor Indenture Trustee appointed by the Issuer. If no successor
Indenture Trustee shall have been so appointed by the Issuer, the Bond
Insurer or Bondholders and shall have accepted appointment in the
manner hereinafter provided, any Bondholder who has been a bonafide
Holder of a Bond for at least six months
-45-
<PAGE> 53
may, on behalf of himself and all others similarly situated, with the
consent of the Bond Insurer, petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
(f) The Issuer shall give notice of each resignation and
each removal of the Indenture Trustee and each appointment of a
successor Indenture Trustee to the Holders of Bonds and the Bond
Insurer. Each notice shall include the name of the successor Indenture
Trustee and the address of its Corporate Trust Office.
SECTION 6.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer, the Bond Insurer and the retiring
Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective
and such successor Indenture Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Indenture Trustee. Notwithstanding the foregoing, on request of
the Issuer or the successor Indenture Trustee, such retiring Indenture Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Indenture Trustee all the rights, powers and
trusts of the retiring Indenture Trustee, and shall duly assign, transfer and
deliver to such successor Indenture Trustee all property and money held by such
retiring Indenture Trustee hereunder. Upon request of any such successor
Indenture Trustee, the Issuer shall execute and deliver any and all instruments
for more fully and certainly vesting in and confirming to such successor
Indenture Trustee all such rights, powers and trusts.
No successor Indenture Trustee shall accept its appointment unless at
the time of such acceptance such successor Indenture Trustee shall be qualified
and eligible under this Article.
SECTION 6.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS OF INDENTURE TRUSTEE.
Any corporation into which the Indenture Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Indenture Trustee, shall be the successor of
the Indenture Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Bonds have been authenticated, but not delivered, by the Indenture Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Indenture Trustee may adopt such authentication and deliver the
Bonds so authenticated with the same effect as if such successor Indenture
Trustee had authenticated such Bonds.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.
The Indenture Trustee (and any co-trustee or separate trustee) shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 311(b), and an Indenture Trustee (and any co-trustee or separate
trustee) who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
SECTION 6.13. CO-INDENTURE TRUSTEES AND SEPARATE INDENTURE TRUSTEES.
At any time or times, for the purpose of meeting the legal requirements
of the TIA or of any jurisdiction in which any of the Trust Estate may at the
time be located, the Indenture Trustee shall have power to appoint, and, upon
the written request of the Indenture Trustee, of the Bond Insurer or of the
Holders of Bonds representing more than 50% of the Bond Balance of the
Outstanding Bonds with respect to which a co-trustee or separate trustee is
being appointed with the consent of the Bond Insurer, the Issuer shall for such
purpose jointly with the Indenture Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Indenture Trustee either to act as
co-trustee, jointly with the Indenture Trustee, of all or any part of the Trust
Estate, or to act as separate trustee of any such property, in either case with
such powers as may be provided in the instrument of appointment, and to vest in
such Person or
-46-
<PAGE> 54
Persons in the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section. If the
Issuer does not join in such appointment within 15 days after the receipt by it
of a request to do so, or in case an Event of Default has occurred and is
continuing, the Indenture Trustee alone shall have power to make such
appointment. All fees and expenses of any co-trustee or separate trustee shall
be payable by the Issuer.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(1) The Bonds shall be authenticated and delivered and
all rights, powers, duties and obligations hereunder in respect of the
custody of securities, cash and other personal property held by, or
required to be deposited or pledged with, the Indenture Trustee
hereunder, shall be exercised, solely by the Indenture Trustee.
(2) The rights, powers, duties and obligations hereby
conferred or imposed upon the Indenture Trustee in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee or by the Indenture
Trustee and such co-trustee or separate trustee jointly, as shall be
provided in the instrument appointing such co-trustee or separate
trustee, except to the extent that under any law of any jurisdiction in
which any particular act is to be performed, the Indenture Trustee
shall be incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee.
(3) The Indenture Trustee at any time, by an instrument
in writing executed by it, with the concurrence of the Issuer evidenced
by an Issuer Order, may accept the resignation of or remove any
co-trustee or separate trustee appointed under this Section, and, in
case an Event of Default has occurred and is continuing, the Indenture
Trustee shall have power to accept the resignation of, or remove, any
such co-trustee or separate trustee without the concurrence of the
Issuer upon the written request of the Indenture Trustee, the Issuer
shall join with the Indenture Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-trustee
or separate trustee so resigned or removed may be appointed in the
manner provided in this Section.
(4) No co-trustee or separate trustee hereunder shall be
personally liable by reason of any act or omission of the Indenture
Trustee, or any other such trustee hereunder.
(5) Any Act of Bondholders delivered to the Indenture
Trustee shall be deemed to have been delivered to each such co-trustee
and separate trustee.
SECTION 6.14. AUTHENTICATING AGENTS.
The Issuer shall appoint an Authenticating Agent with power to act on
its behalf and subject to its direction in the authentication and delivery of
the Bonds designated for such authentication by the Issuer and containing
provisions therein for such authentication (or with respect to which the Issuer
has made other arrangements, satisfactory to the Indenture Trustee and such
Authenticating Agent, for notation on the Bonds of the authority of an
Authenticating Agent appointed after the initial authentication and delivery of
such Bonds) in connection with transfers and exchanges under Section 2.06, as
fully to all intents and purposes as though the Authenticating Agent had been
expressly authorized by that Section to authenticate and deliver Bonds. For all
purposes of this Indenture (other than in connection with the authentication and
delivery of Bonds pursuant to Sections 2.05 and 2.11 in connection with their
initial issuance), the authentication and delivery of Bonds by the
-47-
<PAGE> 55
Authenticating Agent pursuant to this Section shall be deemed to be the
authentication and delivery of Bonds "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.07 for the Indenture Trustee hereunder and has an
office for presentation of Bonds in the United States of America. The Indenture
Trustee shall initially be the Authenticating Agent and shall be the Bond
Registrar as provided in Section 2.06. The office from which the Indenture
Trustee shall perform its duties as Bond Registrar and Authenticating Agent
shall be the Corporate Trust Office. Any Authenticating Agent appointed pursuant
to the terms of this Section 6.14 or pursuant to the terms of any supplemental
indenture shall deliver to the Indenture Trustee as a condition precedent to the
effectiveness of such appointment an instrument accepting the trusts, duties and
responsibilities of Authenticating Agent and of Bond Registrar or co-Bond
Registrar and indemnifying the Indenture Trustee for and holding the Indenture
Trustee harmless against, any loss, liability or expense (including reasonable
attorneys' fees) incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance, administration of the trust or
exercise of authority by such Authenticating Agent, Bond Registrar or co-Bond
Registrar.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any further act on the part of the
parties hereto or the Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Issuer. The Issuer may at any time terminate the
agency of any Authenticating Agent by giving written notice of termination to
such Authenticating Agent and the Issuer. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Issuer
shall promptly appoint a successor Authenticating Agent, shall give written
notice of such appointment to the Indenture Trustee, and shall mail notice of
such appointment to all Holders of Bonds.
The Indenture Trustee agrees, subject to Section 6.01(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its services
and the Indenture Trustee shall be entitled to be reimbursed for such payments
pursuant to Section 6.05 of the Servicing Agreement. The provisions of Sections
2.09, 6.04 and 6.05 shall be applicable to any Authenticating Agent.
SECTION 6.15. REVIEW OF MORTGAGE FILES.
(a) Initial Certification. The Indenture Trustee shall,
for the benefit of the Bondholders and the Bond Insurer, review each
Mortgage File prior to the Closing Date to ascertain that all documents
required to be included in the Mortgage File are included therein, and
shall deliver to the Mortgage Loan Seller, the Bond Insurer and the
Servicer on the Closing Date an Initial Certification in the form
attached hereto as Exhibit E-1 with respect to each Mortgage Loan to
the effect that, except as specifically noted on a schedule of
exceptions thereto, (A) all documents required to be contained in the
Mortgage File are in its possession, (B)such documents have been
reviewed by it and appear regular on their face and relate to such
Mortgage Loan, and (C)based on its examination and only as to the
foregoing documents, the information set forth on the related Mortgage
Loan Schedule accurately reflects information set forth in the Mortgage
File.
It is understood that before making the Initial Certification,
the Indenture Trustee shall examine the related Mortgage Loan Documents
to confirm that:
(1) each Mortgage Note and Mortgage bears an
original signature or signatures purporting to be that of the
Person or Persons named as the maker and mortgagor/trustor or,
if photocopies are permitted, that such copies bear a
reproduction of such signature or signatures;
-48-
<PAGE> 56
(2) except for the endorsement to the Indenture
Trustee, neither the Mortgage nor any Assignment, on the face
or the reverse side(s) thereof, contains evidence of any
unsatisfied claims, liens, security interests, encumbrances or
restrictions on transfer;
(3) the principal amount of the indebtedness
secured by the related Mortgage is identical to the original
principal amount of the related Mortgage Note;
(4) the Assignment of the related Mortgage from
the Mortgage Loan Seller to the Indenture Trustee is in the
form required pursuant to clause (e) of the definition of
"Mortgage Loan Documents" in the Mortgage Loan Sale Agreement,
and bears an original signature of the Mortgage Loan Seller
and any other necessary party (or signatures purporting to be
that of the Mortgage Loan Seller and any such other party) or,
if photocopies are permitted, that such copies bear a
reproduction of such signature or signatures;
(5) if intervening Assignments are included in
the Mortgage File, each such intervening Assignment bears an
original signature of the related mortgagee and/or the
assignee (and any other necessary party) (or signatures
purporting to be that of each such party) or, if photocopies
are permitted, that such copies bear a reproduction of such
signature or signatures;
(6) if either a title insurance policy, a
preliminary title report or a written commitment to issue a
title insurance policy is delivered, the address of the real
property set forth in such policy, report or written
commitment is identical to the real property address contained
in the related Mortgage; and
(7) if any of a title insurance policy,
certificate of title insurance or a written commitment to
issue a title insurance policy is delivered, such policy,
certificate or written commitment is for an amount not less
than the original principal amount of the related Mortgage
Note and such title insurance policy insures that the related
Mortgage creates a first lien, senior in priority to all other
deeds of trust, mortgages, deeds to secure debt, financing
statements and security agreements and to any mechanics'
liens, judgment liens or writs of attachment (or if the title
insurance policy or certificate of title insurance has not
been issued, the written commitment for such insurance
obligates the insurer to issue such policy for an amount not
less than the original principal amount of the related
Mortgage Note).
(b) Final Certification. On or before one year following
the Closing Date, the Indenture Trustee shall deliver to the Mortgage
Loan Seller, the Bond Insurer and the Servicer a Final Certification in
the form attached hereto as Exhibit E-2 evidencing the completeness of
the Mortgage File for each Mortgage Loan, except as specifically noted
on a schedule of exceptions thereto.
(c) Certification Generally. In giving each of the
Initial Certification and the Final Certification, the Indenture
Trustee shall be under no duty or obligation (1) to inspect, review or
examine any such documents, instruments, securities or other papers to
determine that they or the signatures thereto are genuine, enforceable,
or appropriate for the represented purpose or that they have actually
been recorded or that they are other than what they purport to be on
their face or (2) to determine whether any Mortgage File should include
a flood insurance policy, any rider, addenda, surety or guaranty
agreement, power of attorney, buy down agreement, assumption agreement,
modification agreement, written assurance or substitution agreement.
(d) Recordation Report. No later than the fifth Business
Day of each third month, commencing in January 1998, the Indenture
Trustee shall deliver to the Servicer and the Bond Insurer a
recordation report dated as of the first day of such month, identifying
those Mortgage Loans for which it has not yet received (1)an original
recorded Mortgage or a copy thereof certified to be true and correct by
the public recording office in possession of such Mortgage or (2) an
original recorded Assignment of the
-49-
<PAGE> 57
Mortgage to the Indenture Trustee and any required intervening
Assignments or a copy thereof certified to be a true and correct copy
by the public recording office in possession of such Assignment.
SECTION 6.16. INDENTURE TRUSTEE FEES AND EXPENSES.
The Indenture Trustee shall be entitled to receive the Indenture
Trustee Fee on each Payment Date as provided herein. The Indenture Trustee also
shall be entitled, pursuant to the provisions of Section 6.05 of the Servicing
Agreement, to (i) payment of or reimbursement for expenses, disbursements and
advances incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Agreement (including but not limited to the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) as provided in the Servicing Agreement, and
(ii) indemnification against losses, liability and expenses, including
reasonable attorney's fees, incurred, arising out of or in connection with this
Agreement and the Bonds as provided in the Servicing Agreement.
ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES
OF BONDHOLDERS.
(a) The Issuer shall furnish or cause to be furnished to
the Indenture Trustee (i) semi-annually, not less than 45 days nor more
than 60 days after the Payment Date occurring closest to six months
after the Closing Date and each Payment Date occurring at six-month
intervals thereafter, all information in the possession or control of
the Issuer, in such form as the Indenture Trustee may reasonably
require, as to names and addresses of the Holders of Bonds, and (ii) at
such other times, as the Indenture Trustee may request in writing,
within 30 days after receipt by the Issuer of any such request, a list
of similar form and content as of a date not more than 10 days prior to
the time such list is furnished; provided, however, that so long as the
Indenture Trustee is the Bond Registrar, no such list shall be required
to be furnished.
(b) In addition to furnishing to the Indenture Trustee
the Bondholder lists, if any, required under subsection (a), the Issuer
shall also furnish all Bondholder lists, if any, required under Section
3.03 at the times required by Section 3.03.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
BONDHOLDERS.
(a) The Indenture Trustee shall preserve, in as current a
form as is reasonably practicable, the names and addresses of the
Holders of Bonds contained in the most recent list, if any, furnished
to the Indenture Trustee as provided in Section 7.01 and the names and
addresses of the Holders of Bonds received by the Indenture Trustee in
its capacity as Bond Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in Section 7.01 upon receipt of a new
list so furnished.
(b) Bondholders may communicate pursuant to TIA Section
312(b) with other Bondholders with respect to their rights under this
Indenture or under the Bonds.
(c) The Issuer, the Indenture Trustee and the Bond
Registrar shall have the protection of TIA Section 312(c).
SECTION 7.03. REPORTS BY INDENTURE TRUSTEE.
(a) Within 60 days after December 31 of each year (the
"reporting date"), commencing with the year after the issuance of the
Bonds, (i) the Indenture Trustee shall, if required by TIA Section
313(a), mail to all Holders a brief report dated as of such reporting
date that complies with TIA Section 313(a);
-50-
<PAGE> 58
(ii) the Indenture Trustee shall, to the extent not set forth in the
Payment Date Statement pursuant to Section 2.08(d), also mail to
Holders of Bonds and the Bond Insurer with respect to which it has made
advances, any reports with respect to such advances that are required
by TIA Section 313(b)(2); and, the Indenture Trustee shall also mail to
Holders of Bonds and the Bond Insurer any reports required by TIA
Section 313(b)(1). For purposes of the information required to be
included in any such reports pursuant to TIA Sections 313(a)(2),
313(b)(1) (if applicable), or 313(b)(2), the principal amount of
indenture securities outstanding on the date as of which such
information is provided shall be the Bond Balance of the then
Outstanding Bonds covered by the report.
(b) A copy of each report required under this Section
7.03 shall, at the time of such transmission to Holders of Bonds and
the Bond Insurer be filed by the Indenture Trustee with the Commission
and with each securities exchange upon which the Bonds are listed. The
Issuer will notify the Indenture Trustee when the Bonds are listed on
any securities exchange.
SECTION 7.04. REPORTS BY ISSUER.
The Issuer (a) shall deliver to the Indenture Trustee within 15 days
after the Issuer is required to file the same with the Commission copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) that the Issuer is required to file with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, and (b) shall also comply with the other provisions of TIA Section
314(a).
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
SECTION 8.01. COLLECTION OF MONEYS.
Except as otherwise expressly provided herein, the Indenture Trustee
may demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Indenture Trustee
pursuant to this Indenture. The Indenture Trustee shall hold all such money and
property received by it as part of the Trust Estate and shall apply it as
provided in this Indenture.
If the Indenture Trustee shall not have received the Remittable Funds
by close of business on any related Deposit Date, the Indenture Trustee shall,
unless the Issuer or the Servicer shall have made provisions satisfactory to the
Indenture Trustee for delivery to the Indenture Trustee of an amount equal to
such Remittable Funds, deliver a notice, with a copy to the Bond Insurer, to the
Issuer and the Servicer of their failure to remit such Remittable Funds and that
such failure, if not remedied by the close of business on the Business Day after
the date upon which such notice is delivered to the Servicer, shall constitute
an event of default under the Servicing Agreement. If the Indenture Trustee
shall subsequently receive any such Remittable Funds by 2:00 p.m. Eastern Time
on such Business Day, such Event of Default shall not be deemed to have
occurred. Notwithstanding any other provision hereof, the Indenture Trustee
shall deliver to the Issuer or the Servicer, or their respective designee or
assignee, any Remittable Funds received with respect to a Mortgage Loan after
the related Deposit Date to the extent that the Issuer or the Servicer,
respectively, previously made payment or provision for payment with respect to
such Remittable Funds in accordance with this Section 8.01, and any such
Remittable Funds shall not be deemed part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and the
Servicing Agreement, if, following delivery by the Indenture Trustee of the
notice described above, the Servicer shall fail to remit the Remittable Funds on
any Deposit Date, the Indenture Trustee shall deliver a second notice to the
Servicer, the Issuer and the Bond Insurer by 2:00 p.m. Eastern Time on the third
Business Day prior to the related Payment Date indicating that an event of
default occurred and is continuing under the Servicing Agreement. Thereupon, the
Indenture
-51-
<PAGE> 59
Trustee shall take such actions as are required of the Indenture Trustee under
Article VI of the Servicing Agreement. In addition, if a default occurs in any
other performance required under the Servicing Agreement, the Indenture Trustee
may, and upon the request of the Bond Insurer or, with the consent of the Bond
Insurer, the Holders of Bonds representing more than 50% of the Bond Balance of
the Outstanding Bonds shall, take such action as may be appropriate to enforce
such payment or performance including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any right
to claim a Default or Event of Default under this Indenture and to proceed
thereafter as provided in Article V.
SECTION 8.02. BOND ACCOUNT.
(a) The Issuer hereby directs the Indenture Trustee to
establish, at the Corporate Trust Office one or more accounts that
shall collectively be the "Bond Account" on or before the Closing Date.
The Indenture Trustee shall promptly deposit in the Bond Account (i)
all Remittable Funds received by it from the Servicer pursuant to the
Servicing Agreement, (ii) any other funds from any deposits to be made
by the Servicer pursuant to the Servicing Agreement, (iii) any amount
required to be deposited in the Bond Account pursuant to Section 8.01,
(iv) all amounts received pursuant to Section 8.03, and (v) all other
amounts received for deposit in the Bond Account, including the payment
of any Purchase Price received by the Indenture Trustee. All amounts
that are deposited from time to time in the Bond Account are subject to
withdrawal by the Indenture Trustee for the purposes set forth in
subsections (c) and (d) of this Section 8.02. All funds withdrawn from
the Bond Account pursuant to subsection (c) of this Section 8.02 for
the purpose of making payments to the Holders of Bonds shall be applied
in accordance with Section 3.03.
(b) So long as no Default or Event of Default shall have
occurred and be continuing, amounts held in the Bond Account shall be
invested in Permitted Investments, which Permitted Investments shall
mature no later than the Business Day preceding the immediately
following Payment Date or, if such Permitted Investments are an
obligation of the Indenture Trustee or are money market funds for which
the Indenture Trustee or any affiliate is the manager or the advisor,
such Permitted Investments shall mature no later than the following
Payment Date..
All income or other gains, if any, from investment of moneys
deposited in the Bond Account shall be for the benefit of the Indenture
Trustee and on each Payment Date, any such amounts may be released from
the Bond Account and paid to the Indenture Trustee as part of its
compensation for acting as Indenture Trustee. Any loss resulting from
such investment of moneys deposited in the Bond Account shall be
reimbursed immediately as incurred to the Bond Account by the Indenture
Trustee. Subject to Section 6.01 and the preceding sentence, the
Indenture Trustee shall not in any way be held liable by reason of any
insufficiency in the Bond Account.
(c) On each Payment Date, the Indenture Trustee shall
withdraw amounts on deposit in the Bond Account and pay on a pari passu
basis the Bond Insurer Premium, the Indenture Trustee Fee, and,
provided notice is given to the Indenture Trustee no later than the 4th
Business Day prior to the Payment Date, amounts required to pay the
Servicer any unpaid Servicing Fees then due and to reimburse the
Servicer for Monthly Advances and Servicing Advances previously made
by, and not previously reimbursed to or retained by, the Servicer,
which are so reimbursable to the Servicer pursuant to the Servicing
Agreement (as reported in writing by the Servicer to the Indenture
Trustee). After payment of such amounts, unless the Bonds have been
declared due and payable pursuant to Section 5.02 and moneys collected
by the Indenture Trustee are being applied in accordance with Section
5.07, Available Funds on deposit in the Bond Account on any Payment
Date or Redemption Date shall be withdrawn from the Bond Account, in
the amounts required, for application on such Payment Date as follows:
-52-
<PAGE> 60
(i) first, to the payment to the Bond Insurer, as
subrogee to the rights of the Bondholders, the aggregate amount
necessary to reimburse the Bond Insurer for any unreimbursed Insured
Payments paid by the Bond Insurer on prior Payment Dates, together with
interest thereon at the "Late Payment Rate" specified in the Insurance
Agreement from the date such Insured Payments were paid by the Bond
Insurer to such Payment Date and the amount of any unpaid Bond Insurer
Premium for any prior Payment Date together with interest thereon at
the "Late Payment Rate" specified in the Insurance Agreement from the
date such amounts were due; provided, however, that the Bond Insurer
shall be paid such amounts only after the Bondholders have received the
Required Payment Amount with respect to such Payment Date;
(ii) second, to the Bondholders, the Bond Interest for
such Payment Date;
(iii) third, to the Bondholders, the Monthly Principal for
such Payment Date in reduction of the Bond Balance until such Bond
Balance is reduced to zero;
(iv) fourth, to the Bondholders, in reduction of the Bond
Balance, the amount, if any, equal to the lesser of (A)Excess Cash with
respect to such Payment Date, and (B) the lesser of (1) the amount
necessary for the Overcollateralization Amount to equal the Required
Overcollateralization Amount on such Payment Date (after giving effect
to application of Monthly Principal for such Payment Date) and (2) the
amount necessary to reduce the Bond Balance to zero (the "Excess Cash
Payment");
(v) fifth, to the Bond Insurer, any amounts due and owing
under the Insurance Agreement that are not described in clause "first";
and
(vi) sixth, to the Bondholders, the amount of all
Available Funds Cap Carry Forward Amount outstanding on such Payment
Date.
(d) On or after each Payment Date, so long as the
Indenture Trustee shall have prepared a Payment Date Statement in
respect of such Payment Date and (1) shall have made, or, in accordance
with Section 3.03, set aside from amounts in the Bond Account an amount
sufficient to make, the payments required to be made as set forth in
Section 8.02(c) as indicated in such Payment Date Statement, and (2)
shall have set aside any amounts that have been deposited in the Bond
Account prior to such time that represent amounts that are to be used
to make payments on the Bonds on the next succeeding Payment Date, the
cash balance, if any, then remaining in the Bond Account shall be
withdrawn from the Bond Account by the Indenture Trustee and, so long
as no Default or Event of Default shall have occurred and be
continuing, shall be released from the lien of this Indenture and paid
by the Indenture Trustee to the Issuer.
(e) Any payments made by the Indenture Trustee to the
Issuer pursuant to this Section 8.02 shall be remitted to the
Certificate Distribution Account established and maintained pursuant to
the Trust Agreement.
(f) In the event the Indenture Trustee is required to
establish a Collection Account pursuant to the Servicing Agreement, the
Indenture Trustee shall establish and maintain such account in the
manner required under the Servicing Agreement. The Indenture Trustee
shall reinvest amounts in the Collection Account at the direction of
the Servicer in Permitted Investments. All income or other gains, if
any, from investment of moneys deposited in the Collection Account
shall be for the benefit of the Servicer and the Indenture Trustees
shall release any such amounts from the Collection Account to the
Servicer on each Deposit Date.
SECTION 8.03. CLAIMS AGAINST THE MBIA INSURANCE POLICY.
(a) (i) The Indenture Trustee shall (A) receive as
attorney-in-fact of each Bondholder any Insured Payment from the Bond
Insurer or on behalf of the Bond Insurer and (B) disburse such Insured
Payment to such Bondholders in accordance with Section 8.02(c) hereof
for the benefit of the
-53-
<PAGE> 61
related Bondholders. Any Insured Payment received by the Indenture
Trustee shall be held by the Indenture Trustee uninvested. Insured
Payments disbursed by the Indenture Trustee from proceeds of the MBIA
Insurance Policy shall not be considered payment by the Issuer with
respect to the Bonds, nor shall such payments discharge the obligation
of the Issuer with respect to such Bonds, and the Bond Insurer shall
become the owner of such unpaid amounts due from the Issuer in respect
of such Insured Payments as the deemed assignee and subrogee of such
Bondholders and shall be entitled to receive the reimbursement in
respect thereof. The Indenture Trustee hereby agrees on behalf of each
Bondholder for the benefit of the Bond Insurer that it recognizes that
to the extent the Bond Insurer makes Insured Payments for the benefit
of the Bondholders, the Bond Insurer will be entitled to receive the
related reimbursement in accordance with the priority of distributions
referenced in Section 8.02(c) hereof.
(ii) The Indenture Trustee shall promptly notify
the Bond Insurer of any proceeding or the institution of any action, of
which a Responsible Officer of the Indenture Trustee has actual
knowledge, constituting a Preference Amount in respect of any payment
made on the Bonds. Each Bondholder that pays any amount pursuant to a
Preference Amount theretofore received by such Bondholder on account of
a Bond will be entitled to receive reimbursement for such amounts from
the Bond Insurer in accordance with the terms of the MBIA Insurance
Policy. Each Bondholder, by its purchase of Bonds, and the Indenture
Trustee hereby agree that, the Bond Insurer (so long as no MBIA Payment
Default exists) may at any time during the continuation of any
proceeding relating to a Preference Amount direct all matters relating
to such Preference Amount, including, without limitation, (i) the
direction of any appeal of any order relating to such Preference Amount
and (ii) the posting of any surety, supersedeas or performance bond
pending any such appeal. In addition and without limitation of the
foregoing, the Bond Insurer shall be subrogated to the rights of the
Indenture Trustee and each Bondholder in the conduct of any such
Preference Amount, including, without limitation, all rights of any
party to any adversary proceeding action with respect to any court
order issued in connection with any such Preference Amount.
(iii) Each Bondholder, by its purchase of Bonds,
and the Indenture Trustee hereby agree that, unless an MBIA Payment
Default exists and is continuing, the Bond Insurer shall have the right
to direct all matters relating to the Bonds in any proceeding in a
bankruptcy of the Issuer, including without limitation any proceeding
relating to a Preference Amount and the posting of any surety or bond
pending any such appeal.
(iv) With respect to a Preference Amount, the
Indenture Trustee shall be responsible for procuring and delivering the
items set forth in the MBIA Insurance Policy to the Bond Insurer.
(b) Unless a Bond Insurer Default exists and is
continuing, the Indenture Trustee shall cooperate in all respects with
any reasonable request by the Bond Insurer for action to preserve or
enforce the Bond Insurer's rights or interests hereunder without
limiting the rights or affecting the interests of the Bondholders as
otherwise set forth herein.
(c) The Indenture Trustee shall surrender the MBIA
Insurance Policy to the Bond Insurer for cancellation upon the
expiration of the term of the MBIA Insurance Policy as provided in the
MBIA Insurance Policy.
(d) With respect to any Payment Date on which an Insured
Payment is required to be made, the Indenture Trustee shall deliver to
the Bond Insurer a Notice of Claim by no later than noon on the third
Business Day prior to such Payment Date in the manner set forth in the
MBIA Insurance Policy.
SECTION 8.04. GENERAL PROVISIONS REGARDING THE BOND ACCOUNT AND
MORTGAGE LOANS.
(a) The Bond Account shall relate solely to the Bonds and
to the Mortgage Loans, Permitted Investments and other property
securing the Bonds. Funds and other property in the Bond Account shall
-54-
<PAGE> 62
not be commingled with any other moneys or property of the Issuer or
any Affiliate thereof. Notwithstanding the foregoing, the Indenture
Trustee may hold any funds or other property received or held by it as
part of the Bond Account in collective accounts maintained by it in the
normal course of its business and containing funds or property held by
it for other Persons (which may include the Issuer or an Affiliate),
provided that such accounts are under the sole control of the Indenture
Trustee and the Indenture Trustee maintains adequate records indicating
the ownership of all such funds or property and the portions thereof
held for credit to the Bond Account.
(b) If any amounts are needed for payment from the Bond
Account and sufficient uninvested funds are not available therein to
make such payment, the Indenture Trustee shall cause to be sold or
otherwise converted to cash a sufficient amount of the investments in
the Bond Account.
(c) The Indenture Trustee shall, at all times while any
Bonds are Outstanding, maintain in its possession, or in the possession
of an agent whose actions with respect to such items are under the sole
control of the Indenture Trustee, all certificates or other
instruments, if any, evidencing any investment of funds in the Bond
Account. The Indenture Trustee shall relinquish possession of such
items, or direct its agent to do so, only for purposes of collecting
the final payment receivable on such investment or certificate or, in
connection with the sale of any investment held in the Bond Account,
against delivery of the amount receivable in connection with any sale.
(d) The Indenture Trustee shall not invest any part of
the Trust Estate in Permitted Investments that constitute
uncertificated securities (as defined in Section 8-102 of the Uniform
Commercial Code, as enacted in the relevant jurisdiction) or in any
other book-entry securities unless it has received an Opinion of
Counsel reasonably satisfactory in form and substance to the Indenture
Trustee setting forth, with respect to each type of security for which
authority to invest is being sought, the procedures that must be
followed to maintain the lien and security interest created by this
Indenture with respect to the Trust Estate.
SECTION 8.05. RELEASES OF DEFECTIVE MORTGAGE LOANS.
Upon notice or discovery that any of the representations or warranties
of the Mortgage Loan Seller set forth in Section 4(b) and Exhibit B of the
Mortgage Loan Sale Agreement was materially incorrect or otherwise misleading
with respect to any Mortgage Loan as of the time made, the Indenture Trustee
shall direct the Mortgage Loan Seller to either (i) within 60 days after the
Mortgage Loan Seller receives actual knowledge of such incorrectness, eliminate
or otherwise cure the circumstance or condition in respect of which such
representation or warranty was incorrect as of the time made, (ii) withdraw such
Defective Mortgage Loan from the lien of this Indenture following the expiration
of such 60-day period by depositing to the Bond Account an amount equal to the
Purchase Price for such Mortgage Loan or (iii) substitute a Qualified
Replacement Mortgage Loan for such Defective Mortgage Loan and deposit any
Purchase Price required to be paid in connection with such substitution pursuant
to Section 7 of the Mortgage Loan Sale Agreement, all as provided in Section 7
of the Mortgage Loan Sale Agreement. Upon any purchase of or substitution for a
Defective Mortgage Loan by the Mortgage Loan Seller in accordance with Section 7
of the Mortgage Sale Agreement, the Indenture Trustee shall deliver the Mortgage
File relating to such Defective Mortgage Loan to the Mortgage Loan Seller, and
the Issuer and the Indenture Trustee shall execute such instruments of transfer
as are necessary to convey title to such Defective Mortgage Loan to the Mortgage
Loan Seller from the lien of this Indenture.
SECTION 8.06. REPORTS BY INDENTURE TRUSTEE TO BONDHOLDERS; ACCESS TO
CERTAIN INFORMATION.
On each Payment Date, the Indenture Trustee shall deliver the written
report required by Section 2.08(d) to Bondholders of record as of the related
Record Date (including the Clearing Agency, if any).
The Indenture Trustee shall make available at its Corporate Trust
Office, during normal business hours, for review by any Bondholder or any person
identified to the Indenture Trustee as a prospective Bondholder, originals or
copies of the following items: (a) the Indenture and any amendments thereto, (b)
all Payment Date
-55-
<PAGE> 63
Statements delivered to the Issuer since the Closing Date, (c) any Officers'
Certificates delivered to the Indenture Trustee since the Closing Date as
described in the Indenture and (d) any Accountants' reports delivered to the
Indenture Trustee since the Closing Date as required under the Servicing
Agreement. Copies of any and all of the foregoing items will be available from
the Indenture Trustee upon request; however, the Indenture Trustee will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses of providing such copies and shall not be required to provide such
copies without reasonable assurances that such sum will be paid.
SECTION 8.07. TRUST ESTATE MORTGAGE FILES.
(a) The Indenture Trustee shall release Mortgage Files or
portions thereof to the Servicer on the terms specified in the
Servicing Agreement.
(b) The Indenture Trustee shall, at such time as there
are no Bonds outstanding, release all of the Trust Estate to the Issuer
(other than any cash held for the payment of the Bonds pursuant to
Section 3.03 or 4.02).
SECTION 8.08. AMENDMENT TO SERVICING AGREEMENT.
The Indenture Trustee may, without the consent of any Holder, enter
into or consent to any amendment or supplement to the Servicing Agreement for
the purpose of increasing the obligations or duties of any party other than the
Indenture Trustee or the Holders of the Bonds. The Indenture Trustee may, in its
discretion, decline to enter into or consent to any such supplement or
amendment: (i) unless the Indenture Trustee receives an Opinion of Counsel that
the position of the Holders would not be materially adversely affected or
written confirmation from the Rating Agencies that the then-current implied
ratings on the Bonds (without taking into account the MBIA Insurance Policy)
would not be adversely affected by such supplement or amendment or (ii) if its
own rights, duties or immunities would be adversely affected.
SECTION 8.09. DELIVERY OF THE MORTGAGE FILES PURSUANT TO SERVICING
AGREEMENT.
As is appropriate for the servicing or foreclosure of any Mortgage
Loan, the Indenture Trustee shall deliver to the Servicer of such Mortgage the
Mortgage Files for such Mortgage Loan upon receipt by the Indenture Trustee on
or prior to the date such release is to be made of:
(a) such Officers' Certificates, if any, as are required
by the Servicing Agreement; and
(b) a "Request for Release" in the form prescribed by the
Servicing Agreement, executed by the Servicer, providing that the
Servicer will hold or retain the Mortgage Files in trust for the
benefit of the Indenture Trustee, the Bond Insurer and the Holders of
Bonds.
SECTION 8.10. SERVICER AS AGENT.
In order to facilitate the servicing of the Mortgage Loans by the
Servicer of such Mortgage Loans, the Servicer of the Mortgage Loans has been
appointed by the Issuer to retain, in accordance with the provisions of the
Servicing Agreement and this Indenture, all Remittable Funds on such Mortgage
Loans prior to their deposit into the Bond Account on or prior to the related
Deposit Date.
SECTION 8.11. TERMINATION OF SERVICER.
In the event of an event of default specified in Section 6.01 of the
Servicing Agreement, the Indenture Trustee may, with the consent of the Bond
Insurer, and shall, upon the direction of the Bond Insurer, (or as otherwise
provided in the Servicing Agreement) terminate the Servicer as provided in
Section 6.01 and Section 6.02 of the Servicing Agreement. If the Indenture
Trustee terminates the Servicer, the Indenture Trustee shall pursuant to Section
6.02 of the Servicing Agreement assume the duties of the Servicer or appoint a
successor
-56-
<PAGE> 64
servicer acceptable to the Issuer, the Bond Insurer and the Rating Agencies and
meeting the requirements set forth in the Servicing Agreement.
SECTION 8.12. OPINION OF COUNSEL.
The Indenture Trustee shall be entitled to receive at least five
Business Days' notice of any action to be taken pursuant to Section 8.07(a)
(other than in connection with releases of Mortgage Loans that were the subject
of a Full Prepayment of the type described in clause (i) of the definition of
the term "Full Prepayment") and 8.08, accompanied by copies of any instruments
involved, and the Indenture Trustee shall be entitled to receive an Opinion of
Counsel, in form and substance reasonably satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with. Counsel rendering any such opinion may
rely, without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Indenture Trustee in connection
with any such action.
SECTION 8.13. APPOINTMENT OF CUSTODIANS.
The Indenture Trustee may, at no additional cost to the Issuer, with
the consent of the Issuer and the Bond Insurer, appoint one or more Custodians
to hold all or a portion of the Mortgage Files as agent for the Indenture
Trustee. Each Custodian shall (i) be a financial institution supervised and
regulated by the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, the Office of Thrift Supervision, or the Federal Deposit
Insurance Corporation; (ii) have combined capital and surplus of at least
$10,000,000; (iii) be equipped with secure, fireproof storage facilities, and
have adequate controls on access to assure the safety and security of the
Mortgage Files; (iv) utilize in its custodial function employees who are
knowledgeable in the handling of mortgage documents and of the functions of a
mortgage document custodian; and (v) satisfy any other reasonable requirements
that the Issuer may from time to time deem necessary to protect the interests of
Bondholders and the Bond Insurer in the Mortgage Files. Each Custodian shall be
subject to the same obligations and standard of care as would be imposed on the
Indenture Trustee hereunder assuming the Indenture Trustee retained the Mortgage
Files directly. The appointment of one or more Custodians shall not relieve the
Indenture Trustee from any of its obligations hereunder, and the Indenture
Trustee shall remain responsible for all acts and omissions of any Custodian. If
the Servicer is appointed as a Custodian in accordance with this Section 8.14,
it shall fulfill its servicing and custodial duties and obligations through
separate departments and, if it maintains a trust department, shall fulfill its
custodial duties and obligations through such trust department.
SECTION 8.14. RIGHTS OF THE BOND INSURER TO EXERCISE RIGHTS OF
BONDHOLDERS.
By accepting its Bonds, each Bondholder agrees that unless a Bond
Insurer Default exists, the Bond Insurer shall have the right to exercise all
rights of the Bondholders under this Agreement without any further consent of
the Bondholders, including, without limitation:
(i) the right to require the Servicer to effect
foreclosures upon Mortgage Loans upon failure of the Servicer to do so;
(ii) the right to require the Mortgage Loan Seller to
repurchase or substitute for Defective Mortgage Loans pursuant to
Section 8.05;
(iii) the right to direct the actions of the Indenture
Trustee during the continuance of an Event of Default; and
(iv) the right to vote on proposed amendments to this
Indenture.
In addition, each Bondholder agrees that, unless a Bond Insurer Default
exists, the rights specifically set forth above may be exercised by the
Bondholders only with the prior written consent of the Bond Insurer.
-57-
<PAGE> 65
Except as otherwise provided in Section 8.03 and notwithstanding any
provision in this Indenture to the contrary, so long as a Bond Insurer Default
has occurred and is continuing, the Bond Insurer shall have no rights to
exercise any voting rights of the Bondholders hereunder, nor shall the Indenture
Trustee be required to obtain the consent of, or act at the direction of, the
Bond Insurer.
SECTION 8.15. TRUST ESTATE AND ACCOUNTS HELD FOR BENEFIT OF THE BOND
INSURER.
The Indenture Trustee shall hold the Trust Estate and the Mortgage
Files for the benefit of the Bondholders and the Bond Insurer and all references
in this Agreement and in the Bonds to the benefit of Holders of the Bonds shall
be deemed to include the Bond Insurer (provided there does not exist a Bond
Insurer Default).
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Bondholders shall
also be sent to the Bond Insurer.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS.
With the consent of the Bond Insurer and without the consent of the
Holders of any Bonds, the Issuer and the Indenture Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(1) to correct or amplify the description of any property
at any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(2) to add to the conditions, limitations and
restrictions on the authorized amount, terms and purposes of the
issuance, authentication and delivery of any Bonds, as herein set
forth, additional conditions, limitations and restrictions thereafter
to be observed;
(3) to evidence the succession of another Person to the
Issuer to the extent permitted herein, and the assumption by any such
successor of the covenants of the Issuer herein and in the Bonds
contained;
(4) to add to the covenants of the Issuer, for the
benefit of the Holders of all Bonds and the Bond Insurer or to
surrender any right or power herein conferred upon the Issuer;
(5) to cure any ambiguity, to correct or supplement any
provision herein that may be defective or inconsistent with any other
provision herein, or to amend any other provisions with respect to
matters or questions arising under this Indenture, which shall not be
inconsistent with the provisions of this Indenture, provided that such
action shall not adversely affect in any material respect the interests
of the Holders of the Bonds; and provided, further, that the amendment
shall not be deemed to adversely affect in any material respect the
interests of the Holders of the Bonds and the Bond Insurer if the
Person requesting the amendment obtains letters from the Rating
Agencies that the amendment would not result in the downgrading or
withdrawal of the implied ratings then assigned to the Bonds (without
taking into account the MBIA Insurance Policy); or
(6) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute
-58-
<PAGE> 66
hereafter enacted, and to add to this Indenture such other provisions
as may be expressly required by the TIA.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS.
With the consent of the Bond Insurer and with the consent of Holders of
Bonds representing not less than a majority of the Bond Balance of all
Outstanding Bonds by Act of said Holders delivered to the Issuer and the
Indenture Trustee, the Issuer and the Indenture Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Bonds under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Bond
affected thereby:
(1) change the any Payment Date or the Final Maturity
Date of the Bonds or reduce the principal amount thereof, the Bond
Interest Rate thereon or the Redemption Price with respect thereto,
change the earliest date on which any Bond may be redeemed at the
option of the Issuer, change any place of payment where, or the coin or
currency in which, any Bond or any interest thereon is payable, or
impair the right to institute suit for the enforcement of the payment
of any installment of interest due on any Bond on or after the Final
Maturity Date thereof or for the enforcement of the payment of the
entire remaining unpaid principal amount of any Bond on or after the
Final Maturity Date (or, in the case of redemption, on or after the
applicable Redemption Date);
(2) reduce the percentage of the Bond Balance of the
Outstanding Bonds, the consent of the Holders of which is required for
any such supplemental indenture, or the consent of the Holders of which
is required for any waiver of compliance with provisions of this
Indenture or Defaults hereunder and their consequences provided for in
this Indenture;
(3) modify any of the provisions of this Section, Section
5.13 or Section 5.17(b), except to increase any percentage specified
therein or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Outstanding Bond affected thereby;
(4) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(5) permit the creation of any lien other than the lien
of this Indenture with respect to any part of the Trust Estate (except
for Permitted Encumbrances) or terminate the lien of this Indenture on
any property at any time subject hereto or deprive the Holder of any
Bond of the security afforded by the lien of this Indenture;
(6) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the Required Payment Amount
for any Payment Date (including the calculation of any of the
individual components of such Required Payment Amount) or to affect
rights of the Holders of the Bonds to the benefits of any provisions
for the mandatory redemption of Bonds contained herein; or
(7) incur any indebtedness, other than the Bonds, that
would cause the Issuer or the Trust Estate to be treated as a "taxable
mortgage pool" within the meaning of Code Section 7701(i).
The Indenture Trustee may in its discretion determine whether or not
any Bonds would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Bonds, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Bondholders 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.
-59-
<PAGE> 67
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Holders of the Bonds to which such supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Indenture Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and (subject to Section 6.01) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that
affects the Indenture Trustee's own rights, duties or immunities under this
Indenture or otherwise. The Issuer shall cause executed copies of any
Supplemental Indentures to be delivered to the Rating Agencies.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Bonds to which such supplemental indenture relates that have theretofore been
or thereafter are authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
SECTION 9.06. REFERENCE IN BONDS TO SUPPLEMENTAL INDENTURES.
Bonds authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and if required by the
Indenture Trustee shall, bear a notation in form approved by the Indenture
Trustee as to any matter provided for in such supplemental indenture. If the
Issuer shall so determine, new Bonds so modified as to conform, in the opinion
of Indenture Trustee and the Issuer, to any such supplemental indenture may be
prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Bonds.
SECTION 9.07. AMENDMENTS TO GOVERNING DOCUMENTS.
The Indenture Trustee shall, upon Issuer Request, consent to any
proposed amendment to the Issuer's governing documents, or an amendment to or
waiver of any provision of any other document relating to the Issuer's governing
documents, such consent to be given without the necessity of obtaining the
consent of the Holders of any Bonds upon receipt by the Indenture Trustee of:
(i) an Officers' Certificate, to which such proposed
amendment or waiver shall be attached, stating that such attached copy
is a true copy of the proposed amendment or waiver and that all
conditions precedent to such consent specified in this Section 9.07
have been satisfied; and
(ii) written confirmation from the Rating Agencies that
the implementation of the proposed amendment or waiver will not
adversely affect their implied ratings of the Bonds (without taking
into account the MBIA Insurance Policy).
Notwithstanding the foregoing, the Indenture Trustee may decline to
consent to a proposed waiver or amendment that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
-60-
<PAGE> 68
Nothing in this Section 9.07 shall be construed to require that any
Person obtain the consent of the Indenture Trustee to any amendment or waiver or
any provision of any document where the making of such amendment or the giving
of such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the subject
of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF BONDS
SECTION 10.01. REDEMPTION.
(a) All the Bonds may be redeemed in whole, but not in
part, on the Redemption Date at the Redemption Price at the option of
the holders of a majority of the ownership interest of the Issuer (the
"Residual Majority"), or at the option of the Servicer if the Residual
Majority shall not have exercised its option to redeem the Bonds on
such Redemption Date, provided, however, that funds in an amount equal
to the Redemption Price, plus any amounts owed to the Bond Insurer
under the Insurance Agreement any unreimbursed Nonrecoverable Advances
and any unreimbursed amounts due and owing to the Indenture Trustee
hereunder, must have been deposited with the Indenture Trustee prior to
the Indenture Trustee's giving notice of such redemption pursuant to
Section 10.02 or the Issuer shall have complied with the requirements
for satisfaction and discharge of the Bonds specified in Section 4.01.
Notice of the election to redeem the Bonds shall be furnished to the
Indenture Trustee not later than thirty (30) days prior to the Payment
Date selected for such redemption, whereupon all such Bonds shall be
due and payable on such Payment Date upon the furnishing of a notice
pursuant to Section 10.02 to each Holder of such Bonds and the Bond
Insurer. Any expenses associated with the compliance of the provisions
hereof in connection with a redemption of the Bonds shall be paid by
the Residual Majority or the Servicer, depending upon which party is
electing to redeem the Bonds.
(b) Upon receipt of the notice from Issuer of its
election to redeem the Bonds pursuant to Section 10.01(a), the
Indenture Trustee shall prepare and deliver to the Issuer, no later
than the related Redemption Date, a Payment Date Statement stating
therein that it has determined that the conditions to redemption at the
option of the Issuer have been satisfied and setting forth the amount,
if any, to be withdrawn from the Bond Account and paid to the Servicer
as reimbursement for Nonrecoverable Advances and such other information
as may be required to accomplish such redemption.
SECTION 10.02. FORM OF REDEMPTION NOTICE.
Notice of redemption shall be given by the Indenture Trustee in the
name of and at the expense of the Issuer by first class mail, postage prepaid,
mailed not less than ten days prior to the Redemption Date to each Holder of
Bonds to be redeemed, such Holders being determined as of the Record Date for
such Payment Date, and to the Bond Insurer.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price at which the Bonds of such
Series will be redeemed,
(3) the fact of payment in full on such Bonds, the place
where such Bonds are to be surrendered for payment of the Redemption
Price (which shall be the office or agency of the Issuer to be
maintained as provided in Section 3.02), and that no interest shall
accrue on such Bond for any period after the date fixed for redemption.
-61-
<PAGE> 69
Failure to give notice of redemption, or any defect therein, to any
Holder of any Bond selected for redemption shall not impair or affect the
validity of the redemption of any other Bond.
SECTION 10.03. BONDS PAYABLE ON OPTIONAL REDEMPTION.
Notice of redemption having been given as provided in Section 10.02,
the Bonds to be redeemed shall, on the applicable 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 such Redemption
Price for any period after such Redemption Date; provided, however, that if such
Redemption Price is not paid on the Redemption Date, the Bond Balance shall,
until paid, bear interest from the Redemption Date at the Bond Interest Rate.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS.
(a) Upon any application or request by the Issuer to the
Indenture Trustee to take any action under any provision of this
Indenture, the Issuer shall furnish to the Indenture Trustee an
Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have
been complied with and an Opinion of Counsel, if requested by the
Indenture Trustee, stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in
the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this
Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
(b) Every certificate, opinion or letter with respect to
compliance with a condition or covenant provided for in this Indenture,
including one furnished pursuant to specific requirements of this
Indenture relating to a particular application or request (other than
certificates provided pursuant to TIA Section 314(a)(4)) shall include
and shall be deemed to include (regardless of whether specifically
stated therein) the following:
(1) a statement that each individual signing
such certificate, opinion or letter has read such covenant or
condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope
of the examination or investigation upon which the statements
or opinions contained in such certificate, opinion or letter
are based;
(3) a statement that, in the opinion of each
such individual, he has made such examination or investigation
as is necessary to enable him to express an informed opinion
as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of
each such individual, such condition or covenant has been
complied with.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters 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.
-62-
<PAGE> 70
Any certificate or opinion of the Issuer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
Opinion of Counsel may be based on the written opinion of other counsel, in
which event such Opinion of Counsel shall be accompanied by a copy of such other
counsel's opinion and shall include a statement to the effect that such counsel
believes that such counsel and the Indenture Trustee may reasonably rely upon
the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Section 6.01(b)(2).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request or
direction of the Issuer, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Issuer's right to make such request or
direction, the Indenture Trustee shall be protected in acting in accordance with
such request or direction if it does not have knowledge of the occurrence and
continuation of such Default or Event of Default as provided in Section 6.01(d).
SECTION 11.03. ACTS OF BONDHOLDERS.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to
be given or taken by Bondholders may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by such
Bondholders in person or by an agent duly appointed in writing; and,
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of
the Bondholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and
(subject to Section 6.01) conclusive in favor of the Indenture Trustee
and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of
any such instrument or writing may be proved by the affidavit of a
witness of such execution or by the certificate of any notary public or
other officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Whenever such execution is
by an officer of a corporation or a member of a partnership on behalf
of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of Bonds shall be proved by the Bond
Register.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Holder of any Bonds
shall bind the Holder of every Bond issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof, in respect
of anything done, omitted or suffered to be
-63-
<PAGE> 71
done by the Indenture Trustee or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Bonds.
SECTION 11.04. NOTICES, ETC. TO INDENTURE TRUSTEE, THE BOND INSURER AND
ISSUER.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Bondholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with:
(1) the Indenture Trustee by any Bondholder or by the
Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Indenture
Trustee at its Corporate Trust Office; or
(2) the Issuer by the Indenture Trustee or by any
Bondholder shall be sufficient for every purpose hereunder (except as
provided in Section 5.01(3) and (4)) if in writing and mailed,
first-class postage prepaid, to the Issuer addressed to it at Fund
America Investors Trust 1997-NMC1, in care of Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration, or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer.
(3) the Bond Insurer by the Indenture Trustee or by any
Bondholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage prepaid, to MBIA Insurance
Corporation addressed to it at 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management-SF (IPM-SF) (Fund America
Investors Trust 1997-NMC1), or at any other address previously
furnished in writing to the Indenture Trustee by the Bond Insurer; or
(4) the Transferor by the Indenture Trustee or by any
Bondholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage paid, to Fund America
Investors Corporation II, Plaza Tower One, Suite 1200, 6400 South
Fiddler's Green Circle, Englewood, Colorado 80111, Attention: Howard J.
Glicksman or at any other address previously furnished in writing to
the Indenture Trustee by the Transferor; or
(5) the Mortgage Loan Seller or the Servicer by the
Indenture Trustee or by any Bondholder shall be sufficient for every
purpose hereunder if in writing and mailed, first-class, postage paid,
to National Mortgage Corporation, 7600 East Orchard Road, Suite 330S,
Englewood, Colorado 80111, Attention: President or at any other address
previously furnished in writing to the Indenture Trustee by the
Mortgage Loan Seller or the Servicer; or
(6) the Underwriters by any party or by any Bondholder
shall be sufficient for every purpose hereunder if in writing and
mailed, first-class, postage prepaid, to (a) Greenwich Capital Markets,
Inc., 600 Steamboat Road, Greenwich, Connecticut 06830, Attention:
General Counsel, fax: (203) 629-4571, and (b) ContiFinancial Services
Corporation, 277 Park Avenue, New York, New York 10172, Attention:
General Counsel.
Notices required to be given to the Rating Agencies by the
Issuer or the Indenture Trustee shall be in writing, personally
delivered or mailed first-class postage pre-paid, to (i) in the case of
Moody's, at the following address: Moody's Investors Service, Inc.,
Residential Mortgage Monitoring Department, 99 Church Street, New York,
New York 10007 and (ii) in the case of Standard & Poor's, at the
following address: Standard & Poor's Ratings Group, 26 Broadway (15th
Floor), New York, New York, 10004, Attention: Asset Bankers
Surveillance Department; or as to each of the foregoing, at such other
address as shall be designed by written notice to the other parties.
-64-
<PAGE> 72
SECTION 11.05. NOTICES AND REPORTS TO BONDHOLDERS; WAIVER OF NOTICES.
Where this Indenture provides for notice to Bondholders of any event or
the mailing of any report to Bondholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Bondholder affected by such event or to
whom such report is required to be mailed, at the address of such Bondholder as
it appears on the Bond Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice or the mailing
of such report. In any case where a notice or report to Bondholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Bondholder
shall affect the sufficiency of such notice or report with respect to other
Bondholders, and any notice or report that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Bondholders shall be filed with the Indenture
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Bondholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
SECTION 11.06. RULES BY INDENTURE TRUSTEE.
The Indenture Trustee may make reasonable rules for any meeting of
Bondholders.
SECTION 11.07. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Indenture by any of the
provisions of the TIA, such required provision shall control.
SECTION 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 11.09. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
SECTION 11.10. SEPARABILITY.
In case any provision in this Indenture or in the Bonds 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 Bonds, expressed or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any separate trustee or Co-trustee appointed under Section 6.14 and
the Bondholders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
-65-
<PAGE> 73
SECTION 11.12. LEGAL HOLIDAYS.
In any case where the date of any Payment Date, Redemption Date or any
other date on which principal of or interest on any Bond is proposed to be paid
shall not be a Business Day, then (notwithstanding any other provision of the
Bonds or this Indenture) payment need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the nominal date of any such Payment Date, Redemption Date or other date for the
payment of principal of or interest on any Bond and no interest shall accrue for
the period from and after any such nominal date, provided such payment is made
in full on such next succeeding Business Day.
SECTION 11.13. GOVERNING LAW.
IN VIEW OF THE FACT THAT BONDHOLDERS ARE EXPECTED TO RESIDE IN MANY
STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY
THAT THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL
AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS
INDENTURE AND EACH BOND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED THEREIN.
SECTION 11.14. COUNTERPARTS.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.15. RECORDING OF INDENTURE.
This Indenture is subject to recording in any appropriate public
recording offices, such recording to be effected by the Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to Section
2.11(c) or 3.06.
SECTION 11.16. ISSUER OBLIGATION.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Bonds or under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against (i) the Indenture Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director,
employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of the
Trust Agreement.
SECTION 11.17 NO PETITION.
The Indenture Trustee, by entering into this Indenture, and each
Bondholder and Beneficial Owner, by accepting a Bond, hereby covenant and agree
that they will not at any time institute against the Transferor or the Issuer,
or join in any institution against the Transferor or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state
-66-
<PAGE> 74
bankruptcy or similar law in connection with any obligations relating to the
Bonds, this Indenture or any of the Basic Documents. In addition, the Indenture
Trustee will on behalf of the holders of the Bonds, (a) file a written objection
to any motion or other proceeding seeking the substantive consolidation of the
Mortgage Loan Seller with National Mortgage Finance Corporation, the Transferor
or the Issuer, (b) file an appropriate memorandum of points and authorities or
other brief in support of such objection, or (c) endeavor to establish at the
hearing on such objection that the substantive consolidation of such entity
would be materially prejudicial to the Bondholders.
This Section 11.17 will survive for one year AND ONE DAY following the
termination of this Indenture.
SECTION 11.18. INSPECTION.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee and the Bond Insurer, during the
Issuer's normal business hours, to examine all of books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent Accountants selected by the
Indenture Trustee or the Bond Insurer, as the case may be, and to discuss its
affairs, finances and accounts with its officers, employees and Independent
Accountants (and by this provision the Issuer hereby authorizes its Accountants
to discuss with such representatives such affairs, finances and accounts), all
at such reasonable times and as often as may be reasonably requested. Any
expense incident to the exercise by the Indenture Trustee of any right under
this Section 11.17 shall be borne by the Issuer.
SECTION 11.19. USURY.
The amount of interest payable or paid on any Bond under the terms of
this Indenture shall be limited to an amount that shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the United States
or the State of New York (whichever shall permit the higher rate), that could
lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In
the event any payment of interest on any Bond exceeds the Highest Lawful Rate,
the Issuer stipulates that such excess amount will be deemed to have been paid
as a result of an error on the part of both the Indenture Trustee, acting on
behalf of the Holder of such Bond, and the Issuer, and the Holder receiving such
excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Issuer or the Indenture Trustee, refund the amount of such
excess or, at the option of the Indenture Trustee, apply the excess to the
payment of principal of such Bond, if any, remaining unpaid. In addition, all
sums paid or agreed to be paid to the Indenture Trustee for the benefit of
Holders of Bonds for the use, forbearance or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Bonds.
SECTION 11.20. THIRD PARTY BENEFICIARY.
The Bond Insurer is intended as a third party beneficiary of this
Indenture shall be binding upon and inure to the benefit of the Bond Insurer;
provided that, notwithstanding the foregoing, for so long as a Bond Insurer
Default is continuing with respect to its obligations under the MBIA Insurance
Policy, the Bondholders shall succeed to the Bond Insurer's rights hereunder.
Without limiting the generality of the foregoing, all covenants and agreements
in this Indenture that expressly confer rights upon the Bond Insurer shall be
for the benefit of and run directly to the Bond Insurer, and the Bond Insurer
shall be entitled to rely on and enforce such covenants to the same extent as if
it were a party to this Indenture.
-67-
<PAGE> 75
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee and the have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
FUND AMERICA INVESTORS TRUST 1997-NMC1
By: Wilmington Trust Company,
as Owner Trustee
By:
-------------------------------
Authorized Signatory
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
By:
-------------------------------------
Name:
Title:
-68-
<PAGE> 76
State of New York )
) ss.:
County of New York )
On the _________ day of September, 1997 before me, a notary public in
and for said State, personally appeared ______________________________, known to
me to be ______________________ of Wilmington Trust Company, a corporation that
executed the within instrument acting as trustee of Fund America Investors Trust
1997-NMC1, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------------
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On the _________ day of September, 1997 before me, a notary public in
and for said State, personally appeared ______________________________, known to
me to be ______________________ of Norwest Bank Minnesota, National Association,
a national banking association that executed the within instrument, and also
known to me to be the person who executed it on behalf of said association, and
acknowledged to me that such association executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
-----------------------------------------
Notary Public
[Notarial Seal]
-69-
<PAGE> 1
EXHIBIT 10.1
MORTGAGE LOAN SALE AGREEMENT
THIS MORTGAGE LOAN SALE AGREEMENT (this "Agreement"), made as of
September 1, 1997, by and between National Mortgage Corporation, a Colorado
corporation ("NMC" or the "Seller"), and Fund America Investors Corporation II,
a Delaware corporation ("FAIC II"), recites and provides as follows:
RECITALS
1. Schedule I attached hereto (the "Mortgage Loan Schedule")
and made a part hereof lists adjustable-rate mortgage loans secured by first
liens on real properties (the "Mortgage Loans"). The Mortgage Loans are
currently owned by the Seller and the Seller desires to sell such Mortgage Loans
to FAIC II.
2. FAIC II desires to purchase the Mortgage Loans and intends
immediately after its purchase to transfer the Mortgage Loans to Fund America
Investors Trust 1997-NMC1 (the "Issuer"), which will be formed pursuant to the
terms of a deposit trust agreement (the "Trust Agreement"), dated as of
September 1, 1997, by and between FAIC II, as depositor, and Wilmington Trust
Company, N.A., as trustee (the "Owner Trustee").
3. The Issuer will in turn pledge the Mortgage Loans to
Norwest Bank Minnesota, National Association, as trustee (the "Indenture
Trustee"), under an indenture to be dated as of September 1, 1997 (the
"Indenture"), by and between the Issuer and the Indenture Trustee, pursuant to
which the Issuer's Collateralized Mortgage Obligations, Series 1997-NMC1 (the
"Bonds") will be issued.
4. The Bonds shall be sold pursuant to an underwriting
agreement dated September 17, 1997 (the "Underwriting Agreement"), among
Greenwich Capital Markets, Inc. ("Greenwich"), ContiFinancial Services
Corporation ("Conti," and, together with Greenwich, the "Underwriters"), and
FAIC II, and will be offered publicly for sale by the Underwriters pursuant to a
prospectus supplement dated September 17, 1997 (the "Prospectus Supplement"),
and the related prospectus, dated September 17, 1997 (together with the
Prospectus Supplement, the "Prospectus").
5. The certificates of beneficial ownership of the Issuer (the
"Trust Certificates") will be transferred by FAIC II to National Mortgage
Finance Corporation, a Colorado corporation ("NMFC"), that is a wholly-owned
subsidiary of the Seller, which intends to hold such Trust Certificates.
6. Capitalized terms used and not defined herein shall have
the meanings assigned to them in Exhibit C attached hereto or, if not defined
therein, in the Indenture.
<PAGE> 2
AGREEMENT
NOW THEREFORE, in consideration of the above premises, the mutual
promises herein made and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. SALE AND PURCHASE.
(a) Subject to the terms and conditions of this Agreement, the Seller
agrees to sell, and FAIC II agrees to purchase, on the date of the issuance of
the Bonds (the "Closing Date"), which is expected to be on or about September
30, 1997, Mortgage Loans having an aggregate principal balance as of the close
of business on September 1, 1997 or, in the case of those Mortgage Loans which
were funded after September 1, 1997 but before the Closing Date, as of their
respective origination dates, of approximately $123,620,068.92. The "Cut-off
Date" with respect to any Mortgage Loan will be the later of September 1, 1997
or the date such Mortgage Loan was funded by the Seller (which date will have
occurred prior to the Closing Date).
(b) The Seller has prepared, or provided information to FAIC II
enabling it to prepare, the schedule attached hereto as Schedule I identifying
all of the Mortgage Loans to be purchased by FAIC II on the Closing Date and
describing such Mortgage Loans. The Seller shall, with FAIC II's consent, amend
or modify, or provide information to FAIC II enabling it to amend or modify,
Schedule I on or prior to the Closing Date if necessary to reflect the inclusion
of additional Mortgage Loans and the withdrawal of certain of the Mortgage Loans
currently listed on the attached Schedule I. Schedule I, as so amended or
modified (the "Mortgage Loan Schedule"), shall conform to the requirements of
FAIC II as set forth in this Agreement and shall be used as the definitive
mortgage loan schedule attached as an exhibit to the Indenture identifying all
of the Mortgage Loans actually transferred by the Seller and accepted by FAIC II
on the Closing Date.
(c) The sale of the Mortgage Loans shall be effected pursuant to the
Bill of Sale substantially in the form attached hereto as Exhibit A (the "Bill
of Sale").
SECTION 2. POOL PURCHASE PRICE.
(a) On the Closing Date, as full consideration for the Seller's sale of
the Mortgage Loans to FAIC II, FAIC II will (1) pay to the Seller cash in
immediately available funds equal to the proceeds of the sale of the Bonds by
the Issuer, net of underwriting discounts and the Issuance Fee described in
Section 10 below, and (2) transfer the Trust Certificates to NMFC, as the
Seller's designee (collectively, the "Pool Purchase Price").
2
<PAGE> 3
(b) FAIC II or any assignee or transferee of FAIC II (which will
include the Issuer and the Indenture Trustee) shall be entitled to all Monthly
Payments due after the Cut-off Date and all Principal Prepayments and other
unscheduled collections of principal collected in respect of the Mortgage Loans
on or after the Cut-off Date. All Monthly Payments due on or before the Cut-off
Date and collected on or after the Cut-off Date shall belong to the Seller.
(c) Pursuant to the Trust Agreement, FAIC II will transfer and assign
all of its right, title and interest in and to the Mortgage Loans to the Issuer,
which will in turn pledge all of its right, title and interest in and to the
Mortgage Loans to the Indenture Trustee pursuant to the Indenture for the
benefit of the holders of the Bonds and the Bond Insurer.
SECTION 3. TRANSFER OF THE MORTGAGE LOANS.
(a) Transfer of Ownership. Upon the sale of the Mortgage Loans, the
ownership of each Mortgage Loan and the related Mortgage Loan Documents shall be
vested in FAIC II, and the ownership of all other records and documents with
respect to any Mortgage Loan prepared by or which come into the possession of
the Seller shall immediately vest in FAIC II upon such preparation or
possession. The Seller shall promptly deliver to the Indenture Trustee any
documents that come into its possession with respect to the Mortgage Loans
following the sale of the Mortgage Loans to FAIC II. Prior to such delivery, the
Seller shall hold any such documents for the benefit of FAIC II, its successors
and assigns.
All documents with respect to any Mortgage Loan in the possession of
NMC following the execution by NMC of the Servicing Agreement shall be held by
NMC, in its capacity as Servicer, as bailee and agent for FAIC II, its
successors and assigns (including particularly the Issuer and the Indenture
Trustee), and shall only be released in accordance with the terms of the
Servicing Agreement.
(b) Delivery of Mortgage Loan Files. Not later than two Business Days
prior to the Closing Date, the Seller shall deliver to the Indenture Trustee
each of the Mortgage Loan Documents required to be included in the Mortgage File
for each Mortgage Loan. The Mortgage Note for each Mortgage Loan shall be
endorsed without recourse to the Indenture Trustee and the Mortgage for each
Mortgage Loan shall be assigned to the Indenture Trustee. Each endorsement of a
Mortgage Note to the Indenture Trustee shall be in the following form:
WITHOUT RECOURSE,
PAY TO THE ORDER OF
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
AS TRUSTEE
3
<PAGE> 4
Each assignment of a Mortgage relating to a Mortgage Loan shall be made
to "NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, AS TRUSTEE under an Indenture
w/Fund America Investors Trust 1997-NMC1 dated as of September 1, 1997."
The Seller shall deliver the Mortgage Notes and the assignments of
Mortgage in recordable form to the Indenture Trustee endorsed and assigned in
blank, and the Indenture Trustee shall fill in the endorsements and assignments
as specified above by stamp. The Indenture Trustee shall return the completed
assignments of Mortgage to the Seller as soon as possible after the Closing Date
so the Seller can send them out for recording.
Prior to the transfer and sale of the Mortgage Loans pursuant to this
Agreement, all Mortgage Loan Documents delivered to the Indenture Trustee shall
be held by the Indenture Trustee for the benefit of the Seller, and the
possession by the Indenture Trustee of such Mortgage Loan Documents will be at
the will of the Seller and will be in a custodial capacity only. Following the
transfer and sale of the Mortgage Loans from the Seller to FAIC II in accordance
with the terms and upon satisfaction of the conditions of this Agreement and
until transfer of the Mortgage Loans to the Issuer, the Indenture Trustee will
hold all Mortgage Loan Documents delivered to it hereunder for the benefit of
FAIC II, as its agent and bailee. The Indenture Trustee will act on FAIC II's
behalf as a custodian for the receipt and custody of all Mortgage Files during
the period described in the preceding sentence and, after the transfer of the
Mortgage Loans from FAIC II to the Issuer, the Indenture Trustee will hold all
Mortgage Loan Documents delivered to it hereunder as the agent of and custodian
for the Issuer until the Mortgage Loans are pledged by the Issuer to the
Indenture Trustee.
(c) Examination of Mortgage Loan Documents; Acceptance of Mortgage
Loans. Prior to the Closing Date, the Seller shall either (1) deliver to FAIC II
or its designee in escrow, for examination, the Mortgage Loan Documents
pertaining to each Mortgage Loan, or (2) make such Mortgage Loan Documents
available to FAIC II or its designee for examination at the Seller's offices or
at such other place as the Seller shall specify. FAIC II, the Issuer, the
Indenture Trustee, or a designee of any such entity may review the Mortgage Loan
Documents.
Prior to the Closing Date, the Indenture Trustee shall review the
documents delivered pursuant to Section 3(b) hereof as provided in Section
6.15(a) of the Indenture. An additional review shall be conducted by the Trustee
prior to the first anniversary of the Closing Date as provided in Section
6.15(b) of the Indenture. If at any time FAIC II or the Indenture Trustee
discovers or receives notice that any Mortgage Loan Document is missing or
defective in any material respect with respect to any Mortgage Loan, or that
there exists any material discrepancy between the Mortgage Loan Documents and
the Mortgage Loan Schedule, it shall promptly notify the Seller in writing
thereof. Upon its receipt of notice of such incompleteness, defect or
discrepancy, the Seller shall cure, repurchase or substitute for the affected
Mortgage Loan to the extent provided in Section 7(b) hereof. At the time of any
such repurchase or substitution, the Indenture Trustee shall release documents
in its possession relating to such Mortgage Loan to the Seller. The fact that
FAIC II, the Indenture Trustee or a designee of either entity has conducted or
has failed to conduct any partial or complete examination of the
4
<PAGE> 5
Mortgage Loan Documents shall not affect the rights of FAIC II, the Indenture
Trustee (or any assignee or successor of either of them) to demand repurchase or
other relief as provided herein.
(d) Recordation of Assignments of Mortgage. Subject to the sale of the
Mortgage Loans by the Seller to FAIC II in accordance with the terms of this
Agreement, FAIC II hereby authorizes and instructs the Seller, and the Seller
hereby agrees, to record (or to cause one of its affiliates to record) all
assignments with respect to each Mortgage Loan required to be contained in the
Mortgage File pursuant to the Indenture in the public recording office for the
jurisdiction in which the related Mortgaged Property is located. All recording
fees relating to the recordation of the assignments as described above shall be
paid by the Seller or an affiliate of the Seller. Such assignments with respect
to each Mortgage Loan must be delivered to the recording office of the
appropriate jurisdiction within 60 days after the Closing Date, and the failure
of the related assignment to contain evidence of recording thereon within one
year after the Closing Date will constitute a defect for purposes of Section 7
below.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
(a) The Seller hereby represents and warrants to FAIC II as of the date
of this Agreement, or as of such other date as is specifically provided, as
follows:
(1) The Seller has been duly incorporated and is validly existing
and in good standing under the laws of the State of Colorado and is
duly qualified to do business and in good standing under the laws of
each jurisdiction that requires such qualification wherein it owns or
leases any material properties (except where the failure so to qualify
would not have a material adverse effect on the Seller). The Seller
has the full power and authority (corporate and other) to own its
properties and conduct its business as its business is presently
conducted.
(2) The Seller has the full power, authority and legal right to
transfer and convey the Mortgage Loans to FAIC II, and has the full
power, authority (corporate and other) and legal right to execute and
deliver, engage in the transactions contemplated by, and perform and
observe the terms and conditions of, this Agreement.
(3) This Agreement has been duly and validly authorized, executed
and delivered by the Seller and (assuming the due authorization,
execution and delivery hereof by FAIC II) constitutes the valid, legal
and binding agreement of the Seller, enforceable against the Seller in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws
affecting creditors' rights generally and to general principles of
equity, regardless of whether such enforcement is sought in a
proceeding in equity or at law.
5
<PAGE> 6
(4) No consent, approval, authorization or order of or
registration or filing with, or notice to, any governmental authority
or court is required for the execution, delivery and performance of or
compliance by the Seller with this Agreement or the consummation by the
Seller of any other transaction contemplated hereby.
(5) Neither the execution and delivery of this Agreement by
the Seller, nor the consummation by the Seller of the transactions
herein contemplated, nor compliance with the provisions hereof by the
Seller, will (A) conflict with or result in a breach of, or constitute
a default under, any of the provisions of the Seller's articles of
incorporation or by-laws, or any law, governmental rule or regulation,
or any judgment, decree or order binding on the Seller or any of its
properties, or any of the provisions of any indenture, mortgage, deed
of trust, contract or other instrument to which the Seller is a party
or by which the Seller is bound or (B) result in the creation or
imposition of any lien, charge or encumbrance which would have a
material adverse effect upon any of the Seller's properties pursuant to
the terms of any such indenture, mortgage, deed of trust, contract or
other instrument.
(6) The Seller is not, and with passage of time does not
expect to become, insolvent or bankrupt.
(7) There are no actions, suits, proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller
that should reasonably be expected to affect adversely the transfer of
the Mortgage Loans, the issuance of the Bonds, or the execution,
delivery, performance or enforceability of this Agreement or have a
material adverse effect on the financial condition of the Seller.
(8) The Seller is, and, immediately prior to the sale of the
Mortgage Loans to FAIC II, the Seller will be, the sole owner of, and
will have good, indefeasible and marketable title to, the Mortgage
Loans, subject to no prior lien, mortgage, security interest, pledge,
charge or other encumbrance, except any lien to be released prior to or
concurrently with the purchase of the Mortgage Loans by FAIC II.
Following the sale of the Mortgage Loans, FAIC II or the Issuer as FAIC
II's transferee will own such Mortgage Loans, free and clear of any
prior lien, mortgage, security interest, pledge, charge or other
encumbrance (assuming that an Assignment of the related Mortgage from
the Seller to FAIC II, or its designee, is recorded), except the lien
created by the Indenture.
(b)(1) As to each Mortgage Loan, the Seller hereby represents
and warrants to FAIC II as of the date of this Agreement, or as of such
other date as is specifically provided, that each representation and
warranty set forth in Exhibit B hereto is true and correct.
6
<PAGE> 7
(2) The Seller has not dealt with any broker, investment
banker, agent or other person that may be entitled to any commission or
compensation in connection with the sale of the Mortgage Loans to FAIC
II.
(3) The Seller will treat the transfer of the Mortgage Loans
to FAIC II as a sale on its books and records in accordance with
generally accepted accounting principles.
(4) With respect to each Mortgage Loan, the Seller is in
possession of each of the Mortgage Loan Documents required to be
included in the related Mortgage File (except to the extent such
Mortgage File has been delivered to the Indenture Trustee as described
in this Agreement).
(5) The transfer, assignment and conveyance of the Mortgage
Loans by the Seller pursuant to this Agreement are not subject to the
bulk transfer or any similar statutory provisions in effect in any
applicable jurisdiction.
(6) The Seller used no adverse selection procedures in
selecting the Mortgage Loans that identified the Mortgage Loans as
being less desirable or valuable than other mortgage loans in its
portfolio as to which the representations and warranties required by
this Agreement could truthfully be made. The Mortgage Loans are
representative of the Seller's portfolio of adjustable-rate residential
mortgage loans.
(7) The description of those Mortgage Loans that had been
identified as of September 1, 1997 (the "Initial Mortgage Loans") set
forth in the Prospectus Supplement under the heading "Description of
the Mortgage Pool" does not contain any untrue statement of any
material fact or omit any material fact required to be stated therein
or necessary in order to make the statements contained therein, in
light of the circumstances under which they are made, not misleading.
(8) The information set forth in the Mortgage Loan Schedule
hereto is true and correct in all material respects in the case of each
Mortgage Loan, as of its respective Cut-off Date.
(9) The consideration received by the Seller upon the sale of
the Mortgage Loans under this Agreement constitutes fair consideration
and reasonably equivalent value for the Mortgage Loans.
(10) The Seller is solvent, and the sale of the Mortgage Loans
as contemplated hereby will not cause the Seller to become insolvent.
The sale of the Mortgage Loans is not undertaken with the intent to
hinder, delay or defraud any of the Seller's creditors.
(11) The Seller intends to relinquish all rights to possess,
control and monitor the Mortgage Loans sold pursuant to this Agreement
(except such rights as are entailed
7
<PAGE> 8
in its serving as the Servicer of the Mortgage Loans under the
Servicing Agreement). After the Closing Date, the Seller will have no
right to modify or alter the terms of the sale of the Mortgage Loans
(except such rights as are entailed in its serving as the Servicer of
the Mortgage Loans under the Servicing Agreement), and the Seller will
have no right or obligation to repurchase any Mortgage Loan or
substitute another mortgage loan for any Mortgage Loan sold hereunder,
except as provided in Sections 3 and 7 hereof.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF FAIC II. FAIC II hereby
represents and warrants to the Seller as of the date of this Agreement, or as of
such other date as is specifically provided, as follows:
(a) FAIC II is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware.
(b) FAIC II has the full power, authority (corporate and other) and
legal right to execute and deliver, engage in the transactions contemplated by,
and perform and observe the terms and conditions of, this Agreement.
(c) This Agreement has been duly and validly authorized, executed and
delivered by FAIC II, and (assuming the due authorization, execution and
delivery hereof by the Seller) constitutes the valid, legal and binding
agreement of FAIC II, enforceable against FAIC II in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, receivership, moratorium or
other similar laws affecting creditors' rights generally and to general
principles of equity, regardless of whether such enforcement is sought in a
proceeding in equity or at law.
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required, for
the execution, delivery and performance of or compliance by FAIC II with this
Agreement or the consummation by FAIC II of any other transaction contemplated
hereby.
(e) Neither the execution and delivery of this Agreement by FAIC II,
nor the consummation by FAIC II of the transactions hereby contemplated, nor
compliance with the provisions hereof by FAIC II, will (i) conflict with or
result in a breach of, or constitute a default under, any of the provisions of
FAIC II's certificate of incorporation or by-laws, or any law, governmental rule
or regulation, or any judgment, decree or order binding on FAIC II or any of its
properties, or any of the provisions of any contract or other instrument to
which FAIC II is a party or by which it is bound or (ii) result in the creation
or imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Bonds.
8
<PAGE> 9
(f) There are no actions, suits, proceedings or investigations pending
or, to FAIC II's knowledge, threatened against FAIC II that should reasonably be
expected to affect adversely the execution, delivery, performance or
enforceability of this Agreement or have a material adverse effect on the
financial condition of FAIC II.
SECTION 6. COVENANTS OF THE SELLER. The Seller hereby covenants to FAIC
II as follows:
(a) On or before the Closing Date, the Seller shall execute and deliver
a Secretary's or Assistant Secretary's Certificate evidencing the Seller's
authority to enter into the transactions contemplated by this Agreement.
(b) On or before the Closing Date, the Seller shall take all steps
reasonably required of it to effect the transfer of the Mortgage Loans to the
Issuer and the pledge of the Mortgage Loans to the Indenture Trustee, free and
clear of any lien, charge, or encumbrance except the lien evidenced by the
Indenture.
(c) The Seller shall use its best efforts to make available to counsel
for FAIC II in executed form each of the Closing Documents (as defined in
Section 9(b) below) on or before the Closing Date, it being understood that such
documents are to be released and delivered only on the closing of the
transaction contemplated hereby and the sale of the Bonds.
(d) In the event the Seller fails to take all actions necessary to
effect the conveyance of the Mortgage Loans to FAIC II on or before the Closing
Date as contemplated hereby, the Seller hereby constitutes and appoints FAIC II
and its officers and representatives as the Seller's true and lawful
attorneys-in-fact to do all acts and transactions and to execute and deliver all
agreements, documents, instruments and papers by and on behalf of the Seller as
may be necessary to consummate the transfer of the Mortgage Loans to FAIC II.
The foregoing grant of authority shall be deemed to be irrevocable and a power
coupled with an interest.
SECTION 7. REPURCHASE OBLIGATIONS.
(a) Each of the representations and warranties made by the Seller
herein shall survive the purchase by FAIC II of the Mortgage Loans and shall
continue in full force and effect, notwithstanding any restrictive or qualified
endorsement on the Mortgage Notes and notwithstanding subsequent termination of
this Agreement, the Trust Agreement or the Indenture. The Seller's
representations and warranties shall not be impaired by any review or
examination of Mortgage Loan Documents or other documents evidencing or relating
to the Mortgage Loans or any failure on the part of FAIC II to review or examine
such documents and shall inure to the benefit of the Issuer and the Indenture
Trustee (as the assignees of FAIC II) for the benefit of the Bondholders and the
Bond Insurer. With respect to the representations and warranties contained
herein that are made to the best of the Seller's knowledge or as to which the
Seller has no knowledge, if it is discovered by either the Seller, FAIC II, or
the Indenture Trustee that the substance of any such representation and warranty
is inaccurate and such
9
<PAGE> 10
inaccuracy materially and adversely affects the value of the related Mortgage
Loan, then notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation and warranty being inaccurate at the time the
representation and warranty was made, the Seller shall take action in accordance
with the following paragraph in respect of such Mortgage Loan.
(b) Upon discovery or receipt of notice by the Seller, FAIC II or the
Indenture Trustee of any missing or materially defective document in any
Mortgage File, a breach of any of the representations and warranties set forth
in Section 4 hereof or in Exhibit B hereto, or a default in the performance of
any of the covenants or other obligations of the Seller under this Agreement,
that in any of the foregoing cases materially and adversely affects the value of
any Mortgage Loan or the interest therein of FAIC II, the Issuer, the Indenture
Trustee, the Bondholders or the Bond Insurer, the party discovering or receiving
notice of the missing or materially defective document, breach, or default shall
give prompt written notice to the other parties and to the Underwriters. Upon
its discovery or its receipt of notice of any such missing or materially
defective documentation or any such breach of a representation and warranty or
covenant, the Seller shall, within 60 days after such discovery or receipt of
such notice, either (i) cure such defect or breach in all material respects, or
(ii) either repurchase the affected Mortgage Loan at the Purchase Price therefor
or substitute one or more Qualified Replacement Mortgage Loans for the related
Mortgage Loan. The Seller shall amend the Mortgage Loan Schedule to reflect the
withdrawal of any Mortgage Loan from the terms of this Agreement, the Trust
Agreement and the Indenture and the addition, if any, of any Qualified
Replacement Mortgage Loan(s). In order to effect a substitution pursuant to this
Section 7(b), the Seller will deliver to the Indenture Trustee (i) each of the
Mortgage Loan Documents required to be contained in the Mortgage File with
respect to the Qualified Replacement Mortgage Loan(s) and (ii) if the aggregate
Principal Balance on the date of substitution of the Qualified Replacement
Mortgage Loan(s) is less than the Principal Balance of the replaced Mortgage
Loan (after application of Monthly Payments due in the month of substitution),
cash in an amount equal to such shortfall plus 30 days' interest at the Mortgage
Interest Rate on the amount of such shortfall. The Indenture Trustee shall
deposit any such cash into the Bond Account. Any repurchase of a Mortgage Loan
pursuant to this Section 7(b) shall be accomplished by the delivery to the
Indenture Trustee, on (or determined as of) the last day of the calendar month
in which such repurchase is made, of the Purchase Price for such Mortgage Loan
(such delivery may be made on or before the Deposit Date in the month following
such calendar month).
(c) It is understood and agreed that the obligations of the Seller set
forth in this Section 7 to cure, repurchase or substitute for a Mortgage Loan
and to indemnify FAIC II as provided in Section 8 of this Agreement constitute
the sole remedies of FAIC II, the Issuer and the Indenture Trustee against the
Seller with respect to a missing or materially defective document in any
Mortgage File, a breach of representations and warranties of the Seller set
forth in Section 4 hereof or in Exhibit B hereto, or a default in the
performance by the Seller of any of its covenants or other obligations under
this Agreement.
10
<PAGE> 11
SECTION 8. INDEMNIFICATION.
(a) In the event the Seller breaches its representations, warranties,
covenants or obligations set forth herein, the Seller shall indemnify and hold
harmless FAIC II (and its assignees in accordance with Section 17 hereof) (the
"Indemnified Parties") from and against any losses, damages, penalties, fines,
forfeitures, legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, such breach. Promptly after receipt by an
Indemnified Party of notice of the commencement of any such action, such
Indemnified Party will notify the Seller in writing of the commencement thereof
if a claim in respect of such action is to be made against the Seller under this
Section 8, but the omission so to notify the Seller will not relieve the Seller
from any liability hereunder unless such omission materially prejudices the
rights and positions of the Seller. If any such action is brought against an
Indemnified Party, and it notifies the Seller of the commencement thereof, the
Seller will be entitled to participate therein, and to assume the defense
thereof, with counsel selected by the Seller and reasonably satisfactory to such
Indemnified Party, and after notice from the Seller to the Indemnified Party of
its election so to assume the defense thereof, the Seller will not be liable to
the Indemnified Party under this Section 8 for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
of such action; provided, however, that this sentence shall not be in effect if
(1) the Seller shall not have employed counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party within a reasonable time
after notice of commencement of the action or (2) the Seller shall have
authorized the employment of counsel for the Indemnified Party at the expense of
the Seller. If the Seller assumes the defense of any such proceeding, it shall
be entitled to settle such proceeding with the consent of any Indemnified Party
that is also subject to such proceeding or, if such settlement provides for
release of any such Indemnified Party in connection with all matters relating to
the proceeding which have been asserted against such Indemnified Party in such
proceeding by the other parties to such settlement, without the consent of such
Indemnified Party.
(b) The Seller shall reimburse the Underwriters upon demand for all
amounts otherwise payable by FAIC II pursuant to the indemnification provisions
in the Underwriting Agreement, in the event that any breach referred to in the
preceding paragraph or any of the following results in the inability of the
parties hereto to comsummate the transactions contemplated herein: (1) failure
to obtain any consent or authorization, if any, required under federal or
applicable state law for the Seller to perform the transactions contemplated
herein; or (2) the Seller's failure to perform any of the obligations of the
Seller under Section 9(a), (b), (c) or (d) hereof.
(c) In the event of a breach by an Underwriter of its obligation to
purchase the Bonds pursuant to the Underwriting Agreement, subject to payment in
full of the Issuance Fee (as defined in Section 10 below) to FAIC II, FAIC II
hereby assigns to the Seller any and all rights of action or other claims FAIC
II may have against any Underwriter pursuant to the Underwriting Agreement
(other than FAIC II's right to receive payment due FAIC II from the Underwriters
for FAIC II's expenses related to the proposed issuance of the Bonds); provided,
11
<PAGE> 12
however, that FAIC II expressly reserves, and does not hereby assign, its rights
to indemnification and contribution under the Underwriting Agreement and any
other rights to indemnification or contribution it may have at law or in equity.
SECTION 9. CONDITIONS TO OBLIGATION OF FAIC II. The obligation of FAIC
II hereunder to purchase the Mortgage Loans is subject to the following
conditions:
(a) The accuracy in all material respects of all of the representations
and warranties of the Seller under this Agreement and the non-occurrence of any
event which, with notice or the passage of time, would constitute a default
under this Agreement;
(b) FAIC II shall have received, or FAIC II's attorneys shall have
received, in escrow (to be released from escrow at the time of closing), the
following documents (collectively, the "Closing Documents") in such forms as are
agreed upon and acceptable to FAIC II, duly executed by all signatories other
than FAIC II as required pursuant to the respective terms thereof:
(i) A Bill of Sale substantially in the form of
Exhibit A hereto;
(ii) An opinion of counsel for the Seller as to
various corporate matters and such other opinions of counsel
as are necessary in order to obtain the ratings set forth in
Section 9(f) below, each of which shall be acceptable to FAIC
II, its counsel, the Seller, its counsel, and Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies,
Inc. ("S&P" and together with Moody's, the "Rating Agencies")
(it being understood that such opinions shall expressly
provide that the Indenture Trustee shall be entitled to rely
on such opinions of counsel); and
(iii) From Deloitte & Touche LLP, certified public
accountants, comfort letters as required by the Underwriting
Agreement.
(c) The Seller shall have delivered to the Indenture Trustee, in
escrow, all documents required to be delivered hereunder and shall have released
its interest therein to FAIC II or its designee;
(d) Compliance by the Seller with all other terms and conditions of
this Agreement;
(e) The purchase by the Underwriters of the Bonds pursuant to the terms
of the Underwriting Agreement; and
(f) The receipt of written confirmation from Moody's and S&P that they
have assigned ratings of "Aaa" and "AAA" to the Bonds, respectively.
12
<PAGE> 13
SECTION 10. FEES AND DEPOSITS. The Seller shall be responsible for
payment of (1) all fees and expenses of accountants, printers, the Bond Insurer,
the Owner Trustee and the Indenture Trustee in connection with the issuance of
the Bonds, including the fees of their respective attorneys, including such fees
and expenses associated with loan file due diligence review, (2) the fees
incurred by FAIC II in connection with the establishment of the registration
statement with respect to the Bonds, including fees payable to the Securities
and Exchange Commission with respect to the Bonds and FAIC II's related fees and
expenses for attorneys and accountants, (3) the fees and expenses payable to the
Rating Agencies for their initial ratings of the Bonds, including the fees of
their respective attorneys, and (4) the payment of an issuance fee (the
"Issuance Fee") of $75,000 to FAIC II for the use of its services in connection
with the issuance of the Bonds. In addition, the Seller shall pay the fees and
expenses of its and FAIC II's attorneys and accountants in connection with the
issuance of the Bonds.
SECTION 11. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The sale
and delivery on the Closing Date of the Mortgage Loans described in the Mortgage
Loan Schedule are mandatory, it being specifically understood and agreed that
each Mortgage Loan is unique and identifiable on the Closing Date and that an
award of money damages would be insufficient to compensate FAIC II for the
losses and damages that would be incurred by FAIC II in the event of the
Seller's failure to deliver the Mortgage Loans on or before the Closing Date.
The Seller hereby grants to FAIC II a first lien on and a continuing first
priority security interest in each Mortgage Loan and each document and
instrument evidencing each Mortgage Loan to secure the performance by the Seller
of its obligation to deliver such Mortgage Loans hereunder. All rights and
remedies of FAIC II under this Agreement are distinct from, and cumulative with,
any other rights or remedies under this Agreement or afforded by law or equity,
and all such rights and remedies may be exercised concurrently, independently or
successively.
SECTION 12. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered or mailed by registered mail, postage prepaid, or transmitted by
telecopier, telex or telegraph and confirmed by a similar mailed writing, to the
following:
a. If to FAIC II:
Fund America Investors Corporation II
Plaza Tower One, Suite 1200
6400 South Fiddler's Green Circle
Englewood, Colorado 80111
Attention: Peter Lang
Telecopy: (303) 741-6944
13
<PAGE> 14
with a copy, given in the manner
prescribed above, to:
Howard J. Glicksman, Esquire
Plaza Tower One, Suite 1200
6400 South Fiddler's Green Circle
Englewood, Colorado 80111
Telecopy: (303) 741-2630
b. If to the Seller:
National Mortgage Corporation
Harlequin Plaza, Suite 330 S
7600 East Orchard Road
Englewood, Colorado 80111-4943
Telecopy: (303) 741-8131
Attention: Craig A. Stulz
with a copy, given in the manner
prescribed above, to:
Howard J. Glicksman, Esquire
Plaza Tower One, Suite 1200
6400 South Fiddler's Green Circle
Englewood, Colorado 80111
Telecopy: (303) 741-2630
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Section 12 for the giving of notice.
SECTION 13. SEVERABILITY OF PROVISIONS. Any part, provision,
representation, warranty or covenant contained in this Agreement that is
prohibited or unenforceable or that is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law that prohibits
or renders void or unenforceable any provision hereof.
14
<PAGE> 15
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, NOTWITHSTANDING ANY NEW YORK OR OTHER CONFLICT OF LAWS
PROVISION TO THE CONTRARY.
SECTION 15. AGREEMENT OF THE SELLER. The Seller agrees to execute and
deliver such instruments and take such actions as FAIC II, the Issuer or the
Indenture Trustee may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement including,
without limitation, the execution and filing of any UCC financing statements to
evidence the interests of FAIC II and any of its transferees in the Mortgage
Loans and other assets pledged to the Indenture Trustee.
SECTION 16. SURVIVAL. The Seller agrees that the representations,
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to have been relied upon by
FAIC II, notwithstanding any investigation heretofore or hereafter made by FAIC
II or on FAIC II's behalf, and that the representations, warranties and
agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans.
SECTION 17. ASSIGNMENT; THIRD PARTY BENEFICIARIES. The Seller hereby
acknowledges that FAIC II will assign all its rights hereunder (except those
rights set forth in Section 8(b) and Section 10 hereof) to the Issuer, which
will in turn pledge all of the rights hereunder to the Indenture Trustee. The
Seller agrees that, upon the execution of the Indenture, the Indenture Trustee
will have all such rights and remedies provided to FAIC II hereunder (except
those rights set forth in Section 8(b) and Section 10 hereof) and this Agreement
will inure to the benefit of the Indenture Trustee for the benefit of the
Bondholders and the Bond Insurer.
The Indenture Trustee shall constitute not only an assignee of FAIC
II's rights in accordance with this Section 17 but also an intended third-party
beneficiary of this Agreement to the extent necessary to enforce such rights and
to obtain the benefit of such remedies. The Bond Insurer is an intended
third-party beneficiary of this Agreement, and this Agreement shall be binding
upon and inure to the benefit of the Bond Insurer; provided that,
notwithstanding the foregoing, for so long as a Bond Insurer Default is
continuing with respect to its obligations under the Bond Insurance Policy, the
Bondholders shall succeed to the Bond Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Agreement that expressly confer rights upon the Bond Insurer shall be for the
benefit of and run directly to the Bond Insurer, and the Bond Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Agreement.
15
<PAGE> 16
SECTION 18. MISCELLANEOUS.
(a) This Agreement may be executed in two or more counterparts, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument. This Agreement shall
inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and assigns.
(b) Any person into which the Seller may be merged or consolidated or
any person resulting from a merger or consolidation involving the Seller or any
person succeeding to the business of the Seller shall be considered the
successor of the Seller hereunder, without the further act or consent of either
party hereto. Except as provided above, this Agreement cannot be assigned,
pledged or hypothecated by any party without the written consent of each other
party to this Agreement.
(c) This Agreement supersedes all prior agreements and understandings
between the parties hereto relating to the subject matter hereof. Neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is sought. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning of the provisions of this Agreement.
(d) FAIC II shall immediately deliver the Mortgage Loans and all
related Mortgage Loan Documents to the Seller or the Seller's designee and any
security interest created by Section 11 hereof shall be deemed to have been
released if, on the Closing Date, each of the conditions set forth in Section 9
hereof shall not have been satisfied or waived.
(e) It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans by the Seller to FAIC II as contemplated by this Agreement
be construed as a sale of the Mortgage Loans by the Seller to FAIC II. It is,
further, not the intention of the parties that such conveyance be deemed a
pledge of the Mortgage Loans by the Seller to FAIC II or any assignee of FAIC
II, including, but not limited to, the Indenture Trustee, to secure a debt or
other obligation of the Seller. However, in the event that, notwithstanding the
intent of the parties hereto, the Mortgage Loans are held to be property of the
Seller, then (i) this Agreement shall also be deemed to be a security agreement
within the meaning of Article 9 of the New York Uniform Commercial Code; (ii)
the conveyance provided for herein shall be deemed to be a grant by the Seller
to FAIC II of a first priority security interest in all of the Seller's right,
title and interest in and to the Mortgage Loans and all amounts payable to the
holder of the Mortgage Loans in accordance with the terms thereof and all
proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities, or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Bond Account or the Collection Account, whether in the form of cash,
instruments, securities or other property; (iii) the possession by FAIC II or
its agents of items of property that constitute instruments, money, negotiable
documents or chattel paper shall be deemed to be "possession by the secured
party" for purposes of perfecting the security interest
16
<PAGE> 17
pursuant to Section 9-305 of the New York Uniform Commercial Code, and (iv)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from persons holding such property, shall be deemed notifications
to, or acknowledgments, receipts or confirmations from, financial
intermediaries, bailees or agents (as applicable) of FAIC II for the purpose of
perfecting such security interest under applicable law. Any assignment of the
interest of FAIC II pursuant to any provision hereof shall also be deemed to be
an assignment of any security interest created hereby. The Seller and FAIC II
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 would be
maintained as such throughout the terms of this Agreement and the Indenture.
17
<PAGE> 18
IN WITNESS WHEREOF, the Seller and FAIC II have caused this Mortgage
Loan Sale Agreement to be executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
NATIONAL MORTGAGE CORPORATION
By:
---------------------------
Name: Craig A. Stulz
Title: Executive Vice President
FUND AMERICA INVESTORS CORPORATION II
By:
----------------------------
Name: Steven B. Chotin
Title: President
FOR THE LIMITED PURPOSE OF ACKNOWLEDGING ITS OBLIGATIONS UNDER
SECTIONS 3 AND 7 HEREOF:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By:
-----------------------------
Name:
----------------------------
Title:
----------------------------
18
<PAGE> 19
SCHEDULE I
THE MORTGAGE LOANS
<PAGE> 20
EXHIBIT A TO THE MORTGAGE LOAN SALE AGREEMENT
BILL OF SALE
BILL OF SALE, made as of the 30th day of September, 1997, by National
Mortgage Corporation, a Colorado corporation ("NMC" or the "Seller"), to Fund
America Investors Corporation II, a Colorado corporation ("FAIC II").
WHEREAS, the Seller and FAIC II are parties to that certain Mortgage
Loan Sale Agreement, dated as of September 1, 1997, with respect to the sale by
the Seller and purchase by FAIC II of certain Mortgage Loans (the "Sales
Agreement");
WHEREAS, FAIC II intends to transfer the Mortgage Loans and certain
related assets to Fund America Investors Trust 1997-NMC1 (the "Issuer"), and the
Issuer intends in turn to pledge the Mortgage Loans and certain related assets
to Norwest Bank Minnesota, National Association, as trustee (the "Indenture
Trustee") pursuant to an Indenture (the "Indenture"), dated as of September 1,
1997, between the Issuer and the Indenture Trustee.
NOW THEREFORE, the Seller, for and in consideration of the
consideration set forth in the Sales Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, does
hereby bargain, sell, convey, assign and transfer to FAIC II, without recourse,
free and clear of any liens, claims or other encumbrances, all of its right,
title and interest in and to each of the Mortgage Loans identified on Schedule I
to the Indenture, together with the Mortgage Loan Documents and other documents
maintained as part of the related Mortgage Files and the Seller's interest in
any Mortgaged Properties which secure a Mortgage Loan but are acquired by
repossession, foreclosure or deed in lieu of foreclosure after the Closing Date,
and all scheduled payments due on the Mortgage Loans after their respective
Cut-off Dates, and all principal prepayments and other unscheduled collections
collected in respect of the Mortgage Loans on or after the Cut-off Date, and all
proceeds of the conversion, voluntary or involuntary, of the foregoing.
The Seller hereby acknowledges receipt from FAIC II of the Pool
Purchase Price referred to in Section 2 of the Sales Agreement.
Nothing in this Bill of Sale shall be construed to be a modification
of, or limitation on, any provision of the Sales Agreement, including the
representations, warranties and agreements set forth therein.
Unless otherwise defined herein, capitalized terms used in this Bill of
Sale shall have the meanings assigned to them in the Sales Agreement, or if not
assigned in the Sales Agreement, the Indenture.
A-1
<PAGE> 21
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to be
executed and delivered by its respective officer thereunto duly authorized as of
the date above written.
NATIONAL MORTGAGE CORPORATION
By:
-----------------------------
Name: Craig A. Stultz
Title: Executive Vice President
A-2
<PAGE> 22
EXHIBIT B
MORTGAGE LOAN REPRESENTATIONS AND WARRANTIES
The Seller makes the following representations, warranties and covenants as to
each Initial Mortgage Loan as of its Cut-off Date and as of the Closing Date.
(i) Mortgage Loans as Described. The information set forth
in the Mortgage Loan Schedule (as to the Initial Mortgage Loans) and in
the Closing Schedule (with respect to all of the Mortgage Loans) is
true and correct in all material respects.
(ii) Payments Current; No First Payment Default. No payment
required under the Mortgage Note is more than 30 days contractually
delinquent, except for 1.21% (by principal balance) of the Mortgage
Loans with Cut-off Dates of September 1, 1997 which are no more than 59
days delinquent as of the Cut-off Date.
(iii) No Outstanding Charges. There are no defaults in
complying with the terms of the Mortgage, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments and ground rents 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.
(iv) Original Terms Unmodified. The terms of the Mortgage
Note and Mortgage have not been impaired, waived, altered or modified
in any respect, except by a written instrument which has been recorded,
if necessary to protect the interests of the mortgagee and which has
been delivered to FAIC II or its designee as part of the related
Mortgage File. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent
required by the policy. The mortgagor has not been released, in whole
or in part, except in connection with an assumption agreement approved
by the title insurer, to the extent required by the policy, and which
assumption agreement is included in the Mortgage File delivered to FAIC
II or its designee.
(v) No Defenses. The Mortgage Loan is not subject to any
right of rescission, set-off, counterclaim or defense, including
without limitation the defense of usury, nor will the operation of any
of the terms of the Mortgage Note or the Mortgage, or the exercise of
any right thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto.
B-1
<PAGE> 23
(vi) Insurance Policies in Effect. Pursuant to the terms of
the Mortgage, all improvements upon the related Mortgaged Property are
insured by an insurer rated B/III, A/II or better by Best's Key Rating
Guide against loss by fire and such other risks as are usually insured
against in the broad form of extended coverage hazard insurance
available in the jurisdiction where that Mortgaged Property is located,
including flood hazards if the Mortgaged Property is in an area
identified in the Federal Register by the Federal Emergency Management
Agency as subject to special flood hazards (and if flood insurance was
required by federal regulation and flood insurance has been made
available in the jurisdiction where the related Mortgaged Property is
located). All such insurance policies (collectively, the "hazard
insurance policy") meet the requirements of the current guidelines of
the Federal Insurance Administration [conform to the requirements of
the FNMA Sellers' Guide and the FNMA Servicers' Guide] and are standard
policies of insurance for the locale where the related Mortgaged
Property is located. The coverage amount of the insurance provided by
any such insurance policy is at least equal to the lesser of (a) the
full insurable value of the Mortgaged Property on a replacement cost
basis or (b) the unpaid balance of the Mortgage Loan. Each such
insurance policy names (and will name) the present owner of the
Mortgaged Property as the insured and contains a standard mortgagee
loss payable clause naming the loan's originator or the Seller and its
successors and assigns as Mortgagee, and all premiums thereon have been
paid.
The Mortgage obligates the mortgagor thereunder to maintain
the hazard insurance policy at the mortgagor's cost and expense, and on
the mortgagor's failure to do so, authorizes the holder of the Mortgage
to obtain and maintain such insurance at such mortgagor's cost and
expense, and to seek reimbursement therefor from the mortgagor. Where
required by state law or regulation, the mortgagor has been given an
opportunity to choose the carrier of any required hazard or flood
insurance, provided the policy is not a "master" or "blanket" hazard
insurance policy covering a condominium, or a hazard insurance policy
covering the common facilities of a planned unit development. Any such
hazard or flood insurance policy is the valid and binding obligation of
the related insurer, is in full force and effect, and will be in full
force and effect and inure to the benefit of FAIC II and its successors
and assigns upon the consummation of the sale of the Mortgage Loan to
FAIC II and its assignees. In connection with the issuance of any
hazard or flood insurance policy, no unlawful fee, commission, kickback
or other unlawful compensation or value of any kind has been or will be
received, retained or realized by any attorney, firm or other person or
entity, and no such unlawful items have been received, retained or
realized by the Seller. The Seller has not engaged in, and has no
knowledge of the mortgagor having engaged in, any act or omission which
should reasonably be expected to impair the coverage of any such
policy, the benefits of the endorsement provided for therein, or the
validity and binding effect of either.
(vii) Compliance with Applicable Law. Any and all requirements
of any federal, state or local law, rules and regulations including,
without limitation, usury laws, TILA and Regulation Z relating thereto,
RESPA and related regulations, the Fair Credit
B-2
<PAGE> 24
Reporting Act, the Equal Credit Opportunity Act and Regulation B
relating thereto, the Debt Collection Practices Act, the Home Mortgage
Disclosure Act, and any and all consumer credit protection laws and
disclosure laws applicable to the Mortgage Loan, and all rules and
regulations relating thereto, have been complied with, and the Seller
shall maintain in its possession, available for FAIC II's (or FAIC II's
successor's, assignee's or designee's) inspection, and shall deliver to
FAIC II or its successor, assignee or designee upon demand, evidence of
compliance with all such requirements.
(viii) No Satisfaction of Mortgage or Mortgage Note. Neither
the Mortgage nor the Mortgage Note has been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the related
Mortgaged Property has not been released from the lien of the Mortgage,
in whole or in part, nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission. The
Seller has not waived the performance by the mortgagor of any action,
if the mortgagor's failure to perform such action would cause the
Mortgage Loan to be in default, nor has the Seller waived any default
resulting from any action or inaction by the mortgagor.
(ix) Location and Type of Mortgaged Property. The related
Mortgaged Property consists of a parcel of real property with a single
family residence erected thereon, or a two- to four-family dwelling, or
an individual condominium unit in a low-rise or mid-rise condominium
project, or an individual unit in a planned unit development, or a unit
of manufactured housing, provided that no residence or dwelling is a
cooperative or a mobile home attached to a foundation or otherwise
constitutes other than real property under applicable state law. Except
in the case of no more than 1.0% of the Mortgage Loans by principal
balance, the Mortgaged Property is used exclusively for residential
purposes, and the remainder of the Mortgaged Properties are mixed-use
properties in compliance with the Seller's underwriting guidelines.
(x) Valid First Lien. The Mortgage creates a valid,
subsisting and enforceable first lien on the related Mortgaged
Property, including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air
conditioning systems located in or annexed to such buildings, and all
additions, alterations and replacements made at any time with respect
to the foregoing. The lien of the Mortgage is subject only to Permitted
Exceptions. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting and enforceable first lien
and first priority security interest on the property described therein
and the Seller has the full right and authority to pledge and assign
the same to FAIC II or its designee.
B-3
<PAGE> 25
(xi) Validity and Enforceability of Mortgage Documents. The
Mortgage Note and the Mortgage and each other agreement, if any,
executed and delivered by the mortgagor in connection with the Mortgage
Loan is genuine, and each is the legal, valid and binding obligation of
the maker thereof enforceable in accordance with its terms. All parties
to the Mortgage Note, the Mortgage and each other such related
agreement had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note, the Mortgage and any such
agreement, and the Mortgage Note, the Mortgage and each such agreement
has been duly and properly executed by such parties.
(xii) Full Disbursement of Proceeds. Each Mortgage Loan has
been closed and the proceeds of the Mortgage Loan have been fully
disbursed, there is no requirement for future advances thereunder, and
there was no commitment to make future advances in effect with respect
to the Mortgage Loan as of the date of its origination except in the
case of a Mortgage Loan, a portion of the proceeds of which has been
disbursed to an escrow account in connection with improvements to be
made to the related Mortgaged Property where (i) the Mortgage Loan
bears interest on the entire principal amount thereof as if it had been
fully disbursed, (ii) any proceeds of such Mortgage Loan have not been
held in such an escrow account for more than 60 days, and (iii) the
deposit of such funds into such an escrow account has been effected in
accordance with the Seller's holdback policies. Any and all
requirements as to completion of any on-site or off-site improvements
and as to disbursements of any escrow funds therefor have been complied
with. All costs, fees and expenses incurred in making or closing the
Mortgage Loan and the recording of the Mortgage were paid, and the
mortgagor is not entitled to any refund of any amounts paid or due
under the Mortgage Note or Mortgage.
(xiii) Doing Business. All parties who 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) (a) in compliance with any and all applicable
licensing requirements of the laws of the state wherein the related
Mortgaged Property is located, and (b) (i) organized under the laws of
such state, or (ii) qualified to do business in such state, or federal
savings and loan associations, or national banks or (iii) federal
credit unions having principal offices in such state, or (iv) not doing
business in such state.
(xiv) Loan-to-Value (LTV). The initial Loan-to-Value Ratio
("LTV") or Combined Loan-to-Value Ratio, if applicable, of the Mortgage
Loan was as set forth in the Mortgage Loan Schedule. The weighted
average LTV of the Initial Mortgage Loans is no greater than 80%, and
the weighted average LTV of the Additional Mortgage Loans and the
Initial Mortgage Loans considered together shall be no greater than
80%.
B-4
<PAGE> 26
(xv) Title Insurance. The Mortgage Loan is covered by
either (a) an attorney's opinion of title and abstract of title the
form and substance of which is acceptable to Fannie Mae (if the related
Mortgaged Property is located in Iowa) or (b) an ALTA lender's title
insurance policy or other generally acceptable form of policy of
insurance, issued by a title insurer qualified to do business in the
jurisdiction where the related Mortgaged Property is located, in either
case insuring the Seller and its successors and assigns as to the first
priority lien of the Mortgage in the amount of 100% of the outstanding
principal amount of the Mortgage Loan, subject only to Permitted
Exceptions, and against any loss by reason of the invalidity or
unenforceability of the lien resulting from any provisions of the
Mortgage proving for adjustment to the mortgage interest rate and
Monthly Payment. Where required by state law or regulation, the
mortgagor has been given the opportunity to choose the carrier of such
lender's title insurance policy. Immediately prior to the sale of the
Mortgage Loan to FAIC II under this agreement, the Seller, together
with its successors or assigns, was the sole insured under such
lender's title insurance policy, and such lender's title insurance
policy is full force and effect and will be in full force and effect
upon the sale of the Mortgage Loan to FAIC II. No claims have been made
under such lender's title insurance policy, and no prior holder of the
Mortgage, including the Seller, has done, by act or omission, anything
which should reasonably be expected to impair the coverage provided by
such lender's title insurance policy. In connection with the issuance
of such lender's title insurance policy, no unlawful fee, commission,
kickback or other unlawful compensation or value of any kind has been
or will be received, retained or realized by any attorney, firm or
other person or entity, and no such unlawful items have been received,
retained or realized by the Seller.
(xvi) No Defaults. There is no material default, breach,
violation or event of acceleration existing under the Mortgage or the
Mortgage Note or related documents and no event which, with the passage
of time or with notice and the expiration of any applicable grace or
cure period (other than payment delinquencies of not more than 30
days), would constitute a default, breach, violation or event of
acceleration, and neither the Seller nor any of its predecessors has
waived any such default, breach, violation or event of acceleration.
(xvii) No Mechanics' Lien. 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 the law could give rise to such
liens) affecting the related Mortgaged Property which are or may be
liens prior or equal to, or coordinate with, the lien of the Mortgage.
(xviii) Location of Improvements; No Encroachments. All
improvements which were considered in determining the Appraised Value
of the related Mortgaged Property in the Initial Appraisal lay wholly
within the boundaries and building restriction lines of the Mortgaged
Property and no improvements on adjoining properties encroach upon the
Mortgaged Property. No improvement located on or constituting part of
the Mortgaged Property is in violation of any applicable zoning law or
regulation.
B-5
<PAGE> 27
(xix) Origination; Payment Terms. At the time the Mortgage
Loan was originated, the originator was a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to Section 203 and
211 of the National Housing Act or a savings and loan association, a
savings bank, a commercial bank credit union, insurance company or
similar banking institution which is supervised and examined by a
federal or state authority. To the Seller's knowledge, the documents,
instruments and agreements submitted for loan underwriting were not
falsified and contain no untrue statement of material fact and do not
omit to state a material fact required to be stated therein.
(xx) Customary Provisions. The Mortgage contains customary
and enforceable provisions such as to render the rights and remedies of
the holder thereof adequate for the realization against the related
Mortgaged Property of the benefits of the security provided thereby,
including, (a) in the case of a Mortgage denominated as a deed of
trust, by trustee's sale, and (b) otherwise by judicial foreclosure.
There is no homestead or other exemption available to a mortgagor which
would interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage.
(xxi) Conformance with Seller's Underwriting Guidelines.
With the exception of no more than 5% of the Mortgage Loans by
principal balance, which may be Exception Loans, each Mortgage Loan was
underwritten in accordance with, and the Mortgage Loan and Mortgaged
Property conform to, the Borrower's applicable underwriting guidelines.
The Mortgage Note and Mortgage are on forms acceptable to FHLMC or
FNMA, with modifications to provide for prepayment penalties and advice
of local counsel.
(xxii) Occupancy of the Mortgaged Property. 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. Except with respect
to no more than 2.6% of the Mortgage Loans by principal balance, the
Mortgagor represented at the time of origination of each Mortgage Loan
that the Mortgagor would occupy the related Mortgaged Property as the
Mortgagor's primary residence.
(xxiii) No Additional Collateral. The Mortgage Note is not and
has not been secured by any collateral except the lien of the
corresponding Mortgage and the security interest of any applicable
security agreement or chattel mortgage referred to in representation
(x) above.
B-6
<PAGE> 28
(xxiv) Deeds of Trust. In the event the Mortgage is a deed
of trust, a trustee, authorized and duly qualified under applicable law
to serve as such, has been properly designated and currently serves as
trustee and is named in the Mortgage, and no fees or expenses are or
will become payable by FAIC II or its successors and assignees to the
trustee under the deed of trust, except in connection with a trustee's
sale after default by the mortgagor on the Mortgage.
(xxv) Due on Sale. The Mortgage contains an enforceable
provision for the acceleration of the payment of the unpaid principal
balance of the Mortgage Note in the event that the related Mortgaged
Property is sold or transferred without the prior written consent of
the mortgagee or its assignee thereunder.
(xxvi) No Buydown Provisions; No Graduated Payments or
Contingent Interest. The Mortgage Loan is not subject to any provisions
pursuant to which Monthly Payments are paid or partially paid with
funds deposited in any separate account established by the originator,
the servicer, the Seller, the mortgagor or anyone on behalf of the
mortgagor, or pursuant to which Monthly Payments are paid by anyone
other than the mortgagor, nor does it contain any other similar
provisions which may constitute a "buydown" provision. The Mortgage
Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest
feature.
(xxvii) Section 32 Loans. None of the Mortgage Loans is a
"high cost" or "high fee" loan as defined in 15 U.S.C. ss. 1602(aa),
promulgated under TILA.
(xxviii) Mortgaged Property Undamaged. The Mortgaged Property
is undamaged by waste, fire, earthquake or earth movement, windstorm,
flood, tornado or other casualty (causing damages thereto in excess of
any insurance coverage therefor less any deductible) 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. The
Mortgaged Property is in good repair in all material respects. There
have been no condemnation proceedings with respect to the Mortgaged
Property and the Seller has no knowledge of any such proceedings
pending.
(xxix) Conversion to Fixed Interest Rate. The Mortgage Note
does not contain a provision allowing the mortgagor to convert the
Mortgage Note from an adjustable interest rate Mortgage Note to a fixed
interest rate Mortgage Note for the remaining term thereof.
(xxx) Collection Practices; Escrow Deposits. The collection
and servicing practices used with respect to the Mortgage Loan have
been in all respects in compliance with Accepted Servicing Practices,
applicable laws and regulations, and have been in all respects legal
and consistent with industry standards for the servicing of
non-conforming Mortgage loans similar to the Mortgage Loan. All
servicing of the Mortgage Loan has
B-7
<PAGE> 29
been conducted in accordance with Accepted Servicing Practices. With
respect to escrow deposits and escrow payments, all such payments are
in the possession or under the control of the Seller and there exist no
deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made. All escrow payments, if any,
have been collected in full compliance with state and federal law. An
escrow of funds is not prohibited by applicable law and has been
established in an amount sufficient to pay for every material item that
remains unpaid and that has been assessed but is not yet due and
payable. No escrow deposits or escrow payments or other charges or
payments due to the Seller or to the applicable servicer have been
capitalized under the Mortgage or the Mortgage Note. Any interest
required to be paid with respect to any escrow deposits pursuant to
state and local law has been properly paid and credited.
(xxxi) Seller Appraisal. The Servicer Mortgage File (as
defined in the Servicing Agreement) contains an appraisal of the
related Mortgaged Property signed prior to the approval of the Mortgage
Loan application by a qualified appraiser, duly appointed by the
Seller, who had no interest, direct or indirect in the Mortgaged
Property or in any loan made on the security thereof, and whose
compensation was not affected by the approval or disapproval of the
Mortgage Loan.
(xxxii) Computer Tape. The Seller's computer tape describing
the Initial Mortgage Loans was made available to the accountants that
are providing a comfort letter to the Bond Insurer and the Underwriters
in connection with any information contained in the Prospectus
Supplement, and such information was complete and accurate as of its
date and includes a description of the same Initial Mortgage Loans that
are described on the Mortgage Loan Schedule and the payments due
thereunder as of the Closing Date.
(xxxiii) Obligations Fulfilled. The Seller has fulfilled all
obligations to be fulfilled on the lender's part under or in connection
with the origination, acquisition and assignment of the Mortgage Loans
and the related Mortgages and Mortgage Notes, including, without
limitation, giving any notices or consents necessary to effect the
acquisition of each Mortgage Loan and the related Mortgage and Mortgage
Note by FAIC II and its assignees, and has done nothing to impair the
rights of FAIC II, the Issuer, the Indenture Trustee, the Bond Insurer
or the Bondholders in payments with respect thereto.
(xxxiv) Characteristics of Variable Rate Loans. The
applicable interest rate has been adjusted in accordance with the terms
of the related Mortgage Note, to the extent the initial interest rate
adjustment date has occurred. All required notices of interest rate
adjustments have been sent to each Mortgagor on a timely basis and the
computations of such adjustments were properly calculated. All interest
rate adjustments have been made in connection with all applicable law.
B-8
<PAGE> 30
(xxxv) Fully Amortized. With respect to each Mortgage Loan,
the payments required of the related of the Mortgagor are and will be
such that the Mortgage Loan will fully amortize over its term. No
Mortgage Loan requires a balloon payment at the end of its term.
(xxxvi) First Payment Date. The first date on which the
applicable Mortgagor must make a payment on each Mortgage Loan is due
no later than November 1, 1997.
(xxxvii) Timing of Payments. Each Mortgage Note is payable on
the 1st day of the month.
(xxxviii) Current Servicing. The Mortgage Loan is being
serviced by the Servicer.
(xxxix) Fee Simple, Residential. Each property securing a
Mortgage Loan consists of a fee simple estate (or a leasehold estate if
the related Mortgaged Property is located in a jurisdiction where title
to real property is typically held through leasehold estates) in a
single parcel of real property improved by a one- to four-family
residential dwelling.
(xl) Civil Relief Act. To the Seller's knowledge, no
Mortgagor has requested relief under the Soldiers' and Sailors' Civil
Relief Act of 1940.
(xli) No Transfer Taxes. The sale, transfer, assignment
and conveyance of Mortgage Loans by the Seller pursuant to the Mortgage
Loan Sale Agreement is not subject to and will not result in any tax,
fee or governmental charge payable by the Seller, FAIC II, the Issuer
or the Indenture Trustee to any federal, state or local government
("Transfer Taxes") other than Transfer Taxes which have or will be paid
by the Seller as due. In the event that FAIC II, the Issuer or the
Indenture Trustee receives actual notice of any Transfer Taxes arising
out of the transfer, assignment and conveyance of the Mortgage Loans,
on written demand by FAIC II, the Issuer or the Indenture Trustee, or
upon the Seller's otherwise being given notice thereof by FAIC II, the
Issuer or the Indenture Trustee, the Seller shall pay, and otherwise
indemnify and hold FAIC II, the Issuer, the Indenture Trustee, and the
Bond Issuer harmless, on an after-tax basis, from and against any and
all such Transfer Taxes (it being understood that the Bondholders, the
Indenture Trustee, FAIC II, the Issuer, and the Bond Insurer shall have
no obligation to pay such Transfer Taxes).
(xlii) Environmental Compliance. To the Seller's knowledge,
the Mortgaged Property is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or federal
environmental law, rule or regulation with respect to such property.
B-9
<PAGE> 31
(xliii) No Adverse Circumstances. There do not exist any
circumstances or conditions with respect to the Mortgage, the property
securing the same, the Mortgagor or the Mortgagor's credit standing
that reasonably can be expected to cause private institutional
investors to regard the related Mortgage Loan as an unacceptable
investment, cause the Mortgage Loan to become delinquent, or adversely
affect the value or marketability of the Mortgage Loan, it being
understood that the Mortgage Loans are sub-prime credit Mortgage Loans
and the Mortgagors do not meet FNMA or FHLMC credit underwriting
standards.
(xliv) As of the respective Cut-off Dates, none of the
Mortgage Loans are either "consumer credit contracts" or "purchase
money loans" as such terms are defined in 16 C.F.R. ss.433.1.
(xlv) No Mortgage Loan has a final payment date later than
October 1, 2027.
(xlvi) As of the respective Cut-off Dates, at least 52% of
the Mortgage Loans are purchase money mortgage loans.
B-10
<PAGE> 32
EXHIBIT C
DEFINED TERMS
"ACCEPTED SERVICING PRACTICES": With respect to any Mortgage Loan,
written servicing procedures that the Seller would follow in servicing first
lien residential mortgage loans held for its own account, which shall be
consistent with mortgage servicing practices of prudent mortgage lending
institutions that service mortgage loans of the same type, as such Mortgage
Loan.
"APPRAISAL": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, FNMA and FHLMC standards, and must meet the
appraisal standards of the Uniform Standards of Professional Appraisal Practice.
"APPRAISED VALUE": With respect to any Mortgaged Property, the lesser
of (a) the value thereof as determined by an Appraisal and (b) the purchase
price paid for the related Mortgaged Property by the Mortgagor with the proceeds
of the related Mortgage Loan; provided, however, that in the case of a
Refinanced Mortgage Loan, the Appraised Value of the Mortgaged Property shall be
equal to the value thereof as determined by an Appraisal.
"BOND ACCOUNT": As defined in the Indenture.
"BONDHOLDER": As defined in the Indenture.
"COLLECTION ACCOUNT": As defined in the Indenture.
"COMBINED LOAN-TO-VALUE RATIO": As of any date for any Mortgage Loan
with respect to which the related Mortgaged Property is subject to a mortgage,
deed of trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage, the fraction, expressed as a
percentage, (a) the numerator of which is the sum of (1) the outstanding
principal amount of the indebtedness secured by such subordinate lien, plus (2)
the outstanding principal balance of the Mortgage Loan, and (b) the denominator
of which is the Appraised Value of the related Mortgaged Property.
"ESCROW PAYMENT": An amount escrowed by a mortgagor consisting of
amounts necessary to pay taxes, assessments, hazard and flood insurance premiums
and other similar payments anticipated to be made with respect to the related
Mortgage Loan, which is to be held in escrow by the servicer of such Mortgage
Loan for future payment on behalf of the related mortgagor.
C-1
<PAGE> 33
"EXCEPTION LOAN": A Mortgage Loan originated or re-underwritten
generally pursuant to, but which does not fully comply with, the Seller's
underwriting guidelines, but as to which variances from such guidelines have
been specifically approved by the Seller's chief credit officer or chief
underwriter after making a determination that mitigating factors in respect
thereof justified such approval.
"INITIAL APPRAISAL": With respect to any Mortgage Loan, the Appraisal
made for the Mortgage Loan's originator in connection with its origination,
which must be included in the related Mortgage File.
"LOAN-TO-VALUE RATIO" or "LTV": With respect to any Mortgage Loan as of
its date of origination, the ratio on such date borne by the outstanding
principal amount of the Mortgage Loan to the Appraised Value of the related
Mortgaged Property.
"MONTHLY PAYMENT": As defined in the Servicing Agreement.
"MORTGAGE": With respect to a Mortgage Loan, the mortgage, deed of
trust, deed to secure debt or other instrument securing the related Mortgage
Note which creates a valid and enforceable first lien on or first priority
ownership interest in the related Mortgaged Property, subject only to Permitted
Exceptions.
"MORTGAGE FILE": As to each Mortgage Loan, a file containing all of the
related Mortgage Loan Documents.
"MORTGAGE LOAN": Any of the mortgage loans identified on the Mortgage
Loan Schedule.
"MORTGAGE LOAN DOCUMENTS": With respect to each Mortgage Loan, the
following documents:
(a) The original Mortgage Note bearing all intervening endorsements,
endorsed "Pay to the order of Norwest Bank Minnesota, N.A., as Trustee, without
recourse" and signed in the name of the last endorsee (the "Last Endorsee") by
an authorized Person (in the event that the Mortgage Loan was acquired by the
Last Endorsee in a merger, the signature must be in the following form: "[Last
Endorsee], successor by merger to [name of predecessor]"; in the event that the
Mortgage Loan was acquired or originated by the Last Endorsee while doing
business under another name, the signature must be in the following form" "[Last
Endorsee], [formerly known as] or [doing business as] [previous name]").
(b) The original of the guarantee executed in connection with the
Mortgage Note (if any).
(c) The original Mortgage with evidence of recording thereon, or a copy
thereof together with an officer's certificate of NMC or of the title company,
escrow company, or
C-2
<PAGE> 34
attorney that closed the related Mortgage Loan (the "Settlement Agent")
certifying that such represents a true and correct copy of the original and that
such original has been submitted for recordation in the appropriate governmental
recording office of the jurisdiction where the Mortgage Property is located.
(d) The originals of all assumption, modification, consolidation or
extension agreements (if any) with evidence of recording thereon, or copies
thereof together with an officer's certificate of NMC or the Settlement Agent
certifying that such represent true and correct copies of the originals and that
such originals have each been submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property
is located.
(e) The original Assignment of Mortgage to Norwest Bank Minnesota,
N.A., as Trustee, for each Mortgage Loan, in form and substance acceptable for
recording and signed in the name of the Last Endorsee (in the event that the
Mortgage Loan was acquired by the Last Endorsee in a merger, the signature must
be in the following form: "[Last Endorsee], successor by merger to [name of
predecessor]"; in the event that the Mortgage Loan was acquired or originated
while doing business under another name, the signature must be in the following
form: "[Last Endorsee], [formerly known as] or [doing business as] [previous
name]").
(f) The originals of all intervening assignments of mortgage (if any)
with evidence of recording thereon, or copies thereof together with an officer's
certificate of NMC or the Settlement Agent certifying that such represent true
and correct copies of the originals and that such originals have been submitted
for recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located.
(g) The original attorney's opinion of title and abstract of title or
the original mortgagee title insurance policy, or if the original mortgagee
title insurance policy has not been issued, the irrevocable commitment to issue
the same (which may have been marked-up by the title company or its authorized
agent), or the preliminary title report for appropriate jurisdictions.
(h) The original of any security agreement, chattel mortgage or
equivalent document executed in connection with the Mortgage Loan.
(i) The original power of attorney or other authorizing instrument (if
any) with evidence of recording thereon, if the Mortgage Note or Mortgage or any
other material document relating to the Mortgage Loan has been signed by a
person on behalf of the Mortgagor (or a copy thereof together with an officer's
certificate of NMC or the Settlement Agent certifying that such represent true
and correct copies of the originals and that such originals have been submitted
for recordation in the appropriate governmental recording office of the
jurisdiction where the Mortgaged Property is located).
C-3
<PAGE> 35
"MORTGAGE NOTE": With respect to a Mortgage Loan, the note or other
evidence of the indebtedness secured by the related Mortgage.
"MORTGAGED PROPERTY": With respect to a Mortgage Loan, the real
property, together with the improvements thereon, subject to the lien of the
related Mortgage.
"OPINION OF COUNSEL": A written opinion of counsel, which counsel is
satisfactory to the Servicer, the Bond Insurer and the Indenture Trustee.
Whenever an Opinion of Counsel is required hereunder, the renderer of such
Opinion may rely on other Opinions of Counsel. Any Opinion of Counsel relating
to tax matters must be an opinion of independent counsel.
"PERMITTED EXCEPTIONS": Any of the following encumbrances on a
Mortgaged Property: (1) the lien of current real property taxes and assessments
not yet due and payable; (2) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date of recording
acceptable to prudent mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the originator
of the related Mortgage Loan and referred to or otherwise considered in the
appraisal made for the originator of such Mortgage Loan; and (3) 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 the related
Mortgage or the use, enjoyment, value or marketability of the Mortgaged
Property.
"PRINCIPAL BALANCE:" As defined in the Indenture.
"PRINCIPAL PREPAYMENT:" Any mortgagor payment or other recovery in
respect of principal on a Mortgage Loan (including Net Liquidation Proceeds (as
defined in the Indenture)) which, in the case of a mortgagor payment, is
received in advance of its scheduled due date and is not accompanied by an
amount as to interest representing scheduled interest for any month subsequent
to the month of such payment, or that was accompanied by instructions from the
related mortgagor directing the Servicer to apply such payment to the Principal
Balance of such Mortgage Loan currently.
"PURCHASE PRICE": As defined in the Indenture.
"QUALIFIED REPLACEMENT MORTGAGE LOAN": As defined in the Indenture.
"REFINANCED MORTGAGE LOAN": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.
"SERVICER": NMC, or any successor thereto, in its capacity as servicer
under the Servicing Agreement.
"SERVICING AGREEMENT": The Servicing Agreement, dated as of September
1, 1997, between NMC, as servicer of the Mortgage Loans, and the Indenture
Trustee.
C-4
<PAGE> 36
"SIX-MONTH LIBOR": For any Mortgage Loan as of an interest rate
adjustment date for such loan, a per annum rate equal to the average of
interbank offered rates for six-month U.S. dollar-denominated deposits in the
London market based on quotations of major banks as published in The Wall Street
Journal and as most recently available (a) as of the first business day of the
month immediately preceding the month in which the adjustment date occurs or (b)
as of the date 45 days prior to the adjustment date.
C-5
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
DEPOSIT TRUST AGREEMENT
BETWEEN
FUND AMERICA INVESTORS CORPORATION II,
AS DEPOSITOR,
WILMINGTON TRUST COMPANY,
AS OWNER TRUSTEE
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
AS TRUST PAYING AGENT,
AND
NATIONAL MORTGAGE CORPORATION,
AS SERVICER
- --------------------------------------------------------------------------------
FUND AMERICA INVESTORS TRUST 1997-NMC1
COLLATERALIZED MORTGAGE OBLIGATIONS
SERIES 1997-NMC1
DATED AS OF SEPTEMBER 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.....................................................................1
SECTION 1.1. Capitalized Terms...................................................1
SECTION 1.2. Other Definitional Provisions.......................................5
ARTICLE II ORGANIZATION...................................................................5
SECTION 2.1. Name................................................................5
SECTION 2.2. Office..............................................................5
SECTION 2.3. Purposes and Powers.................................................6
SECTION 2.4. Appointment of Owner Trustee........................................6
SECTION 2.5. Initial Capital Contribution of Owner Trust Estate..................6
SECTION 2.6. Declaration of Trust................................................6
SECTION 2.7. Liability of the Holders............................................7
SECTION 2.8. Title to Trust Property.............................................7
SECTION 2.9. Situs of Trust......................................................7
SECTION 2.10. Representations and Warranties of the Company; Covenant of the
Company...........................................................8
SECTION 2.11. Federal Income Tax Provisions......................................9
ARTICLE III CERTIFICATES AND TRANSFER OF INTERESTS.......................................11
SECTION 3.1. Initial Ownership..................................................11
SECTION 3.2. The Certificates...................................................11
SECTION 3.3. Execution, Authentication and Delivery of Trust Certificates.......12
SECTION 3.4. Registration of Transfer and Exchange of Trust Certificates........12
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates..................13
SECTION 3.6. Persons Deemed Owners..............................................13
SECTION 3.7. Access to List of Holders' Names and Addresses.....................13
SECTION 3.8. Maintenance of Office or Agency....................................14
SECTION 3.9. Appointment of Trust Paying Agent..................................14
SECTION 3.10. Restrictions on Transfer of Certificates..........................14
ARTICLE IV ACTIONS BY OWNER TRUSTEE......................................................16
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters............16
SECTION 4.2. Action by Holders with Respect to Bankruptcy.......................18
SECTION 4.3. Restrictions on Holders' Power.....................................18
SECTION 4.4. Majority Control...................................................18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES.....................................19
SECTION 5.1. Establishment of Certificate Distribution Account..................19
SECTION 5.2. Application Of Trust Funds.........................................19
SECTION 5.3. Method of Payment..................................................20
SECTION 5.4. Segregation of Moneys; No Interest.................................20
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE.........................................20
SECTION 6.1. General Authority..................................................20
SECTION 6.2. General Duties.....................................................21
SECTION 6.3. Action upon Instruction............................................21
SECTION 6.4. No Duties Except as Specified in this Agreement, the Basic
Documents or any Instructions.....................................22
SECTION 6.5. No Action Except Under Specified Documents or Instructions.........23
SECTION 6.6. Restrictions.......................................................23
ARTICLE VII CONCERNING THE OWNER TRUSTEE.................................................23
SECTION 7.1. Acceptance of Trusts and Duties....................................23
SECTION 7.2. Furnishing of Documents............................................24
SECTION 7.3 Representations and Warranties.....................................24
SECTION 7.4. Reliance; Advice of Counsel........................................25
SECTION 7.5. Not Acting in Individual Capacity..................................25
SECTION 7.6. Owner Trustee Not Liable for Certificates or Mortgage Loans........26
SECTION 7.7. Owner Trustee May Own Certificates and Bonds.......................26
SECTION 7.8. Licenses..........................................................26
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE...............................................26
SECTION 8.1. Owner Trustee's Fees and Expenses..................................26
SECTION 8.2. Indemnification....................................................27
SECTION 8.3. Payments to the Owner Trustee......................................27
SECTION 8.4. Servicer Liability.................................................27
ARTICLE IX TERMINATION OF TRUST AGREEMENT................................................28
SECTION 9.1. Termination of Trust Agreement.....................................28
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES.........................29
SECTION 10.1. Eligibility Requirements for Owner Trustee........................29
SECTION 10.2. Resignation or Removal of Owner Trustee...........................29
SECTION 10.3. Successor Owner Trustee...........................................30
SECTION 10.4. Merger or Consolidation of Owner Trustee..........................30
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.....................30
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XI MISCELLANEOUS.................................................................32
SECTION 11.1. Supplements and Amendments........................................32
SECTION 11.2. No Legal Title to Owner Trust Estate in Holders...................33
SECTION 11.3. Limitations on Rights of Others...................................33
SECTION 11.4. Notices...........................................................33
SECTION 11.5. Severability......................................................34
SECTION 11.6. Separate Counterparts.............................................34
SECTION 11.7. Successors and Assigns............................................34
SECTION 11.8. No Petition.......................................................34
SECTION 11.9. No Recourse.......................................................34
SECTION 11.10. Headings.........................................................34
SECTION 11.11. GOVERNING LAW....................................................34
SECTION 11.12. Grant of Certificateholder Rights to Bond Insurer................35
SECTION 11.13. Third-Party Beneficiary..........................................35
SECTION 11.14. Suspension and Termination of Bond Insurer's Rights..............35
</TABLE>
iii
<PAGE> 5
DEPOSIT TRUST AGREEMENT
This DEPOSIT TRUST AGREEMENT, dated as of September 1, 1997, between
FUND AMERICA INVESTORS CORPORATION II, a Delaware corporation, as depositor (the
"Company"), WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner
trustee (the "Owner Trustee") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
a national banking association, as trust paying agent (the "Trust Paying
Agent"), and NATIONAL MORTGAGE CORPORATION, as servicer (the "Servicer"), for
the limited purposes set forth herein.
ARTICLE I
DEFINITIONS
SECTION 1.1. CAPITALIZED TERMS. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"ACCOUNTS" shall mean, collectively, the Collection Account and the
Bond Account.
"AGREEMENT" shall mean this Deposit Trust Agreement, as may be amended
and supplemented from time to time.
"ANNUAL TAX REPORTS" shall have the meaning assigned thereto in Section
2.11(k).
"BASIC DOCUMENTS" shall mean this Agreement, the Servicing Agreement,
the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution Agreement, the
Management Agreement, the Insurance Agreement and the Indenture.
"BOND ACCOUNT" shall have the meaning assigned thereto in the
Indenture.
"BOND INSURER" shall mean MBIA Insurance Corporation, a New York stock
insurance company.
"BOND INSURER DEFAULT" shall have the meaning assigned to such term in
the Indenture.
"BONDS" shall mean the Issuer's Collateralized Mortgage Obligations,
Series 1997-NMC1.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or Sunday
or (ii) a day that is either a legal holiday or a day on which banking
institutions in the State of New York, the State of Colorado, the State of
Delaware, or the state in which the Trust Paying Agent's office from which
payments will be made to Certificateholders are authorized or obligated by law,
regulation or executive order to be closed.
"BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12 of I the
Delaware Code, 12 Del. Code S 3801 et seq., as the same may be amended from time
to time.
"CAPITAL ACCOUNT" shall have the meaning assigned thereto in Section
2.11(a).
<PAGE> 6
"CERTIFICATE" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form attached
hereto as Exhibit A.
"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.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"CERTIFICATEHOLDER" or "HOLDER" shall mean a Person in whose name a
Certificate is registered.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and,
where appropriate in context, Treasury Regulations promulgated thereunder.
"COLLECTION ACCOUNT" shall have the meaning assigned thereto in the
Servicing Agreement.
"COMPANY" shall mean Fund America Investors Corporation II, a Delaware
corporation.
"CORPORATE TRUST OFFICE" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001; or at
such other address in the State of Delaware as the Owner Trustee may designate
by notice to the Certificateholders and the Company, or the principal corporate
trust office of any successor Owner Trustee (the address (which shall be in the
State of Delaware) of which the successor owner trustee will notify the
Certificateholder and the Company).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXPENSES" shall have the meaning assigned to such term in Section 8.2.
"HOLDER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning set forth
for "partner nonrecourse debt minimum gain" in Treasury Regulations Section
1.704-2(i)(2). A Holder's share of Holder Nonrecourse Debt Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(i)(5).
"INDENTURE" shall mean the Indenture, dated as of September 1, 1997, by
and between the Issuer and the Indenture Trustee.
"INDENTURE TRUSTEE" means Norwest Bank Minnesota, National Association,
as Indenture Trustee under the Indenture.
2
<PAGE> 7
"INSURANCE AGREEMENT" means the Insurance Agreement, dated as of
September 1, 1997, among MBIA Insurance Corporation, as insurer, the Issuer,
National Mortgage Corporation, as Seller and Servicer, the Company and the
Indenture Trustee.
"INSURANCE POLICY" shall mean the policy issued by the Bond Insurer for
the benefit of the holders of the Bonds.
"ISSUER" shall mean Fund America Investor Trust 1997-NMC1, the Delaware
business trust created pursuant to this Agreement.
"MANAGEMENT AGREEMENT" shall mean the Management Agreement dated as of
September 1, 1997, between the Trust and Norwest Bank Minnesota, National
Association, as Manager.
"MORTGAGE LOAN CONTRIBUTION AGREEMENT" shall mean that certain Mortgage
Loan Contribution Agreement, dated as of September 1, 1997, between the Company,
as transferor, and the Issuer, as transferee.
"MORTGAGE LOAN SALE AGREEMENT" shall mean that certain Mortgage Loan
Sale Agreement, dated as of September 1, 1997, among NMC, as seller, and the
Company, as purchaser.
"NMC" shall mean National Mortgage Corporation, a Colorado corporation.
"NMFC" shall mean National Mortgage Financial Corporation, a Colorado
corporation.
"NON-U.S. PERSON" shall mean an individual, corporation, partnership or
other person other than 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, an estate that
is subject to U.S. federal income tax regardless of the source of its income or
a trust if (i) a court in the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
"OWNER TRUST ESTATE" shall mean the Trust Estate (as defined in the
Indenture), including the contribution of $1 referred to in Section 2.5 hereof.
"OWNER TRUSTEE" shall mean Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor owner trustee hereunder.
"PAYMENT DATE" shall mean the twenty-fifth day of each month or, if
such twenty-fifth day is not a Business Day, the next succeeding Business Day,
commencing October 27, 1997.
"PERCENTAGE INTEREST" shall mean with respect to any Certificate the
percentage portion of all of the Trust Interest evidenced thereby as stated on
the face of such Certificate.
3
<PAGE> 8
"PERMITTED INVESTMENTS" shall have the meaning assigned to such term in
the Indenture.
"PROSPECTIVE HOLDER" shall have the meaning set forth in Section
3.11(a).
"RATING AGENCY CONDITION" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Company, the Servicer, the Bond Insurer, the Owner Trustee and the Issuer in
writing that such action will not result in a reduction or withdrawal of the
then current "implied" rating of the Bonds that it maintains without taking into
account the Bond Insurance.
"RECORD DATE" shall mean as to each Payment Date the last Business Day
of the month immediately preceding the month in which such Payment Date occurs.
"SERVICING AGREEMENT" shall mean the Servicing Agreement dated as of
September 1, 1997, among the Trust, as Issuer, the Indenture Trustee, and NMC,
as Servicer.
"SECRETARY OF STATE" shall mean the Secretary of State of the State of
Delaware.
"TAXABLE YEAR" shall have the meaning assigned thereto in Section
2.11(j).
"TAX MATTERS PARTNER" shall have the meaning assigned thereto in
Section 2.11(l).
"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.
"TRUST INTEREST" shall mean the right to receive, on each Payment Date,
distributions of the amounts, if any, released to the Issuer pursuant to Section
8.02(d) of the Indenture or pursuant to Section 2.05 of the Servicing Agreement.
"TRUST MINIMUM GAIN" shall have the meaning set forth for "partnership
minimum gain" in Treasury Regulations 1.704-2(b)(2) and 1.704-2(d). In
accordance with Treasury Regulations Section 1.704-2(d), the amount of Trust
Minimum Gain is determined by first computing, for each nonrecourse liability of
the Trust, any gain the Trust would realize if it disposed of the property
subject to that liability for no consideration other than full satisfaction of
the liability, and then aggregating the separately computed gains. A Holder's
share of Trust Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(g)(1).
"TRUST PAYING AGENT" shall mean any paying agent or co-paying agent
appointed pursuant to Section 3.9 and authorized by the Owner Trustee to make
payments to and distributions from the Certificate Distribution Account.
4
<PAGE> 9
SECTION 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the 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. 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.
(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
SECTION 2.1. NAME. The Trust created hereby shall be known as "Fund
America Investors Trust 1997-NMC1," 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.
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 in Delaware
as the Owner Trustee may designate by written notice to the Certificateholders,
the Bond Insurer and the Company.
5
<PAGE> 10
SECTION 2.3. PURPOSES AND POWERS. The purpose of the Trust is to engage
in the following activities:
(i) to issue the Bonds pursuant to the Indenture and to
sell such Bonds;
(ii) with the proceeds of the sale of the Bonds, to pay
the organizational, start-up and transactional expenses of the Trust
and to pay the balance to the Company pursuant to the Mortgage Loan
Contribution Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and
convey the Owner Trust Estate pursuant to the Indenture and to hold,
manage and distribute to the Holders any portion of the Owner 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 or is to be 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;
(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
and payments to the Holders and the Bondholders; and
(vii) to issue the Certificates pursuant to this Agreement.
The Trust is hereby authorized by the initial Certificateholders 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 Company 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.
SECTION 2.5. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE. The
Company hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Company, 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. The
Certificateholders 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.
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 Holders, subject to
the obligations of the Trust under the Basic
6
<PAGE> 11
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, after
issuance of the Certificates, the Trust shall be treated as a partnership, with
the assets of the partnership being the Mortgage Loans and other assets held by
the Trust, the partners of the partnership being the holders of the Certificates
and the Bonds being non-recourse debt of the partnership (or, if there is only
one Certificateholder, that the Trust shall be disregarded as an entity separate
from such Holder, with the assets held by the Trust being treated as assets of
the Holder and the Bonds being treated as non-recourse debt of the Holder). The
parties agree that, unless otherwise required by appropriate tax authorities or
unless the Trust is disregarded as an entity separate from its sole
Certificateholder for income and franchise tax purposes, the Owner Trustee 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 pursuant to Section 2.11(k). The parties agree that no
election will be made to treat the Trust or the Owner Trust Estate as a real
estate mortgage investment conduit as defined in Section 860D of the Code.
Effective as of the date hereof, the Owner Trustee shall have all rights, powers
and duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust. The Owner Trustee shall file the
Certificate of Trust with the Secretary of State.
SECTION 2.7. LIABILITY OF THE HOLDERS. No Holder shall have any
personal liability for any liability or obligation of the Trust. The
Certificates shall be fully paid and non-assessable.
SECTION 2.8. TITLE TO TRUST PROPERTY.
(a) Subject to the Indenture, legal title to all of 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 and/or a separate
trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. No transfer by operation of law or otherwise of
any interest of the Certificateholders shall operate to terminate this Agreement
or the trusts hereunder or entitle any transferee to an Accounting or to the
transfer to it of any part of the Owner Trust Estate.
SECTION 2.9. SITUS OF TRUST. The Trust will be located and administered
in the state of Delaware. All accounts maintained at a bank by the Owner Trustee
on behalf of the Trust shall be located in the State of Delaware, the State of
Minnesota or the State of Colorado. The Trust shall not have any employees;
provided, however, nothing herein shall restrict or prohibit the Owner Trustee
from having employees within or without the State of Delaware. Payments will be
received by the Trust only in Delaware, New York, Minnesota or Colorado, and
payments will be made by the Trust only from Delaware, New York, Minnesota or
Colorado. The only office of the Trust will be at the Corporate Trust Office in
Delaware.
7
<PAGE> 12
SECTION 2.10. REPRESENTATIONS AND WARRANTIES OF THE COMPANY; COVENANT
OF THE COMPANY.
(a) The Company hereby represents and warrants to the Owner
Trustee and the Bond Insurer that:
(i) The Company is duly organized and validly
existing as a corporation in good standing under the laws of the State
of Delaware, 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.
(ii) The Company has the power and authority to
execute and deliver this Agreement and to carry out its terms; the
Company has full power and authority to transfer and assign the
property to be transferred and assigned to and deposited with the Trust
and the Company has duly authorized such transfer 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 Company by all necessary corporate action.
(iii) 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, the certificate of incorporation or by-laws of the
Company, or any indenture, agreement or other instrument to which the
Company 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 Company's knowledge, any order, rule or regulation applicable to
the Company of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties.
(iv) There are no proceedings or investigations
pending or notice of which has been received in writing before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties:
(x) asserting the invalidity of this Agreement, (y) seeking to prevent
the consummation of any of the transactions contemplated by this
Agreement or (z) seeking any determination or ruling that should
reasonably be expected to materially and adversely affect the
performance by the Company of its obligations under, or the validity or
enforceability of, this Agreement.
(v) The representations and warranties of the
Company in Section 3(a) of the Mortgage Loan Contribution Agreement are
true and correct.
(b) Each Certificateholder covenants with the Owner Trustee
and the Bond Insurer that during the continuance of this Agreement, and while it
holds Certificates, it will
8
<PAGE> 13
comply in all respects with the provisions of its Certificate of Incorporation
in effect from time to time.
SECTION 2.11. FEDERAL INCOME TAX PROVISIONS. If the Trust is treated as
a partnership (rather than disregarded as a separate entity) for federal income
tax purposes pursuant to Section 2.6, the following provisions shall apply:
(a) A separate capital account (a "Capital Account") shall be
established and maintained for each Certificateholder in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv). No Certificateholder shall be
entitled to interest on its Capital Account or any capital contribution made by
such Holder to the Trust.
(b) Upon termination of the Trust pursuant to Article IX, any
amounts available for distribution to Holders shall be distributed to the
Holders with positive Capital Account balances in accordance with such balances.
For purposes of this Section 2.11(b), the Capital Account of each Holder shall
be determined after all adjustments made in accordance with this Section 2.11
resulting from the Trust's operations and from all sales and dispositions of all
or any part of the assets of the Trust. Any distributions pursuant to this
Section 2.11(b) shall be made by the end of the Taxable Year in which the
termination occurs (or, if later, within 90 days after the date of the
termination).
(c) No Certificateholder shall be required to restore any
deficit balance in its Capital Account. Furthermore, no Holder shall be liable
for the return of the Capital Account of, or of any capital contribution made to
the Trust by, another Holder.
(d) Profit and loss of the Trust for each Taxable Year shall
be allocated to the Certificateholders in accordance with their respective
Percentage Interests.
(e) Notwithstanding any provision to the contrary, (i) any
expense of the Trust that is a "nonrecourse deduction" within the meaning of
Treasury Regulations Section 1.704-2(b)(1) shall be allocated in accordance with
the Holders' respective Percentage Interests, (ii) any expense of the Trust that
is a "partner nonrecourse deduction" within the meaning of Treasury Regulations
Section 1.704-2(i)(2) shall be allocated in accordance with Treasury Regulations
Section 1.704-2(i)(1), (iii) if there is a net decrease in Trust Minimum Gain
within the meaning of Treasury Regulations Section 1.704-2(f)(1) for any Taxable
Year, items of gain and income shall be allocated among the Holders in
accordance with Treasury Regulations Section 1.704-2(f) and the ordering rules
contained in Treasury Regulations Section 1.704-2(j), and (iv) if there is a net
decrease in Holder Nonrecourse Debt Minimum Gain within the meaning of Treasury
Regulations Section 1.704-2(i)(4) for any Taxable Year, items of gain and income
shall be allocated among the Holders in accordance with Treasury Regulations
Section 1.704-2(i)(4) and the ordering rules contained in Treasury Regulations
Section 1.704-2(j). A Holder's "interest in partnership profits" for purposes of
determining its share of the nonrecourse liabilities of the Trust within the
meaning of Treasury Regulations Section 1.752-3(a)(3) shall be such Holder's
Percentage Interest.
(f) If a Holder receives in any Taxable Year an adjustment,
allocation, or distribution described in subparagraphs (4), (5), or (6) of
Treasury Regulations Section 1.704-
9
<PAGE> 14
1(b)(2)(ii)(d) that causes or increases a negative balance in such Holder's
Capital Account that exceeds the sum of such Holder's shares of Trust Minimum
Gain and Holder Nonrecourse Debt Minimum Gain, as determined in accordance with
Treasury Regulations Sections 1.704-2(g) and 1.704-2(i), such Holder shall be
allocated specially for such Taxable Year (and, if necessary, later Taxable
Years) items of income and gain in an amount and manner sufficient to eliminate
such negative Capital Account balance as quickly as possible as provided in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d). After the occurrence of an
allocation of income or gain to a Holder in accordance with this Section
2.11(f), to the extent permitted by Regulations Section 1.704-1(b), items of
expense or loss shall be allocated to such Holder in an amount necessary to
offset the income or gain previously allocated to such Holder under this Section
2.11(f).
(g) Loss shall not be allocated to a Holder to the extent that
such allocation would cause a deficit in such Holder's Capital Account (after
reduction to reflect the items described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Holder's shares
of Trust Minimum Gain and Holder Nonrecourse Debt Minimum Gain. Any loss in
excess of that limitation shall be allocated to all the Holders in accordance
with their respective Percentage Interests. After the occurrence of an
allocation of loss to a Holder in accordance with this Section 2.11(g), to the
extent permitted by Treasury Regulations Section 1.704-1(b), profit shall be
allocated to such Holder in an amount necessary to offset the loss previously
allocated to such Holder under this Section 2.11(g).
(h) If a Holder transfers any part or all of its Holdership
Interest and the transferee is admitted as provided herein (a "Transferee
Holder"), the distributive shares of the various items of profit and loss
allocable among the Holders during such Taxable Year shall be allocated between
the transferor and the Transferee Holder (at the election of the Holders
(including the transferor, but excluding the Transferee Holder)) either (i) as
if the Taxable Year had ended on the date of the transfer or (ii) based on the
number of days of such Taxable Year that each was a Holder without regard to the
results of Trust activities in the respective portions of such Taxable Year in
which the transferor and Transferee Holder were Holders.
(i) "Profit" and "loss" and any items of income, gain, expense
or loss referred to in this Section 2.11 shall be determined in accordance with
federal income tax accounting principles as modified by Treasury Regulations
Section 1.704-1(b)(2)(iv), except that profits and losses shall not include
items of income, gain, and expense that are specially allocated pursuant to
Sections 2.11(e), 2.11(f) or 2.11(g) hereof. All allocations of income, profits,
gains, expenses, and losses (and all items contained therein) for federal income
tax purposes shall be identical to all allocations of such items set forth in
this Section 2.11, except as otherwise required by Section 704(c) of the Code
and Section 1.704-1(b)(4) of the Treasury Regulations.
(j) The taxable year of the Trust (the "Taxable Year") shall
be the calendar year or such other taxable year as may be required by Section
706(b) of the Code.
(k) At the Trust's expense, the Owner Trustee shall (i)
prepare, or cause to be prepared, and file such tax returns relating to the
Trust (including a partnership information return, IRS Form 1065) as are
required by applicable federal, state, and local law, (ii) cause such returns to
be signed in the manner required by law, (iii) make such elections as may from
time to
10
<PAGE> 15
time be required or appropriate under any applicable law so as to maintain the
Trust's classification as a partnership for tax purposes, (iv) prepare and
deliver, or cause to be prepared and delivered, to the Holders, no later than 75
days after the close of each Taxable Year, a Schedule K-1, a copy of the Trust's
informational tax return (IRS Form 1065), and such other reports (collectively,
the "Annual Tax Reports") setting forth in sufficient detail all such
information and data with respect to the transactions effected by or involving
the Trust during such Taxable Year as shall enable the each Holder to prepare
its federal, state, and local income tax returns in accordance with the laws
then prevailing, and (v) collect, or cause to be collected, any withholding tax
as described in Section 5.2(c) with respect to income or distributions to
Certificateholders.
(l) The Holders shall designate a Holder as the tax matters
partner for the Trust within the meaning of Section 6231(a)(7) of the Code (the
Tax Matters Partner"), and shall notify the Indenture Trustee, the Manager (as
defined in Section 5.2(d)) and the Owner Trustee in writing of the name and
address of such Tax Matters Partner. The Tax Matters Partner shall have the
right and obligation to take all actions authorized and required, respectively,
by the Code for the Tax Matters Partner. The Tax Matters Partner shall have the
right to retain professional assistance in respect of any audit or controversy
proceeding initiated with respect to the Trust by the Internal Revenue Service
or any state or local taxing authority, and all expenses and fees incurred by
the Tax Matters Partner on behalf of the Trust shall constitute expenses of the
Trust. In the event the Tax Matters Partner receives notice of a final
partnership adjustment under Section 6223(a)(2) of the Code, the Tax Matters
Partner shall either (i) file a court petition for judicial review of such
adjustment within the period provided under Section 6226(a) of the Code, a copy
of which petition shall be mailed to all other Holders on the date such petition
is filed, or (ii) mail a written notice to all other Holders, within such
period, that describes the Tax Matters Partner's reasons for determining not to
file such a petition.
(m) Except as otherwise provided in this Section 2.11, the
Holders shall instruct the Owner Trustee as to whether to make any available
election under the Code or any applicable state or local tax law on behalf of
the Trust. Notwithstanding the foregoing, any Holder may request that the Owner
Trustee make an election under section 754 of the Code; provided that the
requesting Holder shall agree to bear the cost of preparing such election and
any additional accounting expenses of the Trust incurred as a result of such
election.
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Company pursuant to Section 2.5 and until the issuance of
the Certificates, the Company shall be the sole beneficiary of the Trust.
SECTION 3.2. THE CERTIFICATES. The Certificates shall be issued without
a principal amount and shall evidence beneficial ownership interests in the
Trust. The 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. The Certificates shall be executed on
behalf of the Trust by manual or facsimile signature of a Trust
11
<PAGE> 16
Officer of the Owner Trustee. 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 valid,
notwithstanding that such individuals or any of them shall 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 authentication and delivery of such
Certificates.
A transferee of a Certificate shall become a Certificateholder, and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to Section 3.4.
SECTION 3.3. EXECUTION, AUTHENTICATION AND DELIVERY OF TRUST
CERTIFICATES. Concurrently with the initial transfer of the Mortgage Loans to
the Trust pursuant to the Mortgage Loan Contribution Agreement, the Owner
Trustee shall cause the Certificates, representing 100% of the Percentage
Interests of the Trust Interest, to be executed on behalf of the Trust,
authenticated and delivered to National Mortgage Finance Corporation ("NMFC"),
as the Company's designee. No Certificate shall entitle its holder to any
benefit under this Agreement, or shall be valid for any purpose, unless there
shall appear on such Certificate a certificate of authentication substantially
in the form set forth in Exhibit A, executed by the Owner Trustee or the Owner
Trustee's authenticating agent, by manual or facsimile signature; such
authentication shall constitute conclusive evidence that such Certificate shall
have been duly authenticated and delivered hereunder. All 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 Certificates and of transfers and
exchanges of Certificates as herein provided. The Owner Trustee shall be the
initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates of a like Percentage Interest dated
the date of authentication by the Owner Trustee or any authenticating agent. At
the option of a Certificateholder, Certificates may be exchanged for other
Certificates of a like Percentage Interest upon surrender of the Certificates to
be exchanged at the office or agency maintained pursuant to Section 3.8.
Every 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. In addition,
each Certificate presented or surrendered for registration of transfer and
exchange must be accompanied by a letter from the Prospective Holder certifying
as to the representations set forth in Section 3.11(a), (b) and (c). Each
Certificate surrendered for
12
<PAGE> 17
registration of transfer or exchange shall be canceled and 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 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 Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make and the Certificate Registrar shall not register transfer
or exchanges of Certificates for a period of 15 days preceding the Payment Date
with respect to the Certificates.
SECTION 3.5. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a)
any mutilated 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 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 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
the Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Percentage Interest. In connection with
the issuance of any new 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 Certificate issued pursuant to this Section shall constitute
conclusive 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 3.6. PERSONS DEEMED OWNERS. Each person by virtue of becoming a
Certificateholder in accordance with this Agreement shall be deemed to be bound
by the terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee or the Certificate Registrar may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such 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.
SECTION 3.7. ACCESS TO LIST OF HOLDERS' NAMES AND ADDRESSES. The Owner
Trustee shall furnish or cause to be furnished to the Servicer, the Company and
the Trust Paying Agent immediately prior to each Payment Date, a list of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Certificateholders or one or more Holders of Certificates,
together evidencing Percentage Interests totaling not less than 25%, 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 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
13
<PAGE> 18
current list of Certificateholders. Each Certificateholder, by receiving and
holding a Certificate, shall be deemed to have agreed not to hold any of the
Company, the Certificate Registrar 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 an office or offices or agency or agencies where 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 Certificates and the
Basic Documents may be served. The Owner Trustee initially designates Wilmington
Trust Company as its principal corporate trust office for such purposes. The
Owner Trustee shall give prompt written notice to the Company 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 TRUST PAYING AGENT. The Owner Trustee
hereby appoints Norwest Bank Minnesota, National Association, as Trust Paying
Agent under this Agreement. The Trust Paying Agent shall make distributions to
Certificateholders from the Certificate Distribution Account pursuant to Section
5.2 and shall report to the Owner Trustee on the Payment Date via facsimile
transmission of a distribution statement the amounts of such distributions to
the Certificateholders. The Trust 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. In the event that Norwest Bank
Minnesota, National Association, shall no longer be the Trust Paying Agent
hereunder, the Owner Trustee shall appoint a successor to act as Trust Paying
Agent (which shall be a bank or trust company) acceptable to the
Certificateholders and the Bond Insurer. The Owner Trustee shall cause such
successor Trust Paying Agent or any additional Trust Paying Agent appointed by
the Owner Trustee to execute and deliver to the Owner Trustee an instrument in
which such successor Trust Paying Agent or additional Trust Paying Agent shall
agree with the Owner Trustee that as Trust Paying Agent, such successor Trust
Paying Agent or additional Trust 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. After one year from the date of receipt, the Trust Paying
Agent shall promptly return all unclaimed funds to the Owner Trustee, and upon
removal of a Trust Paying Agent, such Trust Paying Agent shall also return all
funds in its possession to the Owner Trustee. The provisions of Sections 7.1,
7.3(b), 7.4, 8.1, and 10.2 as to resignations, shall apply to the Trust Paying
Agent to the same extent as if it were named therein and, to the extent
applicable, to any other paying agent appointed hereunder. Any reference in this
Agreement to the Trust Paying Agent shall include any co-paying agent unless the
context requires otherwise.
SECTION 3.10 RESTRICTIONS ON TRANSFER OF CERTIFICATES.
(a) Each prospective purchaser and any subsequent transferee
of a Certificate (each, a "Prospective Holder"), other than the Company or NMFC,
shall represent and warrant, in writing, to the Owner Trustee and the
Certificate Registrar and any of their respective successors that:
14
<PAGE> 19
(i) Such Person is (A) a "qualified institutional buyer"
as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), and is aware that the seller of the Certificate
may be relying on the exemption from the registration requirements of
the Securities Act provided by Rule 144A and is acquiring such
Certificate for its own account or for the account of one or more
qualified institutional buyers for whom it is authorized to act, or (B)
a Person involved in the organization or operation of the Trust or an
affiliate of such Person within the meaning of Rule 3a-7 of the
Investment Company Act of 1940, as amended (including, but not limited
to, the Company and NMFC).
(ii) Such Person understands that the Certificates have
not been and will not be registered under the Securities Act and may be
offered, sold, pledged or otherwise transferred only to a person whom
the seller reasonably believes is (C) a qualified institutional buyer
or (D) a Person involved in the organization or operation of the Trust
or an affiliate of such Person, in a transaction meeting the
requirements of Rule 144A under the Securities Act and in accordance
with any applicable securities laws of any state of the United States.
(iii) Such Person understands that the Certificates bear a
legend to the following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN
A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR AN
AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT
NOT LIMITED TO, FUND AMERICA INVESTORS CORPORATION II) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED
TO REGISTER THIS CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
15
<PAGE> 20
(b) By its acceptance of a Certificate, each Prospective
Holder agrees and acknowledges that no legal or beneficial interest in all or
any portion of any Certificate may be transferred directly or indirectly to an
entity that holds residual securities as nominee to facilitate the clearance and
settlement of such securities through electronic book-entry changes in Accounts
of participating organizations (a "Book-Entry Nominee") and any such purported
transfer shall be void and have no effect.
(c) No transfer of this certificate or any beneficial interest
therein shall be made to any person unless the Owner Trustee has received a
certificate from the Transferee to the effect that such transferee (i) is not a
person which is an employee benefit plan, trust or account subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Section 4975 of the Code or a governmental plan, defined in Section 3(32) of
ERISA subject to any federal, state or local law which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code (any such person being
a "plan") and (ii) is not an entity, including an insurance company separate
account or general account, whose underlying assets include plan assets by
reason of a plan's investment in the entity.
(d) The Owner Trustee shall not execute, and shall not
countersign and deliver, a Certificate in connection with any transfer thereof
unless the transferor shall have provided to the Owner Trustee a certificate,
substantially in the form attached as Exhibit C to this Agreement, signed by the
transferee, which certificate shall contain the consent of the transferee to any
amendments of this Agreement as may be required to effectuate further the
foregoing restrictions on transfer of the Certificates to Book-Entry Nominees,
and an agreement by the transferee that it will not transfer a Certificate
without providing to the Owner Trustee a certificate substantially in the form
attached as Exhibit C to this Agreement.
(e) The Certificates shall bear an additional legend referring
to the restrictions contained in paragraph (b) above.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. PRIOR NOTICE TO HOLDERS WITH RESPECT TO CERTAIN MATTERS.
With respect to the following matters, the Owner Trustee shall not take
action, and the Certificateholders shall not direct the Owner Trustee to take
any action, unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders and the Bond Insurer in
writing of the proposed action and neither the Certificateholders nor the Bond
Insurer shall have notified the Owner Trustee in writing prior to the 30th day
after such notice is given that such Certificateholders and/or the Bond Insurer
have withheld consent or the Certificateholders have provided alternative
direction (any direction by the Certificateholders shall require the prior
consent of the Bond Insurer):
(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of the
Mortgage Loans) and the compromise of any
16
<PAGE> 21
action, claim or lawsuit brought by or against the Trust (except with respect to
the aforementioned claims or lawsuits for collection of the Mortgage 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 or other change to this Agreement or any
Basic Document in circumstances where the consent of any Holder or the Bond
Insurer is required;
(d) the amendment or other change to this Agreement or any
Basic Document in circumstances where the consent of any Holder or the Bond
Insurer is not required and such amendment materially adversely affects the
interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor
Bond Registrar, Trust Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar or Trust Paying Agent, or the
consent to the assignment by the Bond Registrar, Paying Agent or Indenture
Trustee or Certificate Registrar or Trust Paying Agent of its obligations under
the Indenture or this Agreement, as applicable.
(f) the consent to the calling or waiver of any default of any
Basic Document;
(g) the consent to the assignment by the Indenture Trustee or
Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other
entity, or convey or transfer all or substantially all of the Trust's assets to
any other entity;
(j) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the Basic Documents;
(k) do any act that conflicts with any other Basic Document;
(l) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.3 hereof;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth
in this Trust Agreement.
17
<PAGE> 22
In addition the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separate from those of any other entity. Except as expressly set forth
herein, the Trust shall pay its indebtedness, operating expenses and liabilities
from its own funds, and the Trust shall not pay the indebtedness, operating
expenses and liabilities of any other entity. The Trust shall maintain
appropriate minutes or other records of all appropriate actions and shall
maintain its office separate from the offices of the Company and NMC.
The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders with the consent of the Bond Insurer, and to the
extent otherwise consistent with the Basic Documents, to (i) remove or replace
the Servicer or the Indenture Trustee, (ii) institute proceedings to have the
Trust declared or adjudicated a bankruptcy or insolvent, (iii) consent to the
institution of bankruptcy or insolvency proceedings against the Trust, (iv) file
a petition or consent to a petition seeking reorganization or relief on behalf
of the Trust under any applicable federal or state law relating to bankruptcy,
(v) consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or any similar official) of the Trust or a substantial portion of
the property of the Trust, (vi) make any assignment for the benefit of the
Trust's creditors, (vii) cause the Trust to admit in writing its inability to
pay its debts generally as they become due, (viii) take any action, or cause the
Trust to take any action, in furtherance of any of the foregoing (any of the
above, a "Bankruptcy Action"). So long as the Indenture and the Insurance
Agreement remain in effect and no Bond Insurer Default exists, no
Certificateholder shall have the power to take, and shall not take, any
Bankruptcy Action with respect to the Trust or direct the Owner Trustee to take
any Bankruptcy Action with respect to the Trust.
SECTION 4.2. ACTION BY HOLDERS 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 consent and approval of the Bond
Insurer, the unanimous prior approval of all Certificateholders and the Bond
Insurer and the delivery to the Owner Trustee by each such Certificateholder of
a certification that such Certificateholder reasonably believes that the Trust
is insolvent.
SECTION 4.3. RESTRICTIONS ON HOLDERS' 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 4.4. 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 Certificates evidencing more than 50% of the Percentage
Interest in the Trust Interest and such action shall be binding upon all
Certificateholders. 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 more than 50% of the Percentage
Interest in the Trust Interest at the time of the delivery of such notice and
such action shall be binding upon all Certificateholders.
18
<PAGE> 23
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. ESTABLISHMENT OF CERTIFICATE DISTRIBUTION ACCOUNT. The
Owner Trustee shall cause the Trust Paying Agent, for the benefit of the
Certificateholders, to establish and maintain with Norwest Bank Minnesota,
National Association, for the benefit of the Owner Trustee one or more Accounts
that while the Trust Paying Agent holds such Account shall be entitled
"Certificate Distribution Account, Norwest Bank Minnesota, National Association,
as Trust Paying Agent, in trust for the Holders of Certificates evidencing
beneficial interests in Fund America Investors Trust 1997-NMC1." Funds shall be
deposited in the Certificate Distribution Account as required by the Indenture
or, following satisfaction and release of the Indenture, by the Servicing
Agreement.
All of the right, title and interest of the Owner Trustee in all funds
on deposit from time to time in the Certificate Distribution Account and in all
proceeds thereof shall be held for the benefit of the Certificateholders, the
Bond Insurer and such other persons entitled to distributions therefrom. Except
as otherwise expressly provided herein, the Certificate Distribution Account
shall be under the sole dominion and control of the Owner Trustee for the
benefit of the Certificateholders and the Bond Insurer.
SECTION 5.2. APPLICATION OF TRUST FUNDS.
(a) On each Payment Date, the Trust Paying Agent shall
distribute to the Certificateholders, on the basis of their respective
Percentage Interests, all amounts then on deposit in the Certificate
Distribution Account.
(b) On each Payment Date, the Trust Paying Agent shall send to
Certificateholders the statement provided to the Owner Trustee by the Indenture
Trustee pursuant to Section 2.08(d) of the Indenture with respect to such
Payment Date. If the Trust Paying Agent is an entity other than the Indenture
Trustee, the Owner Trustee shall provide a copy of such statement to the Trust
Paying Agent to enable it to perform its duties under this Section 5.2(b).
(c) In the event that any withholding tax is imposed under
federal, state, or local tax on the Trust's payment (or allocations of income)
to a Certificateholder, such tax shall reduce the amount otherwise distributable
to such Certificateholder in accordance with this Section. The Owner Trustee,
and the Trust Paying Agent on its behalf, is hereby authorized and directed to
retain in the Certificate Distribution Account 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 Certificate Registrar will provide the Trust Paying Agent
with a statement indicating the amount of any such withholding tax. 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 from the
Certificate Distribution Account at the direction of the Owner Trustee or the
Trust Paying Agent on its behalf. If there is a possibility that withholding tax
is payable with
19
<PAGE> 24
respect to a distribution (such as a distribution to a Certificateholder who is
a Non-U.S. Person), the Trust Paying Agent may in its sole discretion withhold
such amounts in accordance with this paragraph (c). In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax, the
Owner Trustee and the Trust Paying Agent 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.
(d) Notwithstanding anything to the contrary herein, at any
time after the Indenture is no longer in effect but while this Agreement remains
in effect, the manager under the Management Agreement (the "Manager") shall be
entitled to a fee on each Payment Date equal to the Indenture Trustee Fee that
would have been payable to the Indenture Trustee on such Payment Date if the
Indenture were still in effect. Such fee shall be distributed to the Manager
from funds in the Certificate Distribution Account prior to distribution of any
such funds to Certificateholders. Also, in such event, the Servicer shall
provide the same information to the Manager that it would have provided to the
Indenture Trustee pursuant to the Servicing Agreement, as well as any other
information concerning the Mortgage Loans as may be reasonably requested by the
Manager to enable the Manager to perform its obligations under the Management
Agreement. On each such Payment Date, the Trust Paying Agent shall mail to each
Certificateholder a statement detailing the amount remitted to the Trust Paying
Agent by the Servicer on the related Deposit Date and setting forth the amount
of the Monthly Servicing Fee and fees paid to the Manager with respect to such
Payment Date, and the aggregate amount distributed to Certificateholders on such
Payment Date.
SECTION 5.3. METHOD OF PAYMENT. Distributions required to be made to
Certificateholders on any Payment 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 such Certificateholder shall have provided
to the Trust Paying Agent appropriate written instructions at least five
Business Days prior to such Payment Date, or, if not, by check mailed to such
Certificateholder at the address of such Holder appearing in the Certificate
Register.
SECTION 5.4. SEGREGATION OF MONEYS; NO INTEREST. Subject to Sections
5.1 and 5.2, moneys received by the Trust Paying Agent hereunder and deposited
into the Certificate Distribution Account will be segregated except to the
extent required otherwise by law and, if the Holders of more than 50% of the
Certificates so direct, shall be invested in Permitted Investments maturing no
later than one Business Day prior to the related Payment Date at the direction
of such Certificateholders. The Trust Paying Agent shall not be liable for
payment of any interest or losses in respect of such moneys. Investment gains
shall be for the account of and paid to the Certificateholders.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Bonds,
the Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document
20
<PAGE> 25
attached as an exhibit to or contemplated by the Basic Documents to which the
Trust is to be a party and any amendment or other agreement or instrument
described in Article III, in each case, in such form as the Owner Trustee shall
approve, as evidenced conclusively by the Owner Trustee's execution thereof. In
addition, the Owner Trustee is authorized and directed, on behalf of the Trust,
to execute and deliver to the Authenticating Agent the Issuer Request and the
Issuer Order referred to in Section 2.11 of the Indenture, in such form as the
Company shall approve, as evidenced conclusively by the Owner Trustee's or the
Company's execution thereof, directly to the Authenticating Agent to
authenticate and deliver Bonds in the aggregate principal amount of
$121,765,000. 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.
SECTION 6.2. GENERAL DUTIES. It shall be the duty of the Owner Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic Documents
to which the Trust is a party and to administer the Trust in the interest of the
Certificateholders, subject to the Basic Documents and in accordance with the
provisions of this Agreement; the Owner Trustee shall not be responsible for
taking any action with respect to the Indenture or any other of the Basic
Documents unless a Responsible Office of the Owner Trustee has actual knowledge
of the facts which require such action or has received written notice of the
need to take such action; the Owner Trustee shall not be responsible for any
matter regarding the Investment Company Act of 1940, as amended (or any
successor statute) or the rules or regulations thereunder; and
(b) to obtain and preserve the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Bonds, the Mortgage Loans and each other instrument and agreement included in
the Trust Estate.
SECTION 6.3. ACTION UPON INSTRUCTION.
(a) Subject to Article IV and in accordance with the terms of
the Basic Documents, the Certificateholders may by written instruction direct
the Owner Trustee in the management of the Trust but only to the extent
consistent with the limited purpose of the Trust. Such direction may be
exercised at anytime by written instruction of the Certificateholders pursuant
to Article IV. Without limiting the generality of the foregoing, the Owner
Trustee shall act as directed by the Certificateholders in connection with Bond
redemptions requested by the Certificateholders, and shall take all actions and
deliver all documents that the Trust is required to take and deliver in
accordance with Section 4.01 and Article X of the Indenture in order to effect
any redemption requested by the Certificateholders.
(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 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.
21
<PAGE> 26
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or under any Basic Document, the Owner Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Certificateholders and the Bond Insurer requesting instruction from the
Certificateholders 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 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.
(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, THE BASIC
DOCUMENTS OR ANY 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 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, any Basic Document 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
Securities and Exchange 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.
22
<PAGE> 27
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 and the Basic
Documents. 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 or negligence or (ii) in the case of
the 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 Certificateholders;
(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 Bonds;
(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 Company 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
23
<PAGE> 28
authentication on the Certificates, and the Owner Trustee shall in no event
assume or incur any liability, duty, or obligation to any Bondholder 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 Seller, the Company, the Indenture 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
Indenture Trustee under the Indenture or the Servicer under the 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 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
gross negligence 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. On behalf of the Owner Trustee, the Company shall
furnish to Bondholders promptly upon written request therefor, copies of the
Servicing Agreement and the Indenture.
SECTION 7.3. REPRESENTATIONS AND WARRANTIES.
(a) The Owner Trustee hereby represents and warrants to
the Company for the benefit of the Certificateholders, that:
(i) It is a banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) 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.
(iii) 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 or Delaware 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.
24
<PAGE> 29
(b) The Trust Paying Agent hereby represents and warrants
to the Company and the Bond Insurer for the benefit of the Certificateholders,
that:
(i) It is a banking association duly organized and
validly existing in good standing under the laws of the United States
of America. It has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(ii) 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.
(iii) 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 law, governmental rule or regulation
governing the banking or trust powers of the Trust Paying Agent or any
judgment or order binding on it, or constitute any default under its
charter documents or by-laws.
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 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 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, Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim
25
<PAGE> 30
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 CERTIFICATES OR MORTGAGE
LOANS. The recitals contained herein and in the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates) shall
be taken as the statements of the Company, 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 Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates and as specified in
Section 7.3) or the Bonds, or of any Mortgage Loans 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 Mortgage Loan, or
the perfection and priority of any security interest created by any Mortgage
Loan 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
Bondholders 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
Mortgage Loan on any computer or other record thereof, the validity of the
assignment of any Mortgage Loan to the Trust or of any intervening assignment,
the completeness of any Mortgage Loan, the performance or enforcement of any
Mortgage Loan, the compliance by the Company 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
Indenture Trustee or the Servicer or any subservicer taken in the name of the
Owner Trustee.
SECTION 7.7. OWNER TRUSTEE MAY OWN CERTIFICATES AND BONDS. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Bonds and may deal with the Company, the Indenture Trustee
and the Servicer in banking transactions with the same rights as it would have
if it were not Owner Trustee.
SECTION 7.8. LICENSES. The Owner Trustee shall cause the Trust to use
its best efforts to obtain and maintain the effectiveness of any licenses
required in connection with this Agreement and the Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
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 NMC and the Owner Trustee,
and the Owner Trustee shall be entitled to be reimbursed by NMC 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. Such fees and expenses are as set forth on
Exhibit D hereto. The Certificateholders shall be responsible and liable for the
payment of such fees and expenses,
26
<PAGE> 31
pro rata based upon their respective Percentage Interests, and shall pay such
fees and expenses promptly after receipt of a written invoice therefor from the
Owner Trustee.
SECTION 8.2. INDEMNIFICATION. The Certificateholders shall be liable as
obligor for, and shall indemnify the Owner Trustee and the Trust Paying Agent
and their respective successors, assigns, agents and servants (collectively, the
"Indemnified Parties") from and against, any and all liabilities, obligations,
losses, damages, taxes, claims, actions and suits, and any and all reasonable
costs, expenses and disbursements (including reasonable legal fees and expenses)
of any kind and nature whatsoever (collectively, "Expenses") which may at any
time be imposed on, incurred by, or asserted against any Indemnified Party in
any way relating to or arising out of this Agreement, the Basic Documents, the
Owner Trust Estate, the administration of the Owner Trust Estate or the action
or inaction of the Owner Trustee or the Trust Paying Agent hereunder, except
only that the Certificateholders shall not be liable for or required to
indemnify an Indemnified Party 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 Trust Paying Agent 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 Certificateholders will
be entitled to participate therein, with counsel selected by such Holders and
reasonably satisfactory to the Indemnified Parties, and after notice from
Certificateholders to the Indemnified Parties of its election to assume the
defnese thereof, the Certificateholders shall not be liable to the Indemnified
Party under this Section 8.2 for any legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense of such
action; provided, however, that this sentence shall not be in effect if (1) the
Certificateholders shall not have employed counsel reasonably satisfactory to
the Indemnified Party to represent the Indemnified Party within a reasonable
time after notice of commencement of the action or (2) the Certificateholders
shall have authorized the employment of counsel for the Indemnified Party at the
expense of the Certificateholders. If the Certificateholders assume the defense
of any such proceeding, they shall be entitled to settle such proceeding without
any liability being assessed against any Indemnified Party or, if such
settlement provides for release of any such Indemnified Party without any
liability being assessed against any Indemnified Party in connection with all
matters relating to the proceeding which have been asserted against such
Indemnified Party in such proceeding by the other parties to such settlement,
without the consent of such Indemnified Party, but otherwise only with the
consent of such Indemnified Party. Certificateholders shall be liable for this
indemnification obligation pro rata, based upon their respective Percentage
Interests.
SECTION 8.3. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the
Owner Trustee or the Trust Paying Agent pursuant to this Article VIII shall be
deemed not to be a part of the Owner Trust Estate immediately after such
payment.
SECTION 8.4. SERVICER LIABILITY. In the event the Certificateholders
fail to pay all or any portion of any fees, expenses or indemnification amounts
to the Owner Trustee or the Trust Paying Agent for which they are liable under
this Article VIII, the Servicer shall pay such amounts to the Owner Trustee or
the Trust Paying Agent, as the case may be, promptly after receipt of an invoice
therefor from the party entitled thereto.
27
<PAGE> 32
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 on the earlier of: (i) the
final payment or other liquidation of the Mortgage Loans and the disposition of
all REO Properties and the remittance of all funds due hereunder with respect to
such Mortgage Loans and REO Properties or the disposition of the Mortgage Loans
and REO Properties at the direction of a majority of the Certificateholders, in
either case after the satisfaction and discharge of the Indenture pursuant to
Section 4.01 of the Indenture; and (ii) the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy (the late
ambassador of the United States to the Court of St. James's). The bankruptcy,
liquidation, dissolution, death or incapacity of any Certificateholder or the
Company shall not (x) operate to terminate this Agreement or the Trust, nor (y)
entitle such Certificateholder'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 Section 9.1(a) above, none of the
Company, the Servicer, the Bond Insurer nor any Certificateholder shall be
entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Payment Date upon which the Certificateholders shall surrender their
Certificates to the Owner Trustee for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders, the
Bond Insurer, the Rating Agencies and the Trust Paying Agent mailed within five
Business Days of receipt by the Owner Trustee of notice of such termination
pursuant to Section 9.1(a) above, which notice given by the Owner Trustee shall
state (i) the Payment Date upon or with respect to which final payment of the
Certificates shall be made upon presentation and surrender of the Certificates
at the office of the Owner Trustee therein designated, (ii) the amount of any
such final payment and (iii) that the Record Date otherwise applicable to such
Payment Date is not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Owner Trustee therein
specified. The Owner Trustee shall give such notice to the Certificate Registrar
(if other than the Owner Trustee) and the Trust Paying Agent at the time such
notice is given to Certificateholders. The Owner Trustee shall give notice to
the Trust Paying Agent of each presentation and surrender of Certificates
promptly, and the Trust Paying Agent shall promptly cause to be distributed to
the related Certificateholders amounts distributable on such Payment Date
pursuant to Section 5.2(a).
(d) 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 3820 of the Business Trust Statute.
28
<PAGE> 33
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 satisfying the provisions of Section
3807(a) of the Business Trust Statute; authorized to exercise corporate powers;
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal or state authorities; and having (or
having a parent that has) a rating of at least "Baa3" by Moody's and "A-1" by
Standard & Poor's and being acceptable to the Bond Insurer. 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.
SECTION 10.2 RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Servicer, the Indenture Trustee and the
Bond Insurer. Upon receiving such notice of resignation, the Servicer shall
promptly appoint a successor Owner Trustee (acceptable to the Bond Insurer) 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 or the Bond Insurer 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 Certificateholders or 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 Bond Insurer, or the Certificateholders or
the Servicer with the consent of the Bond Insurer, may remove the Owner Trustee.
If the Certificateholders or the Servicer or the Bond Insurer shall remove the
Owner Trustee under the authority of the immediately preceding sentence, the
Bond Insurer, or the Servicer with the consent of the Bond Insurer, 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 written approval by the Bond Insurer 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
29
<PAGE> 34
to each of the Rating Agencies, the Indenture Trustee, the Trust Paying Agent
and the Bond Insurer.
SECTION 10.3. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Company, the Indenture Trustee, the Bond Insurer 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 (if acceptable to the Bond
Insurer), 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 moneys held by it
under this Agreement; and the Company and the predecessor Owner 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
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 Company shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Indenture Trustee, the Trust Paying
Agent, the Bondholders, the Bond Insurer and the Rating Agencies. If the Company
fails 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 Company.
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, and for the purpose of performing certain duties and obligations of the
Owner Trustee with respect to the Trust and the Certificates, the Owner Trustee
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Owner Trustee and acceptable to the Bond
Insurer to act as co-
30
<PAGE> 35
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 Bond Insurer and the Owner Trustee may
consider necessary or desirable. 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 provision 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 Owner Trustee 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 the separate trustees and co-trustees, as if
given to each of them. Every instrument appointing any separate trustee or
co-trustee, other than this Agreement, shall refer to this Agreement and to the
conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of appointment, shall be vested with the estates specified in its
instrument of appointment, either jointly with the Owner 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 Owner Trustee.
Each such instrument shall be filed with the Owner Trustee.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as 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.
31
<PAGE> 36
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. SUPPLEMENTS AND AMENDMENTS. This Agreement may be amended
by the Company, and the Owner Trustee, with the prior consent of the Bond
Insurer, and with prior written notice to the Rating Agencies, but without the
consent of any of the Bondholders or the Certificateholders or the Indenture
Trustee, to cure any ambiguity, 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 Bondholders or the Certificateholders; provided,
however, such action shall not adversely affect in any material respect the
interests of any Bondholder or Certificateholder or the rights of the Bond
Insurer. An amendment described above shall be deemed not to adversely affect in
any material respect the interests of any Bondholder or Certificateholder if the
party requesting the amendment satisfies the Rating Agency Condition with
respect to such amendment.
This Agreement may also be amended from time to time by the Company and
the Owner Trustee, with the prior written consent of the Rating Agencies and
with the prior written consent of the Indenture Trustee, the Bond Insurer, the
Holders (as defined in the Indenture) of Bonds evidencing more than 50% of the
Outstanding Amount of the Bonds, the Holders of Certificates evidencing more
than 50% of the Percentage Interests of the Trust Interest and if the party
requesting such amendment satisfies the Rating Agency Condition with respect to
such amendment, 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 Bondholders or the Certificateholders; provided,
however, 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 the
Mortgage Loans or distributions that shall be required to be made for the
benefit of the Bondholders, the Certificateholders or the Bond Insurer, (b)
reduce the aforesaid percentage of the Outstanding Amount of the Bonds or the
Percentage Interests required to consent to any such amendment, in either case
of clause (a) or (b) without the consent of the holders of all the outstanding
Bonds and the Bond Insurer, and in the case of clause (b) without the consent of
the Holders of all the 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 Indenture Trustee, the Bond
Insurer and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Bondholders or the Indenture 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.
32
<PAGE> 37
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. 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 HOLDERS. 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 Company, the Certificateholders, the Bond Insurer and, to the
extent expressly provided herein, the Indenture Trustee and the Bondholders, and
nothing in this Agreement (other than Section 2.7), 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 11.4. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been given if (1)
personally delivered, (2) upon receipt by the intended recipient or three
Business Days after mailing if mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee shall be deemed given only upon actual receipt
by the Owner Trustee), (3) sent by express courier delivery service and received
by the intended recipient or (4) except with respect to notices sent to the
Owner Trustee, transmitted by telex or facsimile transmission (or any other type
of electronic transmission agreed upon by the parties and confirmed by a writing
delivered by any of the means described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, its Corporate Trust Office; (ii) if to
the Company, Fund America Investors Corporation II, 6400 S. Fiddler's Green
Circle, Suite 1200B, Englewood, Colorado 80111, Attention: Steven B. Chotin,
Telecopy: (303) 741-6944; (iii) if to the Bond Insurer, MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Fund America
Investors Trust 1997-NMC1, Telecopy: (914) 765-3810; (iv) if to the Trust Paying
Agent, Norwest Bank Minnesota, National Association, 11000 Broken Land Parkway,
Columbia, Maryland 21044, Attention: Fund America 1997-NMC1, telecopy: (410)
884-2360; (v) if to National Mortgage Corporation, to Harlequin Plaza, Suite
330S, 7600 East Orchard Road, Englewood, Colorado 80111-4943, Attention: Craig
Stulz, telecopy (303) 741-8131 or, as to each such party, at such other address
as shall be designated by such party in a written notice to each other party.
33
<PAGE> 38
(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 Certificateholder 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
Company, the Bond Insurer, the Owner Trustee and its successors and each owner
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 NO PETITION. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the Indenture
Trustee and each Bondholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Company
or the Trust, or join in any institution against the Company or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or law in connection with any obligations relating to the
Certificates, the Bonds, this Agreement or any of the Basic Documents.
SECTION 11.9 NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificate represents a
beneficial interest in the Trust only and does not represent an interest in or
an obligation of the Servicer, the Company, the Owner 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
Certificates or the Basic Documents.
SECTION 11.10. 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 11.11. 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
34
<PAGE> 39
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.12. GRANT OF CERTIFICATEHOLDER RIGHTS TO BOND INSURER.
(a) In consideration for the issuance of the Certificates and
for the guarantee of the Bonds by the Bond Insurer pursuant to the Insurance
Policy, the holders of the Certificates hereby grant to the Bond Insurer the
right to act as the holder of 100% of the outstanding Certificates for the
purpose of exercising the rights of the Certificateholders under this Agreement
without the consent of the Certificateholders, including the voting rights of
such holders hereunder, but excluding those rights requiring the consent of all
such holders under Section 11.1 and any rights of such holders to distributions
under Section 5.2(a); provided that the preceding grant of rights to the Bond
Insurer by the holders of the Trust Interest shall be subject to Section 11.14.
(b) The rights of the Bond Insurer to direct certain actions
and consent to certain actions of the Certificateholders hereunder will
terminate at such time as the Balance of the Bonds has been reduced to zero and
the Bond Insurer has been reimbursed for any amounts owed under the Insurance
Policy and the Insurance Agreement and the Bond Insurer has no further
obligation under the Insurance Policy.
SECTION 11.13. THIRD-PARTY BENEFICIARY. The Bond Insurer is an intended
third-party beneficiary of this Agreement, and this Agreement shall be binding
upon and inure to the benefit of the Bond Insurer; provided that,
notwithstanding the foregoing, for so long as a Bond Insurer Default is
continuing with respect to its obligations under the Bond Insurance Policy, the
Bondholders shall succeed to the Bond Insurer's rights hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Agreement that expressly confer rights upon the Bond Insurer shall be for the
benefit of and run directly to the Bond Insurer, and the Bond Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it were
a party to this Agreement.
In addition, the Manager is an intended third-party beneficiary of this
Agreement for purposes of enforcing Section 5.2(d) hereof.
SECTION 11.14. SUSPENSION AND TERMINATION OF BOND INSURER'S RIGHTS.
During the continuation of a Bond Insurer Default, rights granted or
reserved to the Bond Insurer hereunder shall vest instead in the Owners;
provided that the Bond Insurer shall be entitled to any distributions in
reimbursement of the Bond Insurer Reimbursement Amount, and the Bond Insurer
shall retain those rights under Section 11.1 to consent to any amendment of this
Agreement.
At such time as either (i) the Bond Balance of the Bonds has been
reduced to zero or (ii) the Insurance Policy has been terminated and in either
case of (i) or (ii) the Bond Insurer has been reimbursed for all amounts owed
under the Insurance Policy and the Insurance Agreement (and the Bond Insurer no
longer has any obligation under the Insurance Policy, except for breach
35
<PAGE> 40
thereof by the Bond Insurer), then the rights and benefits granted or reserved
to the Bond Insurer hereunder (including the rights to direct certain actions
and receive certain notices) shall terminate and the Certificateholders shall be
entitled to the exercise of such rights and to receive such benefits of the Bond
Insurer following such termination to the extent that such rights and benefits
are applicable to the Certificateholders.
[Signatures follow]
36
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Deposit Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
FUND AMERICA INVESTORS CORPORATION II,
as Depositor
By:
-----------------------------------------
Name: Steven B. Chotin
Title: President
WILMINGTON TRUST COMPANY,
in its individual capacity only as
specifically set forth herein and
otherwise not in its individual capacity,
but solely as Owner Trustee
By:
-----------------------------------------
Authorized Signatory
The Trust Paying Agent hereby acknowledges its appointment as Trust
Paying Agent under this Agreement and agrees to act in such capacity as
described herein.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
37
<PAGE> 42
The Servicer hereby acknowledges its obligations under this Agreement
and agrees to act in accordance therewith.
NATIONAL MORTGAGE CORPORATION
By:
-----------------------------------------
Name: Craig A. Stulz
Title: Executive Vice President
38
<PAGE> 43
EXHIBIT A-1
TO THE TRUST AGREEMENT
(FORM OF CERTIFICATE)
<PAGE> 44
THE EQUITY INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE
HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, FUND AMERICA INVESTORS CORPORATION II) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH
LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR
ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST THEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A CERTIFICATE FROM THE
TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS AN
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO
ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN") AND
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS
NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH
ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND
(C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE
TAXABLE INCOME RELATING TO THIS CERTIFICATE.
1
<PAGE> 45
FUND AMERICA INVESTORS TRUST 1997-NMC1
CERTIFICATE
No. 0001
THIS CERTIFIES THAT ____________________________ (the "Owner") is the
registered owner of a 100% Percentage Interest of the Trust Interest in Fund
America Investors Trust 1997-NMC1 (the "Trust") existing under the laws of the
State of Delaware and created pursuant to that certain Deposit Trust Agreement,
dated as of September 1, 1997 (the "Trust Agreement"), between Fund America
Investors Corporation II, as depositor, and Wilmington Trust Company, in its
individual capacity and in its fiduciary capacity as owner trustee under the
Trust Agreement (the "Owner Trustee"). Capitalized terms used but not otherwise
defined herein have the meanings assigned to such terms in the Trust Agreement.
The Owner Trustee, on behalf of the Issuer and not in its individual capacity,
has executed this Certificate by one of its duly authorized signatories as set
forth below. This Certificate is one of the Certificates referred to in the
Trust Agreement and is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement to which the holder of this Certificate by
virtue of the acceptance hereof agrees and by which the holder hereof is bound.
Reference is hereby made to the Trust Agreement for the rights of the holder of
this Certificate, as well as for the terms and conditions of the Trust created
by the Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this
Certificate except in accordance with terms and provisions of the Agreement.
2
<PAGE> 46
THIS 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 Certificate to be duly executed.
FUND AMERICA INVESTORS TRUST 1997-NMC1
By: Wilmington Trust Company, not in its
individual capacity but solely as
Owner Trustee under the Trust Agreement
By:
-----------------------------------------
Authorized Signatory
DATED: September ___, 1997
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
--------------------------------------------
as Authenticating Agent
By:
-----------------------------------------
Authorized Signatory
3
<PAGE> 47
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 Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing ____________________________________________________
Attorney to transfer said Instrument on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
_____________________
*/
--------------------------------------------
Signature Guaranteed:
*/
--------------------------------------------
__________________
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Instrument in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
4
<PAGE> 48
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
FUND AMERICA INVESTORS TRUST 1997-NMC1
THIS CERTIFICATE OF TRUST OF FUND AMERICA INVESTORS TRUST 1997-NMC1
(the "Trust"), dated as of September 30, 1997, is being duly executed and filed
by Wilmington Trust Company, a Delaware banking corporation, as trustee, to form
a business trust under the Delaware Business Trust Act (12 Del. Code, S 3801 et
seq.).
1. NAME. The name of the business trust formed hereby is FUND AMERICA
INVESTORS TRUST 1997-NMC1.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company of Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890. Attention:
___________.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY, not
in its individual capacity
but solely as Owner Trustee
under a Deposit Trust Agreement, dated
as of September 1, 1997.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
<PAGE> 49
EXHIBIT C
FORM OF INVESTMENT LETTER
<PAGE> 50
___________, 1997
Fund America Investors Corporation II
6400 S. Fiddler's Green Circle
Suite 1200B
Englewood, Colorado 80111
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Re: Fund America Investors Trust 1997-NMC1 (the "Issuer")
Collateralized Mortgage Obligations, Series 1997-NMC1
Ladies and Gentlemen:
___________________________________________________ (the "Holder") has
purchased or acquired, or intends to purchase or acquire from ______________,
the current Holder (the "Current Holder"), a Certificate representing a ___%
Percentage Interest (the "__% Certificate") in the Trust Interest for the
referenced Issuer, which represents an interest in the Issuer created pursuant
to that certain Deposit Trust Agreement, dated as of September 1, 1997 (the
"Trust Agreement"), between Fund America Investors Corporation II, as depositor,
and Wilmington Trust Company, as Owner Trustee. Capitalized terms used and not
otherwise defined herein have the meanings assigned to such terms in the Trust
Agreement.
CERTIFICATION
The undersigned, as an authorized officer or agent of the Holder,
hereby certifies, represents, warrants and agrees on behalf of the Holder as
follows:
1. The Holder is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it was formed and is authorized to
invest in the __% Certificate. The person executing this letter on behalf of the
Holder is duly authorized to do so on behalf of the Holder.
2. The Holder hereby acknowledges that no transfer of the __%
Certificate may be made unless such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and applicable state securities laws, or is made in accordance with the
Securities Act and such laws.
3. The Holder understands that the __% Certificate has not been and
will not be registered under the Securities Act and may be offered, sold,
pledged or otherwise transferred only to a person whom the transferor reasonably
believes is (A) a qualified institutional buyer (as defined in Rule 144A under
the Securities Act) or (B) a Person involved in the organization or
C-1
<PAGE> 51
operation of the Trust or an affiliate of such Person, in a transaction meeting
the requirements of Rule 144A under the Securities Act and in accordance with
any applicable securities laws of any state of the United States. The Holder
understands that the __% Certificate bears a legend to the foregoing effect.
4. The Holder is acquiring the __% Certificate for its own account or
for accounts for which it exercises sole investment discretion, and not with a
view to or for sale or other transfer in connection with any distribution of the
__% Certificate in any manner that would violate Section 5 of the Securities Act
or any applicable state securities laws, subject nevertheless to any requirement
of law that the disposition of the Holder's property shall at all times be and
remain within its control.
5. The Holder is (A) a "qualified institutional buyer" (a "QIB") as
defined in Rule 144A under the Securities Act, and is aware that the transferor
of the __% Certificate may be relying on the exemption from the registration
requirements of the Securities Act provided by Rule 144A and is acquiring such
__% Certificate for its own Account or for the Account of one or more qualified
institutional buyers for whom it is authorized to act, or (B) a Person involved
in the organization or operation of the Trust or an affiliate of such Person
within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as
amended (including, but not limited to, the Transferor). The Holder is able to
bear the economic risks of such an investment. The Holder is a QIB because
[STATE FACTUAL BASIS FOR QIB STATUS]
6. If the Holder sells or otherwise transfers the registered ownership
of such __% Certificate, the Holder will comply with the restrictions and
requirements with respect to the transfer of the ownership of the __%
Certificate under the Trust Agreement, and the Holder will obtain from any
subsequent purchaser or transferee substantially the same certifications,
representations, warranties and covenants as required under the Trust Agreement
in connection with such subsequent sale or transfer thereof.
7. The Holder is not an entity that will hold a __% Certificate as
nominee (a "Book Entry Nominee") to facilitate the clearance and settlement of
such security through electronic book-entry changes in Accounts or participating
organizations.
8. The Holder is not (i) is not a person which is an employee benefit
plan, trust or account subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code or a
governmental plan, defined in Section 3(32) of ERISA subject to any federal,
state or local law which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (any such person being a "plan") and (ii) is not
an entity, including an insurance company separate account or general account,
whose underlying assets include plan assets by reason of a plan's investment in
the entity and is not directly or indirectly purchasing such __% Certificate on
behalf of, as investment manager of, as named fiduciary of, as trustee of, or
with assets of a Plan.
9. The Holder hereby agrees to indemnify each of the Issuer, the
Indenture Trustee and the Owner Trustee against any liability that may result if
the Holder's transfer of a __% Certificate (or any portion thereof) is not
exempt from the registration requirements of the
C-2
<PAGE> 52
Securities Act and any applicable state securities laws or is not made in
accordance with such federal and state laws. Such indemnification of the Issuer,
the Owner Trustee shall survive the termination of the related Trust Agreement.
IN WITNESS WHEREOF, the Holder has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its duly authorized signatory this ___ day of _________, 199_.
[NAME OF HOLDER]
--------------------------------------------
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
C-3
<PAGE> 1
EXHIBIT 10.3
========================================================
SERVICING AGREEMENT
Dated as of September 1, 1997
among
FUND AMERICA INVESTORS TRUST 1997-NMC1,
as Issuer,
NATIONAL MORTGAGE CORPORATION,
as Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee and Backup Servicer
========================================================
Adjustable Rate Mortgage Loans
Pledged under an Indenture dated as of September 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.01. Definitions...............................................................................1
Section 1.02. Interest Calculations....................................................................16
Section 1.03. Determination of Material Adverse Effect.................................................16
ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................................17
Section 2.01. Servicing Generally......................................................................17
Section 2.02. Collection of Certain Mortgage Loan Payments; Collection Account.........................18
Section 2.03. Hazard Insurance Policies................................................................21
Section 2.04. Enforcement of Due-on-Sale Clauses; Assumption and Modification Agreements..............22
Section 2.05. Realization upon Defaulted Mortgage Loans, Options to Purchase Mortgage Loans...........23
Section 2.06. Indenture Trustee to Cooperate; Release of Mortgage Files................................24
Section 2.07. Servicing Compensation; Payment of Certain Expenses by the Servicer;
Compensation Interest.................................................................25
Section 2.08. Annual Statement as to Compliance........................................................26
Section 2.09. Annual Independent Public Accountants' Servicing Report..................................26
Section 2.10. Access to Certain Documentation and Information Regarding the Mortgage Loans............27
Section 2.11. Maintenance of Fidelity Bond and Errors and Omissions Policy.............................27
Section 2.12. Notices to the Issuer, the Rating Agencies, the Indenture Trustee and the Bond
Insurer...............................................................................27
Section 2.13. Reports of Foreclosures and Abandonment of Mortgaged Properties..........................28
Section 2.14. Sub-Servicers and Sub-Servicing Agreements...............................................28
Section 2.15. Servicing for Benefit of the Bond Insurer................................................28
Section 2.16. Annual Lien Opinions; Bond Redemptions...................................................29
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE III SERVICER REMITTANCE REPORT; BACK-UP SERVICER.........................................................29
Section 3.01. Servicer Remittance Report...............................................................29
Section 3.02. Reserved.................................................................................29
Section 3.03. Oversight of Servicing...................................................................30
Section 3.04. Back-Up Servicer Compensation............................................................31
Section 3.05. Duties and Responsibilities..............................................................31
ARTICLE IV MONTHLY ADVANCES AND SERVICING ADVANCES...............................................................32
Section 4.01. Monthly Advances; Servicing Advances.....................................................32
ARTICLE V THE SERVICER...........................................................................................33
Section 5.01. Representations and Warranties of the Servicer...........................................33
Section 5.02. Liability of the Servicer................................................................34
Section 5.03. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer...........34
Section 5.04. Limitation on Liability of the Servicer and Others.......................................35
Section 5.05. Servicer Not to Resign...................................................................35
ARTICLE VI DEFAULT...............................................................................................36
Section 6.01. Events of Default........................................................................36
Section 6.02. Indenture Trustee to Act; Appointment of Successor.......................................38
Section 6.03. Notifications to Bondholders.............................................................38
Section 6.04. Assumption or Termination of Sub-Servicing Agreements by the Indenture Trustee
or any Successor Servicer.............................................................39
Section 6.05. Payment of Indenture Trustee's Fees and Expenses.........................................39
ARTICLE VII TERMINATION..........................................................................................40
Section 7.01. Termination..............................................................................40
ARTICLE VIII MISCELLANEOUS PROVISIONS............................................................................41
Section 8.01. Amendment................................................................................41
Section 8.02. Governing Law............................................................................42
Section 8.03. Notices..................................................................................42
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 8.04. Severability of Provisions...............................................................42
Section 8.05. Assignment...............................................................................43
Section 8.06. Third Party Beneficiary; Rating..........................................................43
Section 8.07. Counterparts.............................................................................43
Section 8.08. Intention of the Parties.................................................................43
Section 8.09. Waivers and Modifications................................................................43
Section 8.10. Further Agreements.......................................................................44
Section 8.11. Attorney-in-Fact.........................................................................44
</TABLE>
SCHEDULES AND EXHIBITS
Schedule I Mortgage Loan Schedule
Exhibit A Form of Annual Statement as to Compliance
Exhibit B Form of Request for Release
Exhibit C Ancillary Servicing Compensation
Exhibit D Summary of Servicer's Collection Procedures
Exhibit E Form of Liquidation Report
iii
<PAGE> 5
THIS SERVICING AGREEMENT (this "Agreement"), dated as of September 1,
1997, among Fund America Investors Trust 1997-NMC1, as issuer of its
Collateralized Mortgage Obligations, Series 1997-NMC1 (the "Issuer"), National
Mortgage Corporation, as servicer (in such capacity, together with permitted
successors hereunder, the "Servicer"), and Norwest Bank Minnesota, National
Association, not in its individual capacity but as trustee pursuant to that
certain indenture (the "Indenture"), dated as of September 1, 1997 (the
"Indenture Trustee"), between the Issuer and the Indenture Trustee, and Norwest
Bank Minnesota, National Association, as the Back-Up Servicer (the "Back-Up
Servicer") recites and provides as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing sub-prime
mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture Trustee certain
sub-prime residential mortgage loans, identified on Schedule I hereto (the
"Mortgage Loans") in connection with the issuance of the Issuer's Collateralized
Mortgage Obligations, Series 1997-NMC1 (the "Bonds");
WHEREAS, the Issuer desires to contract with the Servicer for the
servicing responsibilities associated with the Mortgage Loans and the Servicer
desires to assume the servicing responsibilities associated with such Mortgage
Loans; and
WHEREAS, the Issuer, the Servicer and the Indenture Trustee desire to
execute this Agreement to define each party's rights, duties and obligations
relating to the servicing of the Mortgage Loans.
NOW, THEREFORE, in consideration of the above premises and of the
mutual agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Issuer, the Servicer and the Indenture Trustee hereby 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
Section 1.01. Terms capitalized and not otherwise defined herein shall have the
meanings assigned to such terms in the Indenture, even after the Indenture shall
have been terminated.
"AFFILIATE": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the
<PAGE> 6
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings corresponding to the foregoing.
"AGGREGATE PRINCIPAL BALANCE": As defined in the Indenture.
"AGREEMENT": This Servicing Agreement, dated as of September 1, 1997,
among the Issuer, the Servicer and the Indenture Trustee, and all amendments
hereof and supplements hereto.
"APPRAISAL": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, FNMA and FHLMC standards, and must meet the
appraisal standards of the Uniform Standards of Professional Appraisal Practice.
"APPRAISED VALUE": With respect to any Mortgaged Property, the lesser
of (a) the value thereof as determined by an Appraisal and (b) the purchase
price paid for the related Mortgaged Property by the Mortgagor with the proceeds
of the related Mortgage Loan; provided, however, that in the case of a
Refinanced Mortgage Loan, the Appraised Value of the Mortgaged Property shall be
equal to the value thereof as determined by an Appraisal.
"ANCILLARY SERVICING COMPENSATION": Prepayment fees, assumption fees,
fees for insufficient funds, and other items listed on Exhibit C hereto
collected by the Servicer from Mortgagors.
"BASE NET WORTH": For any fiscal quarter at the end of which the
Servicer's Net Worth is less than $15,000,000, $6,700,000. For any fiscal
quarter after the first fiscal quarter at the end of which the Servicer's Net
Worth equals or exceeds $15,000,000, $11,250,000.
"BOND ACCOUNT": The segregated trust account established and maintained
by the Indenture Trustee pursuant to Section 8.02 of the Indenture.
"BOND BALANCE": As defined in the Indenture.
"BONDHOLDER" or "HOLDER": The Person in whose name a Bond is registered
in the Bond Register, except that, solely for the purpose of taking any action
under Article Six or giving any consent pursuant to this Agreement, any Bond
registered in the name of the Issuer or the Servicer or any Person actually
known to a Responsible Officer of the Indenture Trustee to be an Affiliate of
the Issuer or the Servicer shall be deemed not to be outstanding and the Voting
Interest evidenced thereby shall not be taken into account in determining
whether Holders of the requisite Voting Interests necessary to take any such
action or effect any such consent have acted or consented unless the Issuer, the
Servicer or any such Person is an owner of record of all of the Bonds.
"BOND INSURANCE POLICY": The Financial Guaranty Insurance Policy (No.
24873), dated September 30, 1997, including any endorsements thereto, issued by
the Bond Insurer for the
2
<PAGE> 7
benefit of the Bondholders, pursuant to which the Bond Insurer guarantees
payment of Insured Payments.
"BOND INSURER": MBIA Insurance Corporation, a stock insurance company
organized and created under the laws of the State of New York, and any
successors thereto.
"BOND INSURER DEFAULT": The existence and continuance of any of the
following:
(a) an MBIA Payment Default;
(b) entry by a court having jurisdiction in the premises of
(1) a final and nonappealable decree or order for relief in respect of
the Bond Insurer in an involuntary case or proceeding under any
applicable United States federal or state bankruptcy, insolvency,
rehabilitation, reorganization or other similar law or (2) a final and
nonappealable decree or order adjudging the Bond Insurer bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, rehabilitation, arrangement, adjustment or composition
of or in respect of the Bond 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 Bond 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
(c) the commencement by the Bond Insurer of a voluntary case
or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated bankrupt or insolvent, or
the consent of the Bond Insurer to the entry of a decree or order for
relief in respect of the Bond Insurer in an involuntary case or
proceeding under any applicable United States federal or state
bankruptcy, insolvency case or proceeding against Bond Insurer, or the
filing by the Bond 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 Bond 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 Bond Insurer or of any substantial part of its
property, or the failure by the Bond Insurer to pay debts generally as
they become due, or the admission by the Bond Insurer in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Bond Insurer in furtherance of any such
action.
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Bond Insurer Default, the consent by the Bond
Insurer shall not be required for any action or inaction hereunder and the Bond
Insurer shall not have any rights with respect thereto except that the Bond
Insurer shall be entitled to an Opinion of Counsel to the effect that such
amendment does not materially and adversely impair the Bond Insurer's interests
if an amendment is requested while a Bond Insurer Default is continuing.
3
<PAGE> 8
"BOND INSURER PARTIES": The Bond Insurer or its respective agents,
representatives, directors, officers or employees.
"BOND REGISTER": The register maintained pursuant to Section 2.06 of
the Indenture.
"BONDS": The Issuer's Collateralized Mortgage Obligations, Series
1997-NMC1, issued pursuant to the Indenture.
"BUSINESS DAY": Any day other than (a) a Saturday or a Sunday or (b) a
day on which banking institutions in the State of Colorado, the State of New
York, the State of Delaware, the State of Minnesota or the state in which the
principal office of the Bond Insurer is located are required or authorized by
law, executive order or governmental decree to be closed.
"CERTIFICATE DISTRIBUTION ACCOUNT": As defined in the Deposit Trust
Agreement.
"CLOSING DATE": On or about September 30, 1997.
"CODE": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form and proposed regulations thereunder to the extent that,
by reason of their proposed effective date, such proposed regulations would
apply.
"COLLECTION ACCOUNT": The segregated trust account or accounts, which
shall at all times be an Eligible Account, established and maintained pursuant
to Section 2.02(b) and entitled "[Servicer], in trust for the benefit of Holders
of Fund America Investors Trust 1997-NMC1 Collateralized Mortgage Obligations,
Series 1997-NMC1 and MBIA as Bond Insurer, Collection Account". References
herein to the Collection Account shall include any Sub-Servicing Account as the
context requires. If an Event of Default described in Section 6.01(f) hereof
occurs, the Servicer shall close the existing Collection Account and cause it to
be re-established in the name of the Indenture Trustee, and transfer all funds
from the old Collection Account to the new Collection Account.
"COLLECTION PERIOD": As to any Deposit Date, the period beginning on
the first day of the calendar month immediately preceding the month in which
such Deposit Date occurs and ending on the last day of such calendar month.
"COMPENSATING INTEREST": With respect to any Mortgage Loan as to which
a prepayment in whole or in part was received by the Servicer from the related
Mortgagor during a Collection Period, an amount equal to the lesser of (a) the
Monthly Servicing Fee for such Collection Period and (b) the difference between
(1) 30 days' interest at the related Mortgage Interest Rate on the Principal
Balance of such Mortgage Loan (immediately prior to such prepayment) and (2) the
amount of interest actually collected by the Servicer on such Mortgage Loan
during the related Due Period.
4
<PAGE> 9
"CUMULATIVE LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of the fraction obtained by dividing (1) the principal amount of
cumulative Realized Losses on the Mortgage Loans from the applicable Cut-off
Dates through the end of the related Collection Period by (2) the Initial Pool
Balance.
"CUMULATIVE LOSS RATE TRIGGER": The "Cumulative Loss Rate Trigger"
occurs on a Deposit Date if the Cumulative Loss Percentage exceeds the
percentage specified in the table below for the period in which such Deposit
Date occurs.
<TABLE>
<CAPTION>
Deposit Dates Cumulative
from and including to and including Loss Percentage
------------------ ---------------- ---------------
<S> <C> <C>
October 1997 September 1998 1.00%
October 1998 September 1999 1.75%
October 1999 September 2000 2.50%
October 2000 September 2001 3.25%
October 2001 thereafter 4.00%
</TABLE>
"CUT-OFF DATE": For any Mortgage Loan, the later of September 1, 1997
or the date of funding of such Mortgage Loan by National Mortgage Corporation
(which date has occurred prior to the Closing Date).
"DELINQUENCY PERCENTAGE": For any Payment Date, the percentage
equivalent of the fraction obtained by dividing (1) the aggregate of the
Principal Balances of all Mortgage Loans that were 90 days contractually
delinquent, REO Property, in foreclosure, or for which the related Mortgagor was
in a bankruptcy proceeding or paying a reduced Monthly Payment as a result of a
bankruptcy workout, as of the end of the related Collection Period, by (2) the
aggregate of the Principal Balance of all of the Mortgage Loans as of the
related Determination Date.
"DELINQUENCY RATE TRIGGER": The Rolling Delinquency Percentage
equalling or exceeding 14.0% as of any Payment Date.
"DEPOSIT DATE": As to any Payment Date, the 18th day of the month in
which such Payment Date occurs or, if such 18th day is not a Business Day, the
next succeeding Business Day.
"DEPOSIT TRUST AGREEMENT": The Deposit Trust Agreement, dated as of
September 1, 1997, between Fund America Investors Corporation II, as depositor,
Wilmington Trust Company, as owner trustee, Norwest Bank Minnesota, National
Association, as trust paying agent, and the Servicer, pursuant to which the
Issuer was formed.
"DETERMINATION DATE": As to any Deposit Date, the close of business on
the last day of the calendar month preceding the calendar month in which such
Deposit Date occurs.
"DUE PERIOD": As defined in the Indenture.
5
<PAGE> 10
"ELIGIBLE ACCOUNT": Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by Standard & Poor's and "Aa2" or better by Moody's and in the highest
short-term rating category by Standard & Poor's and Moody's, and that is either
(1) a federal savings and loan association duly organized, validly existing and
in good standing under the federal banking laws, (2) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (3) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (4) a principal
subsidiary of a bank holding company or (5) approved in writing by the Bond
Insurer or (B) a trust account maintained with the trust department of a federal
or state chartered depository institution or trust company, having capital and
surplus of not less than $100,000,000, acting in its fiduciary capacity, the
unsecured and uncollateralized debt obligations of which shall be rated "Baa3"
or better by Moody's. Any Eligible Accounts maintained with the Indenture
Trustee shall conform to the preceding clause (B).
"EVENT OF DEFAULT": As defined in Section 6.01.
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"FEMA": The Federal Emergency Management Agency and its successors in
interest.
"FHLMC": The Federal Home Loan Mortgage Corporation and its successors
in interest.
"FNMA": Fannie Mae and its successors in interest.
"GROSS MARGIN": With respect to any Mortgage Loan, the fixed percentage
amount set forth in the related Mortgage Note, which amount is added to the
Index in accordance with the terms of the related Mortgage Note to determine the
Mortgage Interest Rate.
"INDENTURE": The indenture, dated as of September 1, 1997, between the
Issuer and the Indenture Trustee pursuant to which the Mortgage Loans and
certain other assets included in the Trust Estate are pledged as collateral for
the Bonds, and any supplements or amendments thereto.
"INDENTURE TRUSTEE": Norwest Bank Minnesota, National Association, a
national banking association, and its successors in interest or any successor
trustee appointed as provided pursuant to the Indenture.
"INDENTURE TRUSTEE FEE": The monthly fee of the Indenture Trustee,
which shall be determined as set forth in the Indenture.
"INDEX": With respect to any Mortgage Loan, the applicable index for
computing the Mortgage Interest Rate as specified in the Mortgage Note. The
Index for each Mortgage Loan shall be Six-Month LIBOR.
6
<PAGE> 11
"INFORMATION": As defined in Section 3.02.
"INITIAL POOL BALANCE": The aggregate of the Principal Balances of the
Mortgage Loans determined as of their respective Cut-off Dates (after
application of all payments of principal received in respect of any such
Mortgage Loan before such Cut-off Dates), which aggregate amount is
$123,620,068.92.
"INSURANCE PROCEEDS": With respect to any Deposit Date, proceeds paid
by any insurer (other than the Bond Insurer) and received by the Servicer during
the related Collection Period pursuant to any insurance policy covering a
Mortgage Loan or the related Mortgaged Property, including any deductible
payable by the Servicer with respect to a blanket insurance policy pursuant to
Section 2.03 and the proceeds from any fidelity bond or errors and omission
policy pursuant to Section 2.11, net of any component thereof covering any
expenses incurred by or on behalf of the Servicer and specifically reimbursable
under this Agreement.
"INSURED PAYMENT": As defined in the Indenture.
"ISSUER": Fund America Investors Trust 1997-NMC1, as issuer of the
Bonds pursuant to the Indenture.
"LIQUIDATED MORTGAGE LOAN": As to any Deposit Date, any Mortgage Loan
(1) as to which the Servicer has determined, in accordance with the servicing
procedures specified herein, that all Liquidation Proceeds that it expects to
recover from or on account of such Mortgage Loan have been recovered, (2) that
has been purchased by the Servicer pursuant to Section 2.05 on or prior to such
Deposit Date or (3) that has been repurchased by the Seller pursuant to Section
7 of the Mortgage Loan Sale Agreement on or prior to such Deposit Date.
"LIQUIDATION EXPENSES": Expenses that are incurred by the Servicer in
connection with the liquidation of any Mortgage Loan and not recovered under any
insurance policy or from any Mortgagor. Such expenses with respect to any
Liquidated Mortgage Loan shall include, without limitation, legal fees and
expenses, real estate brokerage commissions, any unreimbursed amount expended by
the Servicer pursuant to Section 2.05 respecting the related Mortgage Loan, and
any other related and previously unreimbursed Servicing Advances.
"LIQUIDATION PROCEEDS": Cash (other than Insurance Proceeds) received
in connection with the liquidation of any Mortgaged Property, whether through
trustee's sale, foreclosure sale, condemnation, taking by eminent domain or
otherwise received in respect of any Mortgage Loan foreclosed upon as described
in Section 2.05 (including, without limitation, proceeds from the rental of the
related Mortgaged Property).
"LIQUIDATION REPORT": A liquidation report in the form of Exhibit E
attached hereto.
"LOAN-TO-VALUE RATIO": With respect to any Mortgage Loan as of its date
of origination, the ratio as of its date of origination borne by the outstanding
principal amount of the Mortgage Loan to the Appraised Value of the related
Mortgaged Property.
7
<PAGE> 12
"MAXIMUM RATE": With respect to any Mortgage Loan, any absolute maximum
Mortgage Interest Rate set by provisions in the related Mortgage Note.
"MBIA PAYMENT DEFAULT": As defined in the Indenture.
"MINIMUM RATE": With respect to any Mortgage Loan, any absolute minimum
Mortgage Interest Rate, set by provisions in the related Mortgage Note, subject
to the initial Mortgage Interest Rate first adjusting to a level in excess of
such minimum Mortgage Interest Rate in accordance with the terms of the Mortgage
Note.
"MONTHLY ADVANCE": As defined in Section 4.01(a).
"MONTHLY PAYMENT": With respect to any Mortgage Note, the amount of
each monthly payment payable by the Mortgagor under such Mortgage Note in
accordance with its terms, including one month's accrued interest on the related
Principal Balance at the then applicable Mortgage Interest Rate, but net of any
portion of such monthly payment that represents late payment charges, prepayment
or extension fees or collections allocable to payments to be made by Mortgagors
for payment of insurance premiums or similar items.
"MONTHLY SERVICING FEE": With respect to any Payment Date, 1/12 of the
product of the Servicing Fee Rate and the Aggregate Principal Balance of the
Mortgage Loans as of the first day of the related Due Period (or, in the case of
the first Collection Period, the Initial Pool Balance).
"MOODY'S": Moody's Investors Service, Inc. and its successors in
interest.
"MORTGAGE": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
"MORTGAGE FILE": As defined in the Mortgage Loan Sale Agreement.
"MORTGAGE INTEREST RATE": As defined in the Indenture.
"MORTGAGE LOAN": Each of the mortgage loans pledged to the Indenture
Trustee pursuant to the Indenture that from time to time comprise part of the
Trust Estate, all of which originally so held being identified in the Mortgage
Loan Schedule attached hereto as Schedule I.
"MORTGAGE LOAN DOCUMENTS": As defined in the Mortgage Loan Sale
Agreement and the Indenture.
"MORTGAGE LOAN SALE AGREEMENT": That certain agreement, dated as of
September 1, 1997, between National Mortgage Corporation, as seller, and the
Transferor, as purchaser, pursuant to which the Transferor acquired the Mortgage
Loans.
"MORTGAGE LOAN SCHEDULE": As of any date, the schedule of Mortgage
Loans then subject to this Agreement. The initial schedule of Mortgage Loans as
of the Cut-off Dates therefor is attached hereto as Schedule I. The Mortgage
Loan Schedule shall be amended from
8
<PAGE> 13
time to time by the Servicer to reflect the addition of Mortgage Loans to, and
the removal of Mortgage Loans from, the Trust Estate pursuant to the Indenture.
The Mortgage Loan Schedule shall identify each Mortgage Loan by the Servicer's
loan number and address (including the state) of the related Mortgaged Property
and shall set forth as to each Mortgage Loan the initial Loan-to-Value Ratio,
the Cut-off Date, the Index, the Gross Margin, the current Monthly Payment
amount and the stated maturity date of the related Mortgage Note. The Mortgage
Loan Schedule shall be delivered to the Indenture Trustee in both physical and
computer-readable form.
"MORTGAGE NOTE": The note or other instrument evidencing the
indebtedness of a Mortgagor under the related Mortgage Loan.
"MORTGAGED PROPERTY": The underlying property securing a Mortgage
Loan.
"MORTGAGOR": The obligor under a Mortgage Note.
"NET LIQUIDATION PROCEEDS": As to any Mortgage Loan, Liquidation
Proceeds net of Liquidation Expenses. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan through the end of the Collection Period in which the
related liquidation occurred, and then to the Principal Balance thereof.
"NET WORTH": For any fiscal quarter, the sum of the Servicer's assets
reflected on a balance sheet for such fiscal quarter prepared in accordance with
GAAP consistently applied minus the sum of the Servicer's liabilities required
to be shown as such on a balance sheet for such fiscal quarter prepared in
accordance with GAAP consistently applied.
"NONRECOVERABLE ADVANCE": Any Servicing Advance or Monthly Advance
that, in the Servicer's reasonable judgment, would not be ultimately recoverable
by the Servicer from late collections, Insurance Proceeds or Liquidation
Proceeds on the related Mortgage Loan or otherwise, as evidenced by an Officer's
Certificate delivered to the Bond Insurer and the Indenture Trustee no later
than the Business Day following the Servicer's determination thereof.
"OFFICER'S CERTIFICATE": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Transferor, the Servicer or, in the case of the Issuer,
an authorized signatory of the Owner Trustee, as the case may be, and delivered
to the Indenture Trustee, Bond Insurer or each Rating Agency, as the case may
be.
"OPINION OF COUNSEL": A written opinion of counsel in form and
substance reasonably acceptable to the Indenture Trustee and, in the case of
opinions delivered to Bond Insurer, in form and substance reasonably acceptable
to it. Any expense related to obtaining an Opinion of Counsel for an action
requested by a party shall be borne by the party required to obtain such opinion
or seeking to effect the action that requires the delivery of such Opinion of
Counsel.
"ORIGINAL PRINCIPAL AMOUNT": With respect to any Mortgage Loan, the
original principal amount due under the related Mortgage Note as of its date of
origination.
9
<PAGE> 14
"PAYMENT AHEAD": Any payment remitted by a Mortgagor with respect to a
Mortgage Note during a Due Period in excess of the Monthly Payment due during
such Due Period with respect to such Mortgage Note, which excess sums the
related Mortgagor has instructed the Servicer to apply to Monthly Payments due
in one or more subsequent Due Periods. A Monthly Payment that was a Payment
Ahead shall, for purposes of computing certain amounts under this Agreement, be
deemed to have been received by the Servicer on the date in the related Due
Period on which such Monthly Payment would have been due if such Monthly Payment
had not been paid as part of a Payment Ahead.
"PAYMENT DATE": The date of payment on the Bonds pursuant to the
Indenture, which date is the 25th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
October 27, 1997.
"PERCENTAGE INTEREST": As defined in the Indenture.
"PERMITTED INVESTMENTS": One or more of the following obligations,
instruments and securities:
(a) direct obligations of, and obligations fully guaranteed
by, the United States of America, FHLMC, FNMA, the Federal Home Loan Banks or
any agency or instrumentality of the United States of America rated "Aa3" or
higher by Moody's, the obligations of which are backed by the full faith and
credit of the United States of America;
(b)(i) demand and time deposits in, certificates of deposit
of, banker's acceptances issued by or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or its agent
acting in their respective commercial capacities) incorporated under the laws of
the United States of America or any state thereof and subject to supervision and
examination by federal and/or state authorities, so long as, at the time of such
investment or contractual commitment providing for such investment, such
depository institution or trust company or its ultimate parent has a short-term
unsecured debt rating in one of the two highest available rating categories of
S&P and Moody's and provided that each such investment has an original maturity
of no more than 365 days, and (ii) any other demand or time deposit or deposit
which is fully insured by the Federal Deposit Insurance Corporation;
(c) repurchase obligations with a term not to exceed 30 days
with respect to any security described in clause (a) above and entered into with
a depository institution or trust company (acting as a principal) rated "A" or
higher by "S&P" and rated "A2" or higher by Moody's; provided, however, that
collateral transferred pursuant to such repurchase obligation must be of the
type described in clause (a) above and must (i) be valued daily at current
market price plus accrued interest, (ii) pursuant to such valuation, be equal,
at all times, to 105% of the cash transferred by the Indenture Trustee in
exchange for such collateral and (iii) be delivered to the Indenture Trustee or,
if the Indenture Trustee is supplying the collateral, an agent for the Indenture
Trustee, in such a manner as to accomplish perfection of a security interest in
the collateral by possession of certified securities;
10
<PAGE> 15
(d) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of America
or any state thereof which has a long-term unsecured debt rating in the highest
available rating category of each of the Rating Agencies at the time of such
investment;
(e) commercial paper having an original maturity of less than
365 days and issued by an institution having a short-term unsecured debt rating
in the highest available rating category of each of the Rating Agencies at the
time of such investment;
(f) a guaranteed investment contract approved by each of the
Rating Agencies and the Bond Insurer and issued by an insurance company or other
corporation having a long-term unsecured debt rating in the highest available
rating category of each of the Rating Agencies at the time of such investment;
(g) money market funds having ratings in one of the two
highest available rating categories of S&P and in the highest available rating
category by Moody's at the time of such investment which invest only in other
Permitted Investments (any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity requirements for
Permitted Investments set forth herein), including money market funds of the
Indenture Trustee and any such funds that are managed by the Indenture Trustee
or its affiliates or for which the Indenture Trustee or any affiliate acts as
advisor as long as such money market funds satisfy the criteria of this
subparagraph (g); and
(h) any investment approved in writing by the Bond Insurer;
provided that each Rating Agency must have issued written evidence that any such
investment will not result in a downgrading or withdrawal of the rating by each
Rating Agency on the Bonds.
"PERSON": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"PRINCIPAL BALANCE": As to any Mortgage Loan and any Determination
Date, the actual outstanding principal amount thereof as of the close of
business on the Determination Date in the preceding month (or, in the case of
the first Determination Date, as of the applicable Cut-off Date) less (1) all
scheduled payments of principal received or advanced in respect of such Mortgage
Loan and due during the related Due Period, (2) all other amounts collected,
received or otherwise recovered in respect of principal on the Mortgage Loans
(including Principal Prepayments, but not including Payments Ahead that are not
allocable to principal for the related Due Period) during or in respect of the
related Collection Period, (3) Net Liquidation Proceeds and Trust Insurance
Proceeds allocable to principal recovered or collected in respect of such
Mortgage Loan during the related Collection Period, (4) the portion of the
Purchase Price allocable to principal to be remitted to the Indenture Trustee on
or prior to the next succeeding Deposit Date in connection with a release and
removal of such Mortgage Loan pursuant to the Indenture, to the extent such
amount is actually remitted on or prior to such Deposit Date, and (5) the amount
to be remitted by the Seller to the Indenture Trustee on the next succeeding
11
<PAGE> 16
Deposit Date in connection with a substitution of a Qualified Replacement
Mortgage Loan for such Mortgage Loan pursuant to the Indenture, to the extent
such amount is actually remitted on or prior to such Deposit Date; provided,
however, that a Mortgage Loan that has become a Liquidated Mortgage Loan since
the preceding Determination Date (or, in the case of the first Determination
Date, since the applicable Cut-off Date) will be deemed to have a Principal
Balance of zero on the current Determination Date.
"PRINCIPAL PREPAYMENT": As to any Mortgage Loan and Collection Period,
any payment by a Mortgagor or other recovery in respect of principal on a
Mortgage Loan (including Net Liquidation Proceeds) that, in the case of a
payment by a Mortgagor, is received in advance of its scheduled due date and is
not a Payment Ahead.
"PURCHASE PRICE": As defined in the Indenture.
"RATING AGENCIES": Standard & Poor's and Moody's (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Servicer, notice of which
designation shall be given to the Indenture Trustee.
"REALIZED LOSS": With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance of such Mortgage Loan and accrued
and unpaid interest thereon (determined as of the Determination Date immediately
prior to such Mortgage Loan becoming a Liquidated Mortgage Loan) exceeds the Net
Liquidation Proceeds, if any, in respect of such Mortgage Loan, which amount
shall in no event exceed the Principal Balance of such Mortgage Loan (determined
as of the Determination Date immediately prior to such Mortgage Loan becoming a
Liquidated Mortgage Loan).
"REFINANCED MORTGAGE LOAN": A Mortgage Loan the proceeds of which were
not used to purchase the related Mortgaged Property.
"REMITTABLE FUNDS": With respect to any Deposit Date, the amount equal
to the aggregate of the following amounts:
(a) all payments in respect of or allocable to interest
received (or deemed to have been received in the case of Payments Ahead) with
respect to the Mortgage Loans and due during the related Due Period and all
other interest payments on or in respect of the Mortgage Loans received by or on
behalf of the Servicer during the related Collection Period, net of amounts
representing interest accrued on such Mortgage Loans in respect of any period
prior to the applicable Cut-off Dates, plus any Compensating Interest payments
made by the Servicer and any net income from related REO Properties collected
during the related Collection Period;
(b) all scheduled payments of principal received (or deemed to
have been received, in the case of Payments Ahead) with respect to the Mortgage
Loans and due during the related Due Period, and all other principal payments
(including Principal Prepayments) received or deemed to have been received
during the related Collection Period;
12
<PAGE> 17
(c) all Trust Insurance Proceeds and Net Liquidation Proceeds
received during the related Collection Period; and
(d) the amount of Monthly Advances made by the Servicer in
respect of such Deposit Date pursuant to Section 4.01(a);
but net of the following amounts:
(1) the Monthly Servicing Fee and any other
compensation payable to the Servicer pursuant to
Section 2.07 for the related Collection Period
(except to the extent used to pay Compensating
Interest) to the extent not previously paid to or
retained by the Servicer;
(2) the aggregate amount of Monthly
Advances, if not theretofore recovered from the
Mortgagor on whose behalf such Monthly Advance was
made, from subsequent collections on the related
Mortgage Loan (other than those included in the
related Liquidation Expenses or netted out by the
Servicer from related Insurance Proceeds);
(3) the aggregate amount of Servicing
Advances, if not theretofore recovered from the
Mortgagor on whose behalf such Servicing Advance was
made, from subsequent collections on the related
Mortgage Loan (other than those included in the
related Liquidation Expenses or netted out by the
Servicer from related Insurance Proceeds);
(4) the aggregate amount of Nonrecoverable
Advances not previously reimbursed to the Servicer;
(5) any amount deposited into the Collection
Account that may not be withdrawn therefrom pursuant
to a final and nonappealable order of a United States
bankruptcy court of competent jurisdiction imposing a
stay pursuant to Section 362 of the United States
Bankruptcy Code and that would otherwise have been
included in Remittable Funds on such Deposit Date;
and
(6) excess Net Liquidation Proceeds as
described in the second paragraph of Section 2.05.
"REO PROPERTY": As defined in Section 4.01(a).
"RESPONSIBLE OFFICER": When used with respect to the Indenture Trustee,
the Chairman or Vice Chairman of the Board of Directors or Trustees, the
Chairman or Vice Chairman of the Executive or Standing Committee of the Board of
Directors or Trustees, the President, the Chairman of the Committee on Trust
Matters, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any
Trust Officer or Assistant Trust Officer, the Controller and any Assistant
Controller or any other officer
13
<PAGE> 18
of the Indenture Trustee customarily performing functions similar to those
performed by any of the above designated officers and to whom, with respect to a
particular matter, such matter is referred because of such officer's knowledge
of and familiarity with the particular subject.
"ROLLING DELINQUENCY PERCENTAGE": As of any Payment Date, the average
of the Delinquency Percentages as of the last day of each of the six (or one,
two, three, four and five in the case of the first five Deposit Dates, as
applicable) most recently ended Collection Periods.
"ROLLING LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of a fraction, the numerator of which is the aggregate amount of
Realized Losses incurred during the preceding 12 Collection Periods, and the
denominator of which is the aggregate Principal Balances of the Mortgage Loans
as of the first day of the 12th preceding Collection Period.
"ROLLING LOSS RATE TRIGGER": The Rolling Loss Percentage equalling or
exceeding 1.25% as of any Deposit Date on or after the Deposit Date occurring in
September 1998.
"SELLER": National Mortgage Corporation, as seller of the Mortgage
Loans pursuant to the Mortgage Loan Sale Agreement.
"SERVICER": National Mortgage Corporation or any successor servicer
appointed as provided pursuant to this Agreement.
"SERVICER MORTGAGE FILE": As to each Mortgage Loan, a file maintained
by the Servicer that contains (1) an original hazard insurance policy (and flood
insurance policy, if required pursuant to Section 2.03 hereof) relating to the
underlying Mortgaged Property or a certificate of insurance issued by the
insurer or its agent indicating that a hazard insurance policy (and flood
insurance policy, if required pursuant to Section 2.03 hereof) is in effect with
respect to such Mortgaged Property, (2) the originals of all RESPA and
Regulation Z disclosure statements executed by the related Mortgagors, (3) the
appraisal report made in connection with the origination of the Mortgage Loan
(4) the settlement statement for the purchase and/or refinancing of the
underlying Mortgaged Property by the related Mortgagor under the related
Mortgage Note and Mortgage, (5) the originals of any tax service contracts, (6)
documentation relating to any approvals by the Servicer of any modifications of
the original related Mortgage Loan Documents and any releases of collateral
supporting the related Mortgage Loan, together with copies of the documentation
effecting any such modifications or releases, (7) collection notices or form
notices sent to the related Mortgagor, (8) foreclosure correspondence and legal
notifications, if applicable, (9) water and irrigation company stock
certificates, if applicable, and (10) all other documents relating to such
Mortgage Loan which would customarily be maintained in a mortgage loan file by
the Servicer in order to service the mortgage loan properly, as well as any
other documents relating to such Mortgage Loan (other than Mortgage Loan
documents) that come into the Servicer's possession.
"SERVICER REMITTANCE REPORT": The monthly report prepared by the
Servicer and delivered to the parties specified in Section 3.01.
14
<PAGE> 19
"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 (1) the preservation,
restoration and protection of the Mortgaged Properties, including without
limitation advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
to the extent not paid by the related Mortgagors, (2) any enforcement or
judicial proceedings with respect to the Mortgage Loans or Mortgaged Properties,
including foreclosures, (3) the management and liquidation of any REO Property
and (4) compliance with the Servicer's obligations under Section 2.03 (other
than its obligation to deposit in the Collection Account amounts representing
the deductible in respect of any blanket hazard insurance policy).
"SERVICING FEE RATE": 0.50%.
"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 annexed to an
Officer's Certificate furnished to the Indenture Trustee by the Servicer, as
such list may from time to time be amended.
"SIX-MONTH LIBOR": For any Mortgage Loan as of an interest rate
adjustment date for such loan, a per annum rate equal to the average of
interbank offered rates for six-month U.S. dollar-denominated deposits in the
London market based on quotations of major banks as published in The Wall Street
Journal and as most recently available (i) as of the first business day of the
month immediately preceding the month in which the adjustment date occurs or
(ii) as of the date 45 days prior to the adjustment date.
"STANDARD & POOR'S" OR "S&P": Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc., and its successors in interest.
"SUB-SERVICER": Any Person, including an Affiliate of the Servicer,
with whom the Servicer has entered into a Sub-Servicing Agreement and who
satisfies the requirements set forth in Section 2.14 hereof in respect of the
qualification of a Sub-Servicer.
"SUB-SERVICING ACCOUNT": Any segregated trust account, which shall at
all times be an Eligible Account, established and maintained as though it were a
Collection Account pursuant to Section 2.02(b) and entitled "[Sub-Servicer], in
trust for the benefit of Holders of Fund America Investors Trust 1997-NMC1
Collateralized Mortgage Obligations, Series 1997-NMC1, and MBIA as Bond Insurer
Collection Account". References herein to the Collection Account shall include
any Sub-Servicing Account as the context requires.
"SUB-SERVICING AGREEMENT": A written contract between the Servicer and
any Sub-Servicer relating to the servicing and/or administration of certain
Mortgage Loans.
"TARGET NET WORTH": As of the end of any fiscal quarter, the lesser of
(1) $20,000,000 or (ii) the applicable Base Net Worth plus 75% of all cumulative
after tax net income earned by the Servicer from the later of June 30, 1997 or
the date such Base Net Worth was established, through the end of such quarter.
15
<PAGE> 20
"TRANSFEROR": Fund America Investors Corporation II, as transferor of
the Mortgage Loans to the Issuer pursuant to the terms of that certain Mortgage
Loan Contribution Agreement, dated as of September 1, 1997, between Fund America
Investors Corporation II and the Issuer.
"TRUST CERTIFICATES": The certificates of beneficial ownership of the
Issuer.
"TRUST ESTATE": As defined in the Indenture.
"TRUST INSURANCE PROCEEDS": Insurance Proceeds that (1) are applied by
the Servicer to reduce the Principal Balance of the related Mortgage Loan and
(2) not applied to the restoration or repair of the related Mortgaged Property
or released to the related Mortgagor in accordance with the Servicer's normal
servicing procedures, applicable law or the terms of the related Mortgage Loan.
"TRUST PAYING AGENT": As defined in the Deposit Trust Agreement.
"UNDERWRITERS": ContiFinancial Services, Inc. and Greenwich Capital
Markets, Inc.
"UNDERWRITING AGREEMENT": The underwriting agreement, dated as of
September 17, 1997, between Fund America Investors Corporation II and the
Underwriters.
"VICE PRESIDENT": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
"VOTING INTEREST": With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Bonds evidencing specified
Voting Interests in the Trust Estate, the Bondholders will collectively be
entitled to 100% of the aggregate Voting Interests represented by all Bonds.
Voting Interests allocated to the Bonds shall be allocated in proportion to the
Bond Balance. With respect to any provision hereof providing for action, consent
or approval of the Bonds, each Holder of the Bonds will have a Voting Interest
in the Bonds equal to such Holder's Percentage Interest in the Bonds.
SECTION 1.02. INTEREST CALCULATIONS.
All calculations of interest at the Mortgage Loan Rate that are made in
respect of the Principal Balance of a Mortgage Loan, shall be made on a daily
basis using a 360-day year of twelve 30-day months.
SECTION 1.03. DETERMINATION OF MATERIAL ADVERSE EFFECT.
Whenever a determination is to be made under this agreement as to
whether a given action, course of conduct, event or set of facts or
circumstances could or would have a material adverse effect on the Trust Estate,
the Bond Insurer or any Bondholder (or any similar or analogous determination),
such determination shall be made without giving effect to the insurance provided
by the Bond Insurance Policy.
16
<PAGE> 21
ARTICLE II
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 2.01. SERVICING GENERALLY.
(a) General Duties; Licensing. Acting directly or through one
or more Sub-Servicers as provided in Section 2.14, the Servicer, as servicer,
shall administer the Mortgage Loans with reasonable care, using that degree of
skill and attention that the Servicer exercises with respect to all comparable
mortgage loans that it services for itself or others. The Servicer shall follow
its customary standards, policies and procedures in performing its duties as
Servicer, to the extent not in conflict with the provisions of this Agreement.
Notwithstanding the appointment of any Sub-Servicer, the Servicer shall remain
liable for the performance of all of the servicing obligations and
responsibilities under this Agreement. The Servicer shall maintain all licenses
and qualifications necessary under the laws of any jurisdiction where Mortgaged
Properties are located for it to perform the servicing obligations hereunder
legally. The Servicer shall cause any Sub-Servicer to maintain for it all
licenses and qualifications necessary to perform its servicing obligations in
the states where the Mortgaged Properties to which the applicable Sub-Servicing
Agreement relates are located. The Servicer shall cooperate with the Issuer and
the Indenture Trustee and furnish to the Issuer and the Indenture Trustee such
information in its possession as may be necessary or otherwise reasonably
requested to enable the Issuer and the Indenture Trustee to perform their
respective tax reporting duties under the Indenture. The Issuer and the
Indenture Trustee shall furnish the Servicer with any powers of attorney and
other documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
(b) Interest Rate and Monthly Payment Adjustments. The
Servicer shall enforce each Mortgage Loan and shall timely calculate, record,
report and apply all Mortgage Interest Rate adjustments in accordance with the
related Mortgage Note. The Servicer's records shall, at all times, reflect the
then-current Mortgage Interest Rate and Monthly Payment and the Servicer shall
timely notify the Mortgagor of any changes to the Mortgage Interest Rate and the
Monthly Payment.
(c) Servicer Authority. Without limiting the generality of the
foregoing, the Servicer (1) shall continue, and is hereby authorized and
empowered by the Issuer and the Indenture Trustee, to execute and deliver, on
behalf of itself, the Issuer, the Bondholders, the Bond Insurer and the
Indenture Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the related Mortgaged Properties and (2) subject to Section 2.05, to institute
foreclosure proceedings or obtain deeds in lieu of foreclosure so as to convert
ownership of Mortgaged Properties into the name of the Indenture Trustee
pursuant to Section 2.05 of this Agreement. The Servicer may sue to enforce or
collect on any of the Mortgage Loans or any insurance policy covering a Mortgage
Loan, in its own name if possible, or on behalf of the Issuer or the Indenture
Trustee. If the Servicer commences a legal proceeding to enforce a Mortgage Loan
or any such insurance policy, the Issuer and the Indenture Trustee shall
thereupon be deemed to have automatically assigned the Mortgage Loan or the
17
<PAGE> 22
rights under such insurance policy to the Servicer for purposes of collection
only. If, however, in any suit or legal proceeding for enforcement, it is held
that the Servicer may not enforce or collect on a Mortgage Loan or any insurance
policy covering a Mortgage Loan on the ground that it is not a real party in
interest or a holder entitled to enforce such Mortgage Loan or such insurance
policy, as the case may be, then the Issuer and the Indenture Trustee shall,
upon the written request of a Servicing Officer, execute and return to the
Servicer such powers of attorney and other documents as are necessary or
appropriate to enable the Servicer to enforce such Mortgage Loan or insurance
policy, as the case may be, and which are prepared by the Servicer and submitted
to the Issuer or the Indenture Trustee for execution.
The Servicer, on behalf of the Issuer, the Bondholders and the Bond
Insurer, shall prepare, execute, deliver and take all actions reasonably
necessary to protect the Trust Estate pursuant to Section 3.05 of the Indenture
and shall, on behalf of the Issuer, execute and deliver and take any additional
actions as shall be deemed necessary to effect the administrative obligations of
the Issuer under the Indenture.
(d) Independent Contractor Relationship. The relationship of
the Servicer to the Issuer and the Indenture Trustee under this Agreement is
intended by the parties to be that of an independent contractor and not that of
a joint venturer, partner or agent.
SECTION 2.02. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION
ACCOUNT.
(a) Collection Procedures. The Servicer shall, to the extent
such procedures shall be consistent with this Agreement, follow such collection
procedures as it follows from time to time with respect to mortgage loans in its
servicing portfolio that are comparable to the Mortgage Loans. A summary of the
Servicer's collection procedures is attached hereto as Exhibit D. The Servicer
shall not amend or modify these procedures, policies and practices with respect
to the Mortgage Loans (other than as required by applicable laws and
regulations) without the prior consent of the Bond Insurer, and a copy of any
such amendment or modification shall be furnished to the Indenture Trustee.
Consistent with the foregoing, the Servicer may in its discretion (1) waive any
assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees that may be collected
in the ordinary course of servicing the Mortgage Loans, (2) if a Mortgagor is in
default or appears about to be in default because of a Mortgagor's financial
condition, arrange with the Mortgagor a schedule for the payment of delinquent
payments due on the related Mortgage Loan or (3) modify payments of monthly
principal and interest on any Mortgage Loan becoming subject to the terms of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief Act"),
in accordance with the Servicer's general policies for comparable mortgage loans
subject to the Relief Act; provided, however, that the Servicer shall not,
without the prior written consent of the Bond Insurer, permit any waiver,
modification or variance of a Mortgage Loan which would (1) change the Mortgage
Interest Rate, (2) forgive the payment of any principal or interest, (3) impair
the priority of the lien represented by the related Mortgage or (4) extend the
final maturity date of the Mortgage Loan beyond March 2028, in any case except
to the extent required under the Relief Act. The Servicer will not consent to
the placement of a deed of trust or mortgage, as applicable, on any Mortgaged
Property that has a priority equal to or higher than the lien securing the
related
18
<PAGE> 23
Mortgage Loan unless such Mortgage Loan is prepaid in full. No partial release
of a Mortgage Loan shall be made if it would cause the Loan-to-Value Ratio of
the Mortgage Loan (taking into account the partial release) to be higher than
the Loan-to-Value Ratio of the Mortgage Loan at origination.
(b) Collection Account. The Servicer shall establish and
maintain, or cause to be established and maintained, one or more Eligible
Accounts that in the aggregate are the Collection Account. At the Servicer's
option, amounts held in the Collection Account shall be invested by the
depository institution or trust company then maintaining the account at the
written direction of the Servicer in Permitted Investments that mature not later
than the Deposit Date next succeeding the date of investment. The Servicer shall
not retain any cash or investment in the Collection Account for a period in
excess of 12 months and cash therein shall be considered transferred on a
first-in, first-out basis to the Indenture Trustee for inclusion in the Bond
Account, as described in Section 2.02(d). All net income and gain realized from
any such investment shall be for the benefit of the Servicer as additional
servicing compensation and shall be subject to its withdrawal or order from time
to time. Any losses realized in connection with any such investment shall be for
the account of the Servicer and the Servicer shall deposit or cause to be
deposited the amount of such loss (to the extent not offset by income from other
investments) in the Collection Account immediately upon the realization of such
loss and shall have no right to reimbursement therefor. Any benefit resulting
from deposits, maintenance or investment of funds in the Collection Account
shall be for the Servicer's benefit.
(c) Deposits to Collection Account. Subject to the last
paragraph of this Section 2.02(c), the Servicer shall deposit in the Collection
Account each of the following payments on and collections in respect of the
Mortgage Loans as soon as practicable, but in no event later than the close of
business on the second Business Day after its receipt thereof:
(i) all payments in respect of or allocable to interest on
the Mortgage Loans (including any net income from REO Properties), net
of the Monthly Servicing Fees attributable to such payments;
(ii) all collections of principal on or with respect to the
Mortgage Loans;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds; and
(v) all Trust Insurance Proceeds (including, for this
purpose, any amounts required to be credited by the Servicer pursuant
to the last sentence of Section 2.03).
in any case net of its Monthly Servicing Fees, Ancillary Servicing Compensation,
and reimbursable outstanding Servicing Advances and Monthly Advances, to the
extent the Servicer's automated system deducts such amounts from collected funds
prior to deposit of such collected funds into the Collection Account.
19
<PAGE> 24
The Servicer shall replace all amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of a Monthly
Advance pursuant to Section 4.01(a) or towards the payment of a Servicing
Advance pursuant to Section 4.01(b) by depositing into the Collection Account on
or prior to the Deposit Date immediately following such withdrawal an amount
equal to the total of all such amounts so applied since the immediately
preceding Deposit Date.
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 fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or extension or other
administrative charges paid by Mortgagors or amounts received by the Servicer
for the account of Mortgagors for application towards the payment of taxes,
insurance premiums, assessments and similar items. The amounts deposited in the
Collection Account are subject to withdrawal by the Servicer, from time to time,
(1) to make transfers to the Indenture Trustee for deposit into the Bond Account
pursuant to Section 2.02(d), (2) to pay itself the Monthly Servicing Fee, to the
extent not already paid to or retained by the Servicer, pursuant to Section
2.07, Ancillary Servicing Compensation, and investment income on Permitted
Investments, (3) to make Servicing Advances or to reimburse itself for Servicing
Advances, as applicable, in either case in accordance with Section 4.01(b), (4)
to make Monthly Advances in accordance with Section 4.01(a) or to reimburse
itself for payments of Monthly Advances as described in Section 4.01(a), and (5)
to clear and terminate the Collection Account. In addition, if the Servicer
deposits in the Collection Account any amount not required to be so deposited or
any amount in respect of payments by Mortgagors made by checks subsequently
returned for insufficient funds or other reason for non-payment, it may at any
time withdraw such amount from the Collection Account, any provision herein to
the contrary notwithstanding.
Upon such terms as the Bond Insurer, Standard & Poor's and Moody's may
approve, the Servicer may make the deposits to the Collection Account referred
to in Section 2.02(c) on a later day than the second Business Day after receipt
of the amounts required to be so deposited, which terms and later day shall be
specified by the Bond Insurer, Standard & Poor's and Moody's and confirmed to
the Indenture Trustee and the Servicer in writing; provided, however, that in
any event such amounts shall be deposited into the Collection Account no later
than the next succeeding Deposit Date.
(d) Remittances to Indenture Trustee. At or before 12:00 noon Denver
time on each Deposit Date, the Servicer shall withdraw from the Collection
Account all amounts on deposit therein that constitute any portion of Remittable
Funds for the related Deposit Date (including any amounts therein that are being
held for remittance on a subsequent Deposit Date and are applied toward the
Monthly Advance for the related Deposit Date pursuant to Section 4.01(a)) and
remit such amounts to the Indenture Trustee for deposit into the Bond Account.
In addition, any amounts required pursuant to the Indenture to be deposited into
the Bond Account in connection with a purchase of any Mortgage Loans by the
Servicer pursuant to the Indenture and any other amounts (including Monthly
Advances and Compensating Interest for such Deposit Date) required by this
Agreement to be deposited by the Servicer with the Indenture Trustee shall
20
<PAGE> 25
be remitted to the Indenture Trustee for deposit into the Bond Account on the
applicable Deposit Date. On each Deposit Date after the Indenture has been
satisfied and released for so long as the Deposit Trust Agreement remains in
effect, the Servicer shall remit all Remittable Funds to the Trust Paying Agent,
for deposit into the Certificate Distribution Account in accordance with the
Deposit Trust Agreement.
In the event that the Servicer does not remit all Remittable Funds for
the related Payment Date on the Deposit Date, the Servicer also shall pay to the
Indenture Trustee on demand, for its own account and not for the account of the
Bondholders, an amount equal to the income that the Indenture Trustee would have
received on the investment of such funds in Permitted Investments, as reasonably
calculated by the Indenture Trustee, from the Deposit Date until the date that
such Remittable Funds have been remitted to the Indenture Trustee.
SECTION 2.03. HAZARD INSURANCE POLICIES.
The Servicer shall cause to be maintained for each Mortgage Loan
(including any Mortgage Loan as to which the related Mortgaged Property has been
acquired on behalf of the Indenture Trustee upon foreclosure, by deed in lieu of
foreclosure or comparable conversion), hazard insurance (including flood
insurance coverage, if obtainable, to the extent such property is located in a
federally designated flood area in such amount as is required under applicable
FEMA guidelines) with extended coverage in an amount that is not less than the
lesser of (1) the maximum insurable value from time to time of the improvements
that are a part of such property or a replacement cost basis, or (2) the
principal balance of such Mortgage Loan, determined in the case of a Mortgage
Loan that has been foreclosed at the time of such foreclosure; provided,
further, that such hazard insurance shall be in an amount not less than such
amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. Each such hazard insurance
policy shall contain a standard mortgagee loss payable clause naming the
originator, its successors and assigns, as mortgagee. The Servicer shall be
under no obligation to require that any Mortgagor maintain earthquake or other
additional insurance and shall be under no obligation itself to maintain any
such additional insurance on property acquired in respect of a Mortgage Loan,
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. Amounts collected by
the Servicer under any such policies shall be deposited into the Collection
Account in accordance with Section 2.02 to the extent that they constitute Net
Liquidation Proceeds or Trust Insurance Proceeds. If the Servicer shall obtain
and maintain a blanket policy, issued by an insurer acceptable to each Rating
Agency and the Bond Insurer, insuring against such hazard losses, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first sentence of this Section, it being understood and agreed that such policy
may contain a deductible clause that is in form and substance consistent with
standard industry practice, 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 the first sentence of this Section 2.03, and there shall have
been a loss that would have been covered by such policy, deposit in the
Collection Account in accordance with Section 2.02 the amount not otherwise
payable under the blanket policy because of such deductible clause from its own
funds, and such amount shall not be reimbursable to the Servicer.
21
<PAGE> 26
SECTION 2.04. ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION AND
MODIFICATION AGREEMENTS.
In any case in which property subject to a Mortgage is voluntarily
conveyed by the Mortgagor, the Servicer may enter into an assumption agreement
with the Person to whom such Mortgaged Property has been or is about to be
conveyed, pursuant to which such Person becomes liable under the related
Mortgage Note and, to the extent permitted by applicable law or the related
mortgage documents, the Mortgagor remains liable thereon. The Servicer shall not
enter into any assumption agreement which modifies the Mortgage Interest Rate or
payment terms of the Mortgage Note without the consent of the Bond Insurer. If
the Person to whom such Mortgaged Property has been or is about to be conveyed
satisfies the Servicer's then-current underwriting standards as to borrower
creditworthiness for mortgage loans similar to the Mortgage Loans and is in the
same Seller credit rating category as that which was assigned to the borrower
under the Mortgage Loan being replaced, the Servicer may enter into a
substitution of liability agreement with such person, under which the previous
Mortgagor is released from liability thereon and the transferee is substituted
as a Mortgagor and becomes liable under the Mortgage Note. The Servicer shall
not permit an assumption agreement or a substitution of liability agreement with
respect to a Mortgage Loan unless permitted by applicable law and unless the
Servicer determines that such action would not materially increase the risk of
default or delinquency on such Mortgage Loan or materially impair the security
for such Mortgage Loan. The Servicer will not enter into any assumption
agreement or substitution of liability agreement unless such agreement complies
with the Servicer's standard servicing procedures and the Servicer would enter
into such agreement with respect to a mortgage loan in its own portfolio. The
Servicer shall notify the Indenture Trustee that any assumption agreement or
substitution of liability agreement has been completed and the Servicer shall
forward to the Indenture Trustee the original of such assumption agreement or
substitution of liability agreement. Such assumption agreement or substitution
of liability agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such agreement, the Mortgage
Interest Rate shall not be reduced (but may be increased), the Principal Balance
of such Mortgage Loan shall not be changed and the term of such Mortgage Loan
will not be extended beyond the existing term of such Mortgage Loan. Any fee
collected by the Servicer for entering into any such agreement shall be retained
by the Servicer as Ancillary Servicing Compensation.
In the event the Servicer does not approve an assumption of a Mortgage
Loan as described above, the Servicer will enforce any related due-on-sale
clause to the extent permitted by the related Mortgage Note and Mortgage and by
all applicable laws and regulations, but only to the extent the Servicer does
not believe that such enforcement will (1) adversely affect or jeopardize
coverage under any related insurance policy, (2) result in legal action by the
Mortgagor, or (3) materially increase the risk of default or delinquency on, or
materially impair the security for, such Mortgage Loan.
Notwithstanding the foregoing paragraph of this Section 2.04 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 reasons
of any assumption of a Mortgage Loan, or transfer of any
22
<PAGE> 27
Mortgaged Property without the assumption thereof, by operation of law or any
assumption or transfer that the Servicer reasonably believes it may be
restricted by law from preventing, for any reason whatsoever.
SECTION 2.05. REALIZATION UPON DEFAULTED MORTGAGE LOANS, OPTIONS TO
PURCHASE MORTGAGE LOANS.
The Servicer, on behalf of and as the agent of the Indenture Trustee,
shall foreclose upon or otherwise comparably convert the ownership of Mortgaged
Properties securing such of the Mortgage Loans as come into and continue in
default and as to which no satisfactory arrangements can be made for collection
of delinquent payments pursuant to Section 2.02(a) into the name of the
Indenture Trustee; provided, however, that if the Servicer has actual knowledge
or reasonably believes that any Mortgaged Property is affected by hazardous or
toxic wastes or substances, then the Servicer will cause to be undertaken an
environmental inspection of the Mortgaged Property that complies with Fannie
Mae's selling and servicing guide applicable to single family homes and its
servicing procedures. If the environmental inspection reveals any potentially
hazardous substances, the Servicer will notify the Indenture Trustee and the
Bond Insurer, and the Servicer will not foreclose or accept a deed in lieu of
foreclosure on the Mortgaged Property without the consent of the Indenture
Trustee and the Bond Insurer. In connection with such foreclosure or other
conversion, the Servicer shall follow such practices and procedures as it shall
deem necessary or advisable and as shall be normal and usual in its general
first lien one- to four-family mortgage loan servicing activities. The foregoing
is subject to the proviso that the Servicer shall not be required to expend its
own funds in connection with any foreclosure or restoration of any Mortgaged
Property unless, in the reasonable judgment of the Servicer, such foreclosure,
correction or restoration will increase Net Liquidation Proceeds (taking into
account the reimbursement of such expenses to the Servicer and any unreimbursed
Servicing Advances and Monthly Advances made or expected to be made with respect
to such Mortgage Loan).
To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the Principal Balance of the related Mortgage
Loan and accrued interest thereon at the applicable Mortgage Interest Rate
through the Determination Date during the Collection Period in which such
foreclosure or conversion occurs (net of any Monthly Advances or Servicing
Advances made by the Servicer with respect to such Mortgage Loan and that were
unreimbursed prior to the receipt of such Net Liquidation Proceeds), such excess
shall be paid directly to the Servicer as additional Servicing Compensation and
shall be free from the lien of the Indenture.
The Servicer must determine, as to each defaulted Mortgage Loan, when
such Mortgage Loan has become a Liquidated Mortgage Loan.
The Servicer, at its sole option, may purchase from the Trust Estate on
any Deposit Date any Mortgage Loan as to which the related Mortgagor has failed
to make full Monthly Payments as required under the related Mortgage Note for
three consecutive months at any time following the applicable Cut-off Date and
prior to such Deposit Date at a price equal to the Purchase Price
23
<PAGE> 28
by transferring such amount to the Indenture Trustee for deposit into the Bond
Account on such Deposit Date pursuant to Section 2.02; provided, however, that
the aggregate Principal Balances of the Mortgage Loans purchased by the Servicer
pursuant to the exercise of the option granted in this sentence shall not exceed
10% of the Initial Pool Balance, unless otherwise approved by the Bond Insurer.
On any Deposit Date following the Determination Date as of which the aggregate
of the Principal Balances of the Mortgage Loans is equal to or less than 10% of
the Initial Pool Balance, if the holders of more than 50% of the Trust
Certificates shall not have elected to redeem the Bonds pursuant to the
Indenture, the Servicer, in its sole discretion, may purchase from the Trust
Estate all, but not less than all, of the Mortgage Loans then included in the
Trust Estate at a price equal to the Purchase Price for each such Mortgage Loan
by transferring such amount to the Indenture Trustee for deposit in the Bond
Account on such Deposit Date pursuant to Section 2.02. Upon the receipt by the
Indenture Trustee of the Purchase Price for any Mortgage Loan as to which the
Servicer has exercised its option to purchase pursuant to this paragraph, the
Indenture Trustee shall release to the Servicer the Mortgage File pertaining to
each such Mortgage Loan and the Indenture Trustee and the Issuer shall execute
and deliver such instruments of transfer and all other documents furnished by
the Servicer as are necessary to transfer their respective interests in such
Mortgage Loans to the Servicer. For purposes of this Agreement, any purchase
effected in accordance with this paragraph shall be deemed to be a prepayment of
each Mortgage Loan so purchased.
In the event that title to any Mortgaged Property is acquired as REO
Property by the Indenture Trustee in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be issued to the Indenture
Trustee, or to its nominee, on behalf of the Bondholders and the Bond Insurer,
and the Servicer shall manage, conserve, protect and operate each such REO
Property for the Bondholders solely for the purpose of its prompt disposition
and sale. The Servicer shall use its best efforts to dispose of each such REO
Property as expeditiously as possible consistent with the goal of maximizing Net
Liquidation Proceeds (taking into account any unreimbursed Servicing Advances
and Monthly Advances made or expected to be made with respect to such REO
Property). None of the Issuer, the Indenture Trustee or the Servicer, acting on
behalf of the Trust Estate, shall provide financing from the Trust Estate to any
purchaser of any such REO Property.
SECTION 2.06. INDENTURE TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE
FILES.
(a) Upon the payment in full of the principal balance of any
Mortgage Loan, the Servicer shall notify the Indenture Trustee by a
certification in the form of Exhibit B hereto (a "Request for Release") (which
certification shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited to the
Collection Account pursuant to Section 2.02 have been so deposited) of a
Servicing Officer. Such notification shall be made each month at the time that
the Servicer delivers its Servicer Remittance Report to the Issuer and the
Indenture Trustee pursuant to Section 3.01. Upon any such payment in full, the
Servicer is authorized to procure a deed of full reconveyance covering the
related Mortgaged Property encumbered by such Mortgage, which deed, except as
otherwise provided in applicable law, shall be recorded in the office of the
County Recorder in which the Mortgage is recorded, or, as the case may be, to
procure an instrument of satisfaction or, if the related
24
<PAGE> 29
Mortgagor so requests, an assignment without recourse, in each case prepared by
the Servicer at its expense and executed by the Indenture Trustee, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
Servicer to the Person entitled thereto, it being understood and agreed that no
expenses incurred in connection with such deed of reconveyance, assignment or
instrument of satisfaction shall be reimbursed from amounts at the time on
deposit in the Collection Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan or to effect a partial release of any Mortgaged
Property from the lien of the related Mortgage, the Servicer shall deliver to
the Indenture Trustee a Request for Release requesting the related Trustee
Mortgagee Loan File or specified documents included therein. The Indenture
Trustee shall, within five Business Days after its receipt of such Request for
Release, release the related Mortgage File or the specified documents to the
Servicer. Any such Request for Release shall obligate the Servicer to return
each and every document previously requested from the Mortgage File to the
Trustee by the twenty-first day following the release thereof, unless (1) the
Mortgage Loan has been liquidated and the Net Liquidation Proceeds relating to
the Mortgage Loan have been deposited in the Collection Account or the Bond
Account or (2) the Mortgage File or such document has been delivered to an
attorney, or to a public trustee or other public official as required by law,
for the purposes of initiating or pursuing legal action or other proceedings for
the foreclosure of the Mortgaged Property either judicially or non-judicially,
and the Servicer has delivered to the Indenture Trustee a certificate of the
Servicer certifying as to the name and address of the Person to which such
Mortgage File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of an officer's certificate of the Servicer stating that
such Mortgage Loan was liquidated and that all amounts received or to be
received in connection with such liquidation which are required to be deposited
into the Collection Account or the Bond Account have been so deposited, or that
such Mortgage Loan has become an REO Property (each, a "Servicing Officer's
Certificate"), the Request for Release shall be released by the Indenture
Trustee to the Servicer.
(c) Upon receipt of a Servicing Officer's Certificate, the
Indenture Trustee shall execute any documents prepared by the Servicer and
delivered to it as necessary or appropriate to enable the Servicer to perform
its obligations hereunder, including, without limitation, documents to enable
the Servicer to convey title to a Mortgaged Property to the Mortgagor or its
designee upon payment of the Mortgage Loan in full or to convey title to an REO
Property to the purchaser thereof, or to convey title to a Mortgaged Property
into the name of the Indenture Trustee pursuant to Section 2.05.
SECTION 2.07. SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY
THE SERVICER; COMPENSATION INTEREST.
On each Deposit Date, the Servicer shall be entitled to receive, by
withdrawal by the Servicer from the Collection Account, out of collections of
interest on the Mortgage Loans for the related Collection Period, as servicing
compensation for such Collection Period, the Monthly Servicing Fee, to the
extent not retained by the Servicer from amounts remitted to the Collection
25
<PAGE> 30
Account pursuant to Section 2.02(c)(i). The Servicer shall also be entitled to
retain any Ancillary Servicing Compensation when received.
The Servicer shall pay Compensating Interest to the Indenture Trustee
on behalf of the Bondholders out of the related Monthly Servicing Fee on each
Deposit Date, to the extent of the amount of the Monthly Servicing Fee, and
shall not be entitled to reimbursement therefor. The Servicer shall be required
to pay all expenses incurred by it in connection with its activities hereunder
(including payment of the fees and expenses relating to the Annual Independent
Public Accountant's Servicing Report described in Section 2.09, and all other
fees and expenses not otherwise expressly stated hereunder for the account of
the Bondholders) and shall not be entitled to reimbursement therefor except as
specifically provided herein.
SECTION 2.08. ANNUAL STATEMENT AS TO COMPLIANCE.
(a) The Servicer will deliver to the Issuer, the Indenture
Trustee, the Bond Insurer and each Rating Agency, with a copy to each of the
Underwriters, on or before March 31 of each year, beginning with March 31, 1998,
an Officer's Certificate of the Servicer substantially in the form set forth in
Exhibit A hereto stating that (1) a review of the activities of the Servicer
during the preceding calendar year (or since the Closing Date in the case of the
first such statement) and of its performance under this Agreement has been made
under such officer's supervision and (2) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all its material
obligations under this Agreement throughout such year (or since the Closing Date
in the case of the first such statement), 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.
(b) The Servicer shall deliver to the Issuer and the Indenture
Trustee, with a copy to the Bond Insurer, each Rating Agency and each of the
Underwriters, promptly after having obtained knowledge thereof, but in no event
later than ten Business Days thereafter, written notice by means of an Officer's
Certificate of any event that with the giving of notice or the lapse of time, or
both, would become an Event of Default. Without duplication of the foregoing,
the Servicer will deliver to the Indenture Trustee a copy of any information it
provides to the Bond Insurer under Section 2.02(f) of the Insurance Agreement.
SECTION 2.09. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
On or before March 31 of each year, beginning with March 31, 1998, the
Servicer at its expense shall cause a firm of nationally recognized independent
public accountants (who may also render other services to the Servicer) to
furnish a report to the Issuer, the Indenture Trustee, the Bond Insurer and each
Rating Agency, with a copy to each of the Underwriters, to the effect that such
firm has examined certain documents and records relating to the servicing
activities of the Servicer for the period covered by such report, and that such
examination, which has been conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers (to the extent that the
procedures in such audit guide are applicable to the servicing obligations set
forth in this Agreement), has disclosed no exceptions or errors in records
relating
26
<PAGE> 31
to the servicing activities of the Servicer that, in the opinion of such firm,
are material, except for such exceptions as shall be set forth in such report.
SECTION 2.10. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS.
(a) The Servicer shall provide to Bondholders that are
federally insured savings associations and the FDIC and its supervisory agents
and examiners access to the documentation regarding the Mortgage Loans required
by applicable regulations of the Office of Thrift Supervision, and to the
Issuer, the Indenture Trustee and the Bond Insurer and their respective agents
all documentation relating to the Mortgage Loans that is in the possession of
the Servicer, 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 2.10(a) 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 as a result of such obligation shall not constitute a breach of
this Section.
(b) The Servicer shall supply information to the Indenture
Trustee, upon reasonable advance notice, in such form as the Indenture Trustee
shall reasonably request, as is required in the Indenture Trustee's reasonable
judgment to enable the Indenture Trustee to make required payments and to
furnish the certificates, statements and reports to Bondholders and the Bond
Insurer as required of the Indenture Trustee pursuant to the Indenture, it being
understood that the Servicer is responsible for supplying information concerning
the Mortgage Loans and not for any other information, including, without
limitation, calculation of payments due on the Bonds. The Servicer shall also
supply information upon reasonable advance notice, in such form as the Bond
Insurer shall reasonably request, as is reasonably requested by the Bond Insurer
to enable the Bond Insurer to monitor the performance of the Mortgage Loans.
SECTION 2.11. MAINTENANCE OF FIDELITY BOND AND ERRORS AND OMISSIONS
POLICY.
The Servicer shall during the term of its service as Servicer maintain
in force a (1) policy or policies of insurance covering errors and omissions in
the performance of its obligations as Servicer hereunder and (2) fidelity bond
in respect of its officers, employees and agents, in each case having coverage
amounts deemed by the Servicer to be adequate to its operations.
SECTION 2.12. NOTICES TO THE ISSUER, THE RATING AGENCIES, THE INDENTURE
TRUSTEE AND THE BOND INSURER.
In addition to the other notices required to be given to the Issuer,
the Rating Agencies, the Indenture Trustee, the Bond Insurer and the
Underwriters by the provisions of this Agreement, the Servicer shall give prompt
notice to the Issuer, each Rating Agency, the Indenture Trustee and the Bond
Insurer of (1) any amendment to this Agreement, (2) the occurrence of an Event
of Default and (3) the purchase of any Mortgage Loan pursuant to Section 2.01 or
2.05 by the Servicer, as the case may be.
27
<PAGE> 32
SECTION 2.13. REPORTS OF FORECLOSURES AND ABANDONMENT OF MORTGAGED
PROPERTIES.
On or before February 28 of each year beginning in 1998, the Servicer
shall file the reports of foreclosures and abandonments of any Mortgaged
Property required by Code Section 6050J with the Internal Revenue Service and
provide a copy of such filing to the Indenture Trustee. The reports from the
Servicer shall be in form and substance sufficient to meet the reporting
requirements imposed by such Section 6050J.
SECTION 2.14. SUB-SERVICERS AND SUB-SERVICING AGREEMENTS.
(a) The Servicer may enter into Sub-Servicing Agreements for
any servicing and administration of Mortgage Loans with any institution that is
acceptable to the Bond Insurer and the Indenture Trustee and that is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Sub-Servicing Agreement. The Servicer shall give notice
to the Bond Insurer of the appointment of any Sub-Servicer. The Servicer shall
not enter into any Sub-Servicing Agreement that does not provide for the
servicing of the Mortgage Loans specified therein on a basis consistent with the
terms of this Agreement or that otherwise violates the provisions of this
Agreement. The Servicer may enter into, and make amendments to, any
Sub-Servicing Agreement or enter into different forms of Sub-Servicing
Agreements; provided, however, that any such amendments or forms shall be
consistent with and not violate the provisions of this Agreement.
(b) For purposes of this Agreement the Servicer shall be
deemed to have received payments on Mortgage Loans when any Sub-Servicer has
received such payments. With respect to the Servicer's obligations under Section
2.01 to make deposits into the Collection Account, the Servicer shall be deemed
to have made such deposits when any Sub-Servicer has made such deposits into a
Sub-Servicing Account if permitted by the related Sub-Servicing Agreement.
(c) Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer alone and the Bond Insurer and
the Indenture Trustee shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to any
Sub-Servicer, except that the Indenture Trustee shall have such claims or rights
that arise as a result of any funds held by a Sub-Servicer in trust for or on
behalf of the Trust Estate, the Bondholders and the Bond Insurer.
Notwithstanding the execution of any Sub-Servicing Agreement, the Servicer shall
not be relieved of any liability hereunder and shall remain obligated and liable
for the servicing and administration of the Mortgage Loans.
SECTION 2.15. SERVICING FOR BENEFIT OF THE BOND INSURER.
Provided there does not exist a Bond Insurer Default, the Servicer
hereby acknowledges and agrees that it shall service and administer the Mortgage
Loans and any REO Properties, and shall maintain the Collection Account for the
benefit of the Bondholders and for the benefit of the Bond Insurer, and all
references in this Agreement to the benefit of or actions on behalf of the
Bondholders shall be deemed to include the Bond Insurer.
28
<PAGE> 33
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Bondholders shall
also be sent to the Bond Insurer.
SECTION 2.16. ANNUAL LIEN OPINIONS; BOND REDEMPTIONS.
(a) The Servicer shall procure, at its own expense, the
Opinions of Counsel required to be delivered annually to the Indenture Trustee
pursuant to Section 3.06 of the Indenture.
(b) In the event the Servicer exercises its right to redeem
the Bonds pursuant to Section 10.01 of the Indenture, the Servicer shall, at its
own expense, prepare all documents necessary for the Issuer to sign in
connection with such redemption, and deposit amounts required to be deposited by
the Issuer in connection with such redemption, in each case pursuant to Section
4.01 and Article X of the Indenture, and shall advise the Issuer as to the
actions it must take in accordance with the Indenture in order to effect such
redemption. The Issuer shall follow all such directions of the Servicer.
ARTICLE III
SERVICER REMITTANCE REPORT; BACK-UP SERVICER
SECTION 3.01. SERVICER REMITTANCE REPORT.
Not later than the third Business Day prior to each Deposit Date, the
Servicer shall deliver to the Issuer, the Indenture Trustee, the Bond Insurer
and each of the Underwriters a computer-readable magnetic tape (the "Tape" for
such month) and a series of hard copy reports generally including the same
information included on the Tape (the "Report," and, together with the Tape, the
"Servicer Remittance Report" for such month) detailing the payments and
collections received in respect of the Mortgage Loans during the immediately
preceding Collection Period. The Servicer Remittance Report shall include
loan-by-loan information that specifies account number, borrower name,
outstanding principal balance and activity for the preceding Collection Period
and Due Period, as applicable, and any other information sufficient to enable
the Indenture Trustee to report the items specified in clauses (vi) through
(xiii) of the definition of "Payment Date Statement" in the Indenture, as well
as (a) the information set forth on Exhibit E hereto as to Mortgage Loans that
became Liquidated Mortgage Loans during the related Collection Period, and may
be delivered in a separate report in the form of Exhibit E hereto or as part of
the Servicer Remittance Report and (b) any other information regarding the
Mortgage Loans as may be required to enable the Back-Up Servicer to perform its
obligations under this Article III or as may from time to time be agreed to by
the Servicer, the Indenture Trustee and the Bond Insurer. The Servicer shall
only be required to report information concerning the Mortgage Loans, and shall
not be required to calculate any required payments on the Bonds or to the Bond
Insurer.
SECTION 3.02. RESERVED.
29
<PAGE> 34
SECTION 3.03. OVERSIGHT OF SERVICING.
(a) Prior to each Payment Date, the Back-Up Servicer shall review
the Reports and shall determine the following:
(i) that the Report is complete in all material respects
on its face for the purpose of calculating the
amounts and making the comparisons set forth in
subsection (b) below; and
(ii) (ii) that the amount withdrawn from the Collection
Account and remitted to the Indenture Trustee is the
same as the amount set forth in the Report.
(b) Prior to each Payment Date, the Back-Up Servicer shall, based
solely on the information contained in the Tape for such
Payment Date:
(i) calculate the aggregate amount of principal and
interest due in the Due Period relating to such
Payment Date and verify the aggregate Principal
Balance as of the end of such Due Period; and
(ii) calculate the number and aggregate principal balance
of Mortgage Loans that are (1) 30 days delinquent,
(2) 60 days delinquent, (3) 90 days delinquent or
more than 90 days delinquent, (4) under foreclosure
proceedings and (5) REO Properties.
The Back-Up Servicer shall then compare its calculations pursuant to clauses (i)
and (ii) above to the comparable information provided by the Servicer in the
Report for such Payment Date.
(c) If, based on its calculations and comparisons under subsection (b)
above, the Back-Up Servicer identifies any discrepancy of $100.00 or more (a
"Material Discrepancy"), the Back-Up Servicer shall promptly notify the Servicer
and the Trustee of such Material Discrepancy and shall attempt to resolve it
with the Servicer. If prior to the related Payment Date, the Servicer and the
Back-Up Servicer are unable to resolve such Material Discrepancy, the Back-Up
Servicer shall promptly notify in writing the Rating Agencies, the Indenture
Trustee and the Bond Insurer of such Material Discrepancy.
(d) Other than as specifically set forth in this Article III, the
Back-Up Servicer shall have no obligation to supervise, verify, monitor or
administer the performance of the Servicer and shall have no liability for any
action taken or omitted by the Servicer.
(e) The Back-Up Servicer may consult fully with the Servicer as the
Back-Up Servicer may deem it in its sole discretion to be necessary from time to
time to perform or carry out the Back-Up Servicer's obligations hereunder.
(f) The obligation of the Back-Up Servicer to perform its obligations
pursuant to subsections (a) through (e) of this Section 3.03 shall continue
until at least the first anniversary of the Closing Date. At the end of the
first calendar year, the Bond Insurer will evaluate the
30
<PAGE> 35
performance of the Servicer and in its sole discretion determine whether the
obligations of the Back-Up Servicer pursuant to subsections (a) through (e)
shall continue for another calendar year. If the Bond Insurer determines that
such obligations of the Back-Up Servicer shall cease, the Bond Insurer shall
promptly give written notice to the Back-Up Servicer, the Indenture Trustee, the
Servicer and the Rating Agencies specifying the date of cessation. Following
notice from the Bond Insurer that the Back-Up Servicer is no longer required to
perform its obligations pursuant to subsections (a) through (e), the Servicer
every month shall continue to deliver the Report and the Tape referenced in
subsections (b) above to the Back-Up Servicer, provided, however, that the
Back-Up Servicer shall have no obligations to load the Tape onto its computer
system or verify or compare any amounts in the Reports or Tape. It is understood
by the parties hereto that pursuant to the preceding sentence the role of the
Back-Up Servicer shall be solely to receive the Report and the Tapes.
(g) Notwithstanding anything to the contrary provided for in this
Agreement, if on or following the first anniversary of the Closing Date the
Back-Up Servicer is still performing the back-up servicer obligations pursuant
to subsections (a) through (e) of this Section 3.03 and no Material Discrepancy
has been identified by the Back-Up Servicer in the preceding twelve months, all
responsibilities of the Back-Up Servicer pursuant to subsections (a) through (e)
of this Section 3.03 shall terminate on the first day after the first
anniversary of the last date such a Material Discrepancy was identified;
provided, however, that the Servicer every month shall continue to deliver the
Report and the Tape referenced in subsection (b) above to the Back-Up Servicer;
provided, further, that the Back-Up Servicer shall have no obligation to load
the Tape onto its computer system or verify or compare any amounts in the Report
or Tape.
SECTION 3.04. BACK-UP SERVICER COMPENSATION.
As compensation for the performance of its obligations as Back-Up
Servicer under this Agreement, the Servicer shall pay a monthly fee to be agreed
upon between the Servicer and the Back-Up Servicer, payable out of the
Servicer's own funds and not out of the Trust Estate.
SECTION 3.05. DUTIES AND RESPONSIBILITIES.
(a) The Back-Up Servicer may conclusively rely, without
investigation on its part, as to the truth and accuracy of the information and
data contained in any Report or Tape furnished to the Back-Up Servicer and the
Servicer shall be fully responsible for such information and data and for its
conforming to the requirements of this Agreement.
(b) The Back-Up Servicer shall upon reasonable notice and
during normal business hours from the Bond Insurer, permit the Bond Insurer to
review any books, records or reports of the Back-Up Servicer relating to its
obligations under this Agreement.
31
<PAGE> 36
ARTICLE IV
MONTHLY ADVANCES AND SERVICING ADVANCES
SECTION 4.01. MONTHLY ADVANCES; SERVICING ADVANCES.
(a) Monthly Advances. On or before each Deposit Date, the
Servicer will transfer to the Indenture Trustee for deposit in the Bond Account,
in same day funds, an amount (a "Monthly Advance") equal to the sum of (1) with
respect to all Mortgage Loans for which the Monthly Payment due on the first day
of the month in which the Deposit Date occurs has not yet been paid, the amount
of such late Monthly Payment (net of the Monthly Servicing Fee attributable to
such Mortgage Loan), plus (2) with respect to each Mortgaged Property that was
acquired in foreclosure or similar action (each, an "REO Property") during or
prior to the related Collection Period and as to which a final sale did not
occur during the related Collection Period, an amount equal to the excess, if
any, of the Monthly Payment that would have been due on the related Mortgage
Loan (net of the Monthly Servicing Fee attributable to such REO Property) over
the net income from such REO Property transferred to the Bond Account for such
Payment Date; provided, however, that in no case will the Servicer be required
to make advances with respect to any period following the final due date with
respect to any Mortgage Loan. All or a portion of any Monthly Advance required
to be made on a Deposit Date may be paid out of amounts on deposit in the
Collection Account that are not required to be transferred on such Deposit Date
to the Indenture Trustee for deposit into the Bond Account as any portion of
Remittable Funds for the related Deposit Date; provided, however, that the
Servicer shall be required to replace any such amounts by deposit into the
Collection Account on or before the next Deposit Date and the amount of such
deposit shall thereafter be considered a Monthly Advance for purposes of
reimbursement under this Agreement.
The Servicer may recover Monthly Advances, if not theretofore recovered
from the Mortgagor on whose behalf such Monthly Advance was made, from
collections on the related Mortgage Loan, including Liquidation Proceeds,
Insurance Proceeds and such other amounts as may be collected by the Servicer
from the Mortgagor or otherwise relating to the Mortgage Loan. In addition, if
the Servicer determines, in its good faith business judgment, that a previously
made Monthly Advance has become a Nonrecoverable Advance, the Servicer may
reimburse itself for such Nonrecoverable Advances from amounts on deposit in the
Collection Account, regardless of whether such amounts are attributable to such
Mortgage Loan. Notwithstanding anything herein to the contrary, no Monthly
Advance need be made hereunder if such Monthly Advance would, if made,
constitute a Nonrecoverable Advance.
(b) Servicing Advances. The Servicer shall from time to time
during the term of this Agreement make such Servicing Advances as the Servicer
shall deem appropriate or advisable under the circumstances and are required
pursuant to the terms of this Agreement. Servicing Advances may be paid by the
Servicer out of amounts on deposit in the Collection Account from time to time;
provided, however, that the Servicer shall be required to replace any such
amounts by deposit into the Collection Account on or before the first Deposit
Date occurring after the payment of a Servicing Advance with such amounts, and
the amount of such deposit shall thereafter be considered a Servicing Advance
for purposes of reimbursement under
32
<PAGE> 37
this Agreement. All Servicing Advances made by the Servicer shall be
reimbursable from collections or recoveries relating to the Mortgage Loans in
respect of which such Servicing Advances have been made including Liquidation
Proceeds and Insurance Proceeds, and such other amounts as may be collected by
the Servicer from the Mortgagor, or from other amounts on deposit in the
Collection Account after the Servicer shall have determined, in its good faith
business judgment that such Servicing Advance has become a Nonrecoverable
Advance. Notwithstanding anything herein to the contrary, no Servicing Advances
need be made hereunder if such Servicing Advance would, if made, constitute a
Nonrecoverable Advance.
ARTICLE V
THE SERVICER
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
(a) The Servicer hereby represents and warrants to the Issuer,
the Indenture Trustee, the Bond Insurer and the Bondholders that, as of the
Closing Date:
(i) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado.
The Servicer is in compliance with the laws of each state in which it
is acting as Servicer with respect to a Mortgage Loan to the extent
necessary to perform all servicing obligations with respect to the
related Mortgaged Property hereunder. The Servicer has the power and
authority to execute and deliver this Agreement and to perform its
obligations in accordance herewith. The execution, delivery and
performance of this Agreement (including all instruments of transfer to
be delivered pursuant to this Agreement) by the Servicer and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action. This Agreement
evidences the valid and binding obligation of the Servicer enforceable
against the Servicer in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or
the application of equitable principles in any proceeding, whether at
law or in equity. The consummation of the transactions contemplated
hereby will not result in the breach of any terms or provisions of the
articles of incorporation or by-laws of the Servicer or result in the
breach of any term or provision of, or conflict with or constitute a
default under or result in the acceleration of any obligation under,
any material agreement, indenture or loan or credit agreement or other
material instrument to which the Servicer or its property is subject,
or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Servicer or its property is subject.
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be,
by or from any federal, state or other governmental authority or
agency, that are necessary in connection with the execution and
delivery by the Servicer of this Agreement, have been duly taken, given
or obtained, as the case may be, are in full force and effect, are not
subject to any pending proceedings (administrative,
33
<PAGE> 38
judicial or otherwise) with respect to which the time within which any
appeal therefrom may be taken or review thereof may be obtained has
expired or no review thereof may be obtained or appeal therefrom taken,
and are adequate to authorize the consummation of the transactions
contemplated by this Agreement on the part of the Servicer and the
performance by the Servicer of its obligations under this Agreement.
(iii) There is no action, suit, proceeding or investigation
pending or, to the best of the Servicer's knowledge, threatened against
the Servicer that, either in any one instance or in the aggregate,
should reasonably be expected to result in any material adverse change
in the business, operations, financial condition, properties or assets
of the Servicer or in any material impairment of the right or ability
of the Servicer to carry on its business substantially as now
conducted, or in any material liability on the part of the Servicer or
that would draw into question the validity of this Agreement or the
Mortgage Loans or of any action taken or to be taken in connection with
the obligations of the Servicer contemplated herein, or that should be
reasonably expected to impair the ability of the Servicer to perform
under the terms of this Agreement.
(iv) The Servicer is not in default with respect to any order
or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default should
reasonably be expected to have consequences that would materially and
adversely affect the condition (financial or other) or operations of
the Servicer or its properties or to have consequences that should
reasonably be expected to adversely affect its performance hereunder;
(v) The collection practices used by the Servicer are in all
material respects legal and customary in the non-conforming mortgage
loan servicing business.
(b) Upon discovery by any party hereto of a breach of any of
the foregoing representations and warranties that materially and adversely
affects the interests of the Bondholders, the party discovering such breach
shall give prompt written notice to the other parties hereto and the Bond
Insurer. Within 30 days of its discovery or its receipt of notice of breach, the
Servicer shall cure such breach in all material respects.
SECTION 5.02. LIABILITY OF THE SERVICER.
The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Servicer
herein.
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER.
Any corporation or other entity (1) into which the Servicer may be
merged or consolidated, (2) that may result from any merger, conversion or
consolidation to which the Servicer shall be a party, or (3) that may succeed to
all or substantially all of the business of the Servicer, which corporation or
other entity shall be the successor to the Servicer under this Agreement without
the execution or filing of any document or any further act by any of the
34
<PAGE> 39
parties to this Agreement; provided that if the Servicer is not the surviving
entity, or if the assumption by the surviving entity is not effective by
operation of law, then the surviving entity shall execute and deliver to the
Issuer and the Indenture Trustee an agreement of assumption to perform every
obligation of the Servicer hereunder and provided further that if the surviving
entity is not the Servicer, the surviving entity must (A) have a net worth of
not less than $10,000,000, (B) be acceptable to the Bond Insurer and (C) each
Rating Agency must have issued written confirmation that the succession of such
successor will not result in a downgrading of the implied rating then assigned
by such Rating Agency to the Bonds (without taking into account the Bond
Insurance Policy).
SECTION 5.04. LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
Neither the Servicer nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Indenture Trustee, the
Trust Estate, the Bond Insurer or the Bondholders for any action taken or for
refraining from the taking of any action by the Servicer 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 the duties of the Servicer or by reason of
reckless disregard of the obligations and duties of the Servicer hereunder. The
Servicer and any director, officer, 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
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 5.05. SERVICER NOT TO RESIGN.
Subject to the provisions of Section 5.03 regarding the merger or
consolidation of the Servicer into or with another entity, the Servicer shall
not resign from the obligations and duties hereby imposed on it except upon
determination that the performance of its duties or obligations hereunder is no
longer permissible under applicable law or regulation or are in material
conflict by reason of applicable law or regulation with any other activities
carried on by it at the date of this Agreement. Any such determination
permitting the resignation of the Servicer pursuant to this Section shall be
evidenced by an Opinion of Counsel to such effect delivered to the Issuer, the
Indenture Trustee and the Bond Insurer obtained by the Servicer at its own
expense. No resignation pursuant to this Section 5.05(a) shall become effective
until the Indenture Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 6.02
or (b) shall relieve the Servicer of responsibility for any obligations pursuant
to this Agreement that specifically survive the resignation or termination of
the Servicer. Each of the Rating Agencies shall be given written notice of a
resignation of the Servicer pursuant to this Section.
Notwithstanding the foregoing, the Servicer may resign effective upon
its appointment of a successor the appointment of whom has been approved by the
Bond Insurer and the Indenture
35
<PAGE> 40
Trustee in writing, but only if each Rating Agency shall have confirmed in
writing that the appointment of such successor will not result in the
downgrading of the then-current implied ratings assigned by them to the Bonds
(without taking into account the Bond Insurance Policy).
ARTICLE VI
DEFAULT
SECTION 6.01. EVENTS OF DEFAULT.
If any one of the following events (each an "Event of Default") shall
occur and be continuing:
(a) Any failure by the Servicer to (1) make a required Monthly
Advance on the related Deposit Date or (2) deposit into the Collection Account
or transfer to the Indenture Trustee for deposit in the Bond Account any other
amount required to be deposited therein under this Agreement on the related
Deposit Date, which failure, in the case of only clause (2) hereof, is not
remedied by the close of business on the Business Day after the date upon which
written notice of such failure shall have been given to the Servicer by the
Indenture Trustee or the Bond Insurer or to the Servicer, the Bond Insurer and
the Indenture Trustee by Holders of Bonds evidencing Voting Interests
represented by all Bonds aggregating not less than 51%;
(b) Failure on the part of the Servicer duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement or in the Mortgage Loan Sale Agreement,
which failure (1) materially and adversely affects the Bondholders or the Bond
Insurer and (2) continues unremedied for a period of 30 days after the date on
which written notice of such failure (which notice shall refer specifically to
this Section), requiring the same to be remedied, shall have been given to the
Servicer by the Indenture Trustee, at the direction of the Bond Insurer, or by
the Bond Insurer, or, with the consent of the Bond Insurer, to the Servicer by
the Holders of Bonds evidencing Voting Interests represented by all Bonds
aggregating not less than 51%.
(c) 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, readjustment of debt, marshalling 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 60 consecutive days;
(d) The consent by the Servicer to the appointment of a
trustee, conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to substantially
all of its property; or the admission by the Servicer in writing of its
inability to pay its debts generally as they become due, the Servicer's filing
of a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, the Servicer's making of an assignment for the benefit
of its creditors, or the Servicer's voluntary suspension of payment of its
obligations;
36
<PAGE> 41
(e) The occurrence of a Delinquency Rate Trigger, a Cumulative
Loss Rate Trigger or a Rolling Loss Rate Trigger;
(f) the Servicer's Net Worth as of the end of any fiscal
quarter, commencing with the fiscal quarter ended December 31, 1997, being less
than the Target Net Worth for such quarter; provided, however, that this default
test shall not apply to any quarter ended after December 31, 2002; or
(g) breach by the Servicer in any material respect of any of
its representations and warranties made herein or in the Mortgage Loan Sale
Agreement (not including Section 4(b) thereof), or in any certificate delivered
pursuant hereto or thereto, and the failure of the Servicer to cure such breach
in all material respects within 30 days after the notice of such breach shall
have been given to the Servicer by the Issuer, the Indenture Trustee or the Bond
Insurer;
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, either (1) the Bond Insurer or (2) with
the prior written consent of the Bond Insurer, either the Indenture Trustee or
the Holders of Bonds evidencing Voting Interests represented by all Bonds
aggregating not less than 51%, by notice then given in writing to the Servicer
with a copy to the Bond Insurer and to the Indenture Trustee, may terminate all
of the rights, responsibilities and obligations of the Servicer as 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 Mortgage Loans or otherwise, shall pass to and be vested in
the Indenture Trustee (unless a successor Servicer has been appointed pursuant
to Section 6.02) pursuant to and under this Section and, without limitation, the
Indenture Trustee or successor Servicer 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 necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Mortgage Notes and related documents, or otherwise. The Servicer agrees to
cooperate with the Indenture Trustee in effecting the termination of its
responsibilities and rights as Servicer hereunder, including, without
limitation, the transfer to the Indenture Trustee or successor Servicer for the
administration by it of all cash amounts that shall at the time be held by the
Servicer that have been deposited by the Servicer in the Collection Account or
transferred to the Indenture Trustee for deposit into the Bond Account or
thereafter received by the Servicer with respect to the Mortgage Loans.
The Indenture Trustee shall notify the Servicer in writing immediately
upon its becoming aware of a default described in Section 6.01(a).
All reasonable costs and expenses (including attorneys' fees) incurred
in connection with transferring the Servicer Mortgage Files to a successor
Servicer, amending this Agreement to reflect the appointment of a successor as
Servicer pursuant to this Section 6.01 or otherwise in connection with the
assumption by a successor Servicer of the duties of the predecessor Servicer
hereunder shall be paid by the predecessor Servicer upon presentation of
reasonable documentation of such costs and expenses.
37
<PAGE> 42
SECTION 6.02. INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
On and after the time the Servicer receives a notice of termination
pursuant to Section 6.01, the Indenture Trustee shall appoint a successor
Servicer meeting the criteria described below and, if it does not appoint a
successor, or until the successor's appointment takes effect, the Indenture
Trustee shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof,
including without limitation, the obligation to make Monthly Advances and to pay
Compensating Interest. As compensation therefor, the Indenture 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. In the event the
Indenture Trustee fails to appoint a successor Servicer, and the Indenture
Trustee is unwilling or legally unable to act as successor Servicer itself, it
may petition a court of competent jurisdiction to appoint, any established
housing and home finance institution or any institution that regularly services
non-conforming residential mortgage loans that is then servicing a
non-conforming residential mortgage loan portfolio and having all licenses,
permits and approvals required by applicable law, and having a net worth of not
less than $10,000,000, as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Servicer hereunder; provided that any such successor Servicer (other than
the Indenture Trustee) shall be acceptable to the Bond Insurer, which acceptance
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 implied rating assigned to the Bonds by any Rating Agency,
without taking into account the existence of the Bond Insurance Policy. Pending
appointment of a successor to the Servicer hereunder, unless the Indenture
Trustee is prohibited by law from so acting, the Indenture Trustee shall act in
such capacity as hereinabove provided. In connection with such appointment and
assumption, the Indenture Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of that permitted the Servicer hereunder. The Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effect any such succession. The appointment of a successor Servicer
shall not affect any liability of the predecessor Servicer that may have arisen
under this Agreement prior to its termination as Servicer, nor shall any
successor Servicer be liable for any acts or omissions of the predecessor
Servicer or for any breach by such Servicer or the Issuer of any of its
representations or warranties contained herein or in any related document or
agreement. Each of the Rating Agencies shall be given written notice of the
appointment of a successor Servicer pursuant to this Section.
SECTION 6.03. NOTIFICATIONS TO BONDHOLDERS.
Upon any termination or appointment of a successor to the Servicer
pursuant to this Article Six, the Indenture Trustee shall give prompt written
notice thereof to Bondholders at their respective addresses appearing in the
Bond Register, the Issuer, the Bond Insurer and to each Rating Agency.
38
<PAGE> 43
Within 60 days of obtaining actual knowledge of the occurrence of any
Event of Default that remains uncured, the Indenture Trustee shall transmit by
mail to all Bondholders notice of such Event of Default.
SECTION 6.04. ASSUMPTION OR TERMINATION OF SUB-SERVICING AGREEMENTS BY
THE INDENTURE TRUSTEE OR ANY SUCCESSOR SERVICER.
Upon the termination of the Servicer as servicer under this Agreement,
the Indenture Trustee as successor to the Servicer hereunder or any other
successor to the Servicer hereunder may, subject to the terms of any
Sub-Servicing Agreement, in its sole and absolute discretion elect to assume or
terminate any Sub-Servicing Agreement then in force and effect between the
Servicer and the Sub-Servicer. Notwithstanding the foregoing, any termination
fee due to a Sub-Servicer because of its termination by the Indenture Trustee
hereunder shall be the responsibility of the terminated Servicer and not the
Indenture Trustee. Upon the assumption of any Sub-Servicing Agreement, the
terminated Servicer agrees to deliver to the assuming party any and all
documents and records relating to the applicable Sub-Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effectuate the orderly transfer of the Sub-Servicing
Agreement.
SECTION 6.05. PAYMENT OF INDENTURE TRUSTEE'S FEES AND EXPENSES.
(a) On each Payment Date, the Indenture Trustee will be
entitled to retain its Indenture Trustee Fee from amounts deposited into the
Bond Account on the related Deposit Date. The Indenture Trustee Fee constitutes
compensation for all services rendered by the Indenture Trustee in the exercise
and performance of any of the powers and duties hereunder or under the
Indenture. The Indenture Trustee does not and will not have any lien on the
Trust Estate for payment of any such fees or expenses.
(b) The Servicer shall pay or reimburse the Indenture Trustee,
from its own funds, upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Indenture Trustee in accordance with any of
the provisions of this Agreement, the Indenture and the Management Agreement,
dated as of September 1, 1997, between the Issuer and Norwest Bank Minnesota,
National Association, as manager (the "Management Agreement"), (including but
not limited to the reasonable compensation and the expenses and disbursements of
its counsel and of all persons not regularly in its employ) except any such
expense, disbursement or advance as may arise from its negligence or bad faith
or that is otherwise reimbursed to the Indenture Trustee, and except for
routine, recurring or nominal expenses, disbursements and advances; provided,
however, that the Indenture Trustee shall not refuse to perform any of its
duties hereunder or under the Indenture or the Management Agreement solely as a
result of the failure of the Servicer to pay or reimburse such expenses,
disbursements or advances.
(c) The Servicer agrees to indemnify the Indenture Trustee,
Back-Up Servicer, Paying Agent, and their respective agents, directors,
employees and officers (each an "Indemnified Party") from, and hold it harmless
against, any and all losses and liabilities, damages, claims or expenses
(including reasonable attorneys' fees, expenses and disbursements), incurred or
in
39
<PAGE> 44
connection with this Agreement, the Indenture, the Bonds or the Management
Agreement, including, but not limited to, any such loss, liability or expense
incurred, arising in respect of or in connection with any legal action against
the Trust Estate, the Issuer or the Indenture Trustee or any director, officer,
employee or agent thereof, or the performance of any of the Indenture Trustee's
duties hereunder (except in the event it assumes the duties and obligations of
the Servicer hereunder as the result of an Event of Default), the Indenture or
the Management Agreement, other than any loss, liability or expense incurred by
reason of the negligence, bad faith or intentional misconduct of the Indenture
Trustee. Notwithstanding the generality of the foregoing, if any action, suit or
other proceeding is brought against an Indemnified Party for which the
Indemnified Party seeks indemnification hereunder, the Indemnified Party shall
promptly notify the Servicer of the commencement thereof, whereupon the Servicer
will be entitled to participate therein, and to assume the defense thereof, with
counsel selected by the Servicer and reasonably satisfactory to such Indemnified
Party, provided, that, if in the Indemnified Party's reasonable judgment the
Indemnified Party has any claims or defenses that conflict with or differ from
the interests of the Servicer, the Indemnified Party shall be entitled to select
counsel of its choosing and pursue such claims and defenses separately and all
related costs, expenses and liabilities associated with such separate claims or
defenses will continue to be covered by the Servicer's indemnification
obligation hereunder. The Servicer shall not be entitled to settle any
proceeding without the consent of any Indemnified Party with any right of
indemnification hereunder with respect to such proceeding except upon such terms
as will provide each such Indemnified Party reasonable assurance of full
indemnity hereunder.
(d) This Section 6.05 shall survive the termination of this
Agreement or the resignation or removal of the Indenture Trustee or the Servicer
as regards rights accrued prior to such resignation or removal.
(e) Amounts required to be paid by the Servicer to the
Indenture Trustee under subsections (b) and (c) above shall be paid by the
Servicer out of its own funds, and shall not be reimbursable to the Servicer
from the Collection Account or netted by the Servicer out of funds it is
required to deposit into the Collection Account.
ARTICLE VII
TERMINATION
SECTION 7.01. TERMINATION.
Except as otherwise specifically set forth herein, the obligations and
responsibilities of the Servicer shall terminate upon the earliest to occur of
(1) the final payment or other liquidation of the Mortgage Loans and the
disposition of all REO Properties and the remittance of all funds due hereunder
with respect to such Mortgage Loans and REO Properties and (2) the satisfaction
and discharge of the indebtedness evidenced by the Bonds and the payment of all
amounts due the Bond Insurer under the Insurance Agreement and the termination
of the Deposit Trust Agreement.
40
<PAGE> 45
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. AMENDMENT.
This Agreement may be amended from time to time by the Servicer, the
Issuer and the Indenture Trustee, without the consent of any of the Bondholders
but only with the prior written consent of the Bond Insurer (which consent shall
not be unreasonably withheld), (1) to cure any error or any ambiguity or to
correct or supplement any provisions herein which may be inconsistent with any
other provisions herein, or (2) to comply with the requirements of the Code;
provided that in all such cases the Indenture Trustee shall have received
written confirmation from each Rating Agency that any such modifications to this
Agreement will not result in a qualification, reduction or withdrawal of the
implied rating assigned to the Bonds by such Rating Agency (without taking into
account the Bond Insurance Policy); provided, further, that in all such cases
such action shall not, as evidenced by an Opinion of Counsel furnished by and at
the expense of the party requesting such amendment, adversely affect in any
material respect the interests of any Bondholder or the Bond Insurer.
This Agreement may also be amended from time to time by the Servicer,
the Issuer and the Indenture Trustee, with the consent of the Bond Insurer
(which consent shall not be unreasonably withheld) and the Holders of Bonds
evidencing Voting Interests of the Bonds affected thereby aggregating greater
than 50%, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement, or of modifying in any
manner the rights of the Holders of Bonds of such Bonds; provided, however, that
no such amendment shall (1) reduce in any manner the amount of, or delay the
timing of, collections of payments on Mortgage Loans or payments which are
required to be deposited into the Bond Account without the consent of all
Bondholders or (2) reduce the aforesaid percentage of the Bonds the Holders of
which are required to consent to any such amendment, without the consent of the
Holders of all Bonds then outstanding.
Promptly after the execution of any such amendment or consent pursuant
to the second preceding paragraph, the Indenture Trustee shall furnish written
notification of the substance of such amendment to each Bondholder and an
executed copy of such amendment to each Rating Agency, with a copy to each of
the Underwriters.
It shall not be necessary for the consent of Bondholders under 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 of evidencing the authorization of the
execution thereof by Bondholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the
Indenture Trustee and the Bond Insurer shall be entitled to receive and rely
upon an Opinion of Counsel furnished by and at the expense of the party
requesting such amendment stating that the execution of such amendment is
authorized or permitted by this Agreement. The Indenture Trustee may, but shall
not be
41
<PAGE> 46
obligated to, enter into any such amendment that affects the Indenture Trustee's
own rights, duties or immunities under this Agreement.
SECTION 8.02. GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the
State of New York (without regard to conflict of laws principles and the
application of the laws of any other jurisdiction), and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 8.03. NOTICES.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case of
the Issuer, to Wilmington Trust Company at 1100 N. Market Street, Wilmington,
Delaware 19890, Attention: Emmett Harmon, with copies to the Indenture Trustee,
as Manager, and to Howard J. Glicksman, Esq., at Plaza Tower One, Suite 1200,
6400 South Fiddler's Green Circle, Englewood, Colorado 80111, Telecopy (303)
741- 6944, (b) in the case of the Servicer, at National Mortgage Corporation,
Harlequin Plaza, Suite 3305, 7600 East Orchard Road, Englewood, Colorado,
80111-4943, Telecopy (303) 741-8131, Attention: Craig Stulz; (c) in the case of
the Indenture Trustee, at its Corporate Trust Office at Norwest Bank Minnesota,
National Association, as trustee, 11000 Broken Land Parkway, Columbia, Maryland
21044, Telecopy (410) 884-2360 Attention: Fund America 1997-NMC1; (d) in the
case of the Bond Insurer, MBIA Insurance Corporation, 113 King Street, Armonk,
New York, 10504, Telecopy (914) 765-3810, Attention: Insured Portfolio
Management - Structured Finance (IPM-SF) (Fund America Investors Trust 1997-NMC1
Collateralized Mortgage Obligations, Series 1997-NMC1); (e) in the case of S&P,
to Standard & Poor's, 26 Broadway, 15th Floor, New York, New York 10004,
Attention: Mortgage Surveillance Group; and (f) in the case of Moody's, to
Moody's Investors Service Inc., 99 Church Street, New York, New York 10007, or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party; and (g) in the case of the Underwriters,
to the respective addresses specified in the Indenture. Any notice required or
permitted to be mailed to a Bondholder shall be given by first class mail,
postage prepaid, at its address shown in the Bond 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 Bondholder receives such notice. Any
notice or other document required to be delivered or mailed by the Indenture
Trustee to any Rating Agency shall be given on a best efforts basis and only as
a matter of courtesy and accommodation and the Indenture Trustee shall have no
liability for failure to deliver such notice or document to any such Rating
Agency.
SECTION 8.04. 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
42
<PAGE> 47
this Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Agreement or of the Bonds or the rights of the Holders
thereof.
SECTION 8.05. ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 5.03 and 5.05, this Agreement may not be assigned by the
Issuer or the Servicer without the prior written consent of the Bond Insurer and
the Holders of Bonds evidencing not less than 66% of the Voting Interests of all
Bonds.
SECTION 8.06. THIRD PARTY BENEFICIARY; RATING.
(a) The Bond Insurer is an intended third-party beneficiary of
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the Bond Insurer; provided that, notwithstanding the foregoing, for so long as a
Bond Insurer Default is continuing, the Bondholders shall succeed to the Bond
Insurer's rights hereunder. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement that expressly confer rights upon
the Bond Insurer shall be for the benefit of and run directly to the Bond
Insurer, and the Bond Insurer shall be entitled to rely on and enforce such
covenants to the same extent as if it were a party to this Agreement.
(b) In the event the rating of the Bond Insurer by any of the
Rating Agencies is reduced to a rating that is below "investment grade" (as that
term is then commonly used), the Servicer shall, at its own expense, seek to
obtain ratings of the Bonds (apart from the rating related to the Bond Insurance
Policy) from such Rating Agency.
SECTION 8.07. COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
SECTION 8.08. INTENTION OF THE PARTIES.
It is the intention of the parties that the Issuer is conveying, and
the Servicer is receiving, only a contract for servicing and administering the
Mortgage Loans. Accordingly, the parties hereby acknowledge that the Indenture
Trustee remains the sole and absolute record holder of the Mortgage Loans and
all rights related thereto.
SECTION 8.09. WAIVERS AND MODIFICATIONS.
No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.
43
<PAGE> 48
SECTION 8.10. FURTHER AGREEMENTS.
The Servicer and the Issuer each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.
SECTION 8.11. ATTORNEY-IN-FACT.
The Issuer hereby designates the Servicer its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Agreement or the Indenture.
44
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers, all as of the day and year first
above written.
FUND AMERICA INVESTORS
TRUST 1997-NMC1,
AS ISSUER
By: Wilmington Trust Company, not in its
individual capacity, but solely
as Owner Trustee
By:
------------------------
Authorized Signatory
NATIONAL MORTGAGE CORPORATION,
AS SERVICER
By:
------------------------
Name: Craig A. Stulz
Title: Executive Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
AS INDENTURE TRUSTEE AND BACKUP
SERVICER AND NOT IN ITS
INDIVIDUAL CAPACITY
By:
--------------------------
Name:
Title:
45
<PAGE> 1
EXHIBIT 99.1
FINANCIAL GUARANTY INSURANCE POLICY
OBLIGATIONS: $121,765,000 POLICY NUMBER: 24873
Fund America Investors Trust 1997-NMC1
Collateralized Mortgage Obligations,
Series 1997-NMC1
MBIA Insurance Corporation (the "Insurer"), in consideration of the
payment of the premium and subject to the terms of this Financial Guaranty
Insurance Policy (this "Policy"), hereby unconditionally and irrevocably
guarantees to any Owner that an amount equal to each full and complete Insured
Payment will be received from the Insurer by Norwest Bank Minnesota, National
Association or its successors, as indenture trustee for the Owners (the
"Trustee"), on behalf of the Owners, for distribution by the Trustee to each
Owner of each Owner's proportionate share of the Insured Payment. The
Insurer's obligations hereunder with respect to a particular Insured Payment
shall be discharged to the extent funds equal to the applicable Insured Payment
are received by the Trustee, whether or not such funds are properly applied by
the Trustee. Insured Payments shall be made only at the time set forth in this
Policy and no accelerated Insured Payments shall be made regardless of any
acceleration of the Obligations, unless such acceleration is at the sole option
of the Insurer.
Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust or the Trustee
for withholding taxes, if any (including interest and penalties in respect of
any such liability).
The Insurer will pay any Insured Payment that is a Preference Amount on
the Business Day following receipt on a Business Day by the Fiscal Agent (as
described below) of (i) a certified copy of the order requiring the return of a
preference payment, (ii) an opinion of counsel satisfactory to the Insurer that
such order is final and not subject to appeal, (iii) an assignment in such form
as is reasonably required by the Insurer, irrevocably assigning to the Insurer
all rights and claims of the Owner relating to or arising under the Obligations
against the debtor which made such preference payment or otherwise with respect
to such preference payment and (iv) appropriate instruments to effect the
appointment of the Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Insurer, provided that if such documents are received after
12:00 noon New York City time on such Business Day, they will be deemed to be
received on the following Business Day. Such payments shall be disbursed to
the receiver or trustee in bankruptcy named in the final order of the court
exercising jurisdiction on behalf of the Owner and not to any Owner directly
unless such Owner has returned principal or interest paid on the Obligations to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such Owner.
The Insurer will pay any other amount payable hereunder no later than
12:00 noon New York City time on the later of the Payment Date on which the
related Deficiency Amount is due or the third Business Day following receipt in
New York, New York on a Business Day by State Street Bank and
<PAGE> 2
Trust Company, N.A., as Fiscal Agent for the Insurer or any successor fiscal
agent appointed by the Insurer (the "Fiscal Agent") of a Notice (as described
below); provided that if such Notice is received after 12:00 noon New York City
time on such Business Day, it will be deemed to be received on the following
Business Day. If any such Notice received by the Fiscal Agent is not in proper
form or is otherwise insufficient for the purpose of making claim hereunder it
shall be deemed not to have been received by the Fiscal Agent for purposes of
this paragraph, and the Insurer or the Fiscal Agent, as the case may be, shall
promptly so advise the Trustee and the Trustee may submit an amended Notice.
Insured Payments due hereunder unless otherwise stated herein 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 Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit or cause to be deposited, sufficient funds to
make payments due under this Policy.
As used herein, the following terms shall have the following meanings:
"Agreement" means the Indenture dated as of September 1, 1997 between
the Issuer and the Trustee, without regard to any amendment or supplement
thereto.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which the Insurer or banking institutions in New York City or in 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, with respect to any Payment Date, the sum of
(i) the Bond Interest for such Payment Date minus Available Funds and (ii) the
then existing Overcollateralization Deficit, if any, after application of
Available Funds to reduce the Bond Balance on such Payment Date.
"Insured Payment" means (i) as of any Payment Date, the Deficiency
Amount and (ii) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by fax substantially in the form of Exhibit A attached hereto, 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 Payment Date.
"Owner" means each Holder (as defined in the Agreement) (other than the
Trustee, the Company or the Servicer) who, on the applicable Payment Date, is
entitled under the terms of the applicable Obligations to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner
on the Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in
2
<PAGE> 3
bankruptcy pursuant to the United States Bankruptcy Code (11 U.S.C.), as
amended from time to time, in accordance with a final nonappealable order of a
court having competent jurisdiction.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Agreement as of the date of
execution of this Policy, without giving effect to any subsequent amendment to
or modification of the Agreement unless such amendment or modification has been
approved in writing by the Insurer.
Any notice hereunder or service of process on the Fiscal Agent may be
made at the address listed below for the Fiscal Agent or such other address as
the Insurer shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006 Attention: Municipal Registrar and Paying Agency, or such
other address as the Fiscal Agent shall specify to the Trustee in writing.
This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.
This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.
3
<PAGE> 4
IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this 30th day of September 1997.
MBIA INSURANCE CORPORATION
By
----------------------------------
Title
-------------------------------
Attest:
By
-------------------------------
Secretary
4
<PAGE> 5
EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: 24873
NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: 24873
State Street Bank and Trust Company, N.A., as Fiscal Agent
for MBIA Insurance Corporation
61 Broadway, 15th Floor
New York, NY 10006
Attention: Municipal Registrar and
Paying Agency
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
The undersigned, a duly authorized officer of [NAME OF TRUSTEE], as
indenture trustee (the "Trustee"), hereby certifies to State Street Bank and
Trust Company, N.A. (the "Fiscal Agent") and MBIA Insurance Corporation (the
"Insurer"), with reference to Financial Guaranty Insurance Policy Number: 24873
(the "Policy") issued by the Insurer in respect of the $121,765,000 Fund
America Investors Trust 1997-NMC1 Collateralized Mortgage Obligations, Series
1997-NMC1 (the "Obligations"), that:
(i) the Trustee is the indenture trustee under the Indenture dated as
of September 1, 1997, among Fund America Investors Trust 1997-NMC1, as
Issuer, and the Trustee, as indenture trustee for the Owners;
(ii) the Bond Interest due under clause (i) of the definition of
Deficiency Amount for the Payment Date occurring on (the
"Applicable Payment Date") is $ (the "Bond Interest");
(iii) the amount of the Available Funds for the Applicable Payment Date
is $ (the "Available Funds");
(iv) the excess, if any, of the Bond Interest in clause (ii) over the
Available Funds in clause (iii) is $ ;
(v) the excess, if any, of the Available Funds in clause (iii) over
the Bond Interest in clause (ii) is $ ;
<PAGE> 6
(vi) the amount of the then existing Overcollateralization Deficit
before the application of Available Funds on the Applicable Payment Date
under clause (ii) of the definition of Deficiency Amount is $ ;
(the "Overcollateralization Deficit");
(vii) the excess, if any, of the Overcollateralization Deficit as
reported in clause (vi) over the amount in clause (v) is $ ;
(viii) the sum of the amount in clause (iv) and the amount in clause
(vii) is $ (the "Deficiency Amount");
(ix) the amount of previously distributed payments on the
Obligations that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the Bankruptcy Code in
accordance with a final nonappealable order of a court having competent
jurisdiction is $ (the "Preference Amount");
(x) the total Insured Payment due is $ , which amount
equals the sum of the Deficiency Amount and the Preference Amount;
(xi) the Trustee is making a claim under and pursuant to the terms of
the Policy for the dollar amount of the Insured Payment set forth in (vi)
above to be applied to the payment of the Deficiency Amount for the
Applicable Payment Date in accordance with the Agreement and for the dollar
amount of the Insured Payment set forth in (viii) above to be applied to
the payment of any Preference Amount; and
(xii) the Trustee directs that payment of the Insured Payment be made
to the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Policy:
[TRUSTEE'S ACCOUNT NUMBER].
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.
Any Person Who Knowingly And With Intent To Defraud Any Insurance
Company Or Other Person Files An Application For Insurance Or Statement Of
Claim Containing Any Materially False Information, Or Conceals For The Purpose
Of Misleading, Information Concerning Any Fact Material Thereto, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A
Civil Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The
Claim For Each Such Violation.
<PAGE> 7
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the day of , .
[NAME OF TRUSTEE], as Trustee
By
-------------------------------
Title
----------------------------
