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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 29, 1998
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Fund America Investors Corporation II
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(Exact name of registrant as specified in charter)
Delaware 333-33823 84-1218906
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6400 S. Fiddler's Green Circle, Suite 1200B, Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 290-6025
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
Fund America Investors Trust 1998-NMC1 (the "Issuer") was formed
pursuant to a Deposit Trust Agreement, dated as of June 1, 1998 (the
"Trust Agreement"), by and between the Registrant and Wilmington Trust
Company, as owner trustee (the "Owner Trustee").
On June 29, 1998, the Issuer issued $236,526,000 original
principal amount of its Collateralized Mortgage Obligations, Series
1998-NMC1, which consist of four classes of bonds (collectively, the
"Bonds"), designated as the Class A Bonds, the Class M-1 Bonds, the Class
M-2 Bonds and the Class M-3 Bonds, pursuant to an Indenture, dated as of
June 1, 1998 (the "Indenture"), between the Issuer and Norwest Bank
Minnesota, National Association, as indenture trustee (the "Indenture
Trustee"). Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Indenture.
As security for the Bonds, the Issuer pledged to the Indenture
Trustee pursuant to the Indenture a pool of adjustable rate,
fully-amortizing 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 June 1, 1998, between the Registrant and NMC, and subsequently
transferred to the Issuer pursuant to a Mortgage Loan Contribution
Agreement, dated as of June 1, 1998, by and between the Registrant, as
transferor, and the Issuer, as transferee.
The Bonds have been sold by the Registrant to Salomon Brothers
Inc (the "Underwriter") pursuant to an Underwriting Agreement, dated as of
June 24, 1998, between the Underwriter and the Registrant.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
1.1 Copy of the Underwriting Agreement, dated as of June 24, 1998,
by and between the Registrant and Salomon Brothers Inc.
4.1 Copy of the Indenture, dated as of June 1, 1998, by and
between Fund America Investors Trust 1998-NMC1 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 June 1,
1998, by and between National Mortgage Corporation and the
Registrant.
2
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10.2 Copy of the Deposit Trust Agreement, dated as of June 1, 1998,
by and between the Registrant and Wilmington Trust Company, as
Owner Trustee.
10.3 Copy of the Servicing Agreement, dated as of June 1, 1998, by
and among National Mortgage Corporation, as Servicer, Norwest
Bank Minnesota, National Association, as Indenture Trustee,
and Fund America Investors Trust 1998-NMC1.
3
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
July 8, 1998 FUND AMERICA INVESTORS CORPORATION II
By: /s/ Peter R. Lang
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Name: Peter R. Lang
Title: Vice President
4
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EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Copy of the Underwriting Agreement, dated as of June 24, 1998, by
and between the Registrant and Salomon Brothers Inc
4.1 Copy of the Indenture, dated as of June 1, 1998, by and between
Fund America Investors Trust 1998-NMC1 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 June 1,
1998, by and between National Mortgage Corporation and the
Registrant
10.2 Copy of the Deposit Trust Agreement, dated as of June 1, 1998, by
and between the Registrant and Wilmington Trust Company, as Owner
Trustee
10.3 Copy of the Servicing Agreement, dated as of June 1, 1998, by and
among National Mortgage Corporation, as Servicer, Norwest Bank
Minnesota, National Association, as Indenture Trustee, and Fund
America Investors Trust 1998-NMC1
</TABLE>
5
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EXHIBIT 1.1
FUND AMERICA INVESTORS CORPORATION II
$236,526,000 (Approximate) Collateralized Mortgage Obligations, Series 1998-NMC1
UNDERWRITING AGREEMENT
New York, New York
As of June 24, 1998
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Fund America Investors Corporation II, a limited purpose finance
corporation (the "Company"), proposes to cause Fund America Investors Trust
1998-NMC1, a limited purpose Delaware business trust (the "Trust"), to issue and
sell to Salomon Brothers Inc (the "Underwriter"), approximately $236,526,000
aggregate principal amount of Collateralized Mortgage Obligations, Series
1998-NMC1, which will consist of four classes of bonds (collectively, the
"Bonds"), designated as Class A, Class M-1, Class M-2 and Class M-3.
The Bonds will be issued by the Trust to be formed pursuant to a trust
agreement (the "Trust Agreement") to be entered into between the Company and
Wilmington Trust Company, as trustee (the "Owner Trustee"). The Bonds will be
issued and secured pursuant to an indenture to be dated as of the Cut-off Date
between the Trust and Norwest Bank Minnesota, National Association ("Norwest"),
as indenture trustee (the "Indenture Trustee") (the "Indenture"). The beneficial
ownership interest in the Trust will be represented by certificates (the "Trust
Certificates") which will be transferred by the Company to National Mortgage
Finance Corporation ("NMFC"), a limited purpose wholly-owned subsidiary of
National Mortgage Corporation ("National Mortgage").
The Bonds will be secured by collateral consisting of, among other
things, adjustable rate, fully amortizing residential first mortgage loans (the
"Mortgage Loans") and related property. The Mortgage Loans will be serviced by
National Mortgage pursuant to the terms of a servicing agreement (the "Servicing
Agreement") to be entered into among National Mortgage, the Indenture Trustee
and the Owner Trustee.
The Company will acquire all the Mortgage Loans from National Mortgage
pursuant to a mortgage loan purchase agreement between the Company and National
Mortgage (the "Mortgage Loan Purchase Agreement"); and the Company will
contribute and assign the Mortgage Loans to the Trust pursuant to a mortgage
loan contribution agreement between the Company and the Trust (the "Mortgage
Loan Contribution Agreement"). The Mortgage Loans were originated or acquired by
National Mortgage primarily through its network of brokers and correspondents.
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Certain administrative functions with respect to the Trust will be
performed on behalf of the Trust by Norwest, as manager (the "Manager"),
pursuant to a management agreement (the "Management Agreement") between the
Trust and the Manager.
The Bonds are described more fully in Schedule I hereto and in the
Prospectus (as defined below). The Mortgage Loans will be of the type described
and will have the aggregate principal balance set forth in Schedule I. The Bonds
will consist of four classes, designated as the Class A Bonds, the Class M-1
Bonds, the Class M-2 Bonds and the Class M-3 Bonds, and will be issued in the
denominations specified in Schedule I.
This Agreement, the Trust Agreement, the Indenture, the Servicing
Agreement, the Mortgage Loan Purchase Agreement, the Mortgage Loan Contribution
Agreement and the Management Agreement are collectively referred to herein as
the "Basic Agreements." Capitalized terms used but not defined herein shall have
the meanings assigned thereto in the Indenture.
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, the Underwriter that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3
(File No. 333-33823) for the registration of the Bonds under the
Securities Act of 1933, as amended (the "1933 Act"), which registration
statement has become effective and copies of which have heretofore been
delivered to you. The Company proposes to file with the Commission
pursuant to Rule 424 under the 1933 Act a supplement to the form of
prospectus included in such registration statement relating to the
Bonds and the plan of distribution thereof. Such registration
statement, as from time to time amended through the date hereof,
including all exhibits thereto, and all documents therein incorporated
by reference from time to time pursuant to Item 12 of Form S-3 under
the 1933 Act that were filed under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), on or before the effective date of such
registration statement, each as amended at the date hereof, but
excluding Form T-1, is hereinafter referred to as the "Registration
Statement;" the related prospectus supplement, in the form in which it
shall be first filed with the Commission pursuant to Rule 424 under the
1933 Act, is hereinafter referred to as the "Prospectus Supplement;"
and the prospectus, in the form in which it shall be first filed with
the Commission pursuant to Rule 424 under the 1933 Act, as supplemented
by the Prospectus Supplement, is hereinafter referred to as the
"Prospectus". Any reference herein to the Registration Statement or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which
were filed under the 1934 Act on or before the date hereof; and any
reference herein to the terms "amend", "amendment" or "supplement" with
respect to the Registration Statement or the Prospectus shall be deemed
to refer to and include the filing of any document under the 1934 Act
deemed to be incorporated by reference therein after the date hereof.
The Company will file with the Commission within fifteen days of the
issuance of the Bonds a current report on Form 8-K pursuant to Rule
13a-11 under the 1934 Act (a "Current Report") to which shall be
attached a copy of the Indenture and the Servicing Agreement as
executed and that sets forth specific information concerning the Bonds
and the Mortgage Loans to the extent that such information is not set
forth in the Prospectus.
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(b) As of the date hereof, when the Registration Statement
became effective, when the Prospectus is first filed pursuant to Rule
424 under the 1933 Act, when, prior to the Closing Date, any amendment
to the Registration Statement becomes effective, 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, complies
and will comply in all material respects with the applicable
requirements of the 1933 Act, the 1934 Act and the Trust Indenture Act
of 1934, as amended (the "Trust Indenture Act"), as applicable, and the
rules and regulations thereunder, and (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, does not and will not contain an
untrue statement of a material fact and does 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 the information contained in or
omitted from the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto in reliance upon and in
conformity with the information furnished in writing to the Company by
or on behalf of the Underwriter specifically for use in connection with
the preparation of the Registration Statement and the Prospectus. For
all purposes of this Agreement, the Company acknowledges that the
statements set forth in the first sentence of the second to the last
paragraph and the last paragraph of the cover page, the paragraph
regarding making a market in the Bonds on the inside front cover page
and under the heading "Underwriting" in the Prospectus Supplement
constitute the only information furnished in writing by or on behalf of
the Underwriter for inclusion in the documents referred to in the
immediately preceding sentence.
(c) As of the date hereof, when the Registration Statement
became effective, when the Prospectus is first filed pursuant to Rule
424 under the 1933 Act, when, prior to the Closing Date, any amendment
to the Registration Statement becomes effective, when any supplement to
the Prospectus is filed with the Commission, and at the Closing Date,
there has not and will not have been (i) any request by the Commission
for any further amendment to the Registration Statement or the
Prospectus or for any additional information, (ii) any 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 Bonds for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose.
(d) The Bonds meet required ratings criteria for registration
under the Registration Statement. The Bonds and the Basic Agreements
will each conform in all material respects to the description thereof
contained in the Prospectus. The Bonds have been duly authorized, and
each of the Bonds, when validly authenticated and delivered in
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accordance with the Indenture and paid for by the Underwriter in
accordance with this Agreement, will be duly and validly issued and
will constitute legal, valid and binding obligations of the Trust
enforceable against the Trust in accordance with their 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 in equity or at law, and will be entitled to the benefits of
the Indenture. The Indenture has been duly authorized and duly
qualified under the Trust Indenture Act.
(e) The Trust Certificates represent undivided ownership
interests in the Trust created by the Trust Agreement. The Trust
Certificates have been duly authorized, and each of the Trust
Certificates, when validly authenticated and delivered in accordance
with the Trust Agreement will be duly and validly issued, fully paid
and non-assessable and will be entitled to the benefits of the Trust
Agreement.
(f) [Intentionally Omitted].
(g) Each of the Basic Agreements to which the Company is a
party has been or will be as of the Closing Date duly authorized,
executed and delivered by the Company and constitutes, or will
constitute as of the Closing Date, a legal, valid and binding
obligation of the Company enforceable against the Company 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 in equity or at law.
(h) As of the Closing Date, each of the Basic Agreements to
which the Trust is a party, assuming the due execution and delivery by
the parties thereto, will each constitute a legal, valid and binding
obligation of the Trust, enforceable against the Trust 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 in equity or at law.
(i) The Company is a corporation duly organized and validly
existing as a corporation in good standing under the laws of Delaware
with corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus and
to enter into and perform its obligations under the Basic Agreements to
which it is a party. The Company is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction wherein it owns or leases any material properties or
conducts any material business and which requires such qualification.
(j) Neither the transfer of the Mortgage Loans, nor the
issuance and sale of the Bonds, nor the execution and delivery by the
Company of the Basic Agreements to
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which it is a party, nor the consummation by the Company of any of the
transactions herein or therein contemplated, nor compliance by the
Company with the provisions hereof or thereof, will conflict with or
result in a breach of any term or provision of the Certificate of
Incorporation or by-laws of the Company, or conflict with, result in a
breach, violation or acceleration of or constitute a default under, the
terms of any indenture or other agreement or instrument to which the
Company is a party or by which the Company is bound, or any statute,
order or regulation applicable to the Company, of any court, regulatory
body, administrative agency or governmental body having jurisdiction
over 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 or regulation of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over it, 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 the Basic Agreements to
which it is a party or (ii) the business, operations, financial
condition, properties or assets of the Company.
(k) No filing or registration with, notice to, or consent,
approval, authorization or order or other action of any court or
governmental authority or agency is required for the consummation by
the Company of the transactions contemplated by the Basic Agreements to
which it is a party, except (i) such as have been or will have been
obtained under the 1933 Act and the Trust Indenture Act prior to the
Closing Date in connection with the offer, sale, purchase and
distribution of the Bonds by the Underwriter, (ii) the recordation of
the assignments of the Mortgage Loans to the Indenture Trustee pursuant
to the Indenture that has not yet been completed and (iii) such
approvals, consents, registrations or qualifications as may be required
under state securities or blue sky laws of states other than the State
of New York in connection with the purchase and distribution of the
Bonds by the Underwriter.
(l) There is no action, suit, proceeding or investigation of
or against the Company before or by any court, administrative or
governmental agency, or other tribunal, domestic or foreign, now
pending or, to the best of the Company's knowledge, threatened against
the Company, (i) asserting the invalidity of the Basic Agreements, (ii)
seeking to prevent the issuance of the Bonds or the consummation of any
of the transactions contemplated by the Basic Agreements, (iii) which
might materially and adversely affect the performance by the Company of
its obligations under, or the validity or enforceability of, the Basic
Agreements, or the Bonds or the Trust Certificates, or (iv) seeking to
affect adversely the federal income tax attributes of the Bonds as
described in the Prospectus.
(m) As of the Closing Date, the Mortgage Loans will have been
duly and validly assigned and delivered to the Indenture Trustee,
subject to no prior lien, mortgage, security interest, pledge, adverse
claim, charge or other encumbrance other than Permitted Encumbrances.
(n) [Intentionally Omitted].
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(o) As of the Closing Date, the Company's representations and
warranties in the Basic Agreements to which it is a party will be true
and correct in all material respects.
(p) Immediately prior to the time of execution and delivery of
the Indenture, but after the execution and delivery of the Mortgage
Loan Purchase Agreement, the Company will have good and marketable
title to, and will be the sole owner of, the Mortgage Loans, free and
clear of any lien, mortgage, pledge, charge, encumbrance, adverse claim
or other security interest other than the Permitted Encumbrances
(collectively, "Liens"), and will not have assigned to any Person other
than the Trust or the Indenture Trustee any of its right, title or
interest in such Mortgage Loans.
(q) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the Basic
Agreements, the Trust Certificates and the Bonds have been or will be
paid at or prior to the Closing Date.
(r) The Company possesses all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct the business
now operated by it and as described in the Prospectus, and the Company
has received no notice of proceedings relating to the revocation or
modification of any such license, certificate, authority or permit
which singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the
conduct of the business, operations, financial condition or income of
the Company.
(s) Neither the Company nor the Trust is, and, after giving
effect to the issuance of the Trust Certificates or the offering and
sale of the Bonds, will be, an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act") that is
registered or is required to be registered under the 1940 Act.
(t) [Intentionally Omitted].
(u) The transfer of the Trust Certificates to NMFC does not
require registration under the 1933 Act or any state securities or blue
sky laws.
(v) The Trust Agreement is not required to be qualified under
the Trust Indenture Act.
[(w) The Indenture has been duly qualified under the Trust
Indenture Act.]
Any certificate signed by an officer of the Company and delivered to
the Underwriter or counsel for the Underwriter in connection with the offering
of the Bonds shall be deemed a representation and warranty as to the matters
covered thereby to the Underwriter.
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2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell to the Underwriter, and the Underwriter agrees to purchase from
the Company, the Bonds at the purchase price set forth in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the Bonds
shall be made at the office, on the date and at the time specified in Schedule I
hereto, or such later date and time not later than ten (10) Business Days after
such date and time specified in Schedule I hereto as shall be agreed upon by the
Company and the Underwriter (such date and time of delivery of, and payment for,
the Bonds, the "Closing Date"). Delivery of the Bonds shall be made to the
Underwriter or their designees against payment by the Underwriter of the
purchase price therefor to or upon the order of the Company by delivery of
immediately available funds. The Bonds shall be registered in such names and in
such denominations as the Underwriter may have requested in writing not less
than three (3) full Business Days prior to the Closing Date.
The Company agrees to have the Bonds available for inspection, checking
and packaging in New York, New York, not later than 10:00 a.m. New York time on
the Business Day prior to the Closing Date.
4. Offering by the Underwriter. It is understood that the
Underwriter proposes to offer the Bonds for sale as set forth in the Prospectus.
5. Agreements. The Company agrees with the Underwriter that:
(a) The Company will, prior to the termination of the offering
of the Bonds, promptly advise the Underwriter (i) when any amendment to
the Registration Statement has become effective or any revision of or
supplement to the Prospectus has been so filed, (ii) of any request by
the Commission for any amendment to the Registration Statement or the
Prospectus or for any additional information, (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 Bonds for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop order and, if issued,
to obtain as soon as possible the withdrawal thereof. The Company will
not file any amendment to the Registration Statement or any revision of
or supplement to the Prospectus (including the supplement relating to
the Bonds included in the Prospectus) prior to the termination of the
offering of the Bonds unless the Company has furnished to the
Underwriter a copy for its review and will not file such proposed
amendment or supplement to which any Underwriter reasonably objects.
Subject to the foregoing sentence, the Company will cause the
Prospectus to be filed with the Commission pursuant to Rule 424 under
the 1933 Act by means reasonably calculated to result in a timely
filing with the Commission pursuant to Rule 424 and promptly will
advise the Underwriter when the Prospectus has been so filed.
(b) If, at any time when a prospectus relating to the Bonds is
required to be delivered under the 1933 Act (i) any event occurs as a
result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or
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omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading, or (ii) it shall be necessary
to revise, amend or supplement the Prospectus to comply with the 1933
Act or the rules and regulations of the Commission thereunder, the
Company promptly will notify the Underwriter and promptly will prepare
and file with the Commission, subject to subsection (a) of this Section
5, a revision, amendment or supplement that will correct such untrue
statement or omission or 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
amendment to the Registration Statement to be declared effective as
soon as possible.
(c) The Company will (i) furnish to the Underwriter and
counsel for the Underwriter, without charge, signed copies of the
Registration Statement including exhibits thereto and each amendment
thereto that became effective on or prior to the Closing Date and, so
long as delivery of a prospectus relating to the Bonds is required
under the 1933 Act, as many copies of the Prospectus and any revisions
thereof or amendments or supplements thereto as may be reasonably
requested, and (ii) file promptly all reports and any definitive proxy
or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934
Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required under the 1933 Act in connection
with the offering or sale of the Bonds.
(d) The Company will pay or cause to be paid all expenses
incidental to the performance of its obligations under this Agreement
and the Basic Agreements, including but not limited to: (i) the fees
and disbursements of counsel to the Company, (ii) expenses of printing
the Prospectus, (iii) any fees charged by the Rating Agencies (as
hereinafter defined) for rating the Bonds, (iv) accounting fees and
disbursements, (v) the costs and expenses in connection with the
qualification or exemption of the Bonds under state securities or blue
sky laws, including filing fees and reasonable fees and disbursements
of counsel in connection with the preparation of any blue sky survey
and in connection with any determination of the eligibility of the
Bonds for investment by institutional investors and the preparation of
any legal investment survey, and (vi) the fees and expenses of the
Owner Trustee and the Indenture Trustee and any agent of the Owner
Trustee and Indenture Trustee and the fees and disbursements of counsel
for the Owner Trustee and the Indenture Trustee in connection with the
Trust Agreement, the Servicing Agreement, the Indenture and the Bonds.
It is understood that, except as provided in this subsection (d) and in
Sections 7 and 11 hereof, the Underwriter will pay all of its own
expenses, including the fees of any counsel to the Underwriter, any
transfer taxes on resale of any of the Bonds by the Underwriter and
advertising expenses connected with any offers of the Bonds that the
Underwriter may make.
(e) So long as any Bonds are outstanding, the Company will
cause the Servicer to furnish to the Underwriter, as soon as available,
a copy of (i) the annual statement of compliance delivered by the
Servicer to the Indenture Trustee pursuant to the Servicing Agreement,
(ii) the annual independent public accountants' report furnished
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to the Indenture Trustee pursuant to the Servicing Agreement, (iii)
each report of the Company or the Trust regarding the Bonds filed with
the Commission under the 1934 Act or mailed to the holders of the
Bonds, and (iv) from time to time, such other information concerning
the Bonds as the Underwriter may reasonably request and which may be
furnished by the Company, the Servicer or the Indenture Trustee without
undue expense and without violation of applicable law.
(f) The Company will endeavor, in cooperation with the
Underwriter and the Underwriter's counsel, to qualify the Bonds for
offering and sale under the applicable securities and blue sky laws of
such jurisdictions as the Underwriter may reasonably designate, and
will maintain such qualifications in effect for a period of not less
than one year after the date hereof, unless the offering and sale of
the Bonds is exempt from such qualification under the Secondary
Mortgage Market Enhancement Act of 1984, and will cooperate with the
Underwriter and its counsel to determine the eligibility of the Bonds
for investment by institutional investors in such jurisdictions. The
Company will, at the Underwriter's request or the request of the
Underwriter's counsel, file such statements and reports as may be
required by the laws of each jurisdiction in which the Bonds have been
qualified as above provided. Notwithstanding the foregoing, no such
qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to general service of process,
other than by reason of the offer and sale of the Bonds, qualification
as a foreign corporation or to taxation as a foreign corporation doing
business in such jurisdiction.
(g) The Company will cause the Trust to make generally
available to holders of the Bonds as soon as practicable, but in any
event not later than eighteen months after the effective date of the
Registration Statement (as defined in Rule 158(c) under the 1993 Act),
an earnings statement of the Trust (which need not be audited)
complying with Section 11(a) of the 1933 Act and the rules and
regulations of the Commission thereunder (including, at the option of
the Company, Rule 158).
6. Conditions to the Obligation of the Underwriter. The
obligation of the Underwriter to purchase and pay for the Bonds shall be subject
to the accuracy in all material respects of the representations and warranties
on the part of the Company contained herein as of the date hereof, as of the
date of effectiveness of any amendment to the Registration Statement prior to
the Closing Date and as of the Closing Date, to the accuracy of the statements
of the Company made in any officer's certificate pursuant to the provisions
hereof, to the performance in all material respects by the Company of its
obligations hereunder, and to the following additional conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been instituted and be pending or shall have
been threatened, and the Prospectus shall have been filed or mailed for
filing with the Commission not later than required pursuant to the
rules and regulations of the Commission.
-9-
<PAGE> 10
(b) The Company shall have furnished to the Underwriter a
certificate, dated the Closing Date, signed by the President or a vice
president of the Company to the effect that the signer of such
certificate has carefully examined the Registration Statement, the
Prospectus, and this Agreement and that:
(i) subsequent to the date of this Agreement and
the Registration Statement, there has been no material adverse
change in the condition, financial or otherwise, earnings,
business affairs, regulatory situation or business prospects
of the Company whether or not arising in the ordinary course
of business;
(ii) the representations and warranties of the
Company in Section 1 of this Agreement are true and correct in
all material respects as though made at and as of the date
hereof;
(iii) the Company has in all material respects
complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or
prior to the date hereof;
(iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or
threatened; and
(v) nothing has come to our attention that would
lead us to believe that the Prospectus contains any untrue
statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
The Company shall also have furnished to the Underwriter a certificate, dated
the Closing Date, signed by the Secretary or a vice president of the Company, in
form and substance acceptable to the Underwriter, as to certain corporate
matters and shall attach to such certificate a true and correct copy of the
Company's Certificate of Incorporation and by-laws and a Certificate of Good
Standing for the Company issued by the Secretary of the State of Delaware at
least thirty days prior to the Closing Date, all of which are in full force and
effect on the date of such certificate, and a certified true copy of the
resolution of its Board of Directors with respect to the transactions
contemplated in this Agreement.
(c) The Company shall have furnished to the Underwriter an
opinion, dated as of the Closing Date, of Hunton & Williams, counsel to the
Company, reasonably satisfactory in form and substance to counsel for the
Underwriter.
Such opinion may express its reliance as to factual matters on the
representations and warranties made by, and on certificates or other documents
furnished by, officers of the parties to the Basic Agreements. Such opinion may
assume the due authorization, execution and delivery of the agreements,
instruments and documents referred to therein by the parties thereto other than
the Company and that such other agreements are the valid, legal and binding
obligations of such other parties. Such opinion may be qualified as an opinion
only on the general corporation law of
-10-
<PAGE> 11
the State of Delaware, the laws of the State of New York, the laws of each state
in which the writer of the opinion is admitted to practice law and the federal
law of the United States. To the extent that such firm relies upon the opinion
of other Howard J. Glicksman, general counsel to the Company, and counsel (which
counsel shall be reasonably satisfactory to the Underwriter) in rendering any
portion of its opinion, the opinion of such other counsel shall be attached to
and delivered with the opinion of such firm that is delivered to the
Underwriter.
(d) The Company shall also furnish to the Underwriter such other
opinion or opinions, dated as of the Closing Date, of their counsel as shall be
reasonably required by and reasonably satisfactory to the Rating Agencies.
(e) National Mortgage shall have furnished to the Underwriter an
opinion, dated as of the Closing Date, of counsel to National Mortgage, which
opinion shall be reasonably satisfactory in form and substance to counsel for
the Underwriter.
Such opinion may express its reliance as to factual matters on the
representations and warranties made by, and on certificates or other documents
furnished by officers of the parties to this Agreement and the other Basic
Agreements to which National Mortgage is a party. Such opinion may assume the
due authorization, execution and delivery of the instruments and documents
referred to therein by the parties thereto other than National Mortgage and that
such other agreements are the valid, legal and binding obligations of such other
parties. Such opinion may be qualified as an opinion only on the general
corporation law of the State of Delaware, the laws of the State of New York, the
laws of each state in which the writer of the opinion is admitted to practice
law and the federal law of the United States. To the extent that such firm
relies upon the opinion of other counsel (which counsel shall be reasonably
satisfactory to the Underwriter) in rendering any portion of its opinion, the
opinion of such other counsel shall be attached to and delivered with the
opinion of such firm that is delivered to the Underwriter.
National Mortgage shall also furnish to the Underwriter such other
opinion or opinions, dated as of the Closing Date, of their counsel relating to
bankruptcy or insolvency matters as shall be reasonably requested by the
Underwriter and such other opinion or opinions as shall be reasonably required
by and satisfactory to the Rating Agencies.
(f) The Underwriter shall have received an opinion or opinions, dated
as of the Closing Date, of Richards, Layton & Finger, counsel to the Owner
Trustee, reasonably satisfactory in form and substance to counsel for the
Underwriter.
Such opinion may express its reliance as to factual matters on the
representations and warranties made by, and on certificates or other documents
furnished by, officers of the parties to this Agreement and the other Basic
Agreements to which the Owner Trustee or the Trust is a party. Such opinion may
assume the due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the Owner
Trustee or the Trust. Such opinion may be qualified as an opinion only on the
laws of the State of Delaware, the laws of New York and the laws of each state
in which the writer of the opinion is admitted to practice law and the federal
law of the United States. To the extent that such firm relies upon the opinion
of other counsel in rendering any portion of its opinion, the opinion of such
other counsel shall be attached to and delivered with the opinion of such firm
that is delivered to the Underwriter.
-11-
<PAGE> 12
The Owner Trustee shall also furnish to the Underwriter such other
opinion or opinions, dated as of the Closing Date, of their counsel, as shall be
reasonably required by and reasonably satisfactory to the Rating Agencies.
(g) The Underwriter shall have received an opinion, dated as of the
Closing Date, of counsel to Norwest (in its capacity as Indenture Trustee),
reasonably satisfactory in form and substance to counsel for the Underwriter.
Such opinion may express its reliance as to factual matters on the
representations and warranties made by, and on certificates or other documents
furnished by officers of, the parties to this Agreement and the other Basic
Agreements to which Norwest is a party. Such opinion may assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than Norwest. Such opinion may be
qualified as an opinion only on the laws of the State of New York, the laws of
the State of Minnesota, the laws of each state in which the writer of the
opinion is admitted to practice law and the federal laws of the United States.
To the extent that such firm relies upon the opinion of other counsel in
rendering any portion of its opinion, the opinion of such other counsel shall be
attached to and delivered with the opinion of such firm that is delivered to the
Underwriter.
Norwest shall also furnish to the Underwriter such other opinion or
opinions, dated as of the Closing Date, of their counsel, as shall be reasonably
required by and reasonably satisfactory to the Rating Agencies.
(h) [Intentionally omitted].
(i) The Underwriter shall have received from Thacher Proffitt & Wood,
counsel for the Underwriter, such opinion or opinions in form and substance
satisfactory to the Underwriter, dated as of the Closing Date, with respect to
the issuance and sale of the Bonds and the Prospectus and such other related
matters as the Underwriter may reasonably require.
(j) The Underwriter shall have received from Deloitte & Touche, LLP,
independent certified public accountants, a letter dated the date of the
Prospectus and satisfactory in form and substance to the Underwriter and counsel
for the Underwriter, to the effect that they have performed certain specified
procedures as a result of which they determined that certain information of an
accounting, financial or statistical nature, set forth in the Prospectus
Supplement on the cover thereof and under the captions "Yield Considerations",
"Risk Factors", "Servicing of the Mortgage Loans" and "Description of the
Mortgage Pool", including any Mortgage Loan information filed by the Company in
any Current Report, agrees with the records of the Servicer.
(k) The Underwriter shall have received from Deloitte & Touche, LLP,
independent certified public accountants, the letters satisfactory in form and
substance to the Underwriter and counsel for the Underwriter, to the effect that
(i) they have reviewed certain of the Mortgage Loans and performed certain
specified procedures as a result of which they determined that
-12-
<PAGE> 13
certain information of an accounting, financial or statistical nature set forth
in the Prospectus are, based on the assumptions set forth therein,
mathematically accurate and internally consistent.
(l) The Underwriter shall have received from each Person that is a
party to the Basic Agreements, a certificate dated as of the Closing Date of an
authorized officer of such Person in form and substance reasonably satisfactory
to the Underwriter.
(m) Each Class of the Bonds shall be rated as set forth in the
Prospectus by the Rating Agencies specified in such Prospectus, and such Rating
Agencies shall not have rescinded such ratings and shall not have made any
public announcement that such ratings of the Bonds has been placed under review.
(n) The Underwriter shall have received copies of any opinions of
counsel to the Company supplied to the Rating Agencies or the Indenture Trustee
relating to certain matters with respect to the Bonds including without
limitation any true sale and non-substantive consolidation opinions. Any such
opinions shall be dated the Closing Date and addressed to the Underwriter or
accompanied by reliance letters to the Underwriter or shall state that the
Underwriter may rely upon them.
(o) Each Person that is a party to the Basic Agreements shall have
furnished to the Underwriter such further information, certificates, opinions
and documents as the Underwriter may reasonably have requested, and all
proceedings in connection with the transactions contemplated by this Agreement
and all documents incident hereto shall be in all material respects reasonably
satisfactory in form and substance to the Underwriter and their counsel.
(p) The Underwriter shall have received an indemnification agreement
executed by National Mortgage in favor of the Underwriter substantially in the
form of Exhibit A hereto.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
if the Company is in breach of any materials covenants or agreements contained
herein or if any of the opinions and certificates mentioned above or elsewhere
in this Agreement shall not be in all material respects reasonably satisfactory
in form and substance to the Underwriter and counsel for the Underwriter, this
Agreement and all obligations of the Underwriter hereunder may be canceled at,
or at any time prior to, the Closing Date by the Underwriter. Notice of such
cancellation shall be given to the Company in writing, or by telephone or
facsimile confirmed in writing.
7. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Underwriter,
the directors, officers and employees and agents of the Underwriter, and each
person who controls the Underwriter within the meaning of either the 1933 Act or
the 1934 Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they may become subject under the 1933 Act, the 1934 Act or
other federal or state statutory 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 any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus or in any amendment thereto or
-13-
<PAGE> 14
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by it or them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company as stated herein by or on behalf of the Underwriter specifically for
use in connection with the preparation thereof. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the Company,
each of its directors, each of its officers who signs the Registration Statement
and each person, if any, who controls the Company within the meaning of the 1933
Act or the 1934 Act, to the same extent as the foregoing indemnity from the
Company to the Underwriter, but only with reference to written information
relating to the Underwriter furnished to the Company as herein stated by or on
behalf of the Underwriter specifically for use in the preparation of the
documents referred to in the foregoing indemnity contained in subsection (a) of
this Section 7. This indemnity agreement will be in addition to any liability
that the Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, promptly notify the indemnifying party in writing of the commencement
thereof; provided, however, that the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which it may
have to any indemnified party under the foregoing provisions of this Section 7
unless and only to the extent that such omission results in the forfeiture of
substantive rights of the indemnifying party. If any such action is brought
against any indemnified party and that party notifies the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein, and to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party, which counsel shall not be counsel to
the indemnifying party except with the consent of the indemnified party, and
after receipt of notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation by the indemnified
party undertaken with notice to and approval by the indemnifying party. If the
indemnifying party elects not to assume the defense, all fees, disbursements and
other charges incurred by the indemnified party shall be reimbursed by the
indemnifying party promptly as they are incurred. An indemnifying party will not
be liable for any settlement of any action or claim effected without its consent
(which consent shall not be unreasonably withheld).
-14-
<PAGE> 15
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in subsections (a) and
(b) of this Section 7 is due in accordance with its terms but is for any reason
held by a court to be unavailable on grounds of policy or otherwise, the Company
and the Underwriter shall contribute to the aggregate losses, claims, damages
and liabilities (or actions in respect thereof) to which the Company and the
Underwriter may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriter on
the other from the offering of the Bonds. The relative benefits received by the
Company on the one hand and the Underwriter on the other hand shall be deemed to
be in the same proportion as the total proceeds from the offering of the Bonds
(before deducting expenses) bear to the total compensation or profit (before
deducting expenses) received or realized by the Underwriter from the purchase
and resale, or underwriting, of the Bonds. If the foregoing allocation is not
permitted by applicable law, then such contribution shall be determined based on
such proportions as is appropriate to reflect not only the relative benefits as
described above but also the relative fault of the Company on the one hand and
the Underwriter on the other hand as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Company or the Underwriter. The Company and the Underwriter agrees that it would
not be just and equitable if contribution were determined by pro rata allocation
or any other method of allocation that does not take account of the equitable
considerations referred to above.
Notwithstanding the provisions of this paragraph 7(d), 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 this Section 7, each person,
if any, who controls the Underwriter within the meaning of the 1933 Act or the
1934 Act and each director, officer, employee or agent of the Underwriter shall
have the same rights to contribution as the Underwriter, and each person, if
any, who controls the Company within the meaning of the 1933 Act or the 1934
Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party or parties under this subsection (d), notify such party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any other obligation it or they may have hereunder or
otherwise than under this subsection (d).
8. Termination. This Agreement shall be subject to termination, in the
absolute discretion of the Underwriter, by notice given to the Company prior to
delivery of and payment for the Bonds, if prior to such time (i) trading in
securities generally on the New York Stock Exchange shall have been suspended or
materially limited or any setting of minimum prices for trading on such
exchange, (ii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities, (iii)
there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war or other calamity or crisis
the effect of which on the financial markets of the United States is such as to
make it, in the judgment of the Underwriter, impracticable or inadvisable to
market the Bonds, or (iv) any change, or any development involving a prospective
-15-
<PAGE> 16
change, in or affecting particularly the business or properties of the Company,
or National Mortgage, or any of their respective affiliates, in the judgment of
the Underwriter, materially impairs the investment quality of the Bonds.
9. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company and its respective officers and of the Underwriter set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Underwriter, the Company or any of
the officers, directors or controlling persons referred to in Section 7 hereof,
and will survive delivery of and payment for the Bonds. The provisions of
Section 5(d), Section 7 and Section 11 hereof shall survive the termination or
cancellation of this Agreement.
10. Reimbursement of Underwriter's Expenses. If the sale to the
Underwriter of the Bonds as provided for herein is not consummated for any
reason, other than by reason of a default by the Underwriter, the Underwriter's
reasonable costs and expenses shall be reimbursed by the Company.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, partners and controlling persons referred to in Section 7
hereof and their respective successors and assigns, and no other person will
have any right or obligation hereunder.
12. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
13. Miscellaneous. This Agreement supersedes all prior or
contemporaneous agreements and understandings relating to the subject matter
hereof. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated except by a writing signed by the party against whom
enforcement of such change, waiver, discharge or termination is sought. This
Agreement may be signed in any number of counterparts, each of which shall be
deemed an original, which taken together shall constitute one and the same
instrument.
14. Notices. Communications hereunder will be in writing and effective
only on receipt and, if sent to the Underwriter, will be delivered to Salomon
Brothers Inc, Seven World Trade Center, New York, New York 10048, Attention:
Head: Mortgage Finance or if sent to the Company, will be delivered to Fund
America Investors Corporation II, 6400 South Fiddler's Green Circle, Suite 1200
B, Englewood, Colorado 80111, Attention: Steven B.
Chotin, President.
15. Underwriter Representation. The Underwriter represents to the
Company that no "computational materials" or "structural term sheets" were, or
will be, distributed to investors.
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<PAGE> 17
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the undersigned one counterpart hereof,
whereupon this letter and your acceptance shall represent a binding agreement by
and between the Company and the Underwriter.
Very truly yours,
FUND AMERICA INVESTORS
CORPORATION II
By:
-----------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the date first
above written.
SALOMON BROTHERS INC
By:
----------------------------
Name: Matthew R. Bollo
Title: Vice President
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<PAGE> 18
SCHEDULE I
Underwriter:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Purchase Price for the Bonds: _____% of the initial principal amount of the
Bonds.
Title of Bonds: Collateralized Mortgage Obligations, Series 1998-NMC1, which
consist of four classes of bonds, designated as the Class A Bonds, the Class M-1
Bonds, the Class M-2 Bonds and the Class M-3 Bonds.
Principal Balances for the Bonds: Aggregate original principal balance of
approximately $236,526,000 allocated among each of the four classes as follows:
<TABLE>
<S> <C>
Class A Bonds: $192,024,000
Class M-1 Bonds: $ 19,264,000
Class M-2 Bonds: $ 10,851,000
Class M-3 Bonds: $ 14,387,000
</TABLE>
Description of Bonds: The Bonds are more fully described in the Prospectus.
Type of Mortgage Loans: One- to four-family adjustable rate, fully amortizing
residential mortgage loans having original terms to maturity of up to 30 years.
Aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date:
Approximately $243,841,234.
Cut-Off Date: June 1, 1998
Ratings of Bonds: As provided in the Prospectus.
Denominations of the Bonds: Minimum denominations of $10,000 and increments of
$1.00 in excess thereof.
Closing Office: Hunton & Williams, 200 Park Avenue, 43rd Floor, New York, New
York 10166
Closing Date and Time of Delivery of and Payment for the Bonds: June 29, 1998,
2:00 p.m. Eastern Standard Time)
<PAGE> 1
EXHIBIT 4.1
INDENTURE
BETWEEN
FUND AMERICA INVESTORS TRUST 1998-NMC1,
AS ISSUER,
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE
Dated as of June 1, 1998
Relating to
FUND AMERICA INVESTORS TRUST 1998-NMC1
COLLATERALIZED MORTGAGE OBLIGATIONS, SERIES 1998-NMC1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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<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......................................22
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.....................................................25
Section 2.12. Book-Entry Bonds.........................................................................26
Section 2.13. Termination of Book Entry System.........................................................26
Section 2.14. Interest Payments on the Bonds...........................................................27
Section 2.15. Principal Payments on the Bonds..........................................................27
Section 2.16. Application of Excess Cashflow...........................................................28
Section 2.17. Payment of Prepayment Penalties to the Certificateholder.................................29
ARTICLE III COVENANTS............................................................................................29
Section 3.01. Payment of Bonds.........................................................................29
Section 3.02. Maintenance of Office or Agency..........................................................29
Section 3.03. Money for Bond Payments to Be Held In Trust..............................................31
Section 3.04. Existence of Issuer......................................................................31
Section 3.05. Protection of Trust Estate...............................................................31
Section 3.06. Opinions as to Trust Estate..............................................................32
Section 3.07. Performance of Obligations; Servicing Agreement..........................................32
Section 3.08. Investment Company Act...................................................................32
Section 3.09. Negative Covenants.......................................................................32
Section 3.10. Annual Statement as to Compliance........................................................33
Section 3.11. Restricted Payments......................................................................33
Section 3.12. Treatment of Bonds as Debt for Tax Purposes..............................................33
Section 3.13. Notice of Events of Default..............................................................33
Section 3.14. Further Instruments and Acts.............................................................34
ARTICLE IV SATISFACTION AND DISCHARGE............................................................................34
Section 4.01. Satisfaction and Discharge of Indenture..................................................34
Section 4.02. Application of Trust Money...............................................................35
ARTICLE V DEFAULTS AND REMEDIES..................................................................................35
Section 5.01. Event of Default.........................................................................35
Section 5.02. Acceleration of Maturity; Rescission and Annulment.......................................36
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee................37
Section 5.04. Remedies.................................................................................37
Section 5.05. Indenture Trustee May File Proofs of Claim...............................................37
Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Bonds.........................38
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 5.07. Application of Money Collected...........................................................38
Section 5.08. Limitation on Suits......................................................................39
Section 5.09. Unconditional Rights of Bondholders to Receive Principal and Interest....................40
Section 5.10. Restoration of Rights and Remedies.......................................................40
Section 5.11. Rights and Remedies Cumulative...........................................................40
Section 5.12. Delay or Omission Not Waiver.............................................................40
Section 5.13. Control by Bondholders...................................................................40
Section 5.14. Waiver of Past Defaults..................................................................41
Section 5.15. Undertaking for Costs....................................................................41
Section 5.16. Waiver of Stay or Extension Laws.........................................................41
Section 5.17. Sale of Trust Estate.....................................................................42
Section 5.18. Action on Bonds..........................................................................43
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the Issuer.........................43
Section 5.20. Application of the Trust Indenture Act...................................................43
Section 5.21. Appointment of New Trustee for the Mezzanine Bonds.......................................43
ARTICLE VI THE INDENTURE TRUSTEE.................................................................................43
Section 6.01. Duties of Indenture Trustee..............................................................43
Section 6.02. Notice of Default........................................................................45
Section 6.03. Rights of Indenture Trustee..............................................................45
Section 6.04. Not Responsible for Recitals or Issuance of Bonds........................................45
Section 6.05. May Hold Bonds...........................................................................45
Section 6.06. Money Held in Trust......................................................................45
Section 6.07. Eligibility; Disqualification............................................................45
Section 6.08. Indenture Trustee's Capital and Surplus..................................................46
Section 6.09. Resignation and Removal; Appointment of Successor........................................46
Section 6.10. Acceptance of Appointment by Successor...................................................47
Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee.........47
Section 6.12. Preferential Collection of Claims Against Issuer.........................................47
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees....................................48
Section 6.14. Authenticating Agents....................................................................49
Section 6.15. Review of Mortgage Files.................................................................49
Section 6.16. Indenture Trustee Fees and Expenses......................................................51
ARTICLE VII BONDHOLDERS' LISTS AND REPORTS.......................................................................51
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Bondholders...................51
Section 7.02. Preservation of Information; Communications to Bondholders...............................51
Section 7.03. Reports by Indenture Trustee.............................................................51
Section 7.04. Reports by Issuer........................................................................52
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES..........................................52
Section 8.01. Collection of Moneys.....................................................................52
Section 8.02. Bond Account.............................................................................53
Section 8.03. [Intentionally Omitted.]..................................................................54
Section 8.04. General Provisions Regarding the Bond Account and Mortgage Loans.........................54
Section 8.05. Releases of Defective Mortgage Loans.....................................................55
Section 8.06. Reports by Indenture Trustee to Bondholders; Access to Certain Information...............55
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...........................56
Section 8.10. Servicer as Agent........................................................................56
Section 8.11. Termination of Servicer..................................................................56
Section 8.12. Opinion of Counsel.......................................................................56
Section 8.13. Appointment of Custodians................................................................56
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IX SUPPLEMENTAL INDENTURES...............................................................................57
Section 9.01. Supplemental Indentures Without Consent of Bondholders...................................57
Section 9.02. Supplemental Indentures With Consent of Bondholders......................................57
Section 9.03. Execution of Supplemental Indentures.....................................................58
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
Section 10.01. Redemption..............................................................................60
Section 10.02. Form of Redemption Notice...............................................................60
Section 10.03. Bonds Payable on Optional Redemption....................................................61
Section 10.04. Resale of Redeemed Bonds................................................................61
ARTICLE XI MISCELLANEOUS.........................................................................................61
Section 11.01. Compliance Certificates and Opinions....................................................61
Section 11.02. Form of Documents Delivered to Indenture Trustee........................................62
Section 11.03. Acts of Bondholders.....................................................................62
Section 11.04. Notices, etc. to Indenture Trustee 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..........................................................................66
Section 11.13. Governing Law...........................................................................66
Section 11.14. Counterparts............................................................................66
Section 11.15. Recording of Indenture..................................................................66
Section 11.16. Issuer Obligation.......................................................................66
Section 11.17 No Petition.............................................................................66
Section 11.18. Inspection..............................................................................67
Section 11.19. Usury...................................................................................67
</TABLE>
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<PAGE> 5
SCHEDULES AND EXHIBITS
Schedule I Mortgage Loan Schedule
Exhibit A-1 Form of Class A Bond
Exhibit A-2 Form of Class M-1 Bond
Exhibit A-3 Form of Class M-2 Bond
Exhibit A-4 Form of Class M-3 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 Servicing Agreement
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<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)
(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>
- ------------------------------
*This Cross-Reference Table is not part of the Indenture
<PAGE> 7
THIS INDENTURE, dated as of June 1, 1998 (as amended or supplemented
from time to time as permitted hereby, this "Indenture"), is between FUND
AMERICA INVESTORS TRUST 1998-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
1998-NMC1, which will consist of four classes of bonds (collectively the
"Bonds"), designated and 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. 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, 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 Cut-off Date for
each Mortgage Loan, all payments of interest accruing on each Mortgage Loan
after the Cut-off Date whenever received and all other proceeds received in
respect of such Mortgage Loans, and any Qualified Replacement Mortgage Loan, (b)
the Servicing Agreement, (c) the Mortgage Loan Sale Agreement, (d) the Mortgage
Loan Contribution Agreement, (e) the Management Agreement, (f) the Insurance
Policies, (g) 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), and (h) 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 and 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.
<PAGE> 8
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 and the Indenture Trustee's Fee, 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).
"Applicable Spread": For any Payment Date prior to the Clean-Up Call
Date, 0.180% per annum for the Class A Bonds, 0.400% per annum for the Class M-1
Bonds, 0.650% per annum for the Class M-2 Bonds, and 1.200% per annum for the
Class M-3 Bonds. For each Payment Date on or after the Clean-Up Call Date,
0.360% per annum for the Class A Bonds, 0.600% per annum for the Class M-1
Bonds, 0.975% per annum for the Class M-2 Bonds, and 1.800% per annum for the
Class M-3 Bonds.
"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.
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<PAGE> 9
"Authorized Officer": With respect to the Indenture Trustee, any
Responsible Officer and with respect to any other Person, the Chairman of the
Board, Chief Operating Officer, President or any Vice President of such Person.
"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 and (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 already reimbursed from the related Liquidation Proceeds) in
such Collection Period to the extent permitted by the Servicing Agreement:
(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 Cut-off Date,
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 prepayment penalties and other amounts described elsewhere in
this definition) received or deemed to be received during the related
Collection Period (excluding Payments Ahead, except for 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 Net
Mortgage Rates of the Mortgage Loans as of the first day of the related
Collection Period.
"Available Funds Cap Carry Forward Amount": With respect to each Class
of Bonds, for any Payment Date for which the Bond Interest Rate for such Class
of Bonds was equal to the Available Funds Cap, the difference between the amount
of Bond Interest that would have accrued on such Class of Bonds had the Bond
Interest Rate equaled the Bond Formula Rate, and the amount of Bond Interest
that did accrue on such Class of Bonds for such Payment Date, plus interest
accrued on such difference from such Payment Date at the applicable Bond
Interest Rate for such Class of Bonds 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.
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<PAGE> 10
"Basic Documents": This Indenture, the Trust Agreement, the Servicing
Agreement, the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement and the Management 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 1998-NMC1 Collateralized Mortgage Obligations,
Series 1998-NMC1, Bond Account" on behalf of the Bondholders.
"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": With respect to each Class of Bonds, One Month
LIBOR, as determined on the applicable LIBOR Determination Date, plus the
Applicable Spread for such Class of the Bonds.
"Bond Interest": With respect to each Class of Bonds, as to any Payment
Date, the amount of interest payable to Holders of the Bonds of such Class 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 the initial
Payment Date at the Bond Interest Rate for such Class of Bonds on the Original
Bond Balance for such Class of Bonds, and (b) with respect to any subsequent
Interest Period, interest for the number of days in such Interest Period at the
Bond Interest Rate for such Class of Bonds on the Bond Balance for such Class of
Bonds as of the preceding Payment Date (after giving effect to the payment, if
any, in reduction of principal made on such Class of 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 a
year of 360 days.
"Bond Interest Rate": With respect to the Interest Period relating to
the initial Payment Date, 5.774% per annum for the Class A Bonds, 5.994% per
annum for the Class M-1 Bonds, 6.244% per annum for the Class M-2 Bonds, and
6.794% per annum for the Class M-3 Bonds. With respect to each Interest Period
thereafter, a per annum rate for each Class of Bonds equal to the lesser of (a)
the Bond Formula Rate for such Class of Bonds and (b) the Available Funds Cap.
"Bond Register": As defined in Section 2.06.
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<PAGE> 11
"Bond Registrar": As defined in Section 2.06.
"Bonds": Any bonds authorized by, and authenticated and delivered
under, this Indenture, which shall be issued in four Classes: (i) the Class A
Bonds, (ii) the Class M-1 Bonds, (iii) the Class M-2 Bonds and (iv) the Class
M-3 Bonds.
"Book-Entry Bonds": Any Bonds registered in the name of a Clearing
Agency or its nominee, ownership of which is reflected on the books of such
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 are authorized or obligated by law, regulation or executive order to
be closed.
"Certificates": As defined in the Trust Agreement.
"Certificate Distribution Account": As defined in the Trust Agreement.
"Certificateholders": As defined in the Trust Agreement.
"Class": Collectively, all of the Bonds bearing the same class
designation pursuant to this Indenture.
"Class A Bond Balance": With respect to all of the Class A Bonds, the
aggregate of the Current Bond Balances of all Class A Bonds Outstanding at the
time of determination.
"Class A Bonds": One of the Classes of Bonds authorized by this
Indenture.
"Class A Principal Payment Amount": With respect to any Payment Date on
or after the Stepdown Date and on which a Trigger Event is not in effect, an
amount equal to the excess of (x) the Class A Bond Balance immediately prior to
such Payment Date over (y) the lesser of (A) the product of (i) 57.50% and (ii)
the Aggregate Principal Balance as of the last day of the related Due Period and
(B) the Aggregate Principal Balance as of the last day of the related Due Period
minus $1,828,809.
"Class M-1 Bond Balance": With respect to all of the Class M-1 Bonds,
the aggregate of the Current Bond Balances of all Class M-1 Bonds Outstanding at
the time of determination.
"Class M-1 Bonds": One of the Classes of Bonds authorized by this
Indenture.
"Class M-1 Principal Payment Amount": With respect to any Payment Date
on or after the Stepdown Date and on which a Trigger Event is not in effect, an
amount equal to the excess of (x) the sum of (i) the Class A Bond Balance (after
taking into account the payment of the Class A Principal Payment Amount on such
Payment Date) and (ii) the Class M-1 Bond Balance immediately prior to such
Payment Date over (y) the lesser of (A) the product of (i) 73.30% and (ii) the
Aggregate Principal Balance as of the last day of the related Due Period and (B)
the Aggregate Principal Balance as of the last day of the related Due Period
minus $1,828,809.
"Class M-2 Bond Balance": With respect to all of the Class M-2 Bonds,
the aggregate of the Current Bond Balances of all Class M-2 Bonds Outstanding at
the time of determination.
"Class M-2 Bonds": One of the Classes of Bonds authorized by this
Indenture.
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<PAGE> 12
"Class M-2 Principal Payment Amount": With respect to any Payment Date
on or after the Stepdown Date and on which a Trigger Event is not in effect, an
amount equal to the excess of (x) the sum of (i) the Class A Bond Balance (after
taking into account the payment of the Class A Principal Payment Amount on such
Payment Date), (ii) the Class M-1 Bond Balance (after taking into account the
payment of the Class M-1 Principal Payment Amount on such Payment Date) and
(iii) the Class M-2 Bond Balance immediately prior to such Payment Date over (y)
the lesser of (A) the product of (i) 82.20% and (ii) the Aggregate Principal
Balance as of the last day of the related Due Period and (B) the Aggregate
Principal Balance as of the last day of the related Due Period minus $1,828,809.
"Class M-3 Bond Balance": With respect to all of the Class M-3 Bonds,
the aggregate of the Current Bond Balances of all Class M-3 Bonds Outstanding at
the time of determination.
"Class M-3 Bonds": One of the Classes of Bonds authorized by this
Indenture.
"Class M-3 Principal Payment Amount": With respect to any Payment Date
on or after the Stepdown Date and on which a Trigger Event is not in effect, an
amount equal to the excess of (x) the sum of (i) the Class A Bond Balance (after
taking into account the payment of the Class A Principal Payment Amount on such
Payment Date), (ii) the Class M-1 Bond Balance (after taking into account the
payment of the Class M-1 Principal Payment Amount on such Payment Date), (iii)
the Class M-2 Bond Balance (after taking into account the payment of the Class
M-2 Principal Payment Amount on such date) and (iv) the Class M-3 Bond Balance
immediately prior to such Payment Date over (y) the lesser of (A) the product of
(i) 94.00% and (ii) the Aggregate Principal Balance as of the last day of the
related Due Period and (B) the Aggregate Principal Balance as of the last day of
the related Due Period minus $1,828,809.
"Clean-Up Call Date": The earlier of (i) the Payment Date occurring
during April 2005 or (ii) the Payment Date on which, after taking into account
payments of principal made on such Payment Date, the aggregate Bond Balance is
less than 20% of the Original Bond Balance.
"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, 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": June 29, 1998, 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 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.
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<PAGE> 13
"Compensating Interest". As defined in the Servicing Agreement.
"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 1998-NMC1, Series
1998-NMC1, with a copy to the Indenture Trustee at 11000 Broken Land Parkway,
Columbia, Maryland 21044, Attention: Fund America Investors Trust 1998-NMC1,
Series 1998-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, 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 8.13 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, June 1, 1998.
"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.
"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 Cut-off Date) and ending on the first day of
the calendar month in which such Payment Date occurs.
"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 Fitch and in the highest short term rating
category by Standard & Poor's and Fitch, 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, or (iv) a principal subsidiary
of a bank holding company, 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. Any Eligible Accounts maintained with the Indenture Trustee
shall conform to the preceding clause (B).
"Event Of Default": As defined in Section 5.01.
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"Excess Cashflow": With respect to any Payment Date, the sum of the
Monthly Excess Interest Amount and the Overcollateralization Surplus.
"Extra Principal Payment Amount": With respect to any Payment Date, the
lesser of (x) the Monthly Excess Interest Amount for such Payment Date and (y)
the Overcollateralization Deficiency for such Payment Date.
"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": With respect to any Bond, the date specified in
such Bond as the fixed date on which the final installment of the principal of
such Bond is due and payable.
"Fitch": Fitch IBCA, Inc., and its successors in interest.
"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.
"Highest Lawful Rate": As defined in Section 11.19.
"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 the Indenture Trustee Fee Rate of the Aggregate Principal Balance
times the Mortgage Loans as of the first day of the related Due Period.
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"Indenture Trustee Fee Rate": 0.009% per annum.
"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).
"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.
"Insurance Proceeds": As defined in the Servicing Agreement.
"Interest Carry Forward Amount": With respect to any Class of Bonds and
any Payment Date, the sum of (a) the excess, if any, of the Bond Interest and
any Interest Carry Forward Amount on such Class of Bonds for the prior Payment
Date, over the amount in respect of interest actually paid on such Class on such
prior Payment Date and (b) interest on such excess at the applicable Bond
Interest Rate for such Class of Bonds for the actual number of days elapsed
since the prior Payment Date.
"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 July 1998 and, as to any subsequent Payment Date, the period beginning on the
immediately preceding Payment Date and ending on the day prior to the related
Payment Date.
"Interest Remittance Amount": With respect to any Payment Date, the
sum, without duplication, of (i) all interest due and collected or advanced
during the related Due Period on the Mortgage Loans (less the Administrative Fee
Amount for such Payment Date, certain amounts available for reimbursement of
Monthly Advances and Servicing Advances and certain other reimbursable expenses
pursuant to the Servicing Agreement), (ii) all Compensating Interest Payments
paid by the Servicer with respect to such Payment Date, and (iii) the portion of
any payment in connection with any Purchase Price, Trust Insurance Proceeds or
Net Liquidation Proceeds (as received pursuant to Section 2.05 of the Servicing
Agreement) relating to interest on the Mortgage Loans.
"Issuer": Fund America Investors Trust 1998-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 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 June 29, 1998,
attached hereto as Exhibit D.
"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.
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"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 applicable Final Maturity Date or by declaration
of acceleration, call for redemption or otherwise.
"Management Agreement": That certain Management Agreement, dated as of
June 1, 1998, between the Issuer and the Indenture Trustee, pursuant to which
the Indenture Trustee, as manager, will perform certain obligations of the
Issuer hereunder.
"Mezzanine Bond" Any Class M-1 Bond, Class M-2 Bond or Class M-3 Bond.
"Minimum Rate": As defined in the Servicing Agreement.
"Monthly Advance": As defined the Servicing Agreement.
"Monthly Excess Interest Amount": With respect to any Payment Date, the
amount, if any, of the Interest Remittance Amount remaining after application to
pay the Bond Interest and any Interest Carry Forward Amounts pursuant to Section
2.14 for such Payment Date.
"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 Servicing Fee": As defined in the Servicing Agreement.
"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 Note that becomes REO Property. The Mortgage Loans are listed on the
Mortgage Loan Schedule annexed hereto as Schedule I.
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"Mortgage Loan Contribution Agreement": That certain Mortgage Loan
Contribution Agreement, dated as of June 1, 1998, 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.
"Mortgage Loan Sale Agreement": That certain Mortgage Loan Sale
Agreement, dated as of June 1, 1998, 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
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.
"Most Senior Class": The Class A Bonds or after the Class A Bonds have
been paid in full, the Class of Mezzanine Bonds then Outstanding with the lowest
numerical designation.
"Net Liquidation Proceeds": As defined in the Servicing Agreement.
"Net Mortgage Rate": With respect to any Mortgage Loan, the then
applicable Mortgage Interest Rate thereon minus the sum of the Indenture Trustee
Fee Rate and the Servicing Fee Rate.
"Nonrecoverable Advance": As defined in the Servicing Agreement.
"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, or each Rating Agency, as
the case may be.
"One Month LIBOR": With respect to each Interest Period after the
initial Interest Period, the London interbank offered rate determined by the
Indenture Trustee on the LIBOR Determination Date immediately preceding such
Interest Period for one-month U.S. dollar deposits for such Interest Period on
the basis of the offered rates of the Reference Banks for one-month U.S. dollar
deposits, as such rates appear on Telerate Page 3750, as of 11:00 a.m. (London
time) on such LIBOR Determination Date. On each LIBOR Determination Date, One
Month LIBOR for the related Interest Period 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, One Month LIBOR for the related
Interest Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of
0.0625%); or
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(b) if on such LIBOR Determination Date fewer than two
Reference Banks provide such offered quotations, One Month LIBOR for
the related Interest Period shall be the higher of (x) One Month LIBOR
as determined on the previous LIBOR Determination Date or (y) the
Reserve Interest Rate.
The establishment of One Month LIBOR on each LIBOR
Determination Date by the Indenture Trustee and the Indenture Trustee's
calculation of the rate of interest applicable to the Bonds for the
related Interest Period shall (in the absence of manifest error) be
final and binding.
"Opinion of Counsel": A written opinion of counsel reasonably
acceptable to the Indenture Trustee. 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 aggregate principal balance of all Classes
of the Bonds at the issue date thereof, equal to $236,526,000.
"Original Class A Bond Balance": The principal balance of the Class A
Bonds at the issue date thereof, equal to $192,024,000.
"Original Class M-1 Bond Balance": The principal balance of the Class
M-1 Bonds at the issue date thereof, equal to $19,264,000.
"Original Class M-2 Bond Balance": The principal balance of the Class
M-2 Bonds at the issue date thereof, equal to $10,851,000.
"Original Class M-3 Bond Balance": The principal balance of the Class
M-3 Bonds at the issue date thereof, equal to $14,387,000.
"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;
(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,
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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 redeemed pursuant to
Section 10.04 shall be deemed to be Outstanding for the purposes of this
Indenture.
"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 last day of the related Due Period exceeds (y) the aggregate Bond Balance
for such Payment Date, after taking into account the payments of principal 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 Deficiency": As to any Payment Date, the excess,
if any, of (x) the Required Overcollateralization Amount for such Payment Date
over (y) the Overcollateralization Amount for such Payment Date, calculated for
this purpose after taking into account the reduction on such Payment Date of the
Bond Balance resulting from the payments of the Principal Remittance Amount (but
not the Extra Principal Payment Amount) on such Payment Date.
"Overcollateralization Surplus": As to any Payment Date after the
Stepdown Date on which a Trigger Event is not in effect, the lesser of (i) the
Principal Remittance Amount for such Payment Date, and (ii) the excess, if any,
of (x) the Overcollateralization Amount for such Payment Date, assuming that
100% of the Principal Remittance Amount is applied as a principal payment on the
Bonds on such Payment Date, over (y) the Required Overcollateralization Amount
for 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.
"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
July 27, 1998.
"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 makes available
the necessary Mortgage Loan information to the Indenture Trustee):
(i) the amount of such payment to Bondholders of each
Class on the related Payment Date allocable to principal (separately
setting forth Extra Principal Payment Amount, if any, for such Payment
Date);
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(ii) the amount of such payment for the related Payment
Date to Bondholders of each Class allocable to (x) Bond Interest, (y)
the Interest Carry Forward Amount, if any, and (z) Available Funds Cap
Carry Forward Amount, if any;
(iii) the aggregate Bond Balance and the Class A Bond
Balance, the Class M-1 Bond Balance, the Class M-2 Bond Balance and the
Class M-3 Bond Balance, after giving effect to the payment of amounts
applied to reduce the applicable Bond Balance on such Payment Date;
(iv) whether a Trigger Event has occurred and is
continuing;
(v) the Overcollateralization Amount, the then applicable
Required Overcollateralization Amount, the Overcollateralization
Surplus, if any, and the Overcollateralization Deficiency, 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, and the aggregate amount of unreimbursed
Monthly Advances and Servicing Advances, 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 Balances 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;
(xi) the aggregate amount of the Monthly Servicing Fee
paid to or retained by the Servicer for the related Collection Period;
and
(xiii) the aggregate amount of Realized Losses incurred
during the related Collection Period and the cumulative amount of
Realized Losses since the Cut-off 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 any Class of Bonds, the
undivided percentage interest (carried to eight places rounded down) in such
Class obtained by dividing the original Bond Balance of a Bond in such Class by
the original Bond Balance of such Class.
"Permitted Encumbrance": With respect to any Mortgage Loan, (i) the
lien created by a Mortgage, (ii) liens for taxes, assessments, levies, fees and
other governmental and similar charges either not yet due or being contested in
an appropriate Proceeding which shall suspend the collection thereof, shall not
expose any part of the Trust Estate to loss, sale forfeiture and shall not
affect the payments to the Indenture Trustee of any amounts payable under this
Indenture to the Indenture Trustee, and (iii) the exceptions to title set forth
in any Title Insurance Policy.
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"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, 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 Fitch or, if not rated by Fitch,
Moody's Investors Service, Inc. ("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 Standard & Poor's and by Fitch or, if
not rated by Fitch, 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 Standard & Poor's
and Fitch, or, if not rated by Fitch, Moody's, 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 Standard &
Poor's and Fitch, or, if not rated by Fitch, Moody's, at the time of
such investment;
(f) a guaranteed investment contract approved by each of the
Rating Agencies and issued by an insurance company or other corporation
having a long-term unsecured debt rating in the highest available
rating category of Standard & Poor's and Fitch, or, if not rated by
Fitch, Moody's, at the time of such investment;
(g) money market funds having ratings in one of the two
highest available rating categories of Standard & Poor's and Fitch (or,
if Fitch does not rate any such money market fund, of 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 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 other investment that will not result in a downgrading
or withdrawal of the rating by either Rating Agency on the Bonds, as
confirmed in writing by such Rating Agency.
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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.
"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 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 Loan and due during the related Due Period
and all other amounts collected, received or otherwise recovered in respect of
principal on the Mortgage Loan (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 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 Cut-off Date) will be deemed to have a Principal
Balance of zero on the current Determination Date.
"Principal Payment Amount": With respect to any Payment Date, the sum
of (i) the Principal Remittance Amount (minus, for Payment Dates occurring on
and after the Stepdown Date and for which a Trigger Event is not in effect, the
Overcollateralization Surplus, if any), and (ii) the Extra Principal Payment
Amount, if any.
"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.
"Principal Remittance Amount": For any Payment Date, the amount equal
to 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 (net amounts reimbursable therefrom
to the Servicer or the Indenture Trustee), and (ii) the aggregate of the amounts
allocable to principal deposited in the Bond Account on the related Deposit Date
by the
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<PAGE> 23
Issuer, the Transferor or the Servicer in connection with a repurchase,
release, removal or substitution of any Mortgage Loans pursuant to this
Indenture.
"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, based on
the London interbank offered rate for six-month United States dollar deposits
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,
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 Fitch (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 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
Clean-Up Call Date.
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<PAGE> 24
"Redemption Price": With respect to any Bond to be redeemed, 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 applicable 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 Telerate Page 3750 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.
"Remittable Funds": As defined in the Servicing Agreement.
"REO Property": As defined in the Servicing Agreement.
"Required Overcollateralization Amount" As to any Payment Date, (x)
prior to the Stepdown Date, 3.0% of the Aggregate Principal Balance of the
Mortgage Loans as of the Cut-off Date, and (y) on and after the Stepdown Date
and if no Trigger Event is in effect, the greater of (i) 6.0% of the Aggregate
Principal Balance of the Mortgage Loans as of the last day of the related
Collection Period and (ii) $1,828,809; provided, however, if a Trigger Event is
in effect on and after the Stepdown Date, the Required Overcollateralization
Amount shall be equal to the Required Overcollateralization Amount for the
immediately preceding 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 Date to leading European banks.
"Residual Majority": The meaning specified in Section 10.01.
"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.
"Sale": The meaning specified in Section 5.17.
"Senior Bond": Any Class A Bond.
"Senior Enhancement Percentage": With respect to any Payment Date, the
percentage obtained by dividing (i) the sum of (x) the Class M-1 Bond Balance,
the Class M-2 Bond Balance and the Class M-3 Bond Balance and (y) the
Overcollateralization Amount, in each case after taking into account the payment
of the Principal Payment Amount on such Payment Date, by (ii) the Aggregate
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period.
"Senior Specified Enhancement Percentage": With respect to any
Determination Date, 42.50%.
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<PAGE> 25
"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 June 1,
1998, 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 F.
"Servicing Fee Rate": 0.50% per annum.
"60+ Day Delinquent Loan": Each Mortgagee Loan with respect to which
any portion of a scheduled monthly payment is, as of the last day of the prior
Collection Period, two months or more past due (without giving effect to any
grace period), each Mortgage Loan in foreclosure, all REO Property and each
Mortgage Loan for which the Mortgagor has filed for bankruptcy.
"Standard & Poor's": Standard & Poor's Rating Services, a Division of
The McGraw-Hill Companies, Inc., and its successors in interest.
"Stepdown Date": With respect to any Payment Date, the date that is the
later to occur of (i) the Payment Date in July 2001 and (ii) the first Payment
Date on which the Senior Enhancement Percentage (after taking into account
payments of principal on the Bonds on such Payment Date) is greater than or
equal to the Senior Specified Enhancement Percentage.
"Telerate Page 3750": The display page so designated on the Dow Jones
Telerate Capital Markets Report (or such other page as may replace that page on
that servicer for the purpose of displaying London interbank offered rates of
major banks).
"Title Insurance Policy": With respect to a Mortgage Loan, the policy
of mortgagee's title insurance issued in respect of the Mortgaged Property
securing such Mortgage Loan or a binder or commitment therefor, or in lieu of
such policy, and attorney's opinion of title.
"Transferor": Fund America Investors Corporation II, a Delaware
corporation.
"Trigger Event": With respect to any Payment Date, the condition in
effect if the three-month rolling average (as a percentage of the Aggregate
Principal Balance of the Mortgage Loans) of 60+ Day Delinquent Loans equals or
exceeds the lesser of (i) one-half of the Senior Enhancement Percentage and (ii)
21.25%.
"Trust Agreement": That certain Deposit Trust Agreement, dated as of
June 1, 1998, among the Transferor, as "Depositor" (as such term is defined
therein), the Owner Trustee, the Servicer and the Trust Paying Agent.
"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 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.
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<PAGE> 26
"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.
"Underwriter": Salomon Brothers Inc.
"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 Class A Bonds shall be in substantially the form set forth on
Exhibit A-1 attached hereto, the Class M-1 Bonds shall be substantially in the
form set forth on Exhibit A-2 attached hereto, the Class M-2 Bonds shall be
substantially in the form set forth on Exhibit A-3 attached hereto, and the
Class M-3 Bonds shall be substantially in the form set forth on Exhibit A-4
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:
This is one of the Bonds referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Authenticating Agent
By: /s/ Peter J. Masterman
---------------------------------
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 1998-NMC1" of the Issuer.
The aggregate principal amount of Bonds that may be authenticated and
delivered under this Indenture is limited to the Original Bond Balance of
$236,526,000, 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 be divided among
four Classes, having designations, original Bond Balances, designations as
Senior Bonds or Mezzanine Bonds, Bond Interest Rates for the initial Interest
Period and Final Maturity Dates as follows:
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<PAGE> 27
<TABLE>
<CAPTION>
Bond Interest
Original Bond Senior/ Rate for the initial Final
Designation Balance Mezzanine Interest Period Maturity Date
----------- ------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Class A Bonds $ 192,024,000 Senior 5.774% June 25, 2028
Class M-1 Bonds $ 19,264,000 Mezzanine 5.994% June 25, 2028
Class M-2 Bonds $ 10,851,000 Mezzanine 6.244% June 25, 2028
Class M-3 Bonds $ 14,387,000 Mezzanine 6.744% June 25, 2028
</TABLE>
The Bonds shall be issued in the forms 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 and a
year assumed to consist of 360 days.
Interest on the Bonds shall accrue at the applicable 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 $10,000 and integral multiples of $1.00 in excess thereof, with
the exception of one Bond of each Class which may be issued in a lesser amount.
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.
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<PAGE> 28
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 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 of the same
Class and of a like aggregate principal amount.
At the option of the Holder, Bonds may be exchanged for other Bonds of
the same Class in 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 be imposed
in connection with any registration of transfer or exchange of Bonds.
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 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
Class, tenor and aggregate initial principal amount bearing a number not
contemporaneously outstanding. If,
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<PAGE> 29
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 of the same Class 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.
(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
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<PAGE> 30
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.
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 of the same Class 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 Rating Agencies, the Owner
Trustee, the Underwriter, and each Bondholder as the statement required
pursuant to Section 8.06. Neither the Indenture Trustee nor the Paying
Agent shall have any responsibility to recalculate, verify or recompute
information contained in any such Servicer Remittance Report except to
the extent necessary to satisfy all obligations under this Section
2.08(d).
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 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 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 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, except for an optional redemption
pursuant to Section 10.04, 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, except for an optional redemption
pursuant to Section 10.04, 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
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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 Classes, the Final
Maturity Date, the principal amounts and the applicable Bond Interest
Rates (or the manner in which such Bond Interest Rates are 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 or upon which the Authenticating Agent is
expressly permitted to rely, complying with the requirements of Section
11.01, reasonably satisfactory in form and substance to the
Authenticating Agent.
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).
(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;
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(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 are true and correct copies of letters
signed by (i) Standard & Poor's that the Class A Bonds be rated "AAA,"
the Class M-1 Bonds be rated at least "AA" and the Class M-2 Bonds be
rated at least "A," and (ii) Fitch that the Class A Bonds be rated
"AAA," the Class M-1 Bonds be rated at least "AA," the Class M-2 Bonds
be rated at least "A" and the Class M-3 Bonds be rated at least "BBB."
(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. Until Book-Entry Termination, 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 shall have any
responsibility therefor except as otherwise provided by applicable law. Requests
and directions from, and votes of, such representatives shall not be deemed to
be inconsistent if they are made with respect to different Beneficial Owners.
Section 2.13. Termination of Book Entry System.
(a) The book-entry system through the Clearing Agency with
respect to the Book-Entry 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 or any Class of 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 with respect to the Bonds or any Class of Bonds; or
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(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
applicable Bond Balance of any Class 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 of such Class of Bonds.
(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 of the relevant Class of Bonds, 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 of the relevant Class 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 of the relevant
Class, 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 to such
Class of Bonds.
Section 2.14. Interest Payments on the Bonds.
On each Payment Date, the Bond Interest will be applied from the
Interest Remittance Amount in the following order of priority:
(i) first, to pay the Bond Interest accrued on the Class A
Bonds and any Interest Carry Forward Amount with respect to the Class A
Bonds;
(ii) second, to pay the Bond Interest accrued on the Class
M-1 Bonds and any Interest Carry Forward Amount with respect to the
Class M-1 Bonds;
(iii) third, to pay the Bond Interest accrued on the
Class M-2 Bonds and any Interest Carry Forward Amount with respect to
the Class M-2 Bonds; and
(iv) fourth, to pay the Bond Interest accrued on the
Class M-3 Bonds and any Interest Carry Forward Amount with respect to
the Class M-3 Bonds.
SECTION 2.15. PRINCIPAL PAYMENTS ON THE BONDS.
(a) On each Payment Date (x) prior to the Stepdown Date or (y)
on which a Trigger Event is in effect, the Principal Payment Amount
shall be paid:
(i) first, to the Class A Bonds, until the Class A Bond
Balance has been reduced to zero;
(ii) second, to the Class M-1 Bonds, until the Class M-1
Bond Balance has been reduced to zero;
(iii) third, to the Class M-2 Bonds, until the Class M-2
Bond Balance has been reduced to zero; and
(iv) fourth, to the Class M-3 Bonds, until the Class M-3 Bond
Balance has been reduced to zero.
(b) On each Payment Date (x) on or after the Stepdown Date and
(y) on which a Trigger Event is not in effect, the Holders of the
Senior Bonds and the Mezzanine Bonds shall be entitled to receive
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payments in respect of principal to the extent of the Principal Payment
Amount in the following amounts and order of priority:
(i) first, the lesser of (a) the Principal Payment Amount
and (b) the Class A Principal Payment Amount, shall be paid to the
Holders of the Class A Bonds, until the Class A Bond Balance thereof
has been reduced to zero;
(ii) second, the lesser of (a) the excess of (X) the
Principal Payment Amount over (Y) the amount paid to the holders of the
Class A Bonds pursuant to clause (i) above, and (b) the Class M-1
Principal Payment Amount, shall be paid to the Holders of the Class M-1
Bonds, until the Class M-1 Bond Balance thereof has been reduced to
zero;
(iii) third, the lesser of (a) the excess of (X) the Principal
Payment Amount over (Y) the sum of the amounts paid to the Holders of
the Class A Bonds pursuant to clause (i) above and to the Holders of
the Class M-1 Bonds pursuant to clause (ii) above, and (b) the Class
M-2 Principal Payment Amount, shall be paid to the holders of the Class
M-2 Bonds, until the Class M-2 Bond Balance thereof has been reduced to
zero; and
(iv) fourth, the lesser of (a) the excess of (X) the
Principal Payment Amount over (Y) the sum of the amounts paid to the
Holders of the Class A Bonds pursuant to clause (i) above, to the
Holders of the Class M-1 Bonds pursuant to clause (ii) above and to the
Holders of the Class M-2 Bonds pursuant to clause (iii) above, and (b)
the Class M-3 Principal Payment Amount, shall be paid to the holders of
the Class M-3 Bonds, until the Class M-3 Bond Balance thereof has been
reduced to zero.
(c) On the Final Maturity Date of each Class of Bonds,
principal will be payable on such Class of Bonds in an amount equal to
the Class A Bond Balance, the Class M-1 Bond Balance, the Class M-2
Bond Balance and the Class M-3 Bond Balance, as the case may be, on
such Payment Date.
Section 2.16. Application of Excess Cashflow.
On each Payment Date, the Excess Cashflow will be applied to the
following types payments in the following order of priority:
(i) first, to pay any Interest Carry Forward Amount with
respect to the Class A Bonds for such Payment Date;
(ii) second, to fund any Extra Principal Payment Amount;
(iii) third, to pay any Interest Carry Forward Amount with
respect to the Class M-1 Bonds for such Payment Date;
(iv) fourth, to pay any Interest Carry Forward Amount with
respect to the Class M-2 Bonds for such Payment Date;
(v) fifth, to pay any Interest Carry Forward Amount with
respect to the Class M-3 Bonds for such Payment Date;
(vi) sixth, to pay the Available Funds Cap Carry Forward
Amount, if any, for each Class of Bonds in the same priority order as
interest payments pursuant to Section 2.14; and
(vii) seventh, any remaining amount shall be released from the
lien of this Indenture and paid to the Certificateholder.
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Section 2.17. Payment of Prepayment Penalties to the
Certificateholder.
The Indenture Trustee shall pay amounts received from the Servicer and
identified as prepayment penalties in the Servicer Remittance Report to the
holders of the Certificates based on the percentage interest in all Certificates
evidenced by each Certificate. Such prepayment penalties are not subject to the
lien of the Indenture and shall not be available to make payments on the Bonds.
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.
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 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.
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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;
(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).
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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
and the Mortgage Loan Contribution Agreement.
(b) Subject to Section 3.09(vii), 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.
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.
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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 an Opinion of Counsel reasonably satisfactory in form and
substance to the Indenture Trustee 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 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 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 9.07;
(iv) incur, issue, assume or otherwise become liable for
any indebtedness other than the Bonds;
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(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.
Section 3.10. Annual Statement as to Compliance.
On or before March 31, 1999, and each March 31st thereafter, the Issuer
shall deliver to the Indenture Trustee and the Underwriter 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 Trust Paying Agent, the Paying Agent, the Manger 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 Rating Agencies and
the Underwriter prompt written notice of each Event of Default hereunder, each
default on the part of the Servicer of its obligations under the Servicing
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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, 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
(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; and
(3) the Issuer has delivered to the Indenture Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory in form
and substance to the Indenture Trustee each stating that all conditions
precedent herein providing for the satisfaction and discharge of this
Indenture have been complied with;
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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.
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 (a) on any Payment Date, after taking into account all
payments made in respect of the Bonds on such Payment Date, (i) the
Bond Interest for the Most Senior Class remains unpaid, which default
shall continue for a period of five days or (ii) the Aggregate
Principal Balance of the Mortgage Loans is less than the Bond Balance
of the Most Senior Class, or (b) on the applicable Stated Maturity
Date, default in the payment in full of the Bond Balance of the Most
Senior Class;
(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 Indenture Trustee by the Holders of Bonds of the
Most Senior Class representing at least 25% of the Bond Balance of such
Class 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 Indenture Trustee by the Holders of Bonds of the Most Senior
Class representing at least 25% of the Bond Balance of
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such Class, 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 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 failure to pay the Interest Carry Forward Amount (except with
respect to the Most Senior Class of Bonds Outstanding) or the Available Funds
Cap Carry Over Amount with respect to any Class of Bonds on any Payment Date
will only constitute an Event of Default to the extent funds are available to
make such payment pursuant to Sections 2.14 and 2.16.
Section 5.02. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default occurs and is continuing, then and in every such
case, the Indenture Trustee may, and on request of the Holders of Bonds of the
Most Senior Class representing not less than 50% of the Bond Balance of the such
Class, 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 (including the related Available Funds Cap Carry Forward Amount, if any)
to the date of such acceleration, shall become immediately due and payable.
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 Holders of Bonds of the Most Senior Class representing more than
50% of the Bond Balance of such Class, 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
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(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.
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
proceed to protect and enforce its rights and the rights of the Bondholders 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 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
(subject to Section 5.17, to the extent applicable) may, for the benefit of the
Bondholders, 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 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
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irrespective of whether the Indenture Trustee shall have made any demand on the
Issuer for the payment of any overdue principal or interest) shall, be entitled
and empowered, by intervention in such Proceeding or otherwise to:
(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 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 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, 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 any plan of reorganization, arrangement, adjustment or composition
affecting any of the Bonds or the rights of any Holder thereof, or to authorize
the Indenture Trustee to vote in respect of the claim of any Bondholder 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
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 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 Monthly 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 the applicable Bond Interest
and Interest Carry Forward Amount, if any, then due and unpaid upon the
Outstanding Class A Bonds through the day preceding the date on which
such payment is made;
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(iv) fourth, to the payment of the Bond Balance of the
Outstanding Class A Bonds, up to the amount of Current Bond Balances of
the Class A Bonds, ratably, without preference or priority of any kind;
(v) fifth, to the payment of the applicable Bond Interest
and Interest Carry Forward Amount, if any, then due and unpaid upon the
Outstanding Class M-1 Bonds through the day preceding the date on which
such payment is made;
(vi) sixth, to the payment of the Bond Balance of the
Outstanding Class M-1 Bonds, up to the amount of the Current Bond
Balances of the Class M-1 Bonds, ratably, without preference or
priority of any kind;
(vii) seventh, to the payment of the applicable Bond Interest
and Interest Carry Forward Amount, if any, then due and unpaid upon the
Outstanding Class M-2 Bonds through the day preceding the date on which
such payment is made;
(viii) eighth, to the payment of the Bond Balance of the
Outstanding Class M-2 Bonds, up to the amount of the Current Bond
Balance of the Class M-2 Bonds, ratably, without preference or priority
of any kind;
(ix) ninth, to the payment of the applicable Bond Interest
and Interest Carry Forward Amounts, if any, then due and unpaid upon
the Outstanding Class M-3 Bonds through the day preceding the date on
which such payment is made;
(x) tenth, to the payment of the Bond Balance of the
Outstanding Class M-3 Bonds, up to the amount of the Current Bond
Balance of the Class M-3 Bonds, ratably, without preference or priority
of any kind;
(xi) eleventh, to the payment of the aggregate amount of
Available Funds Cap Carry Forward Amount, if any, among all Classes of
Bonds in proportion to the respective Available Funds Cap Carry Forward
Amounts for each such Class in the same priority as the distribution of
Bond Interest above; and
(xii) twelfth, 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 of a continuing Event of Default;
(2) the Holders of Bonds representing not less than 25% of the
Bond Balance of the Most Senior Class 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; and
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(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
Most Senior Class;
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 of the same Class.
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 Most Senior Class,
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, 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 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 or to such Bondholder, then and in
every such case the Issuer, the Indenture Trustee 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 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 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 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 or to the Bondholders may be exercised from
time to time, and as often as may be deemed expedient, by the Indenture Trustee
or by the Bondholders, 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 Most Senior Class on the applicable Record Date shall have the right to
direct the time, method and place of conducting any Proceeding for
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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 Most Senior Class 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.
Section 5.14. Waiver of Past Defaults.
The Holders of Bonds representing more than 50% of the Bond Balance of
the Most Senior Class on the applicable Record Date may on behalf of the Holders
of all the Bonds, 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 Most Senior Class, or to any suit instituted by any
Bondholder for the enforcement of the payment of any amount due 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.
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Section 5.17. Sale of Trust Estate.
(a) The power to effect any sale (a "Sale") of any portion of
the Trust Estate pursuant to Section 5.04 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 Most Senior Class consent to or
direct the Indenture Trustee to make such Sale; or
(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).
(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;
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(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 this
Indenture nor any rights or remedies of the Indenture Trustee 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.
Section 5.21. Appointment of New Trustee for the Mezzanine Bonds.
Upon the occurrence of an Event of Default (unless such Event of
Default has been cured or waived as permitted herein) with respect to any Class
of Bonds, the Indenture Trustee shall resign as trustee for the Bonds other than
Bonds of the Most Senior Class. The Issuer is required in such circumstances to
appoint one or more separate trustees for the Holders of the Bonds other than
Bonds of the Most Senior Class; provided, however, that if the Issuer fails to
appoint such separate trustees within 15 days thereafter, the Indenture Trustee
shall immediately petition a court of competent jurisdiction to appoint such
separate trustee or trustees.
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:
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(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.
(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 rights of Bondholders 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.
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Section 6.02. Notice of Default.
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.
(c) 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).
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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 by Fitch; 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.
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 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 Act of
the Holders representing more than 50% of the Bond Balance of the Most
Senior Class, 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 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 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
does not join in such appointment within fifteen (15) days after the
receipt by it of a request to do so, or in case an Event of Default has
occurred and is continuing, the Indenture Trustee 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), any Bondholder who has
been a bona fide Holder of a Bond for at least six months may, on
behalf of
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himself and all others similarly situated 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. If within one
year after such resignation, removal or incapability or the occurrence
of such vacancy a successor Indenture Trustee shall be appointed by Act
of the Holders of Bonds representing more than 50% of the Bond Balance
of the Most Senior Class 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 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 may, on behalf
of himself and all others similarly situated 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. 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 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.
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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 or of the Holders of Bonds
representing more than 50% of the Bond Balance of the Most Senior Class with
respect to which a co-trustee or separate trustee is being appointed, the Issuer
shall for such purpose join with the Indenture Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper
to appoint, one or more Persons approved by the Indenture Trustee either to act
as co-trustee, jointly with the Indenture Trustee, of all or any part of the
Trust Estate, or to act as separate trustee of any such property, in either case
with such powers as may be provided in the instrument of appointment, and to
vest in such Person or Persons in the capacity aforesaid, any property, title,
right or power deemed necessary or desirable, subject to the other provisions of
this Section. 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, or
the obligation as provided in Section 5.21, 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.
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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
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. 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, 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 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
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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;
(2) the principal amount of the indebtedness secured
by the related Mortgage is identical to the original principal
amount of the related Mortgage Note;
(3) 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;
(4) 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; and
(5) 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.
(b) Final Certification. On or before one year following the
Closing Date, the Indenture Trustee shall deliver to the Mortgage Loan
Seller 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 September 1998, the Indenture
Trustee shall deliver to the Servicer 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 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.
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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 Indenture (including but not limited to the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) 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
Indenture 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); (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 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
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Holders of Bonds 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, 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 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 by
2:00 p.m. Eastern Time of the Business Day after which such notice is delivered
to the Servicer, the Indenture Trustee shall deliver a second notice to the
Servicer and the Issuer 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
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 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
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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,
and (iv) 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 2.14, Section 2.15,
Section 2.16 and 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 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 Monthly
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:
(i) first, to the Bondholders, the Interest Remittance
Amount applied to Bond Interest for such Payment Date as specified in
Section 2.14;
(ii) second, to the Bondholders, the Principal Payment Amount
for such Payment Date applied to reduce the Bond Balance of the Class
A, Class M-1, Class M-2, Class M-3 Bonds, as specified in Section 2.15;
and
(iii) third, to the Bondholders and the Certificateholders,
the Excess Cashflow for such Payment Date applied as specified in
Section 2.16.
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(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 Certificateholders.
(e) Any payments made by the Indenture Trustee to the
Certificateholders 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. [Intentionally Omitted.]
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 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
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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 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 ratings on
the Bonds would not be adversely affected by such supplement or amendment or
(ii) if its own rights, duties or immunities would be adversely affected.
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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 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 (or as otherwise provided in the
Servicing Agreement shall) 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
servicer acceptable to the Issuer 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, 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 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
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shall remain responsible for all acts and omissions of any Custodian. If the
Servicer is appointed as a Custodian in accordance with this Section 8.13, 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.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Bondholders.
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 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 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 then current
ratings then assigned to the Bonds; 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 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 Holders of Bonds representing not less than a
majority of the Bond Balance of all Outstanding Bonds, or if fewer than all
Classes would be affected, each Class to be affected, 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, relating to such Class or Classes, or
of modifying in any manner the rights of the Holders of the Bonds, or of such
Class or Classes, under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Bond affected thereby:
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(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 of a particular Class would be affected by any supplemental indenture
and any such determination shall be conclusive upon the Holders of such Class of
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.
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,
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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 the then current ratings of the Bonds.
Notwithstanding the foregoing, the Indenture Trustee may decline to
consent to a proposed waiver or amendment that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
Nothing in this Section 9.07 shall be construed to require that any
Person obtain the consent of the Indenture Trustee to any amendment or waiver or
any provision of any document where the making of such amendment or the giving
of such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the subject
of the proposed amendment or waiver.
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ARTICLE X
REDEMPTION OF BONDS
Section 10.01. Redemption.
(a) The Bonds may be redeemed in whole, but not in part, on a
Payment Date that occurs on or after the Clean-Up Call Date at the
aggregate Redemption Price of all the Bonds at the option of the
holder(s) of a majority of the ownership interest in the Certificate
(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 date, provided, however, that funds in an amount equal to
the Redemption Price, plus 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. 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 the Residual Majority or
the Servicer 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 proposed 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.
(c) Subject to Section 10.04, upon surrender of, and payment
for, the Bonds subject to redemption, such Bonds shall be retired and
cancelled by the Issuer.
(d) Upon redemption and retirement of all the Bonds, the
remaining Mortgage Loans securing the Bonds will be released from the
lien of this Indenture.
(e) There will be no prepayment premium in connection with any
redemption of a Class or Classes of the Bonds under this Article X.
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 proposed Redemption Date to each
Holder of Bonds to be redeemed, such Holders being determined as of the Record
Date for such Payment Date.
All notices of redemption shall state:
(1) the proposed Redemption Date;
(2) the Redemption Price at which the Bonds 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
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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.
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,
each Bond to be redeemed shall, on the proposed Redemption Date, become due and
payable at the applicable 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 proposed Redemption Date, the
Bond Balance shall, until paid, bear interest from the Redemption Date at the
Bond Interest Rate. The payment on the applicable Payment Date of the Redemption
Price shall be in lieu of the payment otherwise required to be made on such
Payment Date in respect of the Bonds.
Section 10.04. Resale of Redeemed Bonds.
At the option of the Residual Majority (or if not exercised, the
Servicer), an optional redemption of the Bonds under this Article X may be
effected without retiring and canceling the Bonds so that the redeeming party or
a designee has the ability to own or resell such Class or Classes of the Bonds.
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
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(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.
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
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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 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 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
1998-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 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
(4) 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
(5) the Underwriter by any party or by any Bondholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to Salomon Brothers Inc, Seven World
Trade Center, New York, New York 10048, Attention: Head: Mortgage
Finance.
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
Fitch, at the following address: Fitch IBCA, Inc., One State Street
Plaza, New York, New York 10004 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.
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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 or
Section 5.21, and the Bondholders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
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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 bankruptcy or
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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, 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, 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 11.18 shall be reimbursed pursuant to Section 6.16.
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.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers thereunto duly
authorized, all as of the day and year first above written.
FUND AMERICA INVESTORS TRUST 1998-NMC1
By: Wilmington Trust Company,
as Owner Trustee
By: /s/ Emmett Harmon
----------------------------
Authorized Signatory
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: /s/ Peter J. Masterman
--------------------------------
Name: Peter J. Masterman
Title: Vice President
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State of New York )
) ss.:
County of New York )
On the _________ day of June, 1998 before me, a notary public in and
for said State, personally appeared Emmett Harmon, known to me to be
______________________ of Wilmington Trust Company, a corporation that executed
the within instrument acting as trustee of Fund America Investors Trust
1998-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.
/s/ Kathleen Ward Bradish
---------------------------------
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On the _________ day of June, 1998 before me, a notary public in and
for said State, personally appeared Peter J. Masterman, known to me to be Vice
President 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.
/s/ Kathleen Ward Bradish
---------------------------------
Notary Public
[Notarial Seal]
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MORTGAGE LOAN SALE AGREEMENT
THIS MORTGAGE LOAN SALE AGREEMENT (this "Agreement"), made as of June
1, 1998, 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 1998-NMC1 (the "Issuer"), which will be formed pursuant to the
terms of a deposit trust agreement (the "Trust Agreement"), dated as of June 1,
1998, by and between FAIC II, as depositor, and Wilmington Trust Company, 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 June 1, 1998 (the "Indenture"),
by and between the Issuer and the Indenture Trustee, pursuant to which the
Issuer's Collateralized Mortgage Obligations, Series 1998-NMC1, which will
consist of four classes of bonds (collectively, the "Bonds"), designated as the
Class A Bonds, the Class M-1 Bonds, the Class M-2 Bonds, and the Class M-3
Bonds, will be issued.
4. The Bonds shall be sold pursuant to an underwriting
agreement dated as of June 24, 1998 (the "Underwriting Agreement"), between
Salomon Brothers Inc ("Salomon" or the "Underwriter") and FAIC II, and will be
offered publicly for sale by the Underwriter pursuant to a prospectus supplement
dated June 24, 1998 (the "Prospectus Supplement"), and the related prospectus,
dated June 24, 1998 (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 June 29,
1998, Mortgage Loans having an aggregate principal balance of $243,841,234 as of
the close of business on June 1, 1998 (the "Cut-off 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").
(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.
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<PAGE> 3
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
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 1998-NMC1 dated as of June 1, 1998."
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
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<PAGE> 4
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
Indenture 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 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.
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<PAGE> 5
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.
(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.
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<PAGE> 6
(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.
(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) 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).
(4) 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.
(5) 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.
(6) The description of those 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.
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<PAGE> 7
(7) 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.
(8) 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.
(9) 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.
(10) 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 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.
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<PAGE> 8
(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.
(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.
(e) Other than general solicitations, the Seller shall not solicit any
Mortgagor to refinance its Mortgage Loan until the earlier of (i) the expiration
of the period, if any, in which a prepayment penalty is required to be paid or
(ii) receiving evidence that the Mortgagor intends to refinance its Mortgage
Loan.
(f) The Seller will use its best efforts to qualify and remain
qualified as a real estate investment trust ("REIT") under Section 856 of the
Code and to cause any subsidiary owning interests in the Issuer to be a
"qualified REIT subsidiary" (as defined in Section 856(i) of the Code).
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<PAGE> 9
The Seller agrees to transfer the Trust Certificates to another REIT by December
31, 1998 if it is unable to complete an initial public offering in 1998.
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. 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
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 or the Bondholders, 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 Underwriter. 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
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<PAGE> 10
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.
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 Underwriter 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 consummate the transactions contemplated herein: (1) failure
to obtain any consent or authorization, if any, required under federal or
applicable state law for the
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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 the 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 the Underwriter pursuant to the Underwriting Agreement
(other than FAIC II's right to receive payment due FAIC II from the Underwriter
for FAIC II's expenses related to the proposed issuance of the Bonds); provided,
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 Fitch IBCA, Inc.
("Fitch") and Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc. ("S&P" and together with
Fitch, 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;
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<PAGE> 12
(e) The purchase by the Underwriter of the Bonds pursuant to the terms
of the Underwriting Agreement; and
(f) The receipt of written confirmation from Fitch and S&P that they
have assigned the Class A Bonds a rating of "AAA", the Class M-1 Bonds a rating
of at least "AA" and the Class M-2 Bonds a rating of at least "A", and written
confirmation from Fitch that it has assigned the Class M-3 Bonds a rating of at
least "BBB".
SECTION 10. Fees and Deposits. The Seller shall be responsible for
payment of (1) all fees and expenses of accountants, printers, 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:
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<PAGE> 13
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
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: Kevin J. Nystrom
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.
13
<PAGE> 14
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.
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.
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,
14
<PAGE> 15
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 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.
15
<PAGE> 16
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: /s/ Kevin J. Nystrom
--------------------------------
Name: Kevin J. Nystrom
------------------------------
Title: Executive Vice President and
Chief Financial Officer
-----------------------------
FUND AMERICA INVESTORS CORPORATION II
By: /s/ Peter R. Lang
--------------------------------
Name: Peter R. Lang
------------------------------
Title: Vice President
-----------------------------
FOR THE LIMITED PURPOSE OF ACKNOWLEDGING ITS OBLIGATIONS UNDER SECTIONS 3 AND 7
HEREOF:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By: /s/ Peter J. Masterman
--------------------------------
Name: Peter J. Masterman
------------------------------
Title: Vice President
-----------------------------
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<PAGE> 17
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.
"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
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<PAGE> 18
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 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.
C-2
<PAGE> 19
(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]"; and 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).
"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 and the Indenture Trustee. Whenever an Opinion of
Counsel is required hereunder, the
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<PAGE> 20
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 June 1,
1998, among NMC, as servicer of the Mortgage Loans, the Issuer and the Indenture
Trustee.
"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-4
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- --------------------------------------------------------------------------------
DEPOSIT TRUST AGREEMENT
Among
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 1998-NMC1
Collateralized Mortgage Obligations
Series 1998-NMC1
Dated As Of June 1, 1998
<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.....................................................................................6
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.......................................................................7
SECTION 2.7. Liability of the Holders...................................................................7
SECTION 2.8. Title to Trust Property....................................................................7
SECTION 2.9. Situs of Trust.............................................................................8
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...............................................................12
SECTION 3.1. Initial Ownership.........................................................................12
SECTION 3.2. The Certificates..........................................................................12
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.....................................................................14
SECTION 3.7. Access to List of Holders' Names and Addresses............................................14
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..................................................15
ARTICLE IV ACTIONS BY OWNER TRUSTEE..............................................................................17
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters...................................17
SECTION 4.2. Action by Holders with Respect to Bankruptcy..............................................19
SECTION 4.3. Restrictions on Holders' Power............................................................19
SECTION 4.4. Majority Control..........................................................................19
</TABLE>
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<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.................................................................20
SECTION 5.3. Method of Payment..........................................................................21
SECTION 5.4. Segregation of Moneys; No Interest.........................................................21
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE.................................................................21
SECTION 6.1. General Authority..........................................................................21
SECTION 6.2. General Duties.............................................................................22
SECTION 6.3. Action upon Instruction....................................................................22
SECTION 6.4. No Duties Except as Specified in this Agreement, the Basic Documents or any
Instructions...............................................................................23
SECTION 6.5. No Action Except Under Specified Documents or Instructions.................................23
SECTION 6.6. Restrictions...............................................................................24
ARTICLE VII CONCERNING THE OWNER TRUSTEE.........................................................................24
SECTION 7.1. Acceptance of Trusts and Duties............................................................24
SECTION 7.2. Furnishing of Documents....................................................................25
SECTION 7.3 Representations and Warranties.............................................................25
SECTION 7.4. Reliance; Advice of Counsel................................................................26
SECTION 7.5. Not Acting in Individual Capacity..........................................................27
SECTION 7.6. Owner Trustee Not Liable for Certificates or Mortgage Loans................................27
SECTION 7.7. Owner Trustee May Own Certificates and Bonds...............................................27
SECTION 7.8 . Licenses..................................................................................27
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE.......................................................................28
SECTION 8.1. Owner Trustee's Fees and Expenses..........................................................28
SECTION 8.2. Indemnification............................................................................28
SECTION 8.3. Payments to the Owner Trustee..............................................................29
SECTION 8.4. Servicer Liability.........................................................................29
ARTICLE IX TERMINATION OF TRUST AGREEMENT........................................................................29
SECTION 9.1. Termination of Trust Agreement.............................................................29
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES.................................................30
SECTION 10.1. Eligibility Requirements for Owner Trustee................................................30
SECTION 10.2. Resignation or Removal of Owner Trustee...................................................30
SECTION 10.3. Successor Owner Trustee...................................................................31
SECTION 10.4. Merger or Consolidation of Owner Trustee..................................................32
</TABLE>
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<TABLE>
<S> <C>
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee............................................32
ARTICLE XI MISCELLANEOUS.........................................................................................33
SECTION 11.1. Supplements and Amendments...............................................................33
SECTION 11.2. No Legal Title to Owner Trust Estate in Holders..........................................34
SECTION 11.3. Limitations on Rights of Others..........................................................34
SECTION 11.4. Notices..................................................................................35
SECTION 11.5. Severability.............................................................................35
SECTION 11.6. Separate Counterparts....................................................................35
SECTION 11.7. Successors and Assigns...................................................................35
SECTION 11.8. No Petition..............................................................................35
SECTION 11.9. No Recourse..............................................................................36
SECTION 11.10. Headings.................................................................................36
SECTION 11.11. GOVERNING LAW............................................................................36
SECTION 11.12. Reserved.................................................................................36
SECTION 11.13. Third-Party Beneficiary..................................................................36
</TABLE>
Exhibit A - - Form of Certificate
Exhibit B - - Form of Certificate of Trust
iii
<PAGE> 5
DEPOSIT TRUST AGREEMENT
This DEPOSIT TRUST AGREEMENT, dated as of June 1, 1998 as amended and
supplemented from time to time as permitted hereby (this "Agreement"), 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"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as trust paying agent (the "Trust Paying Agent"),
and NATIONAL MORTGAGE CORPORATION, a Colorado 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 as permitted hereby.
"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 and the Indenture.
"Bond Account" shall have the meaning assigned thereto in the
Indenture.
"Bonds" shall mean the Issuer's Collateralized Mortgage Obligations,
Series 1998-NMC1, which shall be issued in four classes: (i) the Class A Bonds,
(ii) the Class M-1 Bonds, (iii) the Class M-2 Bonds and (iv) the Class M-3
Bonds.
"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).
"Certificate" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form attached
hereto as Exhibit A.
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"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 June 1, 1998, by and
between the Issuer and the Indenture Trustee.
"Indenture Trustee" means Norwest Bank Minnesota, National Association,
as Indenture Trustee under the Indenture.
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"Issuer" shall mean Fund America Investor Trust 1998-NMC1, the Delaware
business trust created pursuant to this Agreement.
"Management Agreement" shall mean the Management Agreement dated as of
June 1, 1998, between the Issuer and Norwest Bank Minnesota, National
Association, as Manager.
"Mortgage Loan Contribution Agreement" shall mean that certain Mortgage
Loan Contribution Agreement, dated as of June 1, 1998, 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 June 1, 1998, 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 and a wholly-owned subsidiary of NMC.
"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 July 27, 1998.
"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.
"Permitted Investments" shall have the meaning assigned to such term in
the Indenture.
"Person" shall mean 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.
"Prospective Holder" shall have the meaning set forth in Section
3.11(a).
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"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
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 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
June 1, 1998, 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.
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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 1998-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.
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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 and
the Company.
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
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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 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).
Furthermore, it is the intention of the parties hereto that, at all times while
the Bonds are outstanding, 100% of the Certificates will be owned by a real
estate investment trust ("REIT") as defined in Section 856 of the Code or one or
more "qualified REIT subsidiaries" (as defined in Section 856(i) of the Code) of
such REIT. 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.
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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.
SECTION 2.10. Representations and Warranties of the Company; Covenant of
the Company.
(a) The Company hereby represents and warrants to the Owner Trustee
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
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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 that during
the continuance of this Agreement, and while it holds Certificates, it will
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
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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 1.704-1(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
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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 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.
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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 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
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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 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 transfers 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
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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 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. 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
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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:
(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
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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."
(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.
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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 in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or the Certificateholders have provided
alternative direction:
(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 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 is required;
(d) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Holder 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;
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(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.
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, 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 remains in effect, 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 unanimous prior approval of all
Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of a certification that such Certificateholder reasonably
believes that the Trust is insolvent.
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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.
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
(collectively, the "Certificate Distribution Account") 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 1998-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 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.
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).
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(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 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.
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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 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.
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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 any time 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.
(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
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
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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.
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 gross 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.
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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 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
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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.
(b) The Trust Paying Agent hereby represents and warrants to the
Company 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.
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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 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
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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, 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
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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
defense 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.
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
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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 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 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.
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 "A-1" by Standard & Poor's and Fitch. 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.
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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 and the Indenture Trustee. Upon
receiving such notice of resignation, the Servicer shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee. If no successor Owner Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Owner Trustee may petition any court of
competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in accordance
with the provisions of Section 10.1 and shall fail to resign after written
request therefor by the 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 Certificateholders or the Servicer may
remove the Owner Trustee. If the Certificateholders or the Servicer shall remove
the Owner Trustee under the authority of the immediately preceding sentence, the
Servicer shall promptly appoint a successor Owner Trustee by written instrument
in duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee and payment
of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Servicer shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies, the
Indenture Trustee and the Trust Paying Agent.
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 and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties, and obligations
of its predecessor under this Agreement, with like effect as if originally named
as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees
and expenses deliver to the successor Owner Trustee all documents and statements
and 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.
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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 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 to act as co-trustee, jointly
with the Owner Trustee, or separate trustee or separate trustees, of all or any
part of the Owner Trust Estate, and to vest in such Person, in such capacity,
such title to the Trust, or any part thereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the 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
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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.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Supplements and Amendments. This Agreement may be amended by
the Company, and the Owner Trustee, 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. 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 Holders (as defined in
the Indenture) of Bonds evidencing more
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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 or the
Certificateholders, (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 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 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.
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 and, to the extent expressly provided
herein, the Indenture Trustee and the
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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 Trust Paying Agent, Norwest Bank
Minnesota, National Association, 11000 Broken Land Parkway, Columbia, Maryland
21044, Attention: Fund America 1998-NMC1, telecopy: (410) 884-2360; (iv) if to
National Mortgage Corporation, to Harlequin Plaza, Suite 330S, 7600 East Orchard
Road, Englewood, Colorado 80111-4943, Attention: Kevin J. Nystrom, 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.
(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 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.
34
<PAGE> 39
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 OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12. [Reserved].
SECTION 11.13. Third-Party Beneficiary. The Manager is an intended
third-party beneficiary of this Agreement for purposes of enforcing Section
5.2(d) hereof, and this Agreement shall be binding upon and inure to the benefit
of the Manager. Without limiting the generality of the foregoing, all covenants
and agreements in this Agreement that expressly confer rights upon the Manager
shall be for the benefit of and run directly to the Manager, and the Manager
shall be entitled to rely on and enforce such covenants to the same extent as if
it were a party to this Agreement.
[Signatures follow]
35
<PAGE> 40
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: /s/ Steven B. Chotin
----------------------------------------------
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: /s/ Emmett Harmon
----------------------------------------------
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: /s/ Peter J. Masterman
----------------------------------------
Name: Peter J. Masterman
Title: Vice President
36
<PAGE> 41
The Servicer hereby acknowledges its obligations under this Agreement and
agrees to act in accordance therewith.
NATIONAL MORTGAGE CORPORATION
By: /s/ James A. Weissenborn
---------------------------------------
Name: James A. Weissenborn
Title: President
37
<PAGE> 1
EXHIBIT 10.3
===========================================
SERVICING AGREEMENT
Dated as of June 1, 1998
among
FUND AMERICA INVESTORS TRUST 1998-NMC1,
as Issuer,
NATIONAL MORTGAGE CORPORATION,
as Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
===========================================
Adjustable Rate Mortgage Loans
Pledged under an Indenture dated as of June 1, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
Section 1.01. Definitions...............................................................................1
Section 1.02. Interest Calculations....................................................................14
Section 1.03. [Reserved.]..............................................................................14
ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................................15
Section 2.01. Servicing Generally......................................................................15
Section 2.02. Collection of Certain Mortgage Loan Payments; Collection Account.........................16
Section 2.03. Hazard Insurance Policies................................................................19
Section 2.04. Enforcement of Due-on-Sale Clauses; Assumption and Modification Agreements...............20
Section 2.05. Realization upon Defaulted Mortgage Loans; Options to Purchase Mortgage Loans............21
Section 2.06. Indenture Trustee to Cooperate; Release of Mortgage Files................................22
Section 2.07. Servicing Compensation; Payment of Certain Expenses by the Servicer;
Compensation Interest.................................................................23
Section 2.08. Annual Statement as to Compliance........................................................24
Section 2.09. Annual Independent Public Accountants' Servicing Report..................................24
Section 2.10. Access to Certain Documentation and Information Regarding the Mortgage Loans.............25
Section 2.11. Maintenance of Fidelity Bond and Errors and Omissions Policy.............................25
Section 2.12. Notices to the Issuer, the Rating Agencies and the Indenture Trustee.....................25
Section 2.13. Reports of Foreclosures and Abandonment of Mortgaged Properties..........................25
Section 2.14. Sub-Servicers and Sub-Servicing Agreements...............................................26
Section 2.15. Annual Lien Opinions; Bond Redemptions...................................................26
Section 2.16. Year 2000 Program........................................................................27
ARTICLE III SERVICER REMITTANCE REPORT...........................................................................27
Section 3.01. Servicer Remittance Report...............................................................27
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV MONTHLY ADVANCES AND SERVICING ADVANCES...............................................................27
Section 4.01. Monthly Advances; Servicing Advances.....................................................27
ARTICLE V THE SERVICER...........................................................................................29
Section 5.01. Representations and Warranties of the Servicer...........................................29
Section 5.02. Liability of the Servicer................................................................30
Section 5.03. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer............30
Section 5.04. Limitation on Liability of the Servicer and Others.......................................31
Section 5.05. Servicer Not to Resign...................................................................31
ARTICLE VI DEFAULT...............................................................................................31
Section 6.01. Events of Default........................................................................31
Section 6.02. Indenture Trustee to Act; Appointment of Successor.......................................33
Section 6.03. Notifications to Bondholders.............................................................34
Section 6.04. Assumption or Termination of Sub-Servicing Agreements by the Indenture Trustee
or any Successor Servicer.............................................................34
Section 6.05. Payment of Indenture Trustee's Fees and Expenses.........................................35
ARTICLE VII TERMINATION..........................................................................................36
Section 7.01. Termination..............................................................................36
ARTICLE VIII MISCELLANEOUS PROVISIONS............................................................................36
Section 8.01. Amendment................................................................................36
Section 8.02. Governing Law............................................................................37
Section 8.03. Notices..................................................................................37
Section 8.04. Severability of Provisions...............................................................38
Section 8.05. Assignment...............................................................................38
Section 8.06. Counterparts.............................................................................38
Section 8.07. Intention of the Parties.................................................................38
Section 8.08. Waivers and Modifications................................................................38
Section 8.09. Further Agreements.......................................................................39
Section 8.10. Attorney-in-Fact.........................................................................39
Section 8.11. No Indenture Trustee Liability...........................................................39
</TABLE>
ii
<PAGE> 4
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 June 1, 1998,
among Fund America Investors Trust 1998-NMC1, as issuer of its Collateralized
Mortgage Obligations, Series 1998-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 June 1, 1998 (the "Indenture Trustee"), between
the Issuer and the Indenture Trustee, 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 1998-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 June 1, 1998, among
the Issuer, the Servicer and the Indenture Trustee, and all amendments hereof
and supplements hereto.
"Ancillary Servicing Compensation": Prepayment charges (other than
prepayment premiums or penalties), assumption fees, fees for insufficient funds,
and other items listed on Exhibit C hereto collected by the Servicer from
Mortgagors.
"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": 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 Register": The register maintained pursuant to Section 2.06 of
the Indenture.
"Bonds": The Issuer's Collateralized Mortgage Obligations, Series
1998-NMC1, which will consist of four Classes of bonds, designated as Class A
Bonds, Class M-1 Bonds, Class M-2 Bonds and Class M-3 Bonds, issued pursuant to
the Indenture.
2
<PAGE> 7
"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 or the State of Minnesota are required or authorized
by law, executive order or governmental decree to be closed.
"Certificate Distribution Account": As defined in the Deposit Trust
Agreement.
"Class": Collectively, all of the Bonds bearing the same class
designation pursuant to the Indenture.
"Closing Date": On or about June 29, 1998.
"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 1998-NMC1 Collateralized Mortgage Obligations,
Series 1998-NMC1, 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.
"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 Cut-off Date through
the end of the related Collection Period by (2) the Initial Pool Balance.
3
<PAGE> 8
"Cut-Off Date": For any Mortgage Loan, June 1, 1998.
"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
June 1, 1998, 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.
"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 Fitch and in the highest short-term rating
category by Standard & Poor's and Fitch, 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 or (4) a principal subsidiary of
a bank holding company 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. 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.
"Fitch": Fitch IBCA, Inc., 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.
4
<PAGE> 9
"Indenture": The indenture, dated as of June 1, 1998, 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.
"Initial Pool Balance": The aggregate of the Principal Balances of the
Mortgage Loans determined as of the Cut-off Date (after application of all
payments of principal received in respect of any such Mortgage Loan before such
Cut-off Date), which aggregate amount is $243,841,234.
"Insurance Proceeds": With respect to any Deposit Date, proceeds paid
by any 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 1998-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
5
<PAGE> 10
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.
"Maximum Rate": With respect to any Mortgage Loan, any absolute maximum
Mortgage Interest Rate set by provisions in the related Mortgage Note.
"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).
"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.
6
<PAGE> 11
"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
June 1, 1998, 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 Date is attached hereto as Schedule I. The Mortgage Loan Schedule
shall be amended from 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.
"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 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
7
<PAGE> 12
Trustee, as the case may be, and delivered to the Indenture Trustee 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. 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.
"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
July 27, 1998.
"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, 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 Fitch (or, if not rated by Fitch, Moody's Investors
Service, Inc.) 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;
8
<PAGE> 13
(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 Fitch (or, if not rated by Fitch, Moody's Investors
Service, Inc.); 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 (or, if not
rated by Fitch, Moody's Investors Service, Inc.) 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 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 (or, if not rated by Fitch, Moody's
Investors Service, Inc.) 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 Fitch (or, if not rated by Fitch,
Moody's Investors Service, Inc.) 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 other investment that will not result in a
downgrading or withdrawal of the rating by either Rating Agency on the Bonds, as
confirmed in writing by such Rating Agency.
"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
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the preceding month (or, in the case of the first Determination Date, as of the
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 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 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 Fitch (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:
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(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 Cut-off Date, 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;
(c) all Trust Insurance Proceeds and Net Liquidation Proceeds
received during the related Collection Period;
(d) all prepayment premiums and penalties received with
respect to the Mortgage Loans received during the related Collection Period; and
(e) 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;
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(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 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.
"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
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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.
"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 1998-NMC1
Collateralized Mortgage Obligations, Series 1998-NMC1, Collection Account".
References herein to the Collection Account shall include any Sub-Servicing
Account as the context requires.
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"Sub-Servicing Agreement": A written contract between the Servicer and
any Sub- Servicer relating to the servicing and/or administration of certain
Mortgage Loans.
"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 June 1, 1998, 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.
"Underwriter": Salomon Brothers Inc, doing business as Salomon Smith
Barney.
"Underwriting Agreement": The underwriting agreement, dated as of June
24, 1998, between Fund America Investors Corporation II and the Underwriter.
"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. [Reserved.]
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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 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
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thereupon be deemed to have automatically assigned the Mortgage Loan or the
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 and the Bondholders, 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 as of the Closing Date is attached hereto as
Exhibit D. 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 charges (other than prepayment premiums and
penalties), 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. Notwithstanding the foregoing, in the event that any Mortgage Loan is in
default or, in the judgment of the Servicer, such default is reasonably
foreseeable, the Servicer, consistent with the servicing standard set forth in
Section 2.01, may waive, modify or vary any term of such Mortgage Loan
(including modifications that change the Mortgage Interest Rate, forgive the
payment of principal or interest or extend the final maturity date of such
Mortgage Loan), accept payment from the related Mortgagor of an amount less than
the unpaid principal balance in final satisfaction of such Mortgage Loan, or
consent to the postponement of such compliance with any such term or otherwise
grant indulgence to any Mortgagor if in the
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Servicer's determination such waiver, modification, postponement or indulgence
will maximize the recovery with respect to such Mortgage Loan. In no event,
however, may the Servicer waive prepayments premiums or penalties, if any. 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 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;
(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); and
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(vi) all prepayment premiums or penalties received with
respect to the Mortgage Loans;
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.
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 charges (other than prepayment premiums and
penalties), 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 Rating Agencies 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 Rating
Agencies 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
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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 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, insuring
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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.
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. 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.
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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 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
Servicer will not foreclose or accept a deed in lieu of foreclosure on the
Mortgaged Property without the consent of the Indenture Trustee. 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
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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 Cut-off Date and prior to
such Deposit Date at a price equal to the Purchase Price 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. 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.
The Servicer also shall have certain rights to redeem the Bonds pursuant to
Section 10.01 of the Indenture.
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 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
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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 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. The Indenture Trustee shall, within five Business Days
after its receipt of such Request for Release, release the related Mortgage File
to the Servicer. Any such Request for Release shall obligate the Servicer to
return 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.
(c) 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 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
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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 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 and each Rating Agency, with a copy to the Underwriter, on or before
March 31 of each year, beginning with March 31, 1999, 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 each Rating Agency and to the Underwriter, 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.
SECTION 2.09. Annual Independent Public Accountants' Servicing Report.
On or before March 31 of each year, beginning with March 31, 1999, 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 and each Rating Agency,
with a copy to the Underwriter, 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 to the
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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 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 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.
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 and the
Indenture Trustee.
In addition to the other notices required to be given to the Issuer,
the Rating Agencies, and the Indenture Trustee by the provisions of this
Agreement, the Servicer shall give prompt notice to the Issuer, each Rating
Agency and the Indenture Trustee 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.
SECTION 2.13. Reports of Foreclosures and Abandonment of Mortgaged
Properties.
On or before February 28 of each year beginning in 1999, 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
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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 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 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 Indenture Trustee
shall not be deemed a party 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
and the Bondholders. 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. 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
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take in accordance with the Indenture in order to effect such redemption. The
Issuer shall follow all such directions of the Servicer.
SECTION 2.16. Year 2000 Program.
Servicer has taken, or will by June 30, 1999 have taken, all steps
necessary and appropriate to prevent any problems in its computer and
information systems arising from or in connection with the information
processing challenges associated with the Year 2000, and will provide to the
Indenture Trustee such information and reports as the Indenture Trustee may
reasonably request from time to time with respect to such steps or have or will
be taken with respect thereto.
ARTICLE III
SERVICER REMITTANCE REPORT
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 and the Underwriter
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 loan
level information sufficient to enable the Indenture Trustee to report the items
specified in "Payment Date Statement" in the Indenture, as well as (a) the
amount of prepayment penalties received on the Mortgage Loans during the related
Collection Period, (b) 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 (c) any other
information regarding the Mortgage Loans as may from time to time be agreed to
by the Servicer and the Indenture Trustee. 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.
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
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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 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.
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ARTICLE V
THE SERVICER
SECTION 5.01. Representations and Warranties of the Servicer.
(a) The Servicer hereby represents and warrants to the Issuer and the
Indenture Trustee, 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, 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
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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. 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 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.
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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, 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 Indenture
Trustee 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
Indenture 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.
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:
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(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 to the Servicer 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 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 or 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; or
(e) The occurrence of a Cumulative Loss Rate Percentage in
excess of 7.0%.
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, 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 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
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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. Notwithstanding anything herein to the
contrary, the Indenture Trustee shall not be deemed to have notice of an Event
of Default unless and until a Responsible Officer of the Indenture Trustee (x)
has actual knowledge of the occurrence of such Event of Default or (y) has
received a notice of the occurrence of such Event of Default from the Servicer
pursuant to Section 2.12 hereof and the Indenture Trustee shall not be in
default of its obligations hereunder with respect to any failure to give a
default notice to the Servicer in the absence of either actual knowledge on the
part of a Responsible Officer of the Indenture Trustee or the receipt of such
notice from the Servicer. 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.
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
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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
the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the then current ratings assigned to
the Bonds by any Rating Agency. 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 and to each Rating Agency.
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.
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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 (as Indenture Trustee or
as Manager) in accordance with any of the provisions of this Agreement, the
Indenture and the Management Agreement, dated as of June 1, 1998, 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,
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 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
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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 termination of
the Deposit Trust Agreement.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01. Amendment.
This Agreement may be amended at any time and from time to time by the
Servicer, the Issuer and the Indenture Trustee, without the consent of any of
the Bondholders, (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
current ratings assigned to the Bonds by such Rating Agency.
This Agreement may also be amended at any time and from time to time by
the Servicer, the Issuer and the Indenture Trustee, with the consent of 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;
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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 the
Underwriter.
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 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 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 330S, 7600 East Orchard Road, Englewood, Colorado,
80111-4943, Telecopy (303) 741-8131, Attention: Kevin J. Nystrom; (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
1998-NMC1; (d) in the case of S&P, to Standard & Poor's, 26 Broadway, 15th
Floor, New York, New York 10004, Attention: Mortgage Surveillance Group; and (e)
in the case
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of Fitch, to Fitch IBCA, Inc., One State Street Plaza, New York, New York 10004,
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 (f) in the case of the Underwriter,
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 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 Holders of Bonds
evidencing not less than 66% of the Voting Interests of all Bonds.
SECTION 8.06. 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 8.07. 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 8.08. 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.
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SECTION 8.09. 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 8.10. 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.
SECTION 8.11. No Indenture Trustee Liability.
The Indenture Trustee shall not be liable for any acts or omissions of
any Servicer. In particular, the Indenture Trustee shall not be liable for any
servicing errors or interruption resulting from any failure of any Servicer to
maintain computer and other information systems that are year-2000 compliant.
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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 1998-NMC1,
as Issuer
By: Wilmington Trust Company, not in its
individual capacity, but solely
as Owner Trustee
By: /s/ Emmett Harmon
---------------------------------------
Authorized Signatory
NATIONAL MORTGAGE CORPORATION,
as Servicer
By: /s/ James A. Weissenborn
---------------------------------------
Name: James A. Weissenborn
Title: President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee and Not in Its
Individual Capacity
By: /s/ Peter J. Masterman
---------------------------------------
Name: Peter J. Masterman
Title: Vice President
40
