SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 16, 1996
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC. (as depositor under an Amended
and Restated Trust Agreement, dated as of December 1, 1996, and pursuant to
which an Indenture was entered into, providing for, inter alia, the issuance of
Home Equity Loan-Backed Term Notes, Series 1996-RHS4)
Residential Funding Mortgage Securities II, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 33-80419 41-1808858
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
8400 Normandale Lake Blvd.
Suite 600
Minneapolis, Minnesota 55437
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code, is (612) 832-7000
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
4.3 Servicing Agreement dated as of December 1, 1996 among
GMAC Mortgage Corporation, as master servicer, 1996-RHS4 LLC, as the limited
liability company and The Chase Manhattan Bank, as indenture trustee.
4.4 Amended and Restated Trust Agreement dated as of December
1, 1996 between Residential Funding Mortgage Securities II, Inc., as depositor
and Wilmington Trust Company, as owner trustee.
4.5 Indenture dated as of December 1, 1996 between Home Equity
Loan Trust 1996-RHS4, as issuer and The Chase Manhattan Bank, as indenture
trustee.
4.6 Operating Agreement of 1996-RHS4 LLC.
10.1 Designated Seller's Agreement dated as of December 1,
1996 by Residential Funding Mortgage Securities II, Inc., as purchaser and GMAC
Mortgage Corporation, as seller.
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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.
RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.
By: /s/ Diane S. Wold
Name: Diane S. Wold
Title: Vice President
Dated: December 16, 1996
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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.
RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.
By:
Name: Diane S. Wold
Title: Vice President
Dated: December 16, 1996
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EXHIBIT 4.3
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EXHIBIT 4.4
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EXHIBIT 4.5
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EXHIBIT 4.6
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EXHIBIT 10.1
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EXHIBITS
(Intentionally Omitted)
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TPW Draft 12/19/96
GMAC MORTGAGE CORPORATION
as Master Servicer,
RESIDENTIAL FUNDING CORPORATION
as Administrator,
1996-RHS4 LLC
as the Limited Liability Company
and
THE CHASE MANHATTAN BANK
as Indenture Trustee
----------------------
SERVICING AGREEMENT
Dated as of December 1, 1996
----------------------
Revolving Credit Loans
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.01. Definitions................................................ 1
-----------
Section 1.02. Other Definitional Provisions.............................. 2
-----------------------------
Section 1.03. Interest Calculations...................................... 2
---------------------
ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warranties Regarding the Master
Servicer................................................... 3
--------
Section 2.02. Representations and Warranties of the 1996-RHS4 LLC........ 4
---------------------------------------------------
Section 2.03. Enforcement of Representations and Warranties.............. 4
---------------------------------------------
ARTICLE III
Administration and Servicing
of Revolving Credit Loans
Section 3.01. The Master Servicer........................................ 6
-------------------
Section 3.02. Collection of Certain Revolving Credit Loan Payments....... 8
----------------------------------------------------
Section 3.03. Withdrawals from the Custodial Account..................... 10
--------------------------------------
Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses................................................... 12
Section 3.05. Modification Agreements.................................... 12
Section 3.06. Trust Estate; Related Documents............................ 13
Section 3.07. Realization Upon Defaulted Revolving Credit Loans.......... 14
Section 3.08. 1996-RHS4 LLC and Indenture Trustee to Cooperate........... 15
Section 3.09. Servicing Compensation; Payment of Certain Expenses by
Master Servicer............................................ 16
Section 3.10. Annual Statement as to Compliance.......................... 16
---------------------------------
Section 3.11. Annual Servicing Report.................................... 17
-----------------------
Section 3.12. Access to Certain Documentation and Information
Regarding the Revolving Credit Loans....................... 17
Section 3.13. Maintenance of Certain Servicing Insurance Policies........ 17
---------------------------------------------------
Section 3.14. Information Required by the Internal Revenue Service and
Reports of Foreclosures and Abandonments of
Mortgaged Property......................................... 18
Section 3.15. Optional Repurchase of Defaulted Revolving Credit
Loans...................................................... 18
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Page
ARTICLE IV
Servicing Certificate
Section 4.01 Statements to Securityholders.............................. 19
ARTICLE V
Distribution Account and Payment Account
Section 5.01. Distribution Account....................................... 21
--------------------
Section 5.02. Payment Account............................................ 21
---------------
ARTICLE VI
The Master Servicer
Section 6.01. Liability of the Master Servicer........................... 22
--------------------------------
Section 6.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Master Servicer........................ 22
Section 6.03. Limitation on Liability of the Master Servicer and
Others..................................................... 22
Section 6.04. Master Servicer Not to Resign.............................. 23
-----------------------------
Section 6.05. Delegation of Duties....................................... 23
--------------------
Section 6.06. Payment of Indenture Trustee's and Owner Trustee's Fees
and Expenses; Indemnification.............................. 24
ARTICLE VII
The Administrator
Section 7.01. Liability of the Administrator............................. 26
------------------------------
Section 7.02. Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Administrator.......................... 26
Section 7.03. Limitation on Liability of the Administrator and Others.... 26
-------------------------------------------------------
Section 7.04. Administrator Not to Resign................................ 27
---------------------------
Section 7.05. Initial Payment of Indenture Trustee's and Owner
Trustee's Fees and Expenses................................ 27
Section 7.06. Administrator Undertakings with Respect to the 1996-
RHS4 LLC................................................... 27
ARTICLE VIII
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Page
Default
Section 8.01. Servicing Default........................................ 28
-----------------
Section 8.02. Indenture Trustee to Act; Appointment of Successor....... 30
--------------------------------------------------
Section 8.03. Notification to Securityholders.......................... 31
-------------------------------
ARTICLE IX
Miscellaneous Provisions
Section 9.01 Amendment................................................ 32
---------
SECTION 9.02 GOVERNING LAW............................................ 32
-------------
Section 9.03 Notices.................................................. 32
-------
Section 9.04 Severability of Provisions............................... 32
--------------------------
Section 9.05 Third-Party Beneficiaries................................ 33
-------------------------
Section 9.06 Counterparts............................................. 33
------------
Section 9.07 Effect of Headings and Table of Contents................. 33
----------------------------------------
Section 9.08 Termination Upon Purchase by the Master Servicer or
---------------------------------------------------
Liquidation of All Revolving Credit Loans;
Partial Redemption....................................... 33
Section 9.09 Certain Matters Affecting the Indenture Trustee.......... 34
Section 9.10 Owner Trustee Not Liable for Related Documents........... 34
EXHIBIT A - REVOLVING CREDIT LOAN SCHEDULE.................................A-1
EXHIBIT B - POWER OF ATTORNEY..............................................B-1
EXHIBIT C - FORM OF REQUEST FOR RELEASE....................................D-1
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This Servicing Agreement, dated as of December 1, 1996, among
GMAC Mortgage Corporation, as master servicer (the "Master Servicer"),
Residential Funding Corporation, as administrator (the "Administrator"), the
1996-RHS4 LLC, as the limited liability company (the "1996-RHS4 LLC"), and The
Chase Manhattan Bank, as the indenture trustee (the "Indenture Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, Residential Funding Mortgage Securities II, Inc. (the
"Depositor") will create 1996-RHS4 LLC, a limited liability company under
Delaware law, and will transfer the Revolving Credit Loans and all of its rights
under the Designated Seller's Agreement to the 1996-RHS4 LLC, as a capital
contribution to the 1996-RHS4 LLC;
WHEREAS, pursuant to the terms of the Operating Agreement the Depositor
will establish two classes of "ownership interests" in the 1996-RHS4 LLC: the
Class A Ownership Interest and the Class B Ownership Interest;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Depositor will sell the Class A Ownership Interest to the Issuer in exchange for
the cash proceeds of the Securities;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Issuer will issue and transfer to or at the direction of the Depositor, the
Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer
will issue and transfer to or at the direction of the Depositor, the Notes,
consisting of the Term Notes and the Variable Funding Notes and secured by the
Class A Ownership Interest;
WHEREAS, pursuant to the terms of the Designated Seller's
Agreement, the 1996-RHS4 LLC will acquire the Revolving Credit Loans and the
Additional Balances;
WHEREAS, pursuant to the terms of this Servicing Agreement,
the Master Servicer will service the Revolving Credit Loans directly or through
one or more Subservicers;
WHEREAS, pursuant to the terms of this Servicing Agreement,
the Administrator will administer the Revolving Credit Loans; and
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Servicing Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms
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not otherwise defined herein shall have the meanings assigned to such terms in
the Definitions contained in Appendix A to the Indenture which is incorporated
by reference herein. All other capitalized terms used herein shall have the
meanings specified herein.
Section 1.02. Other Definitional Provisions. (a) All terms defined in this
Servicing Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto unless otherwise defined
therein.
(b) As used in this Servicing Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Servicing Agreement or in any such certificate or other
document, and accounting terms partly defined in this Servicing 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
Servicing 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 Servicing Agreement or in any such
certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Servicing Agreement shall refer to this Servicing
Agreement as a whole and not to any particular provision of this Servicing
Agreement; Section and Exhibit references contained in this Servicing Agreement
are references to Sections and Exhibits in or to this Servicing Agreement unless
otherwise specified; and the term "including" shall mean "including without
limitation".
(d) The definitions contained in this Servicing Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as the feminine and neuter genders of such terms.
(e) 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.
Section 1.03. Interest Calculations. All calculations of interest
hereunder that are made in respect of the Loan Balance of a Revolving Credit
Loan shall be made on a daily basis using a 365-day year. All calculations of
interest on the Securities shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest penny with one-half of one penny being rounded
up.
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ARTICLE II
Representations and Warranties
Section 2.01. Representations and Warranties Regarding the Master
Servicer. The Master Servicer represents and warrants to the 1996-RHS4 LLC and
for the benefit of the Indenture Trustee, as pledgee of the Class A Ownership
Interest, as of the Cut-off Date:
(i) The Master Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power to own its
assets and to transact the business in which it is currently engaged.
The Master Servicer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure to so
qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Master
Servicer;
(ii) The Master Servicer has the power and authority to
make, execute, deliver and perform this Servicing Agreement and all of
the transactions contemplated under this Servicing Agreement, and has
taken all necessary corporate action to authorize the execution,
delivery and performance of this Servicing Agreement;
(iii) The Master Servicer is not required to obtain the
consent of any other Person or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Servicing Agreement, except for such consent, license, approval or
authorization, or registration or declaration, as shall have been
obtained or filed, as the case may be;
(iv) The execution and delivery of this Servicing
Agreement and the performance of the transactions contemplated hereby
by the Master Servicer will not violate any material provision of any
existing law or regulation or any order or decree of any court
applicable to the Master Servicer or any provision of the Articles of
Incorporation or Bylaws of the Master Servicer, or constitute a
material breach of any mortgage, indenture, contract or other agreement
to which the Master Servicer is a party or by which the Master Servicer
may be bound; and
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Master Servicer threatened, against the
Master Servicer or any of its properties or with respect to this
Servicing Agreement or the Securities which in the opinion of the
Master Servicer has a reasonable likelihood of resulting in a material
adverse effect on the transactions contemplated by this Servicing
Agreement.
The foregoing representations and warranties shall survive any
termination of the Master Servicer hereunder.
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Section 2.02. Representations and Warranties of the 1996-RHS4 LLC. The
1996-RHS4 LLC hereby represents and warrants to the Master Servicer and for the
benefit of the Indenture Trustee, as pledgee of the Class A Ownership Interest,
as of the Cut-off Date:
(i) The 1996-RHS4 LLC is a limited liability company in good standing under
the laws of the State of Delaware;
(ii) The 1996-RHS4 LLC has full power, authority and
legal right to execute and deliver this Servicing Agreement and to
perform its obligations under this Servicing Agreement, and has taken
all necessary action to authorize the execution, delivery and
performance by it of this Servicing Agreement; and
(iii) The execution and delivery by the 1996-RHS4 LLC of
this Servicing Agreement and the performance by the 1996-RHS4 LLC of
its obligations under this Servicing Agreement will not violate any
provision of any law or regulation governing the 1996-RHS4 LLC or any
order, writ, judgment or decree of any court, arbitrator or
governmental authority or agency applicable to the 1996-RHS4 LLC or any
of its assets. Such execution, delivery, authentication and performance
will not require the authorization, consent or approval of, the giving
of notice to, the filing or registration with, or the taking of any
other action with respect to, any governmental authority or agency
regulating the activities of limited liability companies. Such
execution, delivery, authentication and performance will not conflict
with, or result in a breach or violation of, any mortgage, deed of
trust, lease or other agreement or instrument to which the 1996-RHS4
LLC is bound.
Section 2.03. Enforcement of Representations and Warranties. The Master
Servicer, on behalf of and subject to the direction of the Indenture Trustee, as
pledgee of the Class A Ownership Interest, or the Issuer, as Managing Member,
shall enforce the representations and warranties of the Designated Seller
pursuant to the Designated Seller's Agreement. Upon the discovery by the
Designated Seller, the Depositor, the Master Servicer, the Indenture Trustee,
the Credit Enhancer, the 1996-RHS4 LLC, the Issuer, or any Custodian of a breach
of any of the representations and warranties made in the Designated Seller's
Agreement, in respect of any Revolving Credit Loan which materially and
adversely affects the interests of the Securityholders or the Credit Enhancer,
the party discovering such breach shall give prompt written notice to the other
parties (any Custodian being so obligated under a Custodial Agreement). The
Master Servicer shall promptly notify the Designated Seller of such breach and
request that, pursuant to the terms of the Designated Seller's Agreement, the
Designated Seller either (i) cure such breach in all material respects within 45
days (with respect to a breach of the representations and warranties contained
in Section 3.1(a) of the Designated Seller's Agreement) or 90 days (with respect
to a breach of the representations and warranties contained in Section 3.1(b) of
the Designated Seller's Agreement) from the date the Designated Seller was
notified of such breach or (ii) purchase such Revolving Credit Loan from the
1996-RHS4 LLC at the price and in the manner set forth in Section 3.1(b) of the
Designated Seller's Agreement; provided that the Designated Seller shall,
subject to the conditions set forth in the Designated Seller's Agreement, have
the option to substitute an Eligible Substitute Loan or Loans for such Revolving
Credit Loan. In the event that the Designated Seller elects to substitute one or
more Eligible Substitute Loans pursuant to Section 3.1(b) of the Designated
Seller's Agreement, the Designated Seller
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shall deliver to the 1996-RHS4 LLC with respect to such Eligible Substitute
Loans, the original Credit Line Agreement, the Mortgage, and such other
documents and agreements as are required by the Designated Seller's Agreement.
Payments due with respect to Eligible Substitute Loans in the month of
substitution shall not be transferred to the 1996-RHS4 LLC and will be retained
by the Master Servicer and remitted by the Master Servicer to the Designated
Seller on the next succeeding Payment Date provided a payment at least equal to
the applicable Minimum Monthly Payment has been received by the 1996-RHS4 LLC
for such month in respect of the Revolving Credit Loan to be removed. The Master
Servicer shall amend or cause to be amended the Revolving Credit Loan Schedule
to reflect the removal of such Revolving Credit Loan and the substitution of the
Eligible Substitute Loans and the Master Servicer shall promptly deliver the
amended Revolving Credit Loan Schedule to the Owner Trustee and Indenture
Trustee.
It is understood and agreed that the obligation of the Designated
Seller to cure such breach or purchase or substitute for such Revolving Credit
Loan as to which such a breach has occurred and is continuing shall constitute
the sole remedy respecting such breach available to the 1996-RHS4 LLC and the
Indenture Trustee, as pledgee of the Class A Ownership Interest, against the
Designated Seller. In connection with the purchase of or substitution for any
such Revolving Credit Loan by the Designated Seller, the 1996-RHS4 LLC shall
assign to the Designated Seller all of its right, title and interest in respect
of the Designated Seller's Agreement applicable to such Revolving Credit Loan.
Upon receipt of the Repurchase Price, or upon completion of such substitution,
the Master Servicer shall notify the Custodian and then the Custodian shall
deliver the Mortgage Files to the Master Servicer, together with all relevant
endorsements and assignments prepared by the Master Servicer which the Indenture
Trustee shall execute.
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ARTICLE III
Administration and Servicing
of Revolving Credit Loans
Section 3.01. The Master Servicer. (a) The Master Servicer shall
service and administer the Revolving Credit Loans in a manner generally
consistent with the terms of the Program Guide and in a manner consistent with
the terms of this Servicing Agreement and which shall be normal and usual in its
general mortgage servicing activities and shall have full power and authority,
acting alone or through a subservicer, to do any and all things in connection
with such servicing and administration which it may deem necessary or desirable,
it being understood, however, that the Master Servicer shall at all times remain
responsible to the 1996-RHS4 LLC, the Indenture Trustee, as pledgee of the Class
A Ownership Interest, and for the performance of its duties and obligations
hereunder in accordance with the terms hereof and the Program Guide. Without
limiting the generality of the foregoing, the Master Servicer shall continue,
and is hereby authorized and empowered by the 1996-RHS4 LLC and the Indenture
Trustee, as pledgee of the Class A Ownership Interest, to execute and deliver,
on behalf of itself, the 1996- RHS4 LLC, 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
Revolving Credit Loans and with respect to the Mortgaged Properties. The 1996-
RHS4 LLC, the Indenture Trustee and the Custodian, as applicable, shall furnish
the Master Servicer with any powers of attorney and other documents necessary or
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties hereunder. In addition, the Master Servicer may, at its
own discretion and on behalf of the Indenture Trustee, obtain credit information
in the form of a "credit score" from a credit repository. On the Closing Date,
the Indenture Trustee shall deliver to the Master Servicer a limited power of
attorney substantially in the form of Exhibit B hereto.
If the Mortgage relating to a Revolving Credit Loan did not have a lien
senior to the Revolving Credit Loan on the related Mortgaged Property as of the
Cut-off Date, then the Master Servicer, in such capacity, may not consent to the
placing of a lien senior to that of the Mortgage on the related Mortgaged
Property. If the Mortgage relating to a Revolving Credit Loan had a lien senior
to the Revolving Credit Loan on the related Mortgaged Property as of the Cut-off
Date, then the Master Servicer, in such capacity, may consent to the refinancing
of the prior senior lien; provided that (i) the resulting Combined Loan-to-Value
Ratio of such Revolving Credit Loan is no higher than the greater of the
Combined Loan-to-Value Ratio prior to such refinancing or 70% (or 80% for those
borrowers with a FICO "credit score" of 720 or greater), (ii) the interest rate
for the loan evidencing the refinanced senior lien is no higher than the
interest rate on the loan evidencing the existing senior lien immediately prior
to the date of such refinancing (meaning, in the case of an adjustable rate
loan, a substantially similar index and a gross margin no higher than that of
the existing senior lien); provided however if the loan evidencing the existing
senior lien prior to the date of refinancing has an adjustable rate and the loan
evidencing the refinanced senior lien has a fixed rate, then the loan evidencing
the refinanced senior lien may have an interest rate up to 2.0% higher than the
then-current rate of the loan evidencing the existing senior lien and (iii) the
loan evidencing the refinanced senior lien is not subject to negative
amortization.
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In connection with servicing the Revolving Credit Loans, the Master
Servicer may take reasonable actions to encourage or effect the termination of
Loan Agreements that have become dormant.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Servicing Agreement) to the 1996-RHS4 LLC
under this Servicing Agreement is intended by the parties to be that of an
independent contractor and not that of a joint venturer, partner or agent.
(b) The Master Servicer may enter into Subservicing Agreements with
Subservicers for the servicing and administration of certain of the Revolving
Credit Loans. References in this Servicing Agreement to actions taken or to be
taken by the Master Servicer in servicing the Revolving Credit Loans include
actions taken or to be taken by a Subservicer on behalf of the Master Servicer
and any amount received by such Subservicer in respect of a Revolving Credit
Loan shall be deemed to have been received by the Master Servicer whether or not
actually received by the Master Servicer. Each Subservicing Agreement will be
upon such terms and conditions as are not inconsistent with this Servicing
Agreement and as the Master Servicer and the Subservicer have agreed. With the
approval of the Master Servicer, a Subservicer may delegate its servicing
obligations to third-party servicers, but such Subservicers will remain
obligated under the related Subservicing Agreements. The Master Servicer and the
Subservicer may enter into amendments to the related Subservicing Agreements;
provided, however, that any such amendments shall not cause the Revolving Credit
Loans to be serviced in a manner that would be materially inconsistent with the
standards set forth in this Servicing Agreement. The Master Servicer shall be
entitled to terminate any Subservicing Agreement in accordance with the terms
and conditions thereof and without any limitation by virtue of this Servicing
Agreement; provided, however, that in the event of termination of any
Subservicing Agreement by the Master Servicer or the Subservicer, the Master
Servicer shall either act as servicer of the related Revolving Credit Loan or
enter into a Subservicing Agreement with a successor Subservicer which will be
bound by the terms of the related Subservicing Agreement. The Master Servicer
shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Master Servicer and nothing contained in this Servicing
Agreement shall be deemed to limit or modify such indemnification.
In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing Subservicing Agreement with any Subservicer in accordance with the
terms of the applicable Subservicing Agreement or assume the terminated Master
Servicer's rights and obligations under such subservicing arrangements which
termination or assumption will not violate the terms of such arrangements.
As part of its servicing activities hereunder, the Master Servicer, for
the benefit of the 1996-RHS4 LLC, shall use reasonable efforts to enforce the
obligations of each Subservicer under the related Subservicing Agreement, to the
extent that the non-performance of any such obligation would have a material
adverse effect on a Revolving Credit Loan. Such enforcement, including, without
limitation, the legal prosecution of claims, termination of Subservicing
Agreements and the pursuit of other appropriate remedies, shall be in such form
and carried out to such an extent and at such time as the Master Servicer, in
its good faith business judgment,
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would require were it the owner of the related Revolving Credit Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense, and
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Revolving Credit Loan or (ii) from a specific
recovery of costs, expenses or attorneys fees against the party against whom
such enforcement is directed.
(c) Prior to the close of business on tenth calendar day of each month
in which the related Payment Date is to occur, the Master Servicer shall furnish
a statement to the Administrator, in writing and/or in a machine readable format
as the Administrator shall reasonably request setting forth all information
reasonably necessary to allow the Administrator to perform the calculations for
the distributions contemplated by Sections 5.01 and 5.02 and to prepare the
report pursuant to Section 4.01.
Section 3.02. Collection of Certain Revolving Credit Loan Payments. (a)
The Master Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of the Revolving Credit Loans, and shall, to
the extent such procedures shall be consistent with this Servicing Agreement and
generally consistent with the Program Guide, follow such collection procedures
as shall be normal and usual in its general mortgage servicing activities.
Consistent with the foregoing, and without limiting the generality of the
foregoing, the Master Servicer may in its discretion (i) waive any late payment
charge, penalty interest or other fees which may be collected in the ordinary
course of servicing such Revolving Credit Loan and (ii) arrange with a Mortgagor
a schedule for the payment of principal and interest due and unpaid; provided
such arrangement is consistent with the Master Servicer's policies with respect
to home equity revolving credit loans; provided, further, that notwithstanding
such arrangement such Revolving Credit Loans will be included in the information
regarding delinquent Revolving Credit Loans set forth in the Servicing
Certificate. The Master Servicer may also extend the Due Date for payment due on
a Revolving Credit Loan in accordance with the Program Guide, provided, however,
that the Master Servicer shall first determine that any such waiver or extension
will not impair the coverage of any related insurance policy or materially
adversely affect the lien of the related Mortgage or the interests of the
Securityholder or the Credit Enhancer. Consistent with the terms of this
Servicing Agreement, the Master Servicer may also waive, modify or vary any term
of any Revolving Credit Loan (including reduce the Credit Limit with respect to
any Revolving Credit Loan) or consent to the postponement of strict compliance
with any such term or in any manner grant indulgence to any Mortgagor if in the
Master Servicer's determination such waiver, modification, postponement or
indulgence is not materially adverse to the interests of the Securityholders or
the Credit Enhancer, provided, however, that the Master Servicer may not modify
or permit any Subservicer to modify any Revolving Credit Loan (including without
limitation any modification that would change the Loan Rate, forgive the payment
of any principal or interest (unless in connection with the liquidation of the
related Revolving Credit Loan) or extend the final maturity date of such
Revolving Credit Loan) unless such Revolving Credit Loan is in default or, in
the judgment of the Master Servicer, such default is reasonably foreseeable. In
addition, if a Revolving Credit Loan is in default or, in the judgment of the
Master Servicer, such default is reasonably foreseeable, the Master Servicer
may, through modification, convert such Revolving Credit Loan to a fully
amortizing closed-end loan. Notwithstanding the foregoing, the Master Servicer
(i) in its sole discretion may permit the Mortgagor (or may enter into a
modification
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agreement which will allow the Mortgagor) to make monthly payments, with respect
to any Billing Cycle during the related Draw Period, in a minimum amount that
will be equal to the related finance charge for such Billing Cycle and (ii) may
reduce the amount of the Credit Limit (to an amount no less than the then
current Principal Balance of such Revolving Credit Loan) in connection with any
refinancing of a senior lien pursuant to the second paragraph of Section 3.01(a)
of this Agreement.
(b) The Master Servicer shall establish a Custodial Account, which
shall be an Eligible Account in which the Master Servicer shall deposit or cause
to be deposited any amounts representing payments and collections in respect of
the Revolving Credit Loans received by it subsequent to the Cut-off Date (other
than in respect of the payments referred to in the following paragraph) within
one Business Day following receipt thereof (or otherwise on or prior to the
Closing Date), including the following payments and collections received or made
by it (without duplication):
(i) all payments of principal of or interest on the
Revolving Credit Loans received by the Master Servicer from the
respective Subservicer, net of any portion of the interest thereof
retained by the Subservicer as subservicing fees;
(ii) the aggregate Repurchase Price of the Revolving Credit Loans purchased
by the Master Servicer pursuant to Section 3.15;
(iii) Net Liquidation Proceeds net of any related Foreclosure Profit;
(iv) all proceeds of any Revolving Credit Loans
repurchased by the Designated Seller pursuant to the Designated
Seller's Agreement, and all Substitution Adjustment Amounts required to
be deposited in connection with the substitution of an Eligible
Substitute Loan pursuant to the Designated Seller's Agreement;
(v) insurance proceeds, other than Net Liquidation Proceeds, resulting from
any insurance policy maintained on a Mortgaged Property; and
(vi) amounts required to be paid by the Master Servicer pursuant to Section
8.08.
provided, however, that with respect to each Collection Period, the Master
Servicer shall be permitted to retain from payments in respect of interest on
the Revolving Credit Loans, the Master Servicing Fee for such Collection Period.
The foregoing requirements respecting deposits to the Custodial Account are
exclusive, it being understood that, without limiting the generality of the
foregoing, the Master Servicer need not deposit in the Custodial Account amounts
representing Foreclosure Profits, fees (including annual fees) or late charge
penalties, payable by Mortgagors, or amounts received by the Master Servicer for
the accounts of Mortgagors for application towards the payment of taxes,
insurance premiums, assessments and similar items. In the event any amount not
required to be deposited in the Custodial Account is so deposited, the Master
Servicer may at any time withdraw such amount from the Custodial Account, any
provision herein to the contrary notwithstanding. The Custodial Account may
contain funds that belong to one or more trust funds created for the notes or
certificates of other
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series and may contain other funds respecting payments on revolving credit or
other mortgage loans belonging to the Master Servicer or serviced or master
serviced by it on behalf of others. Notwithstanding such commingling of funds,
the Master Servicer shall keep records that accurately reflect the funds on
deposit in the Custodial Account that have been identified by it as being
attributable to the Revolving Credit Loans and shall hold all collections in the
Custodial Account to the extent they represent collections on the Revolving
Credit Loans for the benefit of the 1996-RHS4 LLC and the Indenture Trustee, as
their interests may appear. The Master Servicer shall retain all Foreclosure
Profits as additional servicing compensation.
The Master Servicer may cause the institution maintaining the Custodial
Account to invest any funds in the Custodial Account in Permitted Investments
(including obligations of the Master Servicer or any of its Affiliates, if such
obligations otherwise qualify as Permitted Investments), which shall mature not
later than the Business Day next preceding the Payment Date and shall not be
sold or disposed of prior to its maturity. Except as provided above, all income
and gain realized from any such investment shall inure to the benefit of the
Master Servicer and shall be subject to its withdrawal or order from time to
time. The amount of any losses incurred in respect of the principal amount of
any such investments shall be deposited in the Custodial Account by the Master
Servicer out of its own funds immediately as realized.
(c) The Master Servicer will require each Subservicer to hold all funds
constituting collections on the Revolving Credit Loans, pending remittance
thereof to the Master Servicer, in one or more accounts meeting the requirements
of an Eligible Account, and invested in Permitted Investments, unless, all such
collections are remitted on a daily basis to the Master Servicer for deposit
into the Custodial Account.
Section 3.03. Withdrawals from the Custodial Account. The Master
Servicer shall, from time to time as provided herein, make withdrawals from the
Custodial Account of amounts on deposit therein pursuant to Section 3.02 that
are attributable to the Revolving Credit Loans for the following purposes:
(i) to deposit in the Distribution Account, on the
Business Day prior to each Payment Date, an amount equal to the
Security Collections required to be distributed on such Payment Date;
(ii) prior to either an Amortization Event or the
Collection Period preceding the end of the Revolving Period, to pay to
the Designated Seller, the amount of any Additional Balances as and
when created during the related Collection Period, provided, that the
aggregate amount so paid to the Designated Seller in respect of
Additional Balances at any time during any Collection Period shall not
exceed the amount of Principal Collections theretofore received for
such Collection Period;
(iii) to the extent deposited to the Custodial Account,
to reimburse itself or the related Subservicer for previously
unreimbursed expenses incurred in maintaining individual insurance
policies pursuant to Section 3.04, or Liquidation Expenses, paid
pursuant to Section 3.07 or otherwise reimbursable pursuant to the
terms of this Servicing Agreement (to the extent not payable pursuant
to Section 3.09), such withdrawal right being limited to amounts
received on particular Revolving Credit Loans (other than
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any Repurchase Price in respect thereof) which represent late
recoveries of the payments for which such advances were made, or from
related Liquidation Proceeds or the proceeds of the purchase of such
Revolving Credit Loan;
(iv) to pay to itself out of each payment received on
account of interest on a Revolving Credit Loan as contemplated by
Section 3.09, an amount equal to the related Master Servicing Fee (to
the extent not retained pursuant to Section 3.02), and to pay to any
Subservicer any subservicing fees not previously withheld by the
Subservicer;
(v) to the extent deposited in the Custodial Account to
pay to itself as additional servicing compensation any interest or
investment income earned on funds deposited in the Custodial Account,
Distribution Account and Payment Account that it is entitled to
withdraw pursuant to Sections 3.02(b) and 5.01;
(vi) to the extent deposited in the Custodial Account, to pay to itself as
additional servicing compensation any Foreclosure Profits (to the extent
permitted by law);
(vii) to pay to itself or the Designated Seller, with
respect to any Revolving Credit Loan or property acquired in respect
thereof that has been purchased or otherwise transferred to the
Designated Seller, the Master Servicer or other entity, all amounts
received thereon and not required to be distributed to Securityholders
as of the date on which the related Purchase Price or Repurchase Price
is determined;
(viii) to withdraw any other amount deposited in the Custodial Account that
was not required to be deposited therein pursuant to Section 3.02;
(ix) to pay the Administrator, on the Business Day before each Payment
Date, an amount equal to the Administrator Fee for the prior calendar month; and
(x) after the occurrence of an Amortization Event, to pay to the Designated
Seller, the Excluded Amount for each Revolving Credit Loan.
Since, in connection with withdrawals pursuant to clauses (iii), (iv), (vi) and
(vii), the Master Servicer's entitlement thereto is limited to collections or
other recoveries on the related Revolving Credit Loan, the Master Servicer shall
keep and maintain separate accounting, on a Revolving Credit Loan by Revolving
Credit Loan basis, for the purpose of justifying any withdrawal from the
Custodial Account pursuant to such clauses. Notwithstanding any other provision
of this Servicing Agreement, the Master Servicer shall be entitled to reimburse
itself for any previously unreimbursed expenses incurred pursuant to Section
3.07 or otherwise reimbursable pursuant to the terms of this Servicing Agreement
that the Master Servicer determines to be otherwise nonrecoverable (except with
respect to any Revolving Credit Loan as to which the Repurchase Price has been
paid), by withdrawal from the Custodial Account of amounts on deposit therein
attributable to the Revolving Credit Loans on any Business Day prior to the
Payment Date succeeding the date of such determination.
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Section 3.04. Maintenance of Hazard Insurance; Property Protection
Expenses. To the extent permitted under the related Credit Line Agreement and
Mortgage, and to the extent the Master Servicer receives notice that a hazard
insurance policy has been cancelled, the Master Servicer shall cause to be
maintained for each Revolving Credit Loan hazard insurance naming the Master
Servicer or related Subservicer as loss payee thereunder providing extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements securing such Revolving Credit Loan from
time to time or (ii) the combined principal balance owing on such Revolving
Credit Loan and any mortgage loan senior to such Revolving Credit Loan from time
to time; provided, however, that such coverage may not be less than the minimum
amount required to fully compensate for any loss or damage on a replacement cost
basis. The Master Servicer shall use its best efforts to monitor that hazard
insurance is maintained as described in the previous sentence in the same manner
as it would for revolving credit home equity loans in its own portfolio. The
Master Servicer shall also cause to be maintained on property acquired upon
foreclosure, or deed in lieu of foreclosure, of any Revolving Credit Loan, fire
insurance with extended coverage in an amount which is at least equal to the
amount necessary to avoid the application of any co-insurance clause contained
in the related hazard insurance policy. Amounts collected by the Master Servicer
under any such policies (other than amounts to be applied to the restoration or
repair of the related Mortgaged Property or property thus acquired or amounts
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures) shall be deposited in the Custodial Account to the extent
called for by Section 3.02. In cases in which any Mortgaged Property is located
at any time during the life of a Revolving Credit Loan in a federally designated
flood area, to the extent permitted under the related Credit Line Agreement and
Mortgage, and to the extent the Master Servicer receives notice that the related
flood insurance has been cancelled. All such flood insurance shall be in amounts
equal to the lesser of (i) the amount required to compensate for any loss or
damage to the Mortgaged Property on a replacement cost basis and (ii) the
maximum amount of such insurance available for the related Mortgaged Property
under the national flood insurance program (assuming that the area in which such
Mortgaged Property is located is participating in such program). The Master
Servicer shall use its best efforts to monitor such flood insurance as described
in the previous sentence in the same manner as it would for revolving credit
home equity loans in its own portfolio. The Master 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 Revolving Credit 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. If the Master
Servicer shall obtain and maintain a blanket policy consistent with its general
mortgage servicing activities insuring against hazard losses on all of the
Revolving Credit Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section 3.04, it being
understood and agreed that such policy may contain a deductible clause, in which
case the Master 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 3.04 and there shall have been a loss which would have
been covered by such policy, deposit in the Custodial Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
Any such deposit by the Master Servicer shall be made on the last Business Day
of the Collection Period in the month in which payments under any such policy
would have been deposited in the Custodial Account. In connection with its
activities as servicer of the Revolving Credit Loans, the Master Servicer agrees
to present, on
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behalf of itself, the 1996-RHS4 LLC and the Indenture Trustee, claims under any
such blanket policy.
Section 3.05. Modification Agreements. The Master Servicer or the
related Subservicer, as the case may be, shall be entitled to (A) execute
assumption agreements, substitution agreements, and instruments of satisfaction
or cancellation or of partial or full release or discharge, or any other
document contemplated by this Servicing Agreement and other comparable
instruments with respect to the Revolving Credit Loans and with respect to the
Mortgaged Properties subject to the Mortgages (and the 1996-RHS4 LLC and the
Indenture Trustee each shall promptly execute any such documents on request of
the Master Servicer) and (B) approve the granting of an easement thereon in
favor of another Person, any alteration or demolition of the related Mortgaged
Property or other similar matters, if it has determined, exercising its good
faith business judgment in the same manner as it would if it were the owner of
the related Revolving Credit Loan, that the security for, and the timely and
full collectability of, such Revolving Credit Loan would not be adversely
affected thereby. A partial release pursuant to this Section 3.05 shall be
permitted only if the Combined Loan-to-Value Ratio for such Revolving Credit
Loan after such partial release does not exceed the Combined Loan-to-Value Ratio
for such Revolving Credit Loan as of the Cut-off Date. Any fee collected by the
Master Servicer or the related Subservicer for processing such request will be
retained by the Master Servicer or such Subservicer as additional servicing
compensation.
Section 3.06. Trust Estate; Related Documents. (a) When required by the
provisions of this Servicing Agreement, the 1996-RHS4 LLC or the Indenture
Trustee shall execute instruments to release property from the terms of the
Operating Agreement, or convey the 1996- RHS4 LLC's or the Indenture Trustee's
interest in the same, in a manner and under circumstances which are not
inconsistent with the provisions of this Servicing Agreement. No party relying
upon an instrument executed by the 1996-RHS4 LLC or the Indenture Trustee as
provided in this Section 3.06 shall be bound to ascertain the 1996-RHS4 LLC's or
the Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) If from time to time the Master Servicer shall deliver to the
Custodian copies of any written assurance, assumption agreement or substitution
agreement or other similar agreement pursuant to Section 3.05, the Custodian
shall check that each of such documents purports to be an original executed copy
(or a copy of the original executed document if the original executed copy has
been submitted for recording and has not yet been returned) and, if so, shall
file such documents, and upon receipt of the original executed copy from the
applicable recording office or receipt of a copy thereof certified by the
applicable recording office shall file such originals or certified copies with
the Related Documents. If any such documents submitted by the Master Servicer do
not meet the above qualifications, such documents shall promptly be returned by
the Custodian to the Master Servicer, with a direction to the Master Servicer to
forward the correct documentation.
(c) Upon receipt of a Request for Release from the Master Servicer,
substantially in the form of Exhibit C to the effect that a Revolving Credit
Loan has been the subject of a final payment or a prepayment in full and the
related Revolving Credit Loan has been terminated or that substantially all
Liquidation Proceeds which have been determined by the Master Servicer
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in its reasonable judgment to be finally recoverable have been recovered, and
upon deposit to the Custodial Account of such final monthly payment, prepayment
in full together with accrued and unpaid interest to the date of such payment
with respect to such Revolving Credit Loan or, if applicable, Liquidation
Proceeds, the Custodian shall promptly release the Related Documents to the
Master Servicer, which the Indenture Trustee shall execute, along with such
documents as the Master Servicer or the Mortgagor may request to evidence
satisfaction and discharge of such Revolving Credit Loan, upon request of the
Master Servicer. If from time to time and as appropriate for the servicing or
foreclosure of any Revolving Credit Loan, the Master Servicer requests the
Custodian to release the Related Documents and delivers to the Custodian a trust
receipt reasonably satisfactory to the Custodian and signed by a Responsible
Officer of the Master Servicer, the Custodian shall release the Related
Documents to the Master Servicer. If such Revolving Credit Loans shall be
liquidated and the Custodian receives a certificate from the Master Servicer as
provided above, then, upon request of the Master Servicer, the Custodian shall
release the trust receipt to the Master Servicer.
Section 3.07. Realization Upon Defaulted Revolving Credit Loans. With
respect to such of the Revolving Credit Loans as come into and continue in
default, the Master Servicer will decide whether to (i) foreclose upon the
Mortgaged Properties securing such Revolving Credit Loans, (ii) write off the
unpaid principal balance of the Revolving Credit Loans as bad debt, (iii) take a
deed in lieu of foreclosure, (iv) accept a short sale, (v) arrange for a
repayment plan, (vi) agree to a modification in accordance with this Servicing
Agreement, or (vii) take an unsecured note in each case subject to the rights of
any related first lien holder; provided that if the Master Servicer has actual
knowledge that any Mortgaged Property is affected by hazardous or toxic wastes
or substances and that the acquisition of such Mortgaged Property would not be
commercially reasonable, then the Master Servicer will not cause the 1996-RHS4
LLC or the Indenture Trustee to acquire title to such Mortgaged Property in a
foreclosure or similar proceeding. In connection with such decision, the Master
Servicer shall follow such practices (including, in the case of any default on a
related senior mortgage loan, the advancing of funds to correct such default if
deemed to be appropriate by the Master Servicer) and procedures as it shall deem
necessary or advisable and as shall be normal and usual in its general mortgage
servicing activities and as shall be required or permitted by the Program Guide;
provided that the Master Servicer shall not be liable in any respect hereunder
if the Master Servicer is acting in connection with any such foreclosure or
attempted foreclosure which is not completed or other conversion in a manner
that is consistent with the provisions of this Servicing Agreement. The
foregoing is subject to the proviso that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or attempted
foreclosure which is not completed or towards the correction of any default on a
related senior mortgage loan or restoration of any property unless it shall
determine that such expenditure will increase Net Liquidation Proceeds. In the
event of a determination by the Master Servicer that any such expenditure
previously made pursuant to this Section 3.07 will not be reimbursable from Net
Liquidation Proceeds, the Master Servicer shall be entitled to reimbursement of
its funds so expended pursuant to Section 3.03.
Notwithstanding any provision of this Servicing Agreement, a Revolving
Credit Loan may be deemed to be finally liquidated if substantially all amounts
expected by the Master Servicer to be received in connection with the related
defaulted Revolving Credit Loan have been received; provided, however, any
subsequent collections with respect to any such Revolving
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Credit Loan shall be deposited to the Custodial Account. For purposes of
determining the amount of any Liquidation Proceeds or Insurance Proceeds, or
other unscheduled collections, the Master Servicer may take into account minimal
amounts of additional receipts expected to be received or any estimated
additional liquidation expenses expected to be incurred in connection with the
related defaulted Revolving Credit Loan.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Indenture Trustee, who shall hold the same on behalf of
the 1996-RHS4 LLC in accordance with Section 3.13 of the Indenture.
Notwithstanding any such acquisition of title and cancellation of the related
Revolving Credit Loan, such Mortgaged Property shall (except as otherwise
expressly provided herein) be considered to be an outstanding Revolving Credit
Loan held as an asset of the 1996- RHS4 LLC until such time as such property
shall be sold. Consistent with the foregoing for purposes of all calculations
hereunder, so long as such Mortgaged Property shall be considered to be an
outstanding Revolving Credit Loan it shall be assumed that, notwithstanding that
the indebtedness evidenced by the related Credit Line Agreement shall have been
discharged, such Credit Line Agreement in effect at the time of any such
acquisition of title before any adjustment thereto by reason of any bankruptcy
or similar proceeding or any moratorium or similar waiver or grace period will
remain in effect.
Any proceeds from foreclosure proceedings or the purchase or repurchase
of any Revolving Credit Loan pursuant to the terms of this Servicing Agreement,
as well as any recovery resulting from a collection of Liquidation Proceeds or
Insurance Proceeds, will be applied in the following order of priority: first,
to reimburse the Master Servicer or the related Subservicer in accordance with
this Section 3.07; second, to the Master Servicer or the related Subservicer,
all Servicing Fees payable therefrom; third, to the extent of accrued and unpaid
interest on the related Revolving Credit Loan, at the Net Loan Rate to the
Payment Date on which such amounts are to be deposited in the Payment Account;
fourth, as a recovery of principal on the Revolving Credit Loan; and fifth, to
Foreclosure Profits.
Section 3.08. 1996-RHS4 LLC and Indenture Trustee to Cooperate. On or
before each Payment Date, the Master Servicer will notify the Administrator, and
the Indenture Trustee or the Custodian, with a copy to the 1996-RHS4 LLC, of the
termination of or the payment in full and the termination of any Revolving
Credit Loan during the preceding Collection Period. Upon receipt of payment in
full, the Master Servicer is authorized to execute, pursuant to the
authorization contained in Section 3.01, if the assignments of Mortgage have
been recorded if required under the Designated Seller's Agreement, an instrument
of satisfaction regarding the related Mortgage, which instrument of satisfaction
shall be recorded by the Master Servicer if required by applicable law and be
delivered to the Person entitled thereto. It is understood and agreed that any
expenses incurred in connection with such instrument of satisfaction or transfer
shall be reimbursed from amounts deposited in the Custodial Account. From time
to time and as appropriate for the servicing or foreclosure of any Revolving
Credit Loan, the Indenture Trustee or the Custodian shall, upon request of the
Master Servicer and delivery to the Indenture Trustee or Custodian, with a copy
to the 1996-RHS4 LLC, of a Request for Release, in the form annexed hereto as
Exhibit C, signed by a Servicing Officer, release or cause to be released the
related Mortgage File to the Master Servicer and the 1996-RHS4 LLC or Indenture
Trustee shall promptly execute such documents, in the forms provided by the
Master Servicer, as shall be
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necessary for the prosecution of any such proceedings or the taking of other
servicing actions. Such trust receipt shall obligate the Master Servicer to
return the Mortgage File to the Indenture Trustee or the Custodian (as specified
in such receipt) when the need therefor by the Master Servicer no longer exists
unless the Revolving Credit Loan shall be liquidated, in which case, upon
receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the trust receipt shall be released to the Master Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Revolving Credit Loan that is in default following recordation of the
assignments of Mortgage if required by the provisions of the Designated Seller's
Agreement, the Indenture Trustee or the 1996-RHS4 LLC shall, if so requested in
writing by the Master Servicer, promptly execute an appropriate assignment in
the form provided by the Master Servicer to assign such Revolving Credit Loan
for the purpose of collection to the Master Servicer (any such assignment shall
unambiguously indicate that the assignment is for the purpose of collection
only), and, upon such assignment, such assignee for collection will thereupon
bring all required actions in its own name and otherwise enforce the terms of
the Revolving Credit Loan and deposit or credit the Net Liquidation Proceeds,
exclusive of Foreclosure Profits, received with respect thereto in the Custodial
Account. In the event that all delinquent payments due under any such Revolving
Credit Loan are paid by the Mortgagor and any other defaults are cured, then the
assignee for collection shall promptly reassign such Revolving Credit Loan to
the Indenture Trustee and return all Related Documents to the place where the
related Mortgage File was being maintained.
In connection with the 1996-RHS4 LLC's obligation to cooperate as
provided in this Section 3.08 and all other provisions of this Servicing
Agreement requiring the 1996-RHS4 LLC to authorize or permit any actions to be
taken with respect to the Revolving Credit Loans, the Indenture Trustee, as
pledgee of the Class A Ownership Interest in the 1996-RHS4 LLC and as assignee
of record of the Revolving Credit Loans on behalf of the 1996-RHS4 LLC pursuant
to Section 3.13 of the Indenture, expressly agrees, on behalf of the 1996-RHS4
LLC, to take all such actions on behalf of the 1996-RHS4 LLC and to promptly
execute and return all instruments reasonably required by the Master Servicer in
connection therewith; provided that if the Master Servicer shall request a
signature of the Indenture Trustee, on behalf of the 1996- RHS4 LLC, the Master
Servicer will deliver to the Indenture Trustee an Officer's Certificate stating
that such signature is necessary or appropriate to enable the Master Servicer to
carry out its servicing and administrative duties under this Servicing
Agreement.
Section 3.09. Servicing Compensation; Payment of Certain Expenses by
Master Servicer. The Master Servicer shall be entitled to receive the Master
Servicing Fee in accordance with Section 3.03 as compensation for its services
in connection with servicing the Revolving Credit Loans. Moreover, additional
servicing compensation in the form of late payment charges and other receipts
not required to be deposited in the Custodial Account as specified in Section
3.02 shall be retained by the Master Servicer. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder (including payment of all other fees and expenses not expressly stated
hereunder to be for the account of the Securityholders, including, without
limitation, the fees and expenses of the Owner Trustee, Indenture Trustee and
any Custodian (except with respect to the initial fees and expenses of the Owner
Trustee and Indenture Trustee, which shall be paid by the Administrator pursuant
to Section 7.05 hereof)) and shall not be entitled to reimbursement therefor.
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Section 3.10. Annual Statement as to Compliance. (a) The Master
Servicer will deliver to the 1996-RHS4 LLC, the Issuer, the Administrator and
the Indenture Trustee, with a copy to the Credit Enhancer, beginning June 30,
1997, and on or before March 31 of each year thereafter, an Officer's
Certificate stating that (i) a review of the activities of the Master Servicer
during the preceding fiscal year and of its performance under servicing
agreements, including this Servicing Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Master Servicer has complied in all material respects with the
minimum servicing standards set forth in the Uniform Single Attestation Program
for Mortgage Bankers and has fulfilled all of its material obligations in all
material respects throughout such year, or, if there has been material
noncompliance with such servicing standards or a default in the fulfillment in
all material respects of any such obligation relating to this Servicing
Agreement, such statement shall include a description of such noncompliance or
specify each such default, as the case may be, known to such officer and the
nature and status thereof.
(b) The Master Servicer shall deliver to the 1996-RHS4 LLC, the Issuer,
the Administrator and the Indenture Trustee, with a copy to the Credit Enhancer,
promptly after having obtained knowledge thereof, but in no event later than
five Business Days thereafter, written notice by means of an Officer's
Certificate of any event which with the giving of notice or the lapse of time or
both, would become a Servicing Default.
Section 3.11. Annual Servicing Report. Beginning June 30, 1997, and on
or before March 31 of each year thereafter, the Master Servicer at its expense
shall cause a firm of nationally recognized independent public accountants (who
may also render other services to the Master Servicer) to furnish a report to
the 1996-RHS4 LLC, the Issuer, the Administrator, the Indenture Trustee, the
Depositor, the Credit Enhancer and each Rating Agency stating its opinion that,
on the basis of an examination conducted by such firm substantially in
accordance with standards established by the American Institute of Certified
Public Accountants, the assertions made pursuant to Section 3.10 regarding
compliance with the minimum servicing standards set forth in the Uniform Single
Attestation Program for Mortgage Bankers during the preceding calendar year are
fairly stated in all material respects, subject to such exceptions and other
qualifications that, in the opinion of such firm, such accounting standards
require it to report. In rendering such statement, such firm may rely, as to
matters relating to the direct servicing of revolving credit loans by
Subservicers, upon comparable statements for examinations conducted by
independent public accountants substantially in accordance with standards
established by the American Institute of Certified Public Accountants (rendered
within one year of such statement) with respect to such Subservicers.
Section 3.12. Access to Certain Documentation and Information Regarding
the Revolving Credit Loans. Whenever required by statute or regulation, the
Master Servicer shall provide to the Credit Enhancer, any Securityholder upon
reasonable request (or a regulator for a Securityholder) or the Indenture
Trustee, reasonable access to the documentation regarding the Revolving Credit
Loans such access being afforded without charge but only upon reasonable request
and during normal business hours at the offices of the Master Servicer. Nothing
in this Section 3.12 shall derogate from the obligation of the Master Servicer
to observe any applicable law prohibiting disclosure of information regarding
the Mortgagors and the failure of the Master
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Servicer to provide access as provided in this Section 3.12 as a result of such
obligation shall not constitute a breach of this Section 3.12.
Section 3.13. Maintenance of Certain Servicing Insurance Policies. The
Master Servicer shall during the term of its service as servicer maintain in
force (i) a policy or policies of insurance covering errors and omissions in the
performance of its obligations as master servicer hereunder and (ii) a fidelity
bond in respect of its officers, employees or agents. Each such policy or
policies and bond shall be at least equal to the coverage that would be required
by FNMA or FHLMC, whichever is greater, for Persons performing servicing for
revolving credit loans purchased by such entity.
Section 3.14. Information Required by the Internal Revenue Service and
Reports of Foreclosures and Abandonments of Mortgaged Property. The Master
Servicer shall prepare and deliver all federal and state information reports
with respect to the Revolving Credit Loans when and as required by all
applicable state and federal income tax laws. In particular, with respect to the
requirement under Section 6050J of the Code to the effect that the Master
Servicer or Subservicer shall make reports of foreclosures and abandonments of
any mortgaged property for each year beginning in 1997, the Master Servicer or
Subservicer shall file reports relating to each instance occurring during the
previous calendar year in which the Master Servicer (i) on behalf of the
1996-RHS4 LLC, acquires an interest in any Mortgaged Property through
foreclosure or other comparable conversion in full or partial satisfaction of a
Revolving Credit Loan, or (ii) knows or has reason to know that any Mortgaged
Property has been abandoned. The reports from the Master Servicer or Subservicer
shall be in form and substance sufficient to meet the reporting requirements
imposed by Section 6050J and Section 6050H (reports relating to mortgage
interest received) of the Code.
Section 3.15. Optional Repurchase of Defaulted Revolving Credit Loans.
Notwithstanding any provision in Section 3.07 to the contrary, the Master
Servicer, at its option and in its sole discretion, may repurchase any Revolving
Credit Loan delinquent in payment for a period of 60 days or longer for a price
equal to the Repurchase Price.
Section 3.16. Recording of Assignments. If the credit rating of the
Master Servicer is reduced to below "BBB" by Standard & Poor's or below "A3" by
Moody's, the Master Servicer shall, within 60 days after written notification of
such reduction in credit rating by Standard & Poor's, Moody's or the Credit
Enhancer, the Master Servicer, at its own expense, shall complete and submit for
recording in the appropriate public office for real property records each of the
assignments of the Mortgage for each Revovling Credit Loan. While such
assignment to be recorded is being recorded, the Custodian shall retain a
photocopy of such assignment. If any assignment is lost or returned unrecorded
to the Custodian because of any defect therein, the Master Servicer is required
to prepare a substitute assignment or cure such defect, as the case may be, and
the Master Servicer shall cause such assignment to be recorded in accordance
with this paragraph.
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ARTICLE IV
Servicing Certificate
Section 4.01Statements to Securityholders. With respect to each Payment
Date, on the Business Day following the related Determination Date the
Administrator shall forward to the Indenture Trustee and the Master Servicer and
the Indenture Trustee pursuant to Section 3.26 of the Indenture shall forward or
cause to be forwarded by mail to each Certificateholder, Noteholder, the Credit
Enhancer, the Depositor, the Owner Trustee, the Certificate Paying Agent and
each Rating Agency, a statement setting forth the following information as to
the Variable Funding Notes, Term Notes and Certificates, to the extent
applicable:
(i) the aggregate amount of (a) Security Interest Collections, (b) Security
Principal Collections and (c) Substitution Adjustment Amounts;
(ii) the amount of such distribution as principal to the
Noteholders of the Variable Funding Notes and the Term Notes and as a
Certificate Distribution Amount to the Certificateholders, the Initial
Certificates and the Variable Funding Certificates applied to reduce
the principal balance thereof;
(iii) the amount of such distribution as interest to the
Securityholders of the Variable Funding Notes and the Term Notes and as
a Certificate Preferred Return to the Certificateholders of the Initial
Certificates and the Variable Funding Certificates separately stating
the portion thereof in respect of overdue accrued interest;
(iv) the Credit Enhancement Draw Amount, if any, for such
Payment Date and the aggregate amount of prior draws thereunder not yet
reimbursed;
(v) the aggregate Loan Balance of the Revolving Credit Loans as of the end
of the preceding Collection Period;
(vi) the number and aggregate Loan Balances of Revolving
Credit Loans (a) as to which the Minimum Monthly Payment is delinquent
for 30-59 days, 60-89 days and 90 or more days, respectively, (b) that
are foreclosed and (c) that have become REO, in each case as of the end
of the preceding Collection Period; provided, however, that such
information will not be provided on the statements relating to the
first Payment Date;
(vii) the Weighted Average Net Loan Rate for the related Collection Period;
(viii) the Special Capital Distribution Amount as the end of the related
Collection Period;
(ix) the aggregate amount of Additional Balances created
during the previous Collection Period conveyed to the 1996-RHS4 LLC;
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(x) the aggregate Liquidation Loss Amounts with respect
to the related Collection Period, the amount of any Liquidation Loss
Distribution Amounts with respect to the Term Notes, Certificates and
Variable Funding Notes, respectively, and the aggregate of the
Liquidation Loss Amounts from all Collection Periods to date expressed
as a percentage of the Cut-off Date Loan Balance;
(xi) the aggregate Excess Loss Amounts with respect to the
related Collection Period and the aggregate of the Excess Loss Amounts
from all Collection Periods to date;
(xii) the aggregate Special Hazard Losses, Fraud Losses,
Bankruptcy Losses and losses caused by or resulting from an
Extraordinary Event with respect to the related Collection Period and
the aggregate of each of such losses from all Collection Periods to
date;
(xiii) the aggregate Security Balance of each class of
Securities after giving effect to the distribution of principal on such
Payment Date;
(xiv) the respective Security Percentage applicable to each
of the Securities, after application of payments made on such Payment
Date; and
(xv) the Outstanding Reserve Amount, the Special Hazard Amount, the Fraud
Loss Amount and the Bankruptcy Loss Amount immediately following such Payment
Date.
In the case of information furnished pursuant to clauses (ii) and (iii)
above, the amounts shall be expressed as an aggregate dollar amount per Variable
Funding Note, Term Note or Certificate, as applicable, with a $1,000
denomination.
In addition, the Administrator shall forward to the Indenture Trustee
any other information reasonably requested by the Indenture Trustee necessary to
make distributions pursuant to Section 3.05 of the Indenture. Prior to the close
of business on the Business Day next succeeding each Determination Date, the
Administrator shall furnish a written statement to the Certificate Paying Agent,
the Master Servicer and the Indenture Trustee setting forth the aggregate
amounts required to be withdrawn from the Custodial Account and deposited into
the Payment Account on the Business Day preceding the related Payment Date
pursuant to Section 3.03. The determination by the Administrator of such amounts
shall, in the absence of obvious error, be presumptively deemed to be correct
for all purposes hereunder and the Owner Trustee and Indenture Trustee shall be
protected in relying upon the same without any independent check or
verification. In addition, upon the 1996-RHS4 LLC's written request, the
Administrator shall promptly furnish information reasonably requested by the
1996-RHS4 LLC that is reasonably available to the Administrator to enable the
1996-RHS4 LLC to perform its federal and state income tax reporting obligations.
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ARTICLE V
Distribution Account and Payment Account
Section 5.01. Distribution Account. The Master Servicer shall establish
and maintain a Distribution Account titled "1996-RHS4 LLC". The Distribution
Account shall be an Eligible Account. On the Business Day prior to each Payment
Date, (i) amounts deposited into the Distribution Account pursuant to Section
3.03(i) hereof will be distributed by the Master Servicer in accordance with
Section 9.5 of the Operating Agreement, and (ii) the portion of such amounts
then distributable with respect to the Class A Ownership Interest in accordance
with Section 9.5 of the Operating Agreement shall be deposited into the Payment
Account. The Master Servicer shall invest or cause the institution maintaining
the Distribution Account to invest the funds in the Distribution Account in
Permitted Investments designated in the name of the Master Servicer, which shall
mature not later than the Business Day next preceding the Payment Date next
following the date of such investment (except that (i) any investment in the
institution with which the Distribution Account is maintained may mature on such
Payment Date and (ii) any other investment may mature on such Payment Date if
the Master Servicer shall advance funds on such Payment Date to the Payment
Account in the amount payable on such investment on such Payment Date, pending
receipt thereof to the extent necessary to make distributions on the Securities)
and shall not be sold or disposed of prior to maturity. All income and gain
realized from any such investment shall inure to the benefit of the Master
Servicer and shall be subject to its withdrawal or order from time to time. The
amount of any losses incurred in respect of any such investments shall be
deposited in the Distribution Account by the Master Servicer out of its own
funds immediately as realized.
Section 5.02. Payment Account. The Indenture Trustee shall establish
and maintain a Payment Account titled "The Chase Manhattan Bank, as Indenture
Trustee, for the benefit of the Securityholders, the Certificate Paying Agent
and the Credit Enhancer pursuant to the Indenture, dated as of December 1, 1996,
between Home Equity Loan Trust 1996-RHS4 and The Chase Manhattan Bank". The
Payment Account shall be an Eligible Account. On each Payment Date, amounts on
deposit in the Payment Account will be distributed by the Indenture Trustee in
accordance with Section 3.05 of the Indenture. The Indenture Trustee shall, upon
written request from the Master Servicer, invest or cause the institution
maintaining the Payment Account to invest the funds in the Payment Account in
Permitted Investments designated in the name of the Indenture Trustee, which
shall mature not later than the Business Day next preceding the Payment Date
next following the date of such investment (except that (i) any investment in
the institution with which the Payment Account is maintained may mature on such
Payment Date and (ii) any other investment may mature on such Payment Date if
the Indenture Trustee shall advance funds on such Payment Date to the Payment
Account in the amount payable on such investment on such Payment Date, pending
receipt thereof to the extent necessary to make distributions on the Securities)
and shall not be sold or disposed of prior to maturity. All income and gain
realized from any such investment shall be for the benefit of the Master
Servicer and shall be subject to its withdrawal or order from time to time. The
amount of any losses incurred in respect of any such investments shall be
deposited in the Payment Account by the Master Servicer out of its own funds
immediately as realized.
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ARTICLE VI
The Master Servicer
Section 6.01. Liability of the Master Servicer. The Master Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Master Servicer herein.
Section 6.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer. Any corporation into which the Master
Servicer 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
Master Servicer shall be a party, or any corporation succeeding to the business
of the Master Servicer, shall be the successor of the Master Servicer,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
The Master Servicer may assign its rights and delegate its duties and
obligations under this Servicing Agreement; provided that the Person accepting
such assignment or delegation shall be a Person which is qualified to service
revolving credit loans, is reasonably satisfactory to the Indenture Trustee (as
pledgee of the Class A Ownership Interest), the 1996-RHS4 LLC and the Credit
Enhancer, is willing to service the Revolving Credit Loans and executes and
delivers to the Indenture Trustee and the 1996-RHS4 LLC an agreement, in form
and substance reasonably satisfactory to the Credit Enhancer, the Indenture
Trustee and the 1996-RHS4 LLC, which contains an assumption by such Person of
the due and punctual performance and observance of each covenant and condition
to be performed or observed by the Master Servicer under this Servicing
Agreement; provided further that each Rating Agency's rating of the Securities
in effect immediately prior to such assignment and delegation will not be
qualified, reduced, or withdrawn as a result of such assignment and delegation
(as evidenced by a letter to such effect from each Rating Agency), if determined
without regard to the Credit Enhancement Instrument.
Section 6.03. Limitation on Liability of the Master Servicer and
Others. Neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer shall be under any liability to the
1996-RHS4 LLC, the Issuer, the Owner Trustee, the Administrator, the Indenture
Trustee or the Securityholders for any action taken or for refraining from the
taking of any action in good faith pursuant to this Servicing Agreement,
provided, however, that this provision shall not protect the Master Servicer or
any such Person against any liability which would otherwise be imposed by reason
of its willful misfeasance, bad faith or gross negligence in the performance of
its duties hereunder or by reason of its reckless disregard of its obligations
and duties hereunder. The Master Servicer and any director or officer or
employee or agent of the Master 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 Master Servicer and any director or officer
or employee or agent of the Master Servicer shall be indemnified by the
1996-RHS4 LLC and held harmless against any loss, liability or expense incurred
in connection with any legal action relating to this Servicing Agreement or the
Securities, including any amount paid to the Owner Trustee or the Indenture
Trustee pursuant to Section 6.06(b), other than any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or gross negligence in
the performance of its duties
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hereunder or by reason of its reckless disregard of its obligations and duties
hereunder. The Master Servicer shall not be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its duties to
service the Revolving Credit Loans in accordance with this Servicing Agreement,
and which in its opinion may involve it in any expense or liability; provided,
however, that the Master Servicer may in its sole discretion undertake any such
action which it may deem necessary or desirable in respect of this Servicing
Agreement, and the rights and duties of the parties hereto and the interests of
the Securityholders. In such event, the reasonable legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the 1996-RHS4 LLC, and the Master Servicer shall be entitled to
be reimbursed therefor. The Master Servicer's right to indemnity or
reimbursement pursuant to this Section 6.03 shall survive any resignation or
termination of the Master Servicer pursuant to Section 6.04 or 7.01 with respect
to any losses, expenses, costs or liabilities arising prior to such resignation
or termination (or arising from events that occurred prior to such resignation
or termination).
Section 6.04. Master Servicer Not to Resign. Subject to the provisions
of Section 6.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with any
other activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Servicing Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor servicer to the
1996-RHS4 LLC and the Indenture Trustee in writing and such proposed successor
servicer is reasonably acceptable to the 1996-RHS4 LLC, the Indenture Trustee
and the Credit Enhancer; (b) each Rating Agency shall have delivered a letter to
the 1996-RHS4 LLC, the Credit Enhancer and the Indenture Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Master Servicer hereunder will not result in the
reduction or withdrawal of the then current rating of the Securities, if
determined without regard to the Credit Enhancement Instrument; and (c) such
proposed successor servicer is reasonably acceptable to the Credit Enhancer, as
evidenced by a letter to the 1996-RHS4 LLC and the Indenture Trustee; provided,
however, that no such resignation by the Master Servicer shall become effective
until such successor servicer or, in the case of (i) above, the Indenture
Trustee, as pledgee of the Class A Ownership Interest, shall have assumed the
Master Servicer's responsibilities and obligations hereunder or the Indenture
Trustee, as pledgee of the Class A Ownership Interest, shall have designated a
successor servicer in accordance with Section 8.02. Any such resignation shall
not relieve the Master Servicer of responsibility for any of the obligations
specified in Sections 7.01 and 7.02 as obligations that survive the resignation
or termination of the Master Servicer. Any such determination permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
to such effect delivered to the Indenture Trustee and the Credit Enhancer.
Section 6.05. Delegation of Duties. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, who agrees to conduct such duties in
accordance with standards comparable to those with which the Master Servicer
complies pursuant to Section 3.01. Such delegation shall
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not relieve the Master Servicer of its liabilities and responsibilities with
respect to such duties and shall not constitute a resignation within the meaning
of Section 6.04.
Section 6.06. Payment of Indenture Trustee's and Owner Trustee's Fees
and Expenses; Indemnification. (a) After the Closing Date, the Master Servicer
covenants and agrees to pay to the Owner Trustee, the Indenture Trustee and any
co-trustee of the Indenture Trustee or the Owner Trustee from time to time, and
the Owner Trustee, the Indenture Trustee and any such co-trustee shall be
entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by each of them in the execution of the trusts created
under the Trust Agreement and the Indenture and in the exercise and performance
of any of the powers and duties under the Trust Agreement or the Indenture, as
the case may be, of the Owner Trustee, the Indenture Trustee and any co-trustee,
and the Master Servicer will pay or reimburse the Indenture Trustee and any
co-trustee upon request for all reasonable expenses, disbursements and advances
incurred or made by the Indenture Trustee or any co-trustee in accordance with
any of the provisions of this Servicing Agreement except any such expense,
disbursement or advance as may arise from its negligence, wilful misfeasance or
bad faith.
(b) The Master Servicer and the Administrator agree to indemnify the
Indenture Trustee and the Owner Trustee for, and to hold the Indenture Trustee
and the Owner Trustee, as the case may be, harmless against, any loss, liability
or expense incurred without negligence, bad faith or willful misconduct on the
part of the Indenture Trustee or the Owner Trustee, as the case may be, arising
out of, or in connection with, the acceptance and administration of the Issuer
and the assets thereof, including the costs and expenses (including reasonable
legal fees and expenses) of defending the Issuer against any claim in connection
with the exercise or performance of any of its powers or duties under any Basic
Document (with respect to the Administrator such indemnification shall be
strictly limited to the extent such loss, liability or expense is incurred in
connection with calculations performed or information provided by the
Administrator solely in respect to the Distribution Account and the Payment
Account), provided that:
(i) with respect to any such claim, the Indenture
Trustee or Owner Trustee, as the case may be, shall have given the
Master Servicer or the Administrator, as the case may be, written
notice thereof promptly after the Indenture Trustee or Owner Trustee,
as the case may be, shall have actual knowledge thereof;
(ii) while maintaining control over its own defense, the
1996-RHS4 LLC, the Indenture Trustee or Owner Trustee, as the case may
be, shall cooperate and consult fully with the Master Servicer or the
Administrator, as the case may be, in preparing such defense; and
(iii) notwithstanding anything in this Servicing
Agreement to the contrary, the Master Servicer or the Administrator, as
the case may be, shall not be liable for settlement of any claim by the
Indenture Trustee or the Owner Trustee, as the case may be, entered
into without the prior consent of the Master Servicer or the
Administrator, as the case may be.
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No termination of this Servicing Agreement shall affect the obligations created
by this Section 6.06 of the Master Servicer or the Administrator, as the case
may be, to indemnify the Indenture Trustee and the Owner Trustee under the
conditions and to the extent set forth herein.
Notwithstanding the foregoing, the indemnification provided by the
Master Servicer or the Administrator, as the case may be, in this Section
6.06(b) shall not pertain to any loss, liability or expense of the Indenture
Trustee or the Owner Trustee, including the costs and expenses of defending
itself against any claim, incurred in connection with any actions taken by the
Indenture Trustee or the Owner Trustee at the direction of the Noteholders or
Certificateholders, as the case may be, pursuant to the terms of this Servicing
Agreement.
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ARTICLE VII
The Administrator
Section 7.01. Liability of the Administrator. The Administrator shall
be liable in accordance herewith only to the extent of the obligations
specifically imposed upon and undertaken by the Administrator herein.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Administrator. Any corporation into which the Administrator
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
Administrator shall be a party, or any corporation succeeding to the business of
the Administrator, shall be the successor of the Administrator, hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
Section 7.03. Limitation on Liability of the Administrator and Others.
Neither the Administrator nor any of the directors or officers or employees or
agents of the Administrator shall be under any liability to the 1996-RHS4 LLC,
the Issuer, the Owner Trustee, the Master Servicer, the Indenture Trustee or the
Securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Servicing Agreement, provided, however,
that this provision shall not protect the Administrator or any such Person
against any liability which would otherwise be imposed by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties
hereunder or by reason of its reckless disregard of its obligations and duties
hereunder. The Administrator and any director or officer or employee or agent of
the Administrator 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 Administrator and any director or officer or employee or agent of
the Administrator shall be indemnified by the 1996-RHS4 LLC and held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to this Servicing Agreement or the Securities, other than any
loss, liability or expense incurred by reason of its willful misfeasance, bad
faith or gross negligence in the performance of its duties hereunder or by
reason of its reckless disregard of its obligations and duties hereunder. The
Administrator shall not be under any obligation to appear in, prosecute or
defend any legal action which is not incidental to its duties to service the
Revolving Credit Loans in accordance with this Servicing Agreement, and which in
its opinion may involve it in any expense or liability; provided, however, that
the Administrator may in its sole discretion undertake any such action which it
may deem necessary or desirable in respect of this Servicing Agreement, and the
rights and duties of the parties hereto and the interests of the
Securityholders. In such event, the reasonable legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities of the 1996-RHS4 LLC, and the Administrator shall be entitled to be
reimbursed therefor. The Administrator's right to indemnity or reimbursement
pursuant to this Section 7.03 shall survive any resignation or termination of
the Administrator pursuant to Section 7.04 or 7.01 with respect to any losses,
expenses, costs or liabilities arising prior to such resignation or termination
(or arising from events that occurred prior to such resignation or termination).
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Section 7.04. Administrator Not to Resign. Subject to the provisions of
Section 7.02, the Administrator shall not resign from the obligations and duties
hereby imposed on it except (i) upon determination that the performance of its
obligations or duties hereunder are no longer permissible under applicable law
or are in material conflict by reason of applicable law with any other
activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Administrator so causing such a conflict being of a type and
nature carried on by the Administrator or its subsidiaries or Affiliates at the
date of this Servicing Agreement or (ii) upon satisfaction of the following
conditions: (a) the Administrator has proposed a successor administrator to the
1996-RHS4 LLC and the Indenture Trustee in writing and such proposed successor
administrator is reasonably acceptable to the 1996-RHS4 LLC, the Indenture
Trustee and the Credit Enhancer; (b) each Rating Agency shall have delivered a
letter to the 1996-RHS4 LLC, the Credit Enhancer and the Indenture Trustee prior
to the appointment of the successor administrator stating that the proposed
appointment of such successor administrator as Administrator hereunder will not
result in the reduction or withdrawal of the then current rating of the
Securities, if determined without regard to the Credit Enhancement Instrument;
and (c) such proposed successor administrator is reasonably acceptable to the
Credit Enhancer, as evidenced by a letter to the 1996-RHS4 LLC and the Indenture
Trustee.
Section 7.06. Administrator Undertakings with Respect to the 1996-RHS4
LLC. The Administrator hereby undertakes to (i) prepare all income tax returns
of the 1996-RHS4 LLC in all jurisdictions where in its judgment such filings are
required or where it is directed by the 1996-RHS4 LLC to file such income tax
returns, (ii) deliver such returns to the Tax Matters Partner of the 1996-RHS4
LLC not less than one week prior to their due date in order for the Tax Matters
Partner to sign and timely file such income tax returns and (iii) prepare and
deliver to each Member of the 1996-RHS4 LLC, within ninety (90) days after the
expiration of each Fiscal Year of the 1996-RHS4 LLC all information returns
required by the Code and information with respect to the 1996-RHS4 LLC necessary
for the preparation of the Members' federal income tax returns. In addition, the
Administrator hereby undertakes to perform all of the enumerated duties of the
Company and the Managing Member, including maintaining the records of the
1996-RHS4 LLC, included in Article IV of the Operating Agreement.
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ARTICLE VIII
Default
Section 8.01. Servicing Default. If any one of the following events
("Servicing Default") shall occur and be continuing:
(i) Any failure by the Master Servicer to deposit in
the Custodial Account or Payment Account any deposit required to be
made under the terms of this Servicing Agreement which continues
unremedied for a period of five Business Days after the date upon which
written notice of such failure shall have been given to the Master
Servicer by the 1996-RHS4 LLC, the Issuer or the Indenture Trustee or
to the Master Servicer, the 1996-RHS4 LLC, the Issuer and the Indenture
Trustee by the Credit Enhancer; or
(ii) Failure on the part of the Master Servicer duly to
observe or perform in any material respect any other covenants or
agreements of the Master Servicer set forth in the Securities or in
this Servicing Agreement, which failure, in each case, materially and
adversely affects the interests of Securityholders or the Credit
Enhancer and which continues unremedied for a period of 45 days after
the date on which written notice of such failure, requiring the same to
be remedied, and stating that such notice is a "Notice of Default"
hereunder, shall have been given to the Master Servicer by the
1996-RHS4 LLC, the Issuer or the Indenture Trustee or to the Master
Servicer, the 1996-RHS4 LLC, the Issuer and the Indenture Trustee by
the Credit Enhancer; or
(iii) The entry against the Master 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,
conserva-torship, receivership, 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; or
(iv) The Master Servicer shall voluntarily go into
liquidation, consent to the appointment of a conservator, receiver,
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to all or
substantially all of its property, or a decree or order of a court,
agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Master
Servicer or such decree or order shall have remained in force
undischarged, unbonded or unstayed for a period of 60 days; or the
Master Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors or voluntarily suspend payment of its
obligations, then, and in every such case, so long as a Servicing
Default shall not have been remedied by the Master Servicer, either the
1996-RHS4 LLC
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or the Indenture Trustee, with the consent of the Credit Enhancer, or
the Credit Enhancer, by notice then given in writing to the Master
Servicer (and to the 1996-RHS4 LLC, the Issuer and the Indenture
Trustee if given by the Credit Enhancer) may terminate all of the
rights and obligations of the Master Servicer as servicer under this
Servicing Agreement other than its right to receive servicing
compensation and expenses for servicing the Revolving Credit Loans
hereunder during any period prior to the date of such termination and
the 1996-RHS4 LLC or the Indenture Trustee, with the consent of the
Credit Enhancer, or the Credit Enhancer may exercise any and all other
remedies available at law or equity. Any such notice to the Master
Servicer shall also be given to each Rating Agency, the Credit
Enhancer, the 1996-RHS4 LLC and the Issuer. On or after the receipt by
the Master Servicer of such written notice, all authority and power of
the Master Servicer under this Servicing Agreement, whether with
respect to the Securities or the Revolving Credit Loans or otherwise,
shall pass to and be vested in the Indenture Trustee as pledgee of the
Class A Ownership Interest, pursuant to and under this Section 8.01;
and, without limitation, the Indenture Trustee is hereby authorized and
empowered to execute and deliver, on behalf of the Master 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 each Revolving
Credit Loan and related documents, or otherwise. The Master Servicer
agrees to cooperate with the Indenture Trustee in effecting the
termination of the responsibilities and rights of the Master Servicer
hereunder, including, without limitation, the transfer to the Indenture
Trustee for the administration by it of all cash amounts relating to
the Revolving Credit Loans that shall at the time be held by the Master
Servicer and to be deposited by it in the Custodial Account, or that
have been deposited by the Master Servicer in the Custodial Account or
thereafter received by the Master Servicer with respect to the
Revolving Credit Loans. All reasonable costs and expenses (including,
but not limited to, attorneys' fees) incurred in connection with
amending this Servicing Agreement to reflect such succession as Master
Servicer pursuant to this Section 8.01 shall be paid by the predecessor
Master Servicer (or if the predecessor Master Servicer is the Indenture
Trustee, the initial Master Servicer) upon presentation of reasonable
documentation of such costs and expenses.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a payment on a Revolving Credit Loan which was due prior to
the notice terminating the Master Servicer's rights and obligations hereunder
and received after such notice, that portion to which the Master Servicer would
have been entitled pursuant to Sections 3.03 and 3.09 as well as its Master
Servicing Fee in respect thereof, and any other amounts payable to the Master
Servicer hereunder the entitlement to which arose prior to the termination of
its activities hereunder.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.01(i) or under Section 8.01(ii) after the applicable grace
periods specified in such Sections, shall not constitute a Servicing Default if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Master Servicer and such delay or failure was caused by an act
of God or the public enemy, acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar
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causes. The preceding sentence shall not relieve the Master Servicer from using
reasonable efforts to perform its respective obligations in a timely manner in
accordance with the terms of this Servicing Agreement and the Master Servicer
shall provide the Indenture Trustee, the Credit Enhancer and the Securityholders
with notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Master Servicer shall immediately
notify the Indenture Trustee, the Credit Enhancer and the Owner Trustee in
writing of any Servicing Default.
Section 8.02. Indenture Trustee to Act; Appointment of Successor. (a)
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 8.01 or sends a notice pursuant to Section 6.04, the
Indenture Trustee as pledgee of the Class A Ownership Interest shall be the
successor in all respects to the Master Servicer in its capacity as servicer
under this Servicing 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 Master Servicer by the terms and provisions
hereof. Nothing in this Servicing Agreement or in the Trust Agreement shall be
construed to permit or require the Indenture Trustee to (i) succeed to the
responsibilities, duties and liabilities of the initial Master Servicer in its
capacity as Designated Seller under the Designated Seller's Agreement, (ii) be
responsible or accountable for any act or omission of the Master Servicer prior
to the issuance of a notice of termination hereunder, (iii) require or obligate
the Indenture Trustee, in its capacity as successor Master Servicer, to
purchase, repurchase or substitute any Revolving Credit Loan, (iv) fund any
Additional Balances with respect to any Revolving Credit Loan, (v) fund any
losses on any Permitted Investment directed by any other Master Servicer, or
(vi) be responsible for the representations and warranties of the Master
Servicer. As compensation therefor, the Indenture Trustee shall be entitled to
such compensation as the Master Servicer would have been entitled to hereunder
if no such notice of termination had been given. Notwithstanding the above, (i)
if the Indenture Trustee is unwilling to act as successor Master Servicer, or
(ii) if the Indenture Trustee is legally unable so to act, the Indenture Trustee
as pledgee of the Class A Ownership Interest may (in the situation described in
clause (i)) or shall (in the situation described in clause (ii)) appoint or
petition a court of competent jurisdiction to appoint any established housing
and home finance institution, bank or other mortgage loan or home equity loan
servicer having a net worth of not less than $10,000,000 as the successor to the
Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder;
provided that any such successor Master Servicer shall be acceptable to the
Credit Enhancer, as evidenced by the Credit Enhancer's prior written consent
which consent shall not be unreasonably withheld and provided further that the
appointment of any such successor Master Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the Securities
by the Rating Agencies, if determined without regard to the Credit Enhancement
Instrument. Pending appointment of a successor to the Master 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 successor shall be entitled to receive
compensation out of payments on Revolving Credit Loans in an amount equal to the
compensation which the Master Servicer would otherwise have received pursuant to
Section 3.09 (or such lesser compensation as the Indenture Trustee and such
successor shall agree). The appointment of a successor Master Servicer shall not
affect any liability of the predecessor Master Servicer which may have arisen
under this Servicing Agreement prior to its termination as Master Servicer
(including, without limitation, the
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obligation to purchase Revolving Credit Loans pursuant to Section 3.01, to pay
any deductible under an insurance policy pursuant to Section 3.04 or to
indemnify the Indenture Trustee pursuant to Section 6.06), nor shall any
successor Master Servicer be liable for any acts or omissions of the predecessor
Master Servicer or for any breach by such Master Servicer of any of its
representations or warranties contained herein or in any related document or
agreement. The Indenture Trustee and such successor shall take such action,
consistent with this Servicing Agreement, as shall be necessary to effectuate
any such succession.
(b) Any successor, including the Indenture Trustee, to the Master
Servicer as servicer shall during the term of its service as servicer (i)
continue to service and administer the Revolving Credit Loans for the benefit of
the Securityholders, (ii) maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Master
Servicer hereunder and a fidelity bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.13 and (iii) be bound by the terms of the Insurance Agreement.
(c) Any successor Master Servicer, including the Indenture Trustee,
shall not be deemed in default or to have breached its duties hereunder if the
predecessor Master Servicer shall fail to deliver any required deposit to the
Custodial Account or otherwise cooperate with any required servicing transfer or
succession hereunder.
Section 8.03. Notification to Securityholders. Upon any termination of
or appointment of a successor to the Master Servicer pursuant to this Article
VIII or Section 6.04, the Indenture Trustee shall give prompt written notice
thereof to the Securityholders, the Credit Enhancer, the 1996-RHS4 LLC, the
Issuer, the Administrator and each Rating Agency.
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ARTICLE IX
Miscellaneous Provisions
Section 9.01 Amendment. This Servicing Agreement may be amended from
time to time by the parties hereto, provided that any amendment be accompanied
by a letter from the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to the Securities, if
determined without regard to the Credit Enhancement Instrument and the consent
of the Credit Enhancer and the Indenture Trustee.
SECTION 9.02 GOVERNING LAW. THIS SERVICING AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 9.03 Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by certified mail, return receipt requested, to (a) in
the case of the Master Servicer, 100 Witmer Road, Horsham, Pennsylvania 19044,
Attention: Anthony Renzi, (b) in the case of the Administrator, 8400 Normandale
Lake Boulevard, Suite 700, Minneapolis, Minnesota 55437, Attention: Managing
Director - Mortgage Finance, (c) in the case of the Credit Enhancer, AMBAC
Indemnity Corporation, One State Street Plaza, 17th Floor, New York, New York
10004, (d) in the case of Moody's, Home Mortgage Loan Monitoring Group, 4th
Floor, 99 Church Street, New York, New York 10001, (e) in the case of Standard &
Poor's, 26 Broadway, 15th Floor, New York, New York 10004, Attention:
Residential Mortgage Surveillance Group, (f) in the case of the Owner Trustee,
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, and (g) in the case of the Issuer, to Home
Equity Loan Trust 1996-RHS4, c/o Owner Trustee, Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, and (h)
in the case of the Indenture Trustee, The Chase Manhattan Bank, 450 West 33rd
Street, 10th Floor, New York, NY, 10001, Attention: Global Trust Services, or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party. Any notice required or permitted to be
mailed to a Securityholder shall be given by first class mail, postage prepaid,
at the address of such Securityholder as shown in the Register. Any notice so
mailed within the time prescribed in this Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the Securityholder
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
reasonable efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to delivery such
notice or document to any Rating Agency.
Section 9.04 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Servicing 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 Servicing Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Servicing
Agreement or of the Securities or the rights of the Securityholders thereof.
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Section 9.05 Third-Party Beneficiaries. This Servicing Agreement will
inure to the benefit of and be binding upon the parties hereto, the
Securityholders, the Credit Enhancer, the Owner Trustee and their respective
successors and permitted assigns. Except as otherwise provided in this Servicing
Agreement, no other Person will have any right or obligation hereunder.
Section 9.06 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 9.07 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 9.08 Termination Upon Purchase by the Master Servicer or
Liquidation of All Revolving Credit Loans; Partial Redemption. (a) The
respective obligations and responsibilities of the Master Servicer, the
1996-RHS4 LLC and the Indenture Trustee created hereby shall terminate upon the
last action required to be taken by the Issuer pursuant to the Trust Agreement
and by the Indenture Trustee pursuant to the Indenture following the earlier of:
(i) the date on or before which the Indenture or Trust Agreement is
terminated, or
(ii) the purchase by the Master Servicer from the 1996-RHS4 LLC of
all Revolving Credit Loans and all property acquired in respect of any
Revolving Credit Loan at a price equal to 100% of the unpaid Loan
Balance of each Revolving Credit Loan, plus accrued and unpaid interest
thereon at the Weighted Average Net Loan Rate up to the day preceding
the Payment Date on which such amounts are to be distributed to
Securityholders, plus any amounts due and owing to the Credit Enhancer
under the Insurance Agreement (any unpaid Master Servicing Fee shall be
deemed paid at such time).
The right of the Master Servicer to purchase the assets of the 1996-RHS4 LLC
pursuant to clause (ii) above is conditioned upon the Pool Balance as of such
date being less than ten percent of the aggregate of the Cut-off Date Loan
Balances of the Revolving Credit Loans. If such right is exercised by the Master
Servicer, the Master Servicer shall deposit the amount calculated pursuant to
clause (ii) above with the Indenture Trustee pursuant to Section 4.10 of the
Indenture and, upon the receipt of such deposit, the Indenture Trustee or
Custodian shall release to the Master Servicer, the files pertaining to the
Revolving Credit Loans being purchased.
(b) Subject to the provisions of clause (c) below, the Master Servicer
has the right to purchase a portion of the assets of the 1996-RHS4 LLC upon the
Pool Balance as of such date being less than ten percent of the aggregate of the
Cut-off Date Loan Balances of the Revolving Credit Loans at a price equal to the
greater of (a) 100% of the unpaid Loan Balance of each Revolving Credit Loan so
purchased, plus accrued and unpaid interest thereon at the Weighted Average Net
Loan Rate up to the day preceding the Payment Date on which such amounts are to
be distributed to Securityholders, plus any amounts due and owing to the Credit
Enhancer under the Insurance Agreement (any unpaid Master Servicing Fee shall be
deemed paid at such
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time) and (b) the fair market value of the Revolving Credit Loans as determined
by two bids from competitive participants in the adjustable home equity loan
market. If such right is exercised by the Master Servicer, the Master Servicer
shall deposit the amount calculated above with the Indenture Trustee pursuant to
Section 5.02 of the Indenture and, upon the receipt of such deposit, the
Indenture Trustee or Custodian shall release to the Master Servicer, the files
pertaining to the Revolving Credit Loans being purchased.
(c) With respect to any purchase of a portion of the Revolving Credit
Loans by the Master Servicer pursuant to subsection (b) above, the following
conditions must be satisfied: (i) the Master Servicer shall have delivered to
the Indenture Trustee and the Credit Enhancer a loan schedule containing a list
of all Revolving Credit Loans remaining in the 1996-RHS4 LLC after such removal;
(ii) the Master Servicer shall represent and warrant that no selection
procedures adverse to the interests of the Securityholders or the Credit
Enhancer were used by the Master Servicer in selecting such Revolving Credit
Loans; and (iii) each Rating Agency shall have notified the Master Servicer that
such retransfer would not result in a reduction or withdrawal of the ratings of
the Securities, if determined without regard to the Credit Enhancement
Instrument. In lieu of a cash payment, if an Amortization Event had previously
occurred, all or a portion of such purchase price by the Master Servicer may be
in the form of Additional Balances on other Revolving Credit Loans not
previously conveyed to the 1996-RHS4 LLC.
(d) The Master Servicer, at its expense, shall prepare and deliver to
the Indenture Trustee for execution, at the time the Revolving Credit Loans are
to be released to the Master Servicer, appropriate documents assigning each such
Revolving Credit Loan from the Indenture Trustee or the 1996-RHS4 LLC to the
Master Servicer or the appropriate party.
Section 9.09 Certain Matters Affecting the Indenture Trustee. For all
purposes of this Servicing Agreement, in the performance of any of its duties or
in the exercise of any of its powers hereunder, the Indenture Trustee shall be
subject to and entitled to the benefits of Article VI of the Indenture.
Section 9.10 Owner Trustee Not Liable for Related Documents. The
recitals contained herein shall be taken as the statements of the Depositor, 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
Servicing Agreement, of any Basic Document or of the Certificates (other than
the signatures of the Owner Trustee on the Certificates) or the Notes, or of any
Related Documents. The Owner Trustee shall at no time have any responsibility or
liability with respect to the sufficiency of the Owner Trust Estate or its
ability to generate the payments to be distributed to Certificateholders under
the Trust Agreement or the Noteholders under the Indenture, including, the
compliance by the Depositor or the Designated Seller 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
Certificate Paying Agent, the Certificate Registrar or the Indenture Trustee
taken in the name of the Owner Trustee.
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<PAGE>
IN WITNESS WHEREOF, the Master Servicer and the 1996-RHS4 LLC have
caused this Servicing Agreement to be duly executed by their respective officers
or representatives all as of the day and year first above written.
GMAC MORTGAGE CORPORATION,
as Master Servicer
By:
Name:
Title: Director
RESIDENTIAL FUNDING CORPORATION,
as Administrator
By:
Name:
Title:
1996-RHS4 LLC,
as the Limited Liability Company
By: Home Equity Loan Trust 1996-RHS4, as
Managing Member
By: Wilmington Trust Company, not in
its individual capacity but solely as
Owner Trustee
By:
Name:
Title:Vice President
THE CHASE MANHATTAN BANK, as Indenture
Trustee
By:
Name:
Title:Vice President
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<PAGE>
EXHIBIT A
REVOLVING CREDIT LOAN SCHEDULE
TO BE PROVIDED UPON REQUEST
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<PAGE>
EXHIBIT B
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PREMISES:
That The Chase Manhattan Bank, as Indenture Trustee (the "Indenture Trustee"),
under the Indenture among Home Equity Loan Trust 1996-RHS4 and the Indenture
Trustee, a national banking association organized and existing under the laws of
the United States of America, and having its principal office located at
____________________________________ in the City of ___________, State of
_______, hath made, constituted and appointed, and does by these presents make,
constitute and appoint GMAC Mortgage Corporation, a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania, its true and lawful
Attorney-in-Fact, with full power and authority to sign, execute, acknowledge,
deliver, file for record, and record any instrument on its behalf and to perform
such other act or acts as may be customarily and reasonably necessary and
appropriate to effectuate the following enumerated transactions in respect of
any of the mortgages or deeds of trust (the "Mortgages" and the "Deeds of
Trust", respectively) creating a trust or second lien or an estate in fee simple
interest in real property securing a Revolving Credit Loan and promissory notes
secured thereby (the "Mortgage Notes") for which the undersigned is acting as
Indenture Trustee for various Securityholders (whether the undersigned is named
therein as mortgagee or beneficiary or has become mortgagee by virtue of
endorsement of the Mortgage Note secured by any such Mortgage or Deed of Trust)
and for which GMAC Mortgage Corporation is acting as master servicer and
Residential Funding Corporation as administrator pursuant to a Servicing
Agreement, dated as of December 1, 1996 (the "Servicing Agreement").
This appointment shall apply to the following enumerated transactions only:
1. The modification or re-recording of a Mortgage or Deed of Trust, where
said modification or re-recording is for the purpose of correcting the
Mortgage or Deed of Trust to conform same to the original intent of the
parties thereto or to correct title errors discovered after such title
insurance was issued and said modification or re-recording, in either
instance, does not adversely affect the lien of the Mortgage or Deed of
Trust as insured.
2. The subordination of the lien of a Mortgage or Deed of Trust to an
easement in favor of a public utility company or a government agency or
unit with powers of eminent domain; this section shall include, without
limitation, the execution of partial satisfactions/releases, partial
reconveyances or the execution of requests to trustees to accomplish
same.
3. With respect to a Mortgage or Deed of Trust, the foreclosure, the
taking of a deed in lieu of foreclosure, or the completion of judicial
or non-judicial foreclosure or termination, cancellation or rescission
of any such foreclosure, including, without limitation, any and all of
the following acts:
a. The substitution of trustee(s) serving under a Deed of Trust, in
accordance with state law and the Deed of Trust;
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<PAGE>
b. Statements of breach or non-performance;
c. Notices of default;
d. Cancellations/rescissions of notices of default and/or notices of sale;
e. The taking of a deed in lieu of foreclosure; and
f. Such other documents and actions as may be necessary under the terms of
the Mortgage, Deed of Trust or state law to expeditiously complete said
transactions.
4. The conveyance of the properties to the mortgage insurer, or the
closing of the title to the property to be acquired as real estate
owned, or conveyance of title to real estate owned.
5. The completion of loan assumption agreements.
6. The full satisfaction/release of a Mortgage or Deed of Trust or full
reconveyance upon payment and discharge of all sums secured thereby,
including, without limitation, cancellation of the related Mortgage
Note.
7. The assignment of any Mortgage or Deed of Trust and the related
Mortgage Note, in connection with the repurchase of the Revolving
Credit Loan secured and evidenced thereby.
8. The full assignment of a Mortgage or Deed of Trust upon payment and
discharge of all sums secured thereby in conjunction with the
refinancing thereof, including, without limitation, the endorsement of
the related Mortgage Note.
9. The modification or re-recording of a Mortgage or Deed of Trust, where
said modification or re-recording is for the purpose of any
modification pursuant to Section 3.01 of the Servicing Agreement.
10. The subordination of the lien of a Mortgage or Deed of Trust, where
said subordination is in connection with any modification pursuant to
Section 3.01 of the Servicing Agreement, and the execution of partial
satisfactions/releases in connection with such same Section 3.01.
The undersigned gives said Attorney-in-Fact full power and authority to execute
such instruments and to do and perform all and every act and thing necessary and
proper to carry into effect the power or powers granted by or under this Limited
Power of Attorney as fully as the undersigned might or could do, and hereby does
ratify and confirm to all that said Attorney-in-Fact shall lawfully do or cause
to be done by authority hereof.
Third parties without actual notice may rely upon the exercise of the power
granted under this Limited Power of Attorney; and may be satisfied that this
Limited Power of Attorney shall
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<PAGE>
continue in full force and effect has not been revoked unless an instrument of
revocation has been made in writing by the undersigned.
THE CHASE MANHATTAN BANK
as Indenture Trustee
Name: Name:
Title: Title:
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<PAGE>
STATE OF )
SS.
COUNTY OF )
On this ____ day of December, 1996, before me the undersigned, Notary
Public of said State, personally appeared _______________________________
personally known to me to be duly authorized officers of The Chase Manhattan
Bank that executed the within instrument and personally known to me to be the
persons who executed the within instrument on behalf of The Chase Manhattan Bank
therein named, and acknowledged to me such The Chase Manhattan Bank executed the
within instrument pursuant to its by-laws.
WITNESS my hand
and official seal.
Notary Public in and for the
State of
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<PAGE>
EXHIBIT C
FORM OF REQUEST FOR RELEASE
DATE:
TO:
RE: REQUEST FOR RELEASE OF DOCUMENTS
In connection with your administration of the Class A Ownership Interest, we
request the release of the Mortgage File described below.
Servicing Agreement Dated:
Series #:
Account #:
Pool #:
Loan #:
Borrower Name(s):
Reason for Document Request: (circle one) Revolving Credit Loan
Prepaid in Full
Mortgage Loan Repurchased
"We hereby certify that all amounts received or to be received in connection
with such payments which are required to be deposited have been or will be so
deposited as provided in the Servicing Agreement."
- -------------------------------------
GMAC Mortgage Corporation
Authorized Signature
******************************************************************
TO CUSTODIAN/INDENTURE TRUSTEE: Please acknowledge this request, and check off
documents being enclosed with a copy of this form. You should retain this form
for your files in accordance with the terms of the Servicing Agreement.
Enclosed Documents: [ ] Promissory Note
[ ] Mortgage or Deed of Trust
[ ] Assignment(s) of Mortgage or
Deed of Trust
[ ] Title Insurance Policy
[ ] Other: ___________________________
Name
Title
Date
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<PAGE>
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC.
as Depositor
and
WILMINGTON TRUST COMPANY
as Owner Trustee
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AMENDED AND RESTATED TRUST AGREEMENT
Dated as of December 1, 1996
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Home Equity Loan-Backed Certificates,
Series 1996-RHS4
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Table of Contents
Section Page
ARTICLE I
Definitions
1.01. Definitions......................................................... 1
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1.02. Other Definitional Provisions....................................... 1
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ARTICLE II
Organization
2.01. Name................................................................ 3
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2.02. Office.............................................................. 3
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2.03. Purposes and Powers................................................. 3
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2.04. Appointment of Owner Trustee........................................ 4
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2.05. Initial Capital Contribution of Owner Trust Estate.................. 4
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2.06. Declaration of Trust................................................ 4
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2.07. Liability of the Holder of the Designated Certificate............... 4
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2.08. Title to Trust Property............................................. 5
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2.09. Situs of Trust...................................................... 5
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2.10. Representations and Warranties of the Depositor..................... 5
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2.11. Payment of Trust Fees............................................... 6
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ARTICLE III
Conveyance of the Class A Ownership Interest;
Certificates
3.01. Conveyance of the Class A Ownership Interest........................ 7
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3.02. Initial Ownership................................................... 7
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3.03. The Initial Certificates; The Variable Funding Certificates......... 7
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3.04. Authentication of Certificates...................................... 8
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3.05. Registration of and Limitations on Transfer and Exchange of
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Certificates........................................................ 8
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3.06. Mutilated, Destroyed, Lost or Stolen Certificates................... 11
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3.07. Persons Deemed Certificateholders................................... 11
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3.08. Access to List of Certificateholders' Names and Addresses........... 11
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3.09. Maintenance of Office or Agency..................................... 12
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3.10. Certificate Paying Agent............................................ 12
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3.11. Ownership by MATI................................................... 13
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3.12. Subrogation and Cooperation......................................... 14
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ARTICLE IV
Authority and Duties of Owner Trustee
4.01. General Authority................................................... 15
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Section Page
4.02. General Duties...................................................... 15
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4.03. Action upon Instruction............................................. 15
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4.04. No Duties Except as Specified under Specified Documents or in
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Instructions........................................................ 16
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4.05. Restrictions........................................................ 16
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4.06. Prior Notice to Certificateholders and the Credit Enhancer with
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Respect to Certain Matters.......................................... 16
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4.07. Action by Certificateholders with Respect to Certain Matters........ 17
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4.08. Action by Certificateholders with Respect to Bankruptcy............. 17
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4.09. Restrictions on Certificateholders' Power........................... 17
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4.10. Majority Control.................................................... 17
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4.11. Doing Business in Other Jurisdictions............................... 18
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ARTICLE V
Application of Trust Funds
5.01. Distributions....................................................... 19
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5.02. Method of Payment................................................... 19
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5.03. Signature on Returns................................................ 20
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5.04. Statements to Certificateholders.................................... 20
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5.05. Tax Reporting; Tax Elections........................................ 20
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ARTICLE VI
Concerning the Owner Trustee
6.01. Acceptance of Trusts and Duties..................................... 21
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6.02. Furnishing of Documents............................................. 22
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6.03. Representations and Warranties...................................... 22
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6.04. Reliance; Advice of Counsel......................................... 23
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6.05. Not Acting in Individual Capacity................................... 23
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6.06. Owner Trustee Not Liable for Certificates or Related Documents...... 23
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6.07. Owner Trustee May Own Certificates and Notes........................ 24
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ARTICLE VII
Compensation of Owner Trustee
7.01. Owner Trustee's Fees and Expenses................................... 25
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7.02. Indemnification..................................................... 25
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ARTICLE VIII
Termination of Trust Agreement
8.01. Termination of Trust Agreement...................................... 27
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8.02. Dissolution upon Bankruptcy of the Holder of the Designated
Certificate................................................... 28
ARTICLE IX
Successor Owner Trustees and Additional Owner Trustees
9.01. Eligibility Requirements for Owner Trustee.................... 29
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9.02. Replacement of Owner Trustee.................................. 29
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9.03. Successor Owner Trustee....................................... 30
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9.04. Merger or Consolidation of Owner Trustee...................... 30
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9.05. Appointment of Co-Trustee or Separate Trustee................. 30
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ARTICLE X
Miscellaneous
10.01. Amendments.................................................... 32
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10.02. No Legal Title to Owner Trust Estate.......................... 33
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10.03. Limitations on Rights of Others............................... 33
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10.04. Notices....................................................... 34
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10.05. Severability.................................................. 34
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10.06. Separate Counterparts......................................... 34
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10.07. Successors and Assigns........................................ 34
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10.08. No Petition................................................... 34
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10.09. No Recourse................................................... 35
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10.10. Headings...................................................... 35
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10.11. GOVERNING LAW................................................. 35
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10.12. Integration................................................... 35
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10.13. Rights of Credit Enhancer To Exercise Rights of
Certificateholders............................................ 35
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Signatures ..................................................................40
EXHIBIT
Exhibit A - Form of Certificate............................................A-1
Exhibit B - Certificate of Trust of Residential Home Equity
Loan Trust 1996-RHS4 .........................B-1
Exhibit C - Form of 144A Investment Representation.........................C-1
Exhibit D - Form of Investor Representation Letter.........................D-1
Exhibit E - Form of Transferor Representation Letter.......................E-1
Exhibit F - Form of Certificate of Non-Foreign Status......................F-1
Exhibit G - Form of ERISA Representation Letter............................G-1
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This Amended and Restated Trust Agreement, dated as of December 1, 1996
(as amended from time to time, this "Trust Agreement"), between RESIDENTIAL
FUNDING MORTGAGE SECURITIES II, INC., a Delaware corporation, as Depositor (the
"Depositor") and Wilmington Trust Company, a Delaware banking corporation, as
Owner Trustee (the "Owner Trustee"),
WITNESSETH THAT:
In consideration of the mutual agreements herein contained, the
Depositor and the Owner Trustee agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Trust Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in Appendix A to the Indenture. All other capitalized
terms used herein shall have the meanings specified herein.
Section 1.02. Other Definitional Provisions.
(a) All terms defined in this Trust Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used in this Trust Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Trust Agreement or in any such certificate or other document,
and accounting terms partly defined in this Trust 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 Trust
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 Trust Agreement or in any such certificate or
other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Trust Agreement shall refer to this Trust Agreement as
a whole and not to any particular provision of this Trust Agreement; Section and
Exhibit references contained in this Trust Agreement are references to Sections
and Exhibits in or to this Trust Agreement unless otherwise specified; and the
term "including" shall mean "including without limitation".
(d) The definitions contained in this Trust 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.
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(e) 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.
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ARTICLE II
Organization
Section 2.01. Name. The trust created hereby (the "Trust") shall be
known as "Home Equity Loan Trust 1996-RHS4," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 2.02. 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 Depositor.
Section 2.03. Purposes and Powers. The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Certificates
pursuant to this Trust Agreement and to sell the Notes and the Certificates;
(ii) to purchase the Class A Ownership Interest in 1996-RHS4 LLC, to act as
Managing Member of 1996-RHS4 LLC and to pay the organizational, start-up and
transactional expenses of the Trust;
(iii) to assign, grant, transfer, pledge
and convey the Class A Ownership Interest pursuant to the Indenture and to hold,
manage and distribute to the Certificateholders pursuant to Section 5.01 any
portion of the Class A Ownership Interest 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 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,
including, without limitation, to accept additional contributions of
equity that are not subject to the Lien of the Indenture; and
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Trust Agreement or the
Basic Documents while any Note is outstanding without the consent of a majority
of the Certificateholders and the Indenture Trustee.
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Section 2.04. Appointment of Owner Trustee. The Depositor 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 2.05. Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Trust,
as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial corpus of the Trust and shall
be deposited in the Certificate Distribution Account. The Owner Trustee also
acknowledges on behalf of the Issuer, the receipt in trust of the Class A
Ownership Interest and a Credit Enhancement Instrument assigned to the Trust
pursuant to Section 3.01, which shall constitute the Owner Trust Estate.
Section 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it shall hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Basic Documents. It is the
intention of the parties hereto that the Trust constitute a business trust under
the Business Trust Statute and that this Trust Agreement constitute the
governing instrument of such business trust. It is the intention of the parties
hereto that, solely for income and franchise tax purposes, the Trust shall be
treated as a partnership, with the assets of the partnership being the Owner
Trust Estate, the partners of the partnership being the Certificateholders and
the Notes being debt of the partnership and the provisions of this Trust
Agreement shall be interpreted to further this intention. Solely for income and
franchise tax purposes, the rights of the Certificateholders (other than the
Holder of the Designated Certificate) will be those of limited partners and the
rights of the Holder of the Designated Certificate will be those of a general
partner in a partnership formed under the Delaware Revised Uniform Limited
Partnership Act. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual or
other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes. Effective
as of the date hereof, the Owner Trustee shall have all rights, powers and
duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust.
Section 2.07. Liability of the Holder of the Designated Certificate.
(a) The Holder of the Designated Certificate shall be liable directly to and
shall indemnify any injured party for all losses, claims, damages, liabilities
and expenses of the Trust (including Expenses, to the extent not paid out of the
Owner Trust Estate) to the extent that the Holder of the Designated Certificate
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited Partnership Act in which the Holder of the Designated
Certificate were a general partner; provided, however, that the Holder of the
Designated Certificate shall not be liable for payments required to be made on
the Securities, or for any losses incurred by a Certificateholder in the
capacity of an investor in the Certificates or a Noteholder in the capacity of
an investor in the Notes or the Credit Enhancer for any amount due and owing
under the Credit Enhancement Instrument. The Holder of the Designated
Certificate shall be liable for any entity level taxes imposed on the Trust. In
addition, any third party creditors of the Trust, including the Credit Enhancer
(other than in connection with the obligations described in the first sentence
of this Section 2.07 for which the Holder of the Designated Certificate shall
not be liable) shall
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be deemed third party beneficiaries of this paragraph. The obligations of the
Holder of the Designated Certificate under this paragraph shall be evidenced by
the Designated Certificate.
(b) Subject to subsection (a) above, the Certificateholders shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.
Section 2.08. Title to Trust Property. Legal title to the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee, a co-trustee and/or a
separate trustee, as the case may be.
Section 2.09. Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. The Trust shall not have any employees in any state other
than Delaware; provided, however, that nothing herein shall restrict or prohibit
the Owner Trustee from having employees within or without the State of Delaware
or taking actions outside the State of Delaware in order to comply with Section
2.03. Payments will be received by the Trust only in Delaware or New York, and
payments will be made by the Trust only from Delaware or New York. The only
office of the Trust will be at the Corporate Trust Office in Delaware.
Section 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(i) The Depositor 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 Depositor is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of its property or the conduct of its business shall require such
qualifications and in which the failure to so qualify would have a
material adverse effect on the business, properties, assets or
condition (financial or other) of the Depositor and the ability of the
Depositor to perform under this Trust Agreement.
(iii) The Depositor has the power and authority to execute
and deliver this Trust Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property
to be sold and assigned to and deposited with the Trust as part of the
Trust and the Depositor has duly authorized such sale and assignment
and deposit to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Trust Agreement have been
duly authorized by the Depositor by all necessary corporate action.
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(iv) The consummation of the transactions contemplated by
this Trust 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 articles of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor 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
Depositor's knowledge, any order, rule or regulation applicable to the
Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
Section 2.11. Payment of Trust Fees. The Owner Trustee shall pay the
Trust's fees and expenses incurred with respect to the performance of the
Trust's duties under the Indenture.
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ARTICLE III
Conveyance of the Class A Ownership Interest;
Certificates
Section 3.01. Conveyance of the Class A Ownership Interest. The
Depositor, concurrently with the execution and delivery hereof, does hereby
transfer, convey, sell and assign to the Trust, on behalf of the Holders of the
Notes and the Certificates and the Credit Enhancer, without recourse, all its
right, title and interest in and to the Class A Ownership Interest. The
Depositor will also provide the Trust with the Credit Enhancement Instrument.
The parties hereto intend that the transaction set forth herein be a
sale by the Depositor to the Trust of all of its right, title and interest in
and to the Class A Ownership Interest. In the event that the transaction set
forth herein is not deemed to be a sale, the Depositor hereby grants to the
Trust a security interest in all of its right, title and interest in, to and
under the Owner Trust Estate, all distributions thereon and all proceeds
thereof; and this Trust Agreement shall constitute a security agreement under
applicable law.
Section 3.02. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.05 and until the conveyance
of the Class A Ownership Interest pursuant to Section 3.01 and the issuance of
the Certificates, the Depositor shall be the sole Certificateholder.
Section 3.03. The Initial Certificates; The Variable Funding
Certificates. (a) The Initial Certificates shall be issued in minimum
denominations of $250,000 and in integral multiples of $10,000 in excess
thereof; except for one Initial Certificate that may not be in an integral
multiple of $10,000; provided, however, that the Designated Certificate
initially issued pursuant to Section 3.11 may be issued in the amount of
$101,553.78. The Capped Funding Certificates will be issued in minimum initial
Security Balances of $10,000 and integral multiples of $1,000 in excess thereof,
together with any additional amount necessary to cover (i) the aggregate initial
Security Balance of the Capped Funding Certificates issued at the time of the
initial denominational exchange thereof or (ii) the aggregate initial Security
Balance of any Capped Funding Certificates issued in an exchange described in
subsection (d) below.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of an authorized officer of the Owner Trustee and
authenticated in the manner provided in Section 3.04. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the Trust,
shall be validly issued and entitled to the benefit of this Trust Agreement,
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 Person shall become a Certificateholder and shall be entitled to
the rights and subject to the obligations of a Certificateholder hereunder upon
such Person's acceptance of a Certificate duly registered in such Person's name,
pursuant to Section 3.05.
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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 and upon satisfaction of
the conditions set forth in Section 3.05.
(b) On each Payment Date, the aggregate Security Balance of the
Variable Funding Certificates shall be increased by an amount equal to 8.00% of
the Additional Balance Differential for such Payment Date, subject to the
Maximum Variable Funding Certificate Balance and the terms and conditions set
forth below. On each Payment Date, 1.00% of the aggregate Security Balance
increase of the Variable Funding Certificates shall be allocated to one Variable
Funding Certificate which shall be held as part of the Designated Certificates
pursuant to Section 3.11.
(c) The Variable Funding Certificate issued on the Closing Date shall
bear the Designation "VFC-1" and each new Variable Funding Certificate will bear
sequential numerical designations in the order of their issuance.
(d) In addition to the foregoing, if at any time a Variable Funding
Certificate has a Security Balance of at least $10,000, such Variable Funding
Certificate may be exchanged pursuant to Section 3.05 for (i) one or more Capped
Funding Certificates in minimum denominations as set forth in subsection (a)
above, which shall bear the designation "Capped" in addition to any other
applicable designation, and (ii) a new Variable Funding Certificate having an
initial Security Balance equal to the excess of the outstanding Security Balance
of the Variable Funding Certificate so surrendered over the initial Security
Balances of the Capped Funding Certificates referred to in clause (i) above.
Section 3.04. Authentication of Certificates. Concurrently with the
acquisition of the Class A Ownership Interest by the Trust, the Owner Trustee or
the Certificate Paying Agent shall cause the Initial Certificates in an
aggregate principal amount equal to the Initial Security Balance of the Initial
Certificates to be executed on behalf of the Trust, authenticated and delivered
to or upon the written order of the Depositor, signed by its chairman of the
board, its president or any vice president, without further corporate action by
the Depositor, in authorized denominations. No Certificate shall entitle its
holder to any benefit under this Trust Agreement or 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 Certificate Paying Agent, by manual 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 3.05. Registration of and Limitations on Transfer and Exchange
of Certificates. The Certificate Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 3.09, a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Indenture
Trustee shall be the initial Certificate Registrar. If the Certificate Registrar
resigns or is removed, the Owner Trustee shall appoint a successor Certificate
Registrar.
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Subject to satisfaction of the conditions set forth below and to the
provisions of Section 3.11 with respect to the Designated Certificate, upon
surrender for registration of transfer of any Certificate at the office or
agency maintained pursuant to Section 3.09, the Owner Trustee shall execute,
authenticate and deliver (or shall cause the Certificate Registrar as its
authenticating agent to authenticate and deliver) in the name of the designated
transferee or transferees, one or more new Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of a Certificateholder,
Certificates may be exchanged for other Certificates of authorized denominations
of a like aggregate amount upon surrender of the Certificates to be exchanged at
the office or agency maintained pursuant to Section 3.09.
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 Certificate Registrar duly executed by the Certificateholder
or such Certificateholder's attorney duly authorized in writing. Each
Certificate surrendered for registration of transfer or exchange shall be
cancelled and subsequently disposed of by the Certificate Registrar 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.
Each Certificateholder shall establish its non-foreign status by
submitting to the Certificate Paying Agent an IRS Form W-9 and the Certificate
of Non-Foreign Status set forth in Exhibit F hereto or, alternatively, such
Certificateholder will be subject to United States federal withholding tax at a
rate of 35 percent for foreign holders that are taxable as corporations and
39.6% for all other foreign holders, unless reduced or eliminated pursuant to an
applicable treaty. Each Certificateholder establishing its non-foreign status
shall submit to the Certificate Paying Agent an additional Certificate of
Non-Foreign Status and IRS Form W-9 no later than the end of the third year
after the taxable year of the partnership in which the initial Certificate of
Non-Foreign Status and IRS Form W-9 is submitted and no later than the end of
the third year after the taxable year of the partnership during which each such
additional Certificate of Non-Foreign Status and IRS Form W-9 is submitted.
No Variable Funding Certificate, other than the Designated Certificate
and any Capped Funding Certificate may be transferred. Subject to the provisions
set forth below, Capped Funding Certificates may be transferred, provided that
with respect to the initial transfer thereof by the Designated Seller prior
written notification of such transfer shall have been given to the Rating
Agencies and to the Credit Enhancer by the Designated Seller.
No transfer, sale, pledge or other disposition of a Certificate shall
be made unless such transfer, sale, pledge or other disposition is exempt from
the registration requirements of the Securities Act and any applicable state
securities laws or is made in accordance with said Act and laws. In the event of
any such transfer, the Certificate Registrar or the Depositor shall prior to
such transfer require the transferee to execute (A) either (i) (a) an investment
letter in substantially the form attached hereto as Exhibit C (or in such form
and substance reasonably
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satisfactory to the Certificate Registrar and the Depositor) which investment
letters shall not be an expense of the Trust, the Owner Trustee, the Certificate
Registrar, the Administrator, the Master Servicer or the Depositor and which
investment letter states that, among other things, such transferee (a) is a
"qualified institutional buyer" as defined under Rule 144A, acting for its own
account or the accounts of other "qualified institutional buyers" as defined
under Rule 144A, and (b) is aware that the proposed transferor intends to rely
on the exemption from registration requirements under the Securities Act of
1933, as amended, provided by Rule 144A or (ii) (a) a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Certificate
Registrar and the Depositor that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said
Act and laws or is being made pursuant to said Act and laws, which Opinion of
Counsel shall not be an expense of the Issuer, the Owner Trustee, the
Certificate Registrar, the Master Servicer or the Depositor and (b) the
transferee executes a representation letter, substantially in the form of
Exhibit D hereto, and the transferor executes a representation letter,
substantially in the form of Exhibit E hereto, each acceptable to and in form
and substance satisfactory to the Certificate Registrar and the Depositor
certifying the facts surrounding such transfer, which representation letters
shall not be an expense of the Issuer, the Owner Trustee, the Certificate
Registrar, the Master Servicer of the Depositor and (B) the Certificate of
Non-Foreign Status (in substantially the form attached hereto as Exhibit F)
acceptable to and in form and substance reasonably satisfactory to the
Certificate Registrar and the Depositor, which certificate shall not be an
expense of the Trust, the Owner Trustee, the Certificate Registrar or the
Depositor provided, however, that if a Certificate of Non-Foreign Status is not
provided to the Certificate Registrar and the Depositor upon transfer, the
transferee will be subject to United States federal withholding tax at a rate of
35 percent, unless reduced or eliminated pursuant to an applicable treaty. The
Certificateholder desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trust, the Owner Trustee, the Certificate Registrar, the
Administrator, the Master Servicer and the Depositor against any liability that
may result if the transfer is not so exempt or is not made in accordance with
such federal and state laws.
No transfer of Certificates or any interest therein shall be made to
any employee benefit plan or certain other retirement plans and arrangements,
including individual retirement accounts and annuities, Keogh plans and bank
collective investment funds and insurance company general or separate accounts
in which such plans, accounts or arrangements are invested, that are subject to
ERISA, or Section 4975 of the Code (collectively, "Plan"), any Person acting,
directly or indirectly, on behalf of any such Plan or any Person acquiring such
Certificates with "plan assets" of a Plan within the meaning of the Department
of Labor regulation promulgated at 29 C.F.R. ss.2510.3-101 ("Plan Assets")
unless the Depositor, the Owner Trustee, the Certificate Registrar and the
Master Servicer are provided with an Opinion of Counsel which establishes to the
satisfaction of the Depositor, the Owner Trustee, the Certificate Registrar and
the Master Servicer that the purchase of Certificates is permissible under
applicable law, will not constitute or result in any prohibited transaction
under ERISA or Section 4975 of the Code and will not subject the Depositor, the
Owner Trustee, the Certificate Registrar or the Master Servicer to any
obligation or liability (including obligations or liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in this Agreement,
which Opinion of Counsel shall not be an expense of the Depositor, the Owner
Trustee, the Certificate Registrar or the Master Servicer. In lieu of such
Opinion of Counsel, a Plan, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person acquiring such Certificates with Plan Assets of a
Plan
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may provide a certification in the form of Exhibit G to this Agreement, which
the Depositor, the Owner Trustee, the Certificate Registrar and the Master
Servicer may rely upon without further inquiry or investigation. Neither an
Opinion of Counsel nor a certification will be required in connection with the
initial transfer of any such Certificate by the Depositor to an affiliate of the
Depositor (in which case, the Depositor or any affiliate thereof shall have
deemed to have represented that such affiliate is not a Plan or a Person
investing Plan Assets of any Plan) and the Owner Trustee shall be entitled to
conclusively rely upon a representation (which, upon the request of the Owner
Trustee, shall be a written representation) from the Depositor of the status of
such transferee as an affiliate of the Depositor.
In addition, no transfer of a Certificate shall be permitted, and no
such transfer shall be registered by the Certificate Registrar or be effective
hereunder, if such transfer or the registration of such transfer would cause the
Issuer to be classified as a publicly traded partnership, taxable as a
corporation for federal income tax purposes by causing the Issuer to have more
than 100 Certificateholders at any time during the taxable year of the Issuer.
Section 3.06. 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 and the Issuer harmless, then in
the absence of notice to the Certificate Registrar or the Owner Trustee that
such Certificate has been acquired by a bona fide purchaser, the Owner Trustee
shall execute on behalf of the Trust and the Owner Trustee or the Certificate
Paying Agent, as the Trust'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 tenor and denomination. In
connection with the issuance of any new Certificate under this Section 3.06, 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
3.06 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 3.07. Persons Deemed Certificateholders. Prior to due
presentation of a Certificate for registration of transfer, the Owner Trustee,
the Certificate Registrar or any Certificate Paying Agent may treat the Person
in whose name any Certificate is registered in the Certificate Register as the
owner of such Certificate for the purpose of receiving distributions pursuant to
Section 5.02 and for all other purposes whatsoever, and none of the Trust, the
Owner Trustee, the Certificate Registrar or any Paying Agent shall be bound by
any notice to the contrary.
Section 3.08. Access to List of Certificateholders' Names and
Addresses. The Certificate Registrar shall furnish or cause to be furnished to
the Depositor or the Owner Trustee, within 15 days after receipt by the
Certificate Registrar of a written request therefor from the Depositor or the
Owner Trustee, a list, in such form as the Depositor or the Owner Trustee, as
the case may be, may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. Each Holder, by receiving
and holding
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a Certificate, shall be deemed to have agreed not to hold any of the Trust, the
Depositor, the Holder of the Designated Certificate, 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 3.09. Maintenance of Office or Agency. The Owner Trustee on
behalf of the Trust, shall maintain in the City of New York, The City of New
York, 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 the
Corporate Trust Office of the Indenture Trustee as its office for such purposes.
The Owner Trustee shall give prompt written notice to the Depositor, the Holder
of the Designated Certificate and the Certificateholders of any change in the
location of the Certificate Register or any such office or agency.
Section 3.10. Certificate Paying Agent. (a) The Certificate Paying
Agent shall make distributions to Certificateholders from the Certificate
Distribution Account on behalf of the Trust in accordance with the provisions of
the Certificates and Section 5.01 hereof from payments remitted to the
Certificate Paying Agent by the Indenture Trustee pursuant to Section 3.05 of
the Indenture. The Trust hereby appoints the Indenture Trustee as Certificate
Paying Agent and the Indenture Trustee hereby accepts such appointment and
further agrees that it will be bound by the provisions of this Trust Agreement
relating to the Certificate Paying Agent and shall:
(i) hold all sums held by it for the payment of amounts
due with respect to the Certificates 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;
(ii) give the Owner Trustee notice of any default by the
Trust of which it has actual knowledge in the making of any payment
required to be made with respect to the Certificates;
(iii) at any time during the continuance of any such
default, upon the written request of the Owner Trustee forthwith pay to
the Owner Trustee on behalf of the Trust all sums so held in Trust by
such Certificate Paying Agent;
(iv) immediately resign as Certificate Paying Agent and
forthwith pay to the Owner Trustee on behalf of the Trust all sums held
by it in trust for the payment of Certificates if at any time it ceases
to meet the standards required to be met by the Certificate Paying
Agent at the time of its appointment;
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any
Certificates of any applicable withholding taxes imposed thereon and
with respect to any applicable reporting requirements in connection
therewith; and
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(vi) deliver to the Owner Trustee a copy of the report
to Certificateholders prepared with respect to each Payment Date by the
Administrator pursuant to Section 4.01 of the Servicing Agreement.
(b) On the second LIBOR Business Day immediately preceding (i) the
Closing Date in the case of the first Interest Period and (ii) the first day of
each succeeding Interest Period, the Certificate Paying Agent shall determine
LIBOR and the Certificate Rate for such Interest Period and shall inform the
Master Servicer, the Administrator and the Depositor at their respective
facsimile numbers given to the Certificate Paying Agent in writing thereof.
(c) The Trust may revoke such power and remove the Certificate Paying
Agent if the Owner Trustee determines in its sole discretion that the
Certificate Paying Agent shall have failed to perform its obligations under this
Trust Agreement in any material respect. The Indenture Trustee shall be
permitted to resign as Certificate Paying Agent upon 30 days written notice to
the Owner Trustee; provided the Indenture Trustee is also resigning as Paying
Agent under the Indenture at such time. In the event that the Indenture Trustee
shall no longer be the Certificate Paying Agent under this Trust Agreement and
Paying Agent under the Indenture, the Owner Trustee shall appoint a successor to
act as Certificate Paying Agent (which shall be a bank or trust company) and
which shall also be the successor Paying Agent under the Indenture. The Owner
Trustee shall cause such successor Certificate Paying Agent or any additional
Certificate Paying Agent appointed by the Owner Trustee to execute and deliver
to the Owner Trustee an instrument to the effect set forth in this Section 3.10
as it relates to the Certificate Paying Agent. The Certificate Paying Agent
shall return all unclaimed funds to the Trust and upon removal of a Certificate
Paying Agent such Certificate Paying Agent shall also return all funds in its
possession to the Trust. The provisions of Sections 6.01, 6.03, 6.04 and 7.01
shall apply to the Certificate Paying Agent to the extent applicable. Any
reference in this Agreement to the Certificate Paying Agent shall include any
co-paying agent unless the context requires otherwise.
(d) The Certificate Paying Agent shall establish and maintain with
itself the Certificate Distribution Account in which the Certificate Paying
Agent shall deposit, on the same day as it is received from the Indenture
Trustee, each remittance received by the Certificate Paying Agent with respect
to payments made pursuant to the Indenture. The Certificate Paying Agent shall
make all distributions of Certificate Distribution Amounts, Certificate
Preferred Return and any Interest Shortfalls on the Certificates, from moneys on
deposit in the Certificate Distribution Account.
Section 3.11. Ownership by MATI. (a) MATI shall on the Closing Date
purchase a Certificate representing approximately 1% of the Initial Security
Balance of the Initial Certificates and shall take delivery of the Variable
Funding Certificate referred to in the second sentence of Section 3.03(b)
(collectively, the "Designated Certificates") and shall thereafter retain
beneficial and record ownership of the Designated Certificates. The Owner
Trustee shall cause the Designated Certificates to contain a legend stating
"THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT UPON SATISFACTION OF THE CONDITIONS
IN SECTION 3.11(b) OF THE TRUST AGREEMENT."
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(b) The Designated Certificates shall, for income and franchise tax
purposes, be treated as the general partnership interest of the Trust in
accordance with Sections 2.06 and 2.07. The Designated Certificates shall not be
transferred by MATI or any subsequent Holder unless (a) the transferee shall be
either (1) the Designated Seller or an Affiliate of the Designated Seller, or
(2) a "qualified institutional buyer" under Rule 144A under the Securities Act
in which case the prior written consent of the Credit Enhancer is obtained,
which will not be unreasonably withheld, (b) the applicable provisions of
Section 3.05 are satisfied, (c) the Certificate Registrar receives an Opinion of
Counsel to the effect that the transfer of the Designated Certificates shall not
cause the Trust to be subject to an entity level tax and (d) the Rating Agencies
shall consent to such transfer.
Section 3.12. Subrogation and Cooperation. (a) The Owner Trustee
acknowledges that (i) to the extent the Credit Enhancer makes payments under the
Credit Enhancement Instrument on account of principal of or interest on the
Class A Ownership Interest, the Credit Enhancer will be fully subrogated to the
rights of the holder of the Class A Ownership Interest to receive such principal
and interest from the 1996-RHS4 LLC, and (ii) the Credit Enhancer shall be paid
such principal and interest but only from the sources and in the manner provided
herein, in the Operating Agreement and in the Insurance Agreement for the
payment of such principal and interest.
The Trustee shall cooperate in all respects with any reasonable request
by the Credit Enhancer for action to preserve or enforce the Credit Enhancer's
rights or interest under this Trust Agreement or the Insurance Agreement,
consistent with this Trust Agreement and without limiting the rights of the
Certificateholders as otherwise set forth in the Trust Agreement.
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ARTICLE IV
Authority and Duties of Owner Trustee
Section 4.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver 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 herein, in each case, in
such form as the Owner Trustee shall approve, as evidenced conclusively by the
Owner Trustee's execution thereof. In addition to the foregoing, the Owner
Trustee is obligated to take all actions required of the Trust pursuant to the
Basic Documents.
Section 4.02. General Duties. The Owner Trustee shall be responsible to
administer the Trust pursuant to the terms of this Trust Agreement and the Basic
Documents to which the Trust is a party and in the interest of the
Certificateholders, subject to the Basic Documents and in accordance with the
provisions of this Trust Agreement. In the event of any request made to the
Issuer, as the Class A Ownership Interest Holder, for consent to any transfer of
any interest in any portion of the Class B Ownership Interest, the Owner Trustee
shall respond to such request in its discretion on behalf of the Issuer and
shall not be required to consult with the Certificateholders or the Indenture
Trustee.
Section 4.03. Action upon Instruction. (a) Subject to this 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.
Such direction may be exercised at any time by written instruction of the
Certificateholders pursuant to this Article IV.
(b) Notwithstanding the foregoing, 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 Trust Agreement or
under any Basic Document, or in the event that the Owner Trustee is unsure as to
the application of any provision of this Trust 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
Trust 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 shall promptly
give notice (in such form as shall be appropriate under the circumstances) to
the Certificateholders (with a copy to the Credit Enhancer) requesting
instruction as to the course of action to be adopted, and to the extent the
Owner Trustee acts in good faith in accordance with any written instructions
received from Holders of Certificates representing a majority of the Security
Balance thereof, 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
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circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Trust Agreement or the Basic
Documents, as it shall deem to be in the best interests of the
Certificateholders, and the Owner Trustee shall have no liability to any Person
for such action or inaction.
Section 4.04. No Duties Except as Specified under Specified Documents
or in Instructions. The Owner Trustee shall not have any duty or obligation to
manage, make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Trust 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 4.03; and no implied duties or obligations
shall be read into this Trust 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 Trust 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 4.05. Restrictions. (a) The Owner Trustee shall not take any
action (x) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (y) that, to the actual knowledge of the Owner Trustee, would
result in the Trust 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 4.05.
(b) The Owner Trustee shall not convey or transfer any of the Trust's
properties or assets, including those included in the Trust Estate, to any
person unless (a) it shall have received an Opinion of Counsel to the effect
that such transaction will not have any material adverse tax consequence to the
Trust or any Certificateholder and (b) such conveyance or transfer shall not
violate the provisions of Section 3.16(b) of the Indenture.
Section 4.06. Prior Notice to Certificateholders and the Credit
Enhancer with Respect to Certain Matters. With respect to the following matters,
the Owner Trustee shall not take action unless at least 30 days before the
taking of such action, the Owner Trustee shall have notified the
Certificateholders and the Credit Enhancer in writing of the proposed action and
Holders of Certificates representing a majority of the Security Balance thereof
and the Credit Enhancer 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 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 cash distributions due
and owing under the Class A Ownership Interest) and the compromise of any
action, claim or lawsuit brought by or against
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the Trust (except with respect to the aforementioned claims or lawsuits for
collection of cash distributions due and owing under the Class A Ownership
Interest);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment
of the Indenture by a supplemental indenture in circumstances where the consent
of any Noteholder is not required and such amendment materially adversely
affects the interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Trust Agreement
of a successor Certificate Registrar or Certificate Paying Agent or the consent
to the assignment by the Note Registrar, Paying Agent, Indenture Trustee,
Certificate Registrar or Certificate Paying Agent of its obligations under the
Indenture or this Trust Agreement, as applicable.
Section 4.07. Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of Certificateholders evidencing not less than a majority of the outstanding
Security Balance of the Certificates, and with the consent of the Credit
Enhancer, to (a) remove the Master Servicer under the Servicing Agreement
pursuant to Sections 7.01 and 8.05 thereof or (b) except as expressly provided
in the Basic Documents, sell the Class A Ownership Interest after the
termination of the Indenture. The Owner Trustee shall take the actions referred
to in the preceding sentence only upon written instructions signed by
Certificateholders evidencing not less than a majority of the outstanding
Security Balance of the Certificates and with the consent of the Credit
Enhancer.
Section 4.08. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Certificateholders and with the consent of the Credit Enhancer and the delivery
to the Owner Trustee by each such Certificateholder of a certificate certifying
that such Certificateholder reasonably believes that the Trust is insolvent.
Section 4.09. Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or to 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 Trust Agreement or any of the Basic
Documents or would be contrary to Section 2.03, nor shall the Owner Trustee be
obligated to follow any such direction, if given.
Section 4.10. Majority Control. Except as expressly provided herein,
any action that may be taken by the Certificateholders under this Trust
Agreement may be taken by the Certificateholders evidencing not less than a
majority of the outstanding Security Balance of the Certificates. Except as
expressly provided herein, any written notice of the Certificateholders
delivered pursuant to this Trust Agreement shall be effective if signed by
Certificateholders
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evidencing not less than a majority of the outstanding Security Balance of the
Certificates at the time of the delivery of such notice.
Section 4.11. Doing Business in Other Jurisdictions. Notwithstanding
anything contained herein to the contrary, neither Wilmington Trust Company nor
the Owner Trustee shall be required to take any action in any jurisdiction other
than in the State of Delaware if the taking of such action will, even after the
appointment of a co-trustee or separate trustee in accordance with Section 9.05
hereof, (i) require the consent or approval or authorization or order of or the
giving of notice to, or the registration with or the taking of any other action
in respect of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware; (ii) result in any fee, tax or
other governmental charge under the laws of the State of Delaware becoming
payable by Wilmington Trust Company, or (iii) subject Wilmington Trust Company
to personal jurisdiction in any jurisdiction other than the State of Delaware
for causes of action arising from acts unrelated to the consummation of the
transactions by Wilmington Trust Company or the Owner Trustee, as the case may
be, contemplated hereby.
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ARTICLE V
Application of Trust Funds
Section 5.01. Distributions. (a) On each Payment Date, the Certificate
Paying Agent shall distribute to the Certificateholders all funds on deposit in
the Certificate Distribution Account and available therefor (as provided in
Section 3.05 of the Indenture), as the Certificate Distribution Amount, the
Certificate Preferred Return and any Interest Shortfalls for such Payment Date.
All distributions made pursuant to this Section shall be made on a pro rata
basis to the Certificateholders based on the Security Balances thereof; provided
however that any amount on deposit in the Certificate Distribution Account
relating to a payment to the Certificate Paying Agent pursuant to Section
3.05(a)(x) of the Indenture shall be distributed solely to the Holder of the
Designated Certificate.
(b) In the event that any withholding tax is imposed on the
distributions (or allocations of income) to a Certificateholder, such tax shall
reduce the amount otherwise distributable to the Certificateholder in accordance
with this Section 5.01. The Certificate Paying Agent is hereby authorized and
directed to retain or cause to be retained from amounts otherwise distributable
to the Certificateholders sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Owner
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such Certificateholder
at the time it is withheld by the Certificate Paying Agent and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Certificate Paying Agent may in its sole discretion
withhold such amounts in accordance with this paragraph (b).
(c) All calculations of the Certificate Preferred Return on the
Certificates shall be made on the basis of the actual number of days in an
Interest Period and a year assumed to consist of 360 days.
(d) Distributions to Certificateholders shall be subordinated to the
creditors of the Trust, including the Noteholders.
Section 5.02. Method of Payment. Subject to Section 8.01(c),
distributions required to be made to Certificateholders on any Payment Date as
provided in Section 5.01 shall be made to each Certificateholder of record on
the preceding Record Date either by, in the case of any Certificateholder owning
Certificates, other than the Designated Certificate, having denominations
aggregating at least $1,000,000, 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
Certificate Registrar 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. All distributions in respect of the Designated Certificate shall be
made to MATI or its permitted assignees or transferees, as the case may be, by
wire transfer, in immediately available funds, to the account of such entity at
a bank or other entity having appropriate facilities therefor, as
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specified in written instructions to the Certificate Paying Agent on or prior to
the first Payment Date.
Section 5.03. Signature on Returns. The Holder of the Designated
Certificate, as the tax matters partner, shall sign on behalf of the Trust the
tax returns of the Trust.
Section 5.04. Statements to Certificateholders. On each Payment Date,
the Certificate Paying Agent shall send to each Certificateholder the statement
or statements provided to the Owner Trustee and the Certificate Paying Agent by
the Administrator pursuant to Section 4.01 of the Servicing Agreement with
respect to such Payment Date.
Section 5.05. Tax Reporting; Tax Elections. The Depositor shall prepare
or cause to be prepared all federal and state partnership or other income tax
returns and information statements that in the judgment of the Depositor or its
designee are required to be prepared and filed with respect to the Trust for
each of its taxable years and shall deliver such returns to the tax matters
partner of the Trust at least one week prior to their due dates in order for the
tax matters partner to sign and timely file such returns. The tax matters
partner shall timely sign and file such returns, subject to its right to review
such returns for completeness and accuracy. Within 90 days after the end of each
calendar year, the Depositor shall provide or cause to be provided to each
Certificateholder an Internal Revenue Service "K-1" or any successor schedule
and supplemental information, if required by law, to enable each
Certificateholder to file its federal and state income tax returns. The Holder
of the Designated Certificate may from time to time make and revoke such tax
elections with respect to the Trust as it deems necessary or desirable in its
sole discretion to carry out the business of the Trust or the purposes of this
Trust Agreement if permitted by applicable law. Notwithstanding the foregoing,
an election under Section 754 of the Code shall not be made without the written
consent of a majority in interest of the Holders of the Certificates. The Holder
of the Designated Certificate shall serve as tax matters partner for the Trust.
The Holder of the Designated Certificate and the Certificateholders
agree by their purchase of Certificates to treat the Issuer as a partnership
solely for purposes of federal and state income tax, franchise tax and any other
tax measured in whole or in part by income, with the assets of the partnership
being the assets held by the Issuer, the partners of the partnership being the
Certificateholders (including the Holder of the Designated Certificate), and the
Notes being debt of the partnership.
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ARTICLE VI
Concerning the Owner Trustee
Section 6.01. 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 Trust Agreement. The
Owner Trustee and the Certificate Paying Agent also agree to disburse all moneys
actually received by it constituting part of the Owner Trust Estate upon the
terms of the Basic Documents and this Trust 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, negligence or bad
faith or negligent failure to act or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 6.03 expressly made by the Owner
Trustee. In particular, but not by way of limitation (and subject to the
exceptions set forth in the preceding sentence):
(a) No provision of this Trust 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, duties 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;
(b) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(c) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Trust Agreement or for the due execution hereof
by the Depositor or the Holder of the Designated Certificate 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, the Notes, the Certificates, other than the certificate of
authentication on the Certificates, if executed by the Owner Trustee and the
Owner Trustee shall in no event assume or incur any liability, duty, or
obligation to any Noteholder or to any Certificateholder, other than as
expressly provided for herein or expressly agreed to in the Basic Documents;
(d) The execution, delivery, authentication and performance by it of
this Trust Agreement will not require the authorization, consent or approval of,
the giving of notice to, the filing or registration with, or the taking of any
other action with respect to, any governmental authority or agency;
(e) The Owner Trustee shall not be liable for the default or misconduct
of the Holder of the Designated Certificate, the Depositor, Indenture Trustee or
the Master 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 Trust Agreement or the Basic Documents that are required to be
performed by the Indenture Trustee under the Indenture or the Designated Seller
under the Designated Seller's Agreement; and
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(f) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it or duties imposed by this Trust Agreement, or
to institute, conduct or defend any litigation under this Trust Agreement or
otherwise or in relation to this Trust 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 Trust Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its negligence, bad faith or willful misconduct in
the performance of any such act.
Section 6.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Securityholders promptly upon receipt of a written reasonable request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Trust under the Basic Documents.
Section 6.03. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(a) 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 Trust Agreement;
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Trust Agreement, and this Trust Agreement
will be executed and delivered by one of its officers who is duly authorized to
execute and deliver this Trust Agreement on its behalf;
(c) Neither the execution nor the delivery by it of this Trust
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 bylaws or any
indenture, mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound;
(d) This Trust Agreement, assuming due authorization, execution and
delivery by the Owner Trustee and the Depositor, constitutes a valid, legal and
binding obligation of the Owner Trustee, enforceable against it in accordance
with the terms hereof subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the enforcement of
creditors' rights generally and to general principles of equity, regardless of
whether such enforcement is considered in a proceeding in equity or at law;
(e) The Owner Trustee 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 might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Owner Trustee or its properties or might have consequences
that would materially adversely affect its performance hereunder; and
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(f) No litigation is pending or, to the best of the Owner Trustee's
knowledge, threatened against the Owner Trustee which would prohibit its
entering into this Trust Agreement or performing its obligations under this
Trust Agreement.
Section 6.04. 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 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 Trust hereunder and in the
performance of its duties and obligations under this Trust Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents,
attorneys, custodians or nominees (including persons acting under a power of
attorney) 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,
attorneys, custodians or nominees (including persons acting under a power of
attorney) if such persons 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 at the
expense of the Trust. 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 Trust Agreement or any Basic Document.
Section 6.05. Not Acting in Individual Capacity. Except as provided in
this Article VI, 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 Trust Agreement or any Basic Document shall
look only to the Owner Trust Estate for payment or satisfaction thereof.
Section 6.06. Owner Trustee Not Liable for Certificates or Related
Documents. The recitals contained herein and in the Certificates (other than the
signatures of the Owner Trustee on the Certificates) shall be taken as the
statements of the Depositor, 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 Trust Agreement, of any Basic Document or of the
Certificates (other than the signatures of the Owner Trustee on the
Certificates) or the Notes, or of any Related Documents. The Owner Trustee shall
at no time have any responsibility or liability with respect to the sufficiency
of the Owner Trust Estate or its ability to generate the payments to be
distributed to Certificateholders under this Trust Agreement or the Noteholders
under the Indenture, including, the compliance by the Depositor or the
Designated Seller with any warranty or representation made under any Basic
Document or in
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any related document or the accuracy of any such warranty or representation, or
any action of the Certificate Paying Agent, the Certificate Registrar or the
Indenture Trustee taken in the name of the Owner Trustee.
Section 6.07. Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Depositor, the Designated Seller,
the Certificate Paying Agent, the Certificate Registrar and the Indenture
Trustee in transactions with the same rights as it would have if it were not
Owner Trustee.
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ARTICLE VII
Compensation of Owner Trustee
Section 7.01. 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, and the Owner Trustee shall be
reimbursed for its reasonable expenses hereunder and under the Basic Documents,
including the reasonable compensation, expenses and disbursements of such
agents, representatives, experts and counsel as the Owner Trustee may reasonably
employ in connection with the exercise and performance of its rights and its
duties hereunder and under the Basic Documents which shall be payable by the
Master Servicer pursuant to Section 3.09 of the Servicing Agreement.
Section 7.02. Indemnification. The Holder of the Designated Certificate
shall indemnify, defend and hold harmless the Owner Trustee and its successors,
assigns, agents and servants (collectively, the "Indemnified Parties") from and
against, any and all liabilities, obligations, losses, damages, taxes, claims,
actions and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Trust Agreement, the Basic Documents, the Owner Trust
Estate, the administration of the Owner Trust Estate or the action or inaction
of the Owner Trustee hereunder, provided, that:
(i) the Holder of the Designated Certificate shall not
be liable for or required to indemnify an Indemnified Party from and
against Expenses arising or resulting from the Owner Trustee's willful
misconduct, negligence or bad faith or as a result of any inaccuracy of
a representation or warranty contained in Section 6.03 expressly made
by the Owner Trustee;
(ii) with respect to any such claim, the Indemnified
Party shall have given the Holder of the Designated Certificate written
notice thereof promptly after the Indemnified Party shall have actual
knowledge thereof;
(iii) while maintaining control over its own defense, the
Holder of the Designated Certificate shall consult with the Indemnified
Party in preparing such defense; and
(iv) notwithstanding anything in this Agreement to the
contrary, the Holder of the Designated Certificate shall not be liable
for settlement of any claim by an Indemnified Party entered into
without the prior consent of the Holder of the Designated Certificate
which consent shall not be unreasonably withheld.
The indemnities contained in this Section shall survive the resignation
or termination of the Owner Trustee or the termination of this Trust Agreement.
In the event of any claim, action or proceeding for which indemnity will be
sought pursuant to this Section 7.02, the Owner Trustee's choice of legal
counsel, if other than the legal counsel retained by the Owner Trustee in
connection with the execution and delivery of this Trust Agreement, shall be
subject to the
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approval of the Holder of the Designated Certificate, which approval shall not
be unreasonably withheld. In addition, upon written notice to the Owner Trustee
and with the consent of the Owner Trustee which consent shall not be
unreasonably withheld, the Holder of the Designated Certificate has the right to
assume the defense of any claim, action or proceeding against the Owner Trustee.
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ARTICLE VIII
Termination of Trust Agreement
Section 8.01. Termination of Trust Agreement. (a) This Trust Agreement
(other than this Article VIII) and the Trust shall terminate and be of no
further force or effect upon the earliest of (i) the final distribution of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture and this Trust Agreement, (ii) the Payment Date
in February 2011, (iii) at the time provided in Section 8.02 or (iv) the
purchase by the Master Servicer of all Revolving Credit Loans pursuant to
Section 8.08(a) of the Servicing Agreement. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, other than the Holder
of the Designated Certificate as described in Section 8.02, shall not (x)
operate to terminate this Trust Agreement or the Trust or (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or the Owner Trust Estate or (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 8.01(a), none of the Depositor, the
Holder of the Designated Certificate or any other Certificateholder shall be
entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which Certificateholders shall surrender their Certificates to the
Certificate Paying Agent for payment of the final distribution and cancellation,
shall be given by the Certificate Paying Agent by letter to Certificateholders
and the Credit Enhancer mailed within five Business Days of receipt of notice of
such termination from the Owner Trustee, stating (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 Certificate
Paying Agent 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 Certificate Payment Agent therein specified.
The Certificate Paying Agent shall give such notice to the Owner Trustee and the
Certificate Registrar at the time such notice is given to Certificateholders.
Upon presentation and surrender of the Certificates, the Certificate Paying
Agent shall cause to be distributed to Certificateholders amounts distributable
on such Payment Date pursuant to Section 5.01.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Certificate Paying Agent shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. Subject to applicable laws with respect to escheat of funds, if within
one year following the Payment Date on which final payment of the Certificates
was to have been made pursuant to Section 3.10, all the Certificates shall not
have been surrendered for cancellation, the Certificate Paying Agent may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this
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Trust Agreement. Any funds remaining in the Certificate Distribution Account
after exhaustion of such remedies shall be distributed by the Certificate Paying
Agent to the Holder of the Designated Certificate.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810(c) of the Business Trust Statute.
Section 8.02. Dissolution upon Bankruptcy of the Holder of the
Designated Certificate. In the event that an Insolvency Event shall occur with
respect to the Holder of the Designated Certificate, this Trust Agreement and
the Trust shall be terminated in accordance with Section 8.01, 90 days after the
date of such Insolvency Event, unless, before the end of such 90- day period,
the Owner Trustee shall have received written instructions from (a) if no Credit
Enhancer Default shall have occurred and be continuing, Holders of Certificates
(other than the Holder of the Designated Certificate) representing a majority of
the Security Balance of the Certificates (not including the Security Balance of
the Designated Certificate), to the effect that such Holders disapprove of the
termination of the Trust or (b) if a Credit Enhancer Default shall have occurred
and be continuing, (i) each of the Holders of Certificates (other than the
Holder of the Designated Certificate), (ii) each of the Holders of Term Notes,
and (iii) each of the Holders of Variable Funding Notes (other than Holders of
Variable Funding Notes held by the Designated Seller or an Affiliate of the
Designated Seller), to the effect that such Holders disapprove of the
termination of the Trust. Promptly after the occurrence of any Insolvency Event
with respect to the Holder of the Designated Certificate (A) the Holder of the
Designated Certificate shall give the Indenture Trustee, the Credit Enhancer and
the Owner Trustee written notice of such Insolvency Event, (B) the Owner Trustee
shall, upon the receipt of such written notice from the Holder of the Designated
Certificate, give prompt written notice to the Certificateholders of the
occurrence of such event and (C) the Indenture Trustee shall give prompt written
notice of such event to the Noteholders; provided, however, that any failure to
give a notice required by this sentence shall not prevent or delay, in any
manner, a termination of the Trust pursuant to the first sentence of this
Section 8.02. Upon a termination pursuant to this Section, the Owner Trustee
shall direct the Indenture Trustee promptly to sell the assets of the Trust
(other than the Payment Account) in a commercially reasonable manner and on
commercially reasonable terms. Such sale shall be effected by the Indenture
Trustee by the liquidation of the assets of the 1996-RHS4 LLC as Manager thereof
and distribution thereof as provided in Section 14.3 of the Operating Agreement.
The amount of such proceeds allocable to the Class A Ownership Interest shall be
deposited into the Payment Account for distribution in accordance with Section
5.04(b) of the Indenture.
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ARTICLE IX
Successor Owner Trustees and Additional Owner Trustees
Section 9.01. 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 trust
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) long term debt obligations with a rating of
at least A by Moody's and/or Standard & Poor's. 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
9.01, the Owner Trustee shall resign immediately in the manner and with the
effect specified in Section 9.02.
Section 9.02. Replacement of Owner Trustee. The Owner Trustee may at
any time resign and be discharged from the trusts hereby created by giving 30
days prior written notice thereof to the Credit Enhancer and the Depositor. Upon
receiving such notice of resignation, the Indenture Trustee shall promptly
appoint a successor Owner Trustee with the consent of the Credit Enhancer which
will not be unreasonably withheld, by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and 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 9.01 and shall fail to resign after
written request therefor by the Indenture Trustee, 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 Indenture Trustee may and shall at the
direction of the Credit Enhancer remove the Owner Trustee. If the Indenture
Trustee shall remove the Owner Trustee under the authority of the immediately
preceding sentence, the Indenture Trustee shall promptly appoint a successor
Owner Trustee acceptable to the Credit Enhancer 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 shall pay
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 9.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee.
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Section 9.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 9.02 shall execute, acknowledge and deliver to the
Indenture Trustee and to its predecessor Owner Trustee an instrument accepting
such appointment under this Trust 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 Trust Agreement, with like effect as if originally named
as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees
and expenses deliver to the successor Owner Trustee all documents and statements
and monies held by it under this Trust Agreement; and the predecessor Owner
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section 9.03 unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 9.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section 9.03, the Indenture Trustee shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Indenture Trustee shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Indenture Trustee.
Section 9.04. Merger or Consolidation of Owner Trustee. Any Person into
which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, 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, that such Person shall be eligible pursuant to Section 9.01 and,
provided, further, that the Owner Trustee shall mail notice of such merger or
consolidation to the Rating Agencies.
Section 9.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Trust Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate may at the time be located, the Owner Trustee
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons to act as co-trustee, jointly with the Owner Trustee, or as
separate trustee or 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 Trust
Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 9.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 9.03.
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Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Owner Trust Estate 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;
(b) No trustee under this Trust Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Trust Agreement;
and
(c) 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 each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Trust
Agreement and the conditions of this Article. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Owner Trustee or separately, as may be provided therein,
subject to all the provisions of this Trust Agreement, specifically including
every provision of this Trust 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
Trust 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 co-trustee or separate trustee.
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ARTICLE X
Miscellaneous
Section 10.01. Amendments. (a) This Trust Agreement may be amended from
time to time by the parties hereto as specified in this Section 10.01, provided
that any amendment, except as provided in subparagraph (e) below, be accompanied
by an Opinion of Counsel, to the Owner Trustee to the effect that such amendment
(i) complies with the provisions of this Section and (ii) will not cause the
Trust to be subject to an entity level tax.
(b) If the purpose of the amendment (as detailed therein) is to correct
any mistake, eliminate any inconsistency, cure any ambiguity or deal with any
matter not covered (i.e. to give effect to the intent of the parties), it shall
not be necessary to obtain the consent of any Holders, but the Owner Trustee
shall be furnished with (A) a letter from the Rating Agencies that the amendment
will not result in the downgrading or withdrawal of the rating then assigned to
any Security if determined without regard to the Credit Enhancement Instrument
and (B) an Opinion of Counsel to the effect that such action will not adversely
affect in any material respect the interests of any Holders, and the consent of
the Credit Enhancer shall be obtained.
(c) If the purpose of the amendment is to prevent the imposition of any
federal or state taxes at any time that any Security is outstanding (i.e.
technical in nature), it shall not be necessary to obtain the consent of any
Holder, but the Owner Trustee shall be furnished with an Opinion of Counsel that
such amendment is necessary or helpful to prevent the imposition of such taxes
and is not materially adverse to any Holder and the consent of the Credit
Enhancer shall be obtained.
(d) If the purpose of the amendment is to add or eliminate or change
any provision of the Trust Agreement other than as contemplated in (b) and (c)
above, the amendment shall require (A) the consent of the Credit Enhancer and an
Opinion of Counsel to the effect that such action will not adversely affect in
any material respect the interests of any Holders and (B) either (a) a letter
from the Rating Agency that the amendment will not result in the downgrading or
withdrawal of the rating then assigned to any security if determined without
regard to the Credit Enhancement Instrument or (b) the consent of Holders of
Certificates evidencing a majority of the Security Balance of the Certificates
and the Indenture Trustee; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments received
that are required to be distributed on any Certificate without the consent of
the related Certificateholder and the Credit Enhancer, or (ii) reduce the
aforesaid percentage of Certificates the Holders of which are required to
consent to any such amendment, without the consent of the Holders of all such
Certificates then outstanding.
(e) If the purpose of the amendment is to provide for the holding of
any of the Certificates in book-entry form, it shall require the consent of
Holders of all such Certificates then outstanding; provided, that the Opinion of
Counsel specified in subparagraph (a) above shall not be required.
(f) If the purpose of the amendment is to provide for the issuance of
additional certificates representing an interest in the Trust, it shall not be
necessary to obtain the consent
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of any Holder, but the Owner Trustee shall be furnished with (A) an Opinion of
Counsel to the effect that such action will not adversely affect in any material
respect the interests of any Holders and (B) a letter from the Rating Agencies
that the amendment will not result in the downgrading or withdrawal of the
rating then assigned to any Security, if determined without regard to the Credit
Enhancement Instrument and the consent of the Credit Enhancer shall be obtained.
(g) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, the
Credit Enhancer and each of the Rating Agencies. It shall not be necessary for
the consent of Certificateholders or the Indenture Trustee pursuant to this
Section 10.01 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Trust 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.
(h) In connection with the execution of any amendment to any agreement
to which the Trust is a party, other than this Trust Agreement, the Owner
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel to the effect that such amendment is authorized or permitted by the
documents subject to such amendment and that all conditions precedent in the
Basic Documents for the execution and delivery thereof by the Trust or the Owner
Trustee, as the case may be, have been satisfied.
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 of the State of Delaware.
Section 10.02. No Legal Title to Owner Trust Estate. 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 beneficial 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 Trust 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 10.03. Limitations on Rights of Others. Except for Section
2.07, the provisions of this Trust Agreement are solely for the benefit of the
Owner Trustee, the Depositor, the Holder of the Designated Certificate, the
Certificateholders, the Credit Enhancer and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, and nothing in this Trust
Agreement (other than Section 2.07), 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 Trust Agreement
or any covenants, conditions or provisions contained herein.
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33
<PAGE>
Section 10.04. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt , if to the Owner Trustee, addressed to the Corporate
Trust Office; if to the Depositor, addressed to Residential Funding Mortgage
Securities II, Inc., 8400 Normandale Lake Boulevard, Suite 700, Minneapolis,
Minnesota 55437; if to MATI, addressed to Mortgage Assets Trading Inc., 8400
Normandale Lake Boulevard, Suite 700, Minneapolis, Minnesota 55437, Attention:
CFO; if to the Credit Enhancer, addressed to AMBAC Indemnity Corporation, One
State Street Plaza, 17th Floor, New York, New York 10004, if to the Rating
Agencies, addressed to Moody's Investors Service, Inc., 99 Church Street, 4th
Floor, New York, New York 10001 and Standard & Poor's Ratings Services, 26
Broadway, 15th Floor, New York, New York 10004, Attention: Structured Finance
Department - MBS or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Trust Agreement shall be conclusively presumed to have
been duly given, whether or not the Certificateholder receives such notice.
(c) A copy of any notice delivered to the Owner Trustee or the Trust shall
also be delivered to the Depositor.
Section 10.05. Severability. Any provision of this Trust Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 10.06. Separate Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 10.07. Successors and Assigns. All representations, warranties,
covenants and agreements contained herein shall be binding upon, and inure to
the benefit of, each of the Depositor, the Owner Trustee and its successors and
each Certificateholder and its successors and permitted assigns, all as herein
provided and the Credit Enhancer. Any request, notice, direction, consent,
waiver or other instrument or action by a Certificateholder shall bind the
successors and assigns of such Certificateholder.
Section 10.08. No Petition. The Owner Trustee, by entering into this
Trust Agreement and each Certificateholder, by accepting a Certificate, hereby
covenant and agree that they will not at any time institute against the
Depositor or the Trust, or join in any institution against the Depositor or the
Trust of, any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations to the
Certificates, the Notes, this Trust Agreement or any of the Basic Documents.
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<PAGE>
Section 10.09. No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Holder of the Designated Certificate, the
Designated Seller, the Owner Trustee, the Indenture 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 Trust Agreement, the
Certificates or the Basic Documents.
Section 10.10. 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 10.11. GOVERNING LAW. THIS TRUST 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 10.12. Integration. This Trust Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understanding pertaining thereto.
Section 10.13. Rights of Credit Enhancer To Exercise Rights of
Certificateholders. By accepting its Certificate, each Certificateholder agrees
that unless a Credit Enhancer Default exists, the Credit Enhancer shall have the
right to exercise all rights of the Certificateholders under this Agreement
(other than the right to vote to disapprove of a termination of the Trust
pursuant to Section 8.02) without any further consent of the Certificateholders.
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<PAGE>
IN WITNESS WHEREOF, the Depositor and the Owner Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.
By:
Name: Diane Wold
Title: Vice President
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee, except with respect
to the representations and
warranties contained in Section 6.03
hereof,
By:
Name: Emmett R. Harmon
Title: Vice President
Acknowledged and Agreed:
The Chase Manhattan Bank
Indenture Trustee, as Certificate
Registrar and Certificate
Paying Agent
By:
Name: Regina Bishop
Title: Vice President
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36
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO
THE TERM NOTES AND THE VARIABLE FUNDING NOTES AS DESCRIBED IN THE
AGREEMENT (AS DEFINED HEREIN).
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT
AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 3.05 OF THE TRUST AGREEMENT ("THE
AGREEMENT").
NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE
CERTIFICATE REGISTRAR SHALL HAVE RECEIVED EITHER (i) A REPRESENTATION LETTER
FROM THE TRANSFEREE OF THIS CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE PROHIBITED TRANSACTION RESTRICTIONS
AND THE FIDUCIARY RESPONSIBILITY REQUIREMENTS OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE"), ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON
BEHALF OF ANY SUCH PLAN OR ANY PERSON USING THE ASSETS OF ANY SUCH PLAN TO
ACQUIRE THIS CERTIFICATE (COLLECTIVELY A "PLAN INVESTOR"), OR (ii) IF THIS
CERTIFICATE IS PRESENTED FOR REGISTRATION IN THE NAME OF A PLAN INVESTOR, AN
OPINION OF COUNSEL, OR A CERTIFICATION IN THE FORM OF EXHIBIT G TO THE AGREEMENT
IN LIEU OF SUCH OPINION OF COUNSEL, TO THE EFFECT THAT THE PURCHASE OR HOLDING
OF THIS CERTIFICATE IS PERMISSIBLE UNDER APPLICABLE LAW, WILL NOT CONSTITUTE OR
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE (OR COMPARABLE PROVISIONS OF ANY SUBSEQUENT ENACTMENTS) AND WILL NOT
SUBJECT THE COMPANY, THE OWNER TRUSTEE, THE MASTER SERVICER, THE ADMINISTRATOR
OR THE CERTIFICATE REGISTRAR TO ANY OBLIGATION OR LIABILITY IN ADDITION TO THOSE
UNDERTAKEN IN THE AGREEMENT.
[THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT UPON
SATISFACTION OF THE CONDITIONS IN SECTION 3.11(b) OF THE TRUST
AGREEMENT.]
THE TRANSFEREE OF THIS CERTIFICATE SHALL BE SUBJECT TO
UNITED STATES FEDERAL WITHHOLDING TAX UNLESS THE CERTIFICATE
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<PAGE>
REGISTRAR SHALL HAVE RECEIVED A CERTIFICATE OF NON-FOREIGN STATUS
CERTIFYING AS TO THE TRANSFEREE'S STATUS AS A U.S. PERSON OR
CORPORATION OR PARTNERSHIP UNDER U.S. LAW.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE DESIGNATED SELLER, THE COMPANY, THE MASTER SERVICER, THE
INDENTURE TRUSTEE, OR THE OWNER TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES,
EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT OR THE BASIC DOCUMENTS.
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<PAGE>
Certificate No. ____ Certificate Preferred Return:
Date of Trust Agreement
and Cut-off Date:
December 1, 1996
[Aggregate initial Security Balance
of the Initial Certificates: $___________
First Payment Date: Initial Security Balance of
January 21, 1997 this Certificate: $____________]
[Maximum Undivided Variable Funding
Certificate Balance: $_____________]
Assumed Final Payment Date: CUSIP [_____]
February 20, 2011
HOME EQUITY LOAN-BACKED CERTIFICATE
SERIES 1996-RHS4
evidencing a fractional undivided interest in the Owner Trust Estate,
the property of which consists primarily of the Class A Ownership Interest in
the 1996-RHS4 LLC, a special purpose limited liability company (the "1996-RHS4
LLC") created by RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC. (hereinafter
called the "Company," which term includes any successor entity under the
Agreement referred to below).
This Certificate is payable solely from the assets of the
Owner Trust Estate, and does not represent an obligation of or interest in the
Company, the Designated Seller, the Master Servicer, the Indenture Trustee, the
Owner Trustee, the Administrator or GMAC Mortgage Corporation or any of their
affiliates. Neither this Certificate nor the Class A Ownership Interest in the
1996-RHS4 LLC is guaranteed or insured by any governmental agency or
instrumentality or by the Company, the Designated Seller, the Master Servicer,
the Indenture Trustee, the Owner Trustee or GMAC Mortgage Corporation or any of
their affiliates. None of the Company, the Designated Seller, the Master
Servicer, the Indenture Trustee, the Owner Trustee, GMAC Mortgage Corporation or
any of their affiliates will have any obligation with respect to any certificate
or other obligation secured by or payable from payments on the Certificates.
This certifies that [name of Holder] is the registered owner
of the Percentage Interest evidenced by this Certificate (obtained by dividing
the [Security Balance of this Certificate] [the principal amount set forth on
Schedule A attached hereto] by the aggregate Security Balance of all
Certificates, prior to any Payment Date) in certain distributions with respect
to the Owner Trust Estate consisting primarily of the Class A Ownership Interest
in the 1996-RHS4 LLC, created by Residential Funding Mortgage Securities II,
Inc. The Trust (as defined herein) was created pursuant to a Trust Agreement
dated as specified above (as amended
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A-3
<PAGE>
and supplemented from time to time, the "Agreement") between the Company and
Wilmington Trust Company, as owner trustee (the "Owner Trustee," which term
includes any successor entity under the Agreement), a summary of certain of the
pertinent provisions of which is set forth hereafter. To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
Pursuant to the terms of the Agreement, a distribution will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (the "Payment Date"), commencing on the
first Payment Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last day (or if such last day is
not a Business Day, the Business Day immediately preceding such last day) of the
month immediately preceding the month of such distribution (the "Record Date"),
in an amount equal to the pro rata portion evidenced by this Certificate (based
on the Security Balance of all Initial Certificates and Variable Funding
Certificates prior to such Payment Date) of the Certificate Preferred Return,
Certificate Distribution Amount and Interest Shortfall, if any required to be
distributed to Holders of Certificates on such Payment Date. Distributions on
this Certificate will be made as provided in the Agreement by the Certificate
Paying Agent by wire transfer or check mailed to the Certificateholder of record
in the Certificate Register without the presentation or surrender of this
Certificate or the making of any notation hereon.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Certificate Paying Agent of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained by the Certificate Registrar for that purpose in the
City and State of New York. [The initial Security Balance of this Certificate is
set forth above.] [The initial Maximum Variable Funding Certificate Balance is
set forth above.] The Security Balance hereof will be reduced to the extent of
the distributions allocable to principal.
No transfer of this Certificate will be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. In the event that such a transfer is to be
made, (i) the Certificate Registrar or the Company may require an opinion of
counsel acceptable to and in form and substance satisfactory to the Certificate
Registrar and the Company that such transfer is exempt (describing the
applicable exemption and the basis therefor) from or is being made pursuant to
the registration requirements of the Securities Act of 1933, as amended, and of
any applicable statute of any state and (ii) the transferee shall execute an
investment letter in the form described in the Agreement and (iii) the
Certificate Registrar shall require the transferee to execute an investment
letter and a Certificate of Non-Foreign Status in the form described by the
Agreement (or if a Certificate of Non-Foreign Status is not provided, the
transferee will be subject to United States federal withholding tax), which
investment letter and certificate shall not be at the expense of the Trust, the
Owner Trustee, the Certificate Registrar or the Company. The Holder hereof
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trust, the Owner Trustee, the Company, the Master Servicer and the Certificate
Registrar against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws. In connection
with
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A-4
<PAGE>
any such transfer, the Certificate Registrar (unless otherwise directed by the
Company) will also require (i) a representation letter, in the form as described
by the Agreement, stating that the transferee is not an employee benefit or
other plan subject to the prohibited transaction restrictions or the fiduciary
responsibility requirements of ERISA or Section 4975 of the Code ("Plan"), any
person acting, directly or indirectly, on behalf of any such plan or any person
using the assets of any such plan to effect such acquisition (collectively, a
"Plan Investor") or (ii) if such transferee is a Plan Investor, an opinion of
counsel acceptable to and in form and substance satisfactory to the Company, the
Owner Trustee, the Master Servicer and the Certificate Registrar, or a
certification in the form of Exhibit G to the Agreement, to the effect that the
purchase or holding of the Certificate is permissible under applicable law, will
not constitute or result in a prohibited transaction under Section 406 of ERISA
or Section 4975 of the Code (or comparable provisions of any subsequent
enactments) and will not subject the Company, the Owner Trustee, the Master
Servicer or the Certificate Registrar to any obligation or liability in addition
to those undertaken in the Agreement.
This [Initial Certificate] [Variable Funding Certificate] is
one of a duly authorized issue of Certificates designated as Home Equity
Loan-Backed Certificates of the Series specified hereon (herein collectively
called the "Certificates"). All terms used in this Certificate which are defined
in the Agreement shall have the meanings assigned to them in the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds on deposit in the Certificate
Distribution Account that have been released from the Lien of the Indenture for
payment hereunder and that neither the Owner Trustee in its individual capacity
nor the Company is personally liable to the Certificateholders for any amount
payable under this Certificate or the Agreement or, except as expressly provided
in the Agreement, subject to any liability under the Agreement.
The Holder of this Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Certificate are
subordinated to the rights of the Noteholders as described in the Indenture,
dated as of December 1, 1996 between Home Equity Loan Trust 1996-RHS4 (the
"Trust") and The Chase Manhattan Bank, as Indenture Trustee (the "Indenture").
Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Company, 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 similar law in connection with any obligations relating to the
Certificates, the Notes, the Agreement or any of the Basic Documents.
The Agreement permits the amendment thereof as specified
below, provided that any amendment be accompanied by the consent of the Credit
Enhancer and an Opinion of Counsel to the Owner Trustee to the effect that such
amendment complies with the provisions of the Agreement and will not cause the
Trust to be subject to an entity level tax. If the purpose of the amendment is
to correct any mistake, eliminate any inconsistency, cure any ambiguity or deal
with any matter not covered, it shall not be necessary to obtain the consent of
any Holder, but the Owner Trustee shall be furnished with a letter from the
Rating Agencies that the amend-
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A-5
<PAGE>
ment will not result in the downgrading or withdrawal of the rating then
assigned to any Security if determined without regard to the Credit Enhancement
Instrument and the counsel of the Credit Enhancer shall be obtained. If the
purpose of the amendment is to prevent the imposition of any federal or state
taxes at any time that any Security is outstanding, it shall not be necessary to
obtain the consent of the any Holder, but the Owner Trustee shall be furnished
with an Opinion of Counsel that such amendment is necessary or helpful to
prevent the imposition of such taxes and is not materially adverse to any Holder
and the consent of the Credit Enhancer shall be obtained. If the purpose of the
amendment is to add or eliminate or change any provision of the Agreement, other
than as specified in the preceding two sentences, the amendment shall require
either (a) a letter from the Rating Agencies that the amendment will not result
in the downgrading or withdrawal of the rating then assigned to any Security, if
determined without regard to the Credit Enhancement Instrument or (b) the
consent of Holders of the Certificates evidencing a majority of the Percentage
Interests of the Certificates and the Indenture Trustee; provided, however, that
no such amendment shall (i) reduce in any manner the amount of, or delay the
time of, payments received that are required to be distributed on any
Certificate without the consent of the related Certificateholder and the Credit
Enhancer, or (ii) reduce the aforesaid percentage of Certificates the Holders of
which are required to consent to any such amendment without the consent of the
Holders of all such Certificates then outstanding.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registerable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
in the City and State of New York, accompanied by a written instrument of
transfer in form satisfactory to the Certificate Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same Class and aggregate Percentage Interest will be issued to the
designated transferee. The initial Certificate Registrar appointed under the
Agreement is the Owner Trustee.
Except as provided in the Agreement, the Certificates are
issuable only in minimum denominations of $250,000 and in integral multiples of
$10,000 in excess thereof, except for one Certificate which may be an amount
which is not an integral multiple of $10,000. As provided in the Agreement and
subject to certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of authorized denominations, as requested by
the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge
payable in connection therewith.
The Owner Trustee, the Certificate Paying Agent, the
Certificate Registrar and any agent of the Owner Trustee, the Certificate Paying
Agent, or the Certificate Registrar may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Owner Trustee, the Certificate Paying Agent, the Certificate Registrar or any
such agent shall be affected by any notice to the contrary.
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A-6
<PAGE>
This Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
The obligations created by the Agreement in respect of the
Certificates and the Trust created thereby shall terminate upon the earliest of
(i) the final distribution of all moneys or other property or proceeds of the
Owner Trust Estate in accordance with the terms of the Indenture and the
Agreement, (ii) the Payment Date in February 2011, or (iii) the bankruptcy or
insolvency of the Holder of the Designated Certificate and the satisfaction of
other conditions specified in Section 8.02 of the Agreement.
Unless the certificate of authentication hereon shall have
been executed by an authorized officer of the Owner Trustee, or an
authenticating agent by manual signature, this Certificate shall not be entitled
to any benefit under the Agreement or be valid for any purpose.
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A-7
<PAGE>
[SCHEDULE A]
to
HOME EQUITY LOAN TRUST 1996-RHS4
Home Equity Loan-Backed Variable Funding Certificate
===============================================================================
Date Percentage Principal Principal Authorized Signature
Interest Repaid Outstanding of Indenture Trustee
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A-8
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
HOME EQUITY LOAN
TRUST 1996-RHS4
by WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as Owner
Trustee
Dated: December 20, 1996
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the [Initial Certificates] [Variable Funding Certificates]
referred to in the within mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By:______________________________
Authorized Signatory
or __________________________________,
as Authenticating Agent of the Trust
By:______________________________
Authorized Signatory
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A-9
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated:
__________________________________*/
Signature Guaranteed:
____________________________*/
- -----------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
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A-10
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Certificate Paying Agent:
Distribution shall be made by wire transfer in immediately available funds to
- ----------------------------------------------
- -----------------------------------------------------------------
for the account of ________________________________________, account number
______________, or, if mailed by check, to ______________.
Applicable statements should be mailed to__________________.
------------------------------
Signature of assignee or agent
(for authorization of wire
transfer only)
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A-11
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST
OF
HOME EQUITY LOAN TRUST 1996-RHS4
THE UNDERSIGNED, ______________________, as owner trustee (the
"Trustee"), for the purpose of forming a business trust does hereby certify as
follows:
1. The name of the business trust is:
HOME EQUITY LOAN TRUST 1996-RHS4
2. The name and business address of the Trustee of the business
trust in the State of Delaware is ______________________, _________________,
__________, Delaware _____.
3. The business trust reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Trust in the manner now or
hereafter prescribed by law.
4. This Certificate of Trust shall be effective upon filing.
THE UNDERSIGNED, being the Trustee hereinbefore named, for the purpose
of forming a business trust pursuant to the provisions of the Delaware Business
Trust Act, does make this certificate of trust, hereby declaring and further
certifying that this is its act and deed and that to the best of the
undersigned's knowledge and belief the facts herein stated are true.
[NAME OF OWNER TRUSTEE],
not in its individual capacity but
solely as owner trustee under a Trust
Agreement dated as of December 1,
1996
By:
Name:
Title:
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<PAGE>
EXHIBIT C
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including
numbers:
===============================================
===============================================
The undersigned seller, as registered holder (the "Seller"),
intends to transfer the Rule 144A Securities described above to the undersigned
buyer (the "Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the Seller
hereby certifies the following facts: Neither the Seller nor anyone acting on
its behalf has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Rule 144A Securities under the Securities Act of 1933, as amended (the "1933
Act"), or that would render the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require registration pursuant thereto,
and that the Seller has not offered the Rule 144A Securities to any person other
than the Buyer or another "qualified institutional buyer" as defined in Rule
144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with,
the Owner Trustee and the Depositor (as defined in the Trust Agreement (the
"Agreement"), dated as of _________, ____ between Residential Funding Mortgage
Securities II, Inc., as Depositor and ______________________, as Owner Trustee
pursuant to Section 3.05 of the Agreement and __________________________________
as indenture trustee, as follows:
a. The Buyer understands that the Rule 144A
Securities have not been registered under the 1933 Act or the
securities laws of any state.
b. The Buyer considers itself a substantial,
sophisticated institutional investor having such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Rule 144A
Securities.
c. The Buyer has been furnished with all information
regarding the Rule 144A Securities that it has requested from the
Seller, the Indenture Trustee, the Owner Trustee or the Master
Servicer.
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<PAGE>
d. Neither the Buyer nor anyone acting on its behalf
has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any
other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, any
interest in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the
Rule 144A Securities under the 1933 Act or that would render the
disposition of the Rule 144A Securities a violation of Section 5 of the
1933 Act or require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in such
manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as
that term is defined in Rule 144A under the 1933 Act and has completed
either of the forms of certification to that effect attached hereto as
Annex 1 or Annex 2. The Buyer is aware that the sale to it is being
made in reliance on Rule 144A. The Buyer is acquiring the Rule 144A
Securities for its own account or the accounts of other qualified
institutional buyers, understands that such Rule 144A Securities may be
resold, pledged or transferred only (i) to a person reasonably believed
to be a qualified institutional buyer that purchases for its own
account or for the account of a qualified institutional buyer to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, or (ii) pursuant to another exemption from
registration under the 1933 Act.
3. The Buyer represents that:
(i) either (a) or (b) is satisfied, as marked below:
____ a. The Buyer is not any employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the Internal Revenue Code of 1986 (the "Code"), a
Person acting, directly or indirectly, on behalf of any such plan or
any Person acquiring such Certificates with "plan assets" of a Plan
within the meaning of the Department of Labor regulation promulgated at
29 C.F.R. ss.2510.3-101; or
____ b. The Buyer will provide the Depositor, the
Owner Trustee, the Certificate Registrar and the Master Servicer with
either: (x) an opinion of counsel, satisfactory to the Depositor, the
Owner Trustee, the Certificate Registrar and the Master Servicer, to
the effect that the purchase and holding of a Certificate by or on
behalf of the Buyer is permissible under applicable law, will not
constitute or result in a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code (or comparable provisions of any
subsequent enactments) and will not subject the Depositor, the Owner
Trustee, the Certificate Registrar, the Master Servicer or the
Administrator to any obligation or liability (including liabilities
under ERISA or Section 4975 of the Code) in addition to those
undertaken in the Trust Agreement, which opinion of counsel shall not
be an expense of the Depositor, the Owner Trustee, the Certificate
Registrar,
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
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<PAGE>
the Master Servicer or the Administrator; or (y) in lieu of such opinion of
counsel, a certification in the form of Exhibit G to the Trust Agreement; and
(ii) the Buyer is familiar with the prohibited transaction restrictions
and fiduciary responsibility requirements of Sections 406 and 407 of
ERISA and Section 4975 of the Code and understands that each of the
parties to which this certification is made is relying and will
continue to rely on the statements made in this paragraph 3.
4. This document may be executed in one or more counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same document.
IN WITNESS WHEREOF, each of the parties has executed this
document as of the date set forth below.
Print Name of Seller Print Name of Buyer
By: By:
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. No.
Date: Date:
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
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<PAGE>
ANNEX 1 TO EXHIBIT C
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in
connection with the Rule 144A Investment
Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested
on a discretionary basis $______________________1 in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and (ii)
the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts
or similar business trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal Revenue Code.
___ Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of
Columbia, the business of which is substantially confined to
banking and is supervised by the State or territorial banking
commission or similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial
statements, a copy of which is attached hereto.
- --------
1 Buyer must own and/or invest on a discretionary basis at least $100,000,000 in
securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
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<PAGE>
___ Savings and Loan. The Buyer (a) is a savings and loan association,
building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and
examined by a State or Federal authority having supervision over
any such institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial
statements.
___ Broker-Dealer. The Buyer is a dealer registered pursuant to
Section 15 of the
-------------
Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company whose primary
and predominant business activity is the writing of insurance or
the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a
similar official or agency of a State or territory or the District
of Columbia.
___ State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political
subdivisions, for the benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act
of 1974.
___ Investment Adviser. The Buyer is an investment adviser registered
under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958.
___ Trust Fund. The Buyer is a trust fund whose trustee is a bank or
trust company and whose participants are exclusively (a) plans
established and maintained by a State, its political subdivisions,
or any agency or instrumentality of the State or its political
subdivisions, for the benefit of its employees, or (b) employee
benefit plans within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, but is not a trust fund
that includes as participants individual retirement accounts or
H.R.
10 plans.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
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<PAGE>
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Rule 144A
Securities are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
___ ___ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer
agrees that, in connection with any purchase of securities sold to the Buyer for
the account of a third party (including any separate account) in reliance on
Rule 144A, the Buyer will only purchase for the account of a third party that at
the time is a "qualified institutional buyer" within the meaning of Rule 144A.
In addition, the Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer has obtained a current representation letter from
such third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification as of the date of such
purchase.
Print Name of Buyer
By:
Name:
Title:
Date:
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
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<PAGE>
ANNEX 2 TO EXHIBIT C
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with
the Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President,
Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer
is a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used.
____ The Buyer owned $___________________ in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $______________ in securities (other
than the excluded securities referred to below) as of the end
of the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that each of the
parties to which this certification is made are relying and will continue to
rely on the statements
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
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<PAGE>
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. The undersigned will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.
Print Name of Buyer
By:
Name:
Title:
IF AN ADVISER:
Print Name of Buyer
Date:
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
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<PAGE>
EXHIBIT D
FORM OF INVESTOR REPRESENTATION LETTER
, 19
Residential Funding Mortgage Securities II, Inc.
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, MN 55437
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, NY 10001
Attention: Corporate Trust Administration
Re: Home Equity Loan-Backed Certificates
Series 1996-RHS4
Ladies and Gentlemen:
(the "Purchaser") intends to purchase from (the
"Seller") $ [Initial Security Balance of Certificates] [Variable Funding
Certificates] of Series 1996-RHS4 (the "Certificates"),issued pursuant to the
Trust Agreement (the "Trust Agreement"), dated as of December 1, 1996 between
Residential Funding Mortgage Securities II, Inc. as depositor (the "Company")
and Wilmington Trust Company, as owner trustee (the "Owner Trustee"), as
acknowledged and agreed by The Chase Manhattan Bank as Certificate Registrar.
All terms used herein and not otherwise defined shall have the meanings set
forth in the Trust Agreement. The Purchaser hereby certifies, represents and
warrants to, and covenants with, the Company and the Certificate Registrar that:
1. The Purchaser understands that (a) the
Certificates have not been and will not be registered or
qualified under the Securities Act of 1933, as amended (the
"Act") or any state securities law, (b) the Company is not
required to so register or qualify the Certificates, (c) the
Certificates may be resold only if registered and qualified
pursuant to the provisions of the Act or any state securities
law, or if an exemption from such registration and
qualification is available, (d) the Trust Agreement contains
restrictions regarding the transfer of the Certificates and
(e) the Certificates will bear a legend to the foregoing
effect.
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
D-1
<PAGE>
2. The Purchaser is acquiring the Certificates for
its own account for investment only and not with a view to or
for sale in connection with any distribution thereof in any
manner that would violate the Act or any applicable state
securities laws.
3. The Purchaser is (a) a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters, and, in particular, in such
matters related to securities similar to the Certificates,
such that it is capable of evaluating the merits and risks of
investment in the Certificates, (b) able to bear the economic
risks of such an investment and (c) an "accredited investor"
within the meaning of Rule 501(a) promulgated pursuant to the
Act.
4. The Purchaser has been furnished with, and has had
an opportunity to review (a) [a copy of the Private Placement
Memorandum, dated , 19 , relating to the Certificates (b)] a
copy of the Trust Agreement and [b] [c] such other information
concerning the Certificates, the Revolving Credit Loans and
the Company as has been requested by the Purchaser from the
Company or the Seller and is relevant to the Purchaser's
decision to purchase the Certificates. The Purchaser has had
any questions arising from such review answered by the Company
or the Seller to the satisfaction of the Purchaser. [If the
Purchaser did not purchase the Certificates from the Seller in
connection with the initial distribution of the Certificates
and was provided with a copy of the Private Placement
Memorandum (the "Memorandum") relating to the original sale
(the "Original Sale") of the Certificates by the Company, the
Purchaser acknowledges that such Memorandum was provided to it
by the Seller, that the Memorandum was prepared by the Company
solely for use in connection with the Original Sale and the
Company did not participate in or facilitate in any way the
purchase of the Certificates by the Purchaser from the Seller,
and the Purchaser agrees that it will look solely to the
Seller and not to the Company with respect to any damage,
liability, claim or expense arising out of, resulting from or
in connection with (a) error or omission, or alleged error or
omission, contained in the Memorandum, or (b) any information,
development or event arising after the date of the
Memorandum.]
5. The Purchaser has not and will not nor has it
authorized or will it authorize any person to (a) offer,
pledge, sell, dispose of or otherwise transfer any
Certificate, any interest in any Certificate or any other
similar security to any person in any manner, (b) solicit any
offer to buy or to accept a pledge, disposition of other
transfer of any Certificate, any interest in any Certificate
or any other similar security from any person in any manner,
(c) otherwise approach or negotiate with respect to any
Certificate, any interest in any Certificate or any other
similar security with any person in any manner, (d) make any
general solicitation by means of general advertising or in any
other manner or (e) take any other action, that (as to any of
(a) through (e) above) would constitute a distribution of any
Certificate under the Act, that would render the disposition
of any Certificate a violation of Section 5 of the Act or any
state securities law, or
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
D-2
<PAGE>
that would require registration or qualification pursuant
thereto. The Purchaser will not sell or otherwise transfer any
of the Certificates, except in compliance with the provisions
of the Trust Agreement.
6. The Purchaser represents:
(i) that either (a) or (b) is satisfied, as marked below:
____ a. The Purchaser is not any employee benefit
plan subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the Internal Revenue Code of 1986 (the "Code"), a
Person acting, directly or indirectly, on behalf of any such plan or
any Person acquiring such Certificates with "plan assets" of a Plan
within the meaning of the Department of Labor regulation promulgated at
29 C.F.R. ss.2510.3-101; or
____ b. The Purchaser will provide the Depositor, the
Owner Trustee, the Certificate Registrar and the Master Servicer with
either: (x) an opinion of counsel, satisfactory to the Depositor, the
Owner Trustee, the Certificate Registrar and the Master Servicer, to
the effect that the purchase and holding of a Certificate by or on
behalf of the Purchaser is permissible under applicable law, will not
constitute or result in a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code (or comparable provisions of any
subsequent enactments) and will not subject the Depositor, the Owner
Trustee, the Certificate Registrar or the Master Servicer to any
obligation or liability (including liabilities under ERISA or Section
4975 of the Code) in addition to those undertaken in the Trust
Agreement, which opinion of counsel shall not be an expense of the
Depositor, the Owner Trustee, the Certificate Registrar or the Master
Servicer; or (y) in lieu of such opinion of counsel, a certification in
the form of Exhibit G to the Trust Agreement; and
(ii) the Purchaser is familiar with the prohibited transaction
restrictions and fiduciary responsibility requirements of Sections 406
and 407 of ERISA and Section 4975 of the Code and understands that each
of the parties to which this certification is made is relying and will
continue to rely on the statements made in this paragraph 6.
7. The Purchaser is not a non-United States person.
Very truly yours,
By:
Name:
Title:
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
D-3
<PAGE>
EXHIBIT E
FORM OF TRANSFEROR REPRESENTATION LETTER
, 19
Residential Funding Mortgage Securities II, Inc.
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, MN 55437
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, NY 10001
Attention: Corporate Trust Administration
Re: Home Equity Loan-Backed Certificates
Series 1996-RHS4
Ladies and Gentlemen:
(the "Purchaser") intends to purchase from (the
"Seller") $ [Initial Security Balance of Certificates] [Variable Funding
Certificates] of Series 1996-RHS4 (the "Certificates"), issued pursuant to the
Trust Agreement (the "Trust Agreement"), dated as of December 1, 1996 between
Residential Funding Mortgage Securities II, Inc. as depositor (the "Company")
and Wilmington Trust Company, as owner trustee (the "Owner Trustee"), as
acknowledged and agreed by The Chase Manhattan Bank as Certificate Registrar.
All terms used herein and not otherwise defined shall have the meanings set
forth in the Trust Agreement. The Seller hereby certifies, represents and
warrants to, and covenants with, the Company and the Certificate Registrar that:
Neither the Seller nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, or (e) has taken any other action, that (as to any of (a) through
(e) above) would constitute a distribution of the Certificates under the
Securities Act of 1933 (the "Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Act or any state securities law, or
that would require registration or qualification
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
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<PAGE>
pursuant thereto. The Seller will not act, in any manner set forth in the
foregoing sentence with respect to any Certificate. The Seller has not and will
not sell or otherwise transfer any of the Certificates, except in compliance
with the provisions of the Trust Agreement.
Very truly yours,
(Seller)
By:
Name:
Title:
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
E-2
<PAGE>
EXHIBIT F
CERTIFICATE OF NON-FOREIGN STATUS
This Certificate of Non-Foreign Status ("certificate") is delivered
pursuant to Section 3.05 of the Trust Agreement, dated as of _________, ____
(the "Trust Agreement"), between Residential Funding Mortgage Securities II,
Inc., as depositor and ______________________, as Owner Trustee, in connection
with the acquisition of, transfer to or possession by the undersigned, whether
as beneficial owner (the "Beneficial Owner"), or nominee on behalf of the
Beneficial Owner of the Residential Home Equity Loan-Backed Certificates, Series
1996-RHS4 (the "Certificate"). Capitalized terms used but not defined in this
certificate have the respective meanings given them in the Trust Agreement.
Each holder must complete Part I, Part II (if the holder is a nominee), and in
all cases sign and otherwise complete Part III. In addition, each holder shall
submit with the Certificate an IRS Form W-9 relating to such holder.
To confirm to the Trust that the provisions of Sections 871, 881 or 1446 of the
Internal Revenue Code (relating to withholding tax on foreign partners) do not
apply in respect of the Certificate held by the undersigned, the undersigned
hereby certifies:
Part I - Complete Either A or B
A. Individual as Beneficial Owner
1. I am (The Beneficial Owner is ) not a non-resident alien for
purposes of U.S. income taxation;
2. My (The Beneficial Owner's) name and home address are:
; and
3. My (The Beneficial Owner's) U.S. taxpayer identification number
(Social Security Number) is .
B. Corporate, Partnership or Other Entity as Beneficial Owner
1. (Name of the Beneficial Owner) is not a
foreign corporation, foreign partnership, foreign trust or foreign
estate (as those terms are defined in the Code and Treasury
Regulations;
2. The Beneficial Owner's office address and place of incorporation
(if applicable) is
; and
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F-1
<PAGE>
3. The Beneficial Owner's U.S. employer identification number is
.
Part II - Nominees
If the undersigned is the nominee for the Beneficial Owner, the
undersigned certifies that this certificate has been made in reliance upon
information contained in:
an IRS Form W-9
a form such as this or substantially similar
provided to the undersigned by an appropriate person and (i) the undersigned
agrees to notify the Trust at least thirty (30) days prior to the date that the
form relied upon becomes obsolete, and (ii) in connection with change in
Beneficial Owners, the undersigned agrees to submit a new Certificate of
Non-Foreign Status to the Trust promptly after such change.
Part III - Declaration
The undersigned, as the Beneficial Owner or a nominee thereof, agrees
to notify the Trust within sixty (60) days of the date that the Beneficial Owner
becomes a foreign person. The undersigned understands that this certificate may
be disclosed to the Internal Revenue Service by the Trust and any false
statement contained therein could be punishable by fines, imprisonment or both.
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
F-2
<PAGE>
Under penalties of perjury, I declare that I have examined this
certificate and to the best of my knowledge and belief it is true, correct and
complete and will further declare that I will inform the Trust of any change in
the information provided above, and, if applicable, I further declare that I
have the authority* to sign this document.
Name
Title (if applicable)
Signature and Date
*NOTE: If signed pursuant to a power of attorney, the power of attorney must
accompany this certificate.
[NY01:241702.4] 16069-00382 12/19/96 10:59pm
F-3
<PAGE>
EXHIBIT G
FORM OF ERISA REPRESENTATION LETTER
_____________, 199__
Residential Funding Mortgage
Securities II, Inc.
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, MN 55437
Wilmington Trust Company
[ADDRESS]
Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, MN 55437
[CERTIFICATE REGISTRAR]
Re: Residential Funding Mortgage Securities II, Inc.
Home Equity Loan-Backed Certificates, Series 1996-RHS4
Dear Sirs:
__________________________________ (the "Transferee") intends
to acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Residential Mortgage Securities II, Inc. Home
Equity Loan-Backed Certificates, Series 1996-RHS4 (the "Certificates"), issued
pursuant to a Trust Agreement (the "Trust Agreement") dated December 1, 1996
among Residential Funding Mortgage Securities II, Inc., as depositor (the
"Depositor") and Wilmington Trust Company, as trustee (the "Owner Trustee").
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Trust Agreement.
The Transferee hereby certifies, represents and warrants to,
and covenants with, the Depositor, the Owner Trustee, the Certificate Registrar
and the Master Servicer that either:
(1) The Certificates (i) are not being acquired by, and will
not be transferred to, any employee benefit plan within the meaning of
section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or other retirement arrangement, including individual
retirement accounts and annuities, Keogh plans and bank collective
investment funds and insurance company general or separate accounts in
which such plans, accounts or arrangements are invested, that is
subject to Section 406 of ERISA or Section 4975 of the Internal Revenue
Code of 1986 (the "Code") (any of
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<PAGE>
the foregoing, a "Plan"), (ii) are not being acquired with "plan
assets" of a Plan within the meaning of the Department of Labor ("DOL")
regulation, 29 C.F.R. ss. 2510.3-101, and (iii) will not be transferred
to any entity that is deemed to be investing in plan assets within the
meaning of the DOL regulation, 29 C.F.R. ss. 2510.3-101; or
(2) The purchase of the Certificates is permissible under
applicable law, will not constitute or result in any prohibited
transaction under ERISA or Section 4975 of the Code, will not subject
the Depositor or the Trustee to any obligation in addition to those
undertaken in the Trust Agreement and, with respect to each source of
funds being used by the Transferee to acquire the Certificates (each
being referred to as a "Source") and the following statements in at
least one of (a), (b), (c), (d), (e) or (f) are accurate:
(a) the Transferee is an insurance company and (i)
the Source is assets of its "general account," (ii) the
conditions set forth in PTCE 95-60 issued by the DOL have been
satisfied and the purchase and holding of Certificates by or
on behalf of the Transferee are exempt under PTCE 95-60 and
(iii) the amount of reserves and liabilities for such general
account contracts held by or on behalf of any Plan do not
exceed 10% of the total reserves and liabilities of such
general account plus surplus as of the date hereof (for
purposes of this clause, all Plans maintained by the same
employer (or affiliate thereof) or employee organization are
deemed to be a single Plan) in connection with its purchase
and holding of such Certificates; or
(b) the Transferee is an insurance company and (i)
the Source is assets of its "general account," (ii) the
requirements of Section 401(c) of ERISA and the DOL
regulations to be promulgated thereunder ("401(c)
Regulations") have been satisfied and will continue to be
satisfied and (iii) the Transferee represents that it
understands that the operation of the general account after
December 31, 1998 may affect its ability to continue to hold
the Certificates after the date which is 18 months after the
401(c) Regulations become final and unless a class exemption
issued by the DOL or an exception under Section 401(c) of
ERISA is then available for the continued holding of
Certificates, if the assets of the general account constitute
Plan Assets, it will dispose of the Certificates prior to the
date which is 18 months after the 401(c) Regulations become
final; or
(c) the Transferee is an insurance company and (i)
the Source is an insurance company "pooled separate account,"
(ii) the conditions set forth in PTCE 90-1 issued by the DOL
have been satisfied and the purchase and holding of
Certificates by or on behalf of the Transferee are exempt
under PTCE 90-1 and (iii) there is no Plan whose assets in
such separate account exceed 10% of the total assets of such
separate account as of the date hereof (for purposes of this
clause, all Plans maintained by the same employer or employee
organization are deemed to be a single Plan); or
(d) the Transferee is a bank and (i) the Source is a
"collective investment fund" as described in Section IV(e) of
PTCE 91-38 with respect to which the bank is trustee, (ii) the
conditions set forth in PTCE 91-38 issued by
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the DOL have been satisfied and the purchase and holding of
Certificates by or on behalf of the Transferee are exempt
under PTCE 91-38 and (iii) no Plan has assets invested in such
collective investment fund exceeding 10% of the total assets
of such collective investment fund as of the date hereof (for
purposes of this clause, all Plans maintained by the same
employer or employee organization are deemed to be a single
Plan); or
(e) the Transferee is an "investment fund" described
in PTCE 84-14 and (i) the undersigned is a "QPAM" as defined
in PTCE 84-14, (ii) the conditions set forth in PTCE 84-14
issued by the DOL have been satisfied and will continue to be
satisfied and (iii) the purchase and holding of Certificates
by or on behalf of the Transferee are exempt under PTCE 84-14;
or
(f) the transfer of Certificates is effected by an
"INHAM" defined in PTCE 96-23 and (i) the conditions set forth
in PTCE 96-23 issued by the DOL have been satisfied and will
continue to be satisfied and (ii) the purchase and holding of
Certificates by or on behalf of the Transferee are exempt
under PTCE 96-23.
(3) The Transferee is familiar with the prohibited transaction
restrictions and fiduciary responsibility requirements of Sections 406
and 407 of ERISA and Section 4975 of the Code and understands that each
of the parties to which this certification is made is relying and will
continue to rely on the statements made herein.
Very truly yours,
By:
Name:
Title:
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HOME EQUITY LOAN TRUST 1996-RHS4
Issuer
AND
THE CHASE MANHATTAN BANK
Indenture Trustee
INDENTURE
Dated as of December 1, 1996
------------------------------------------
HOME EQUITY LOAN-BACKED TERM NOTES
HOME EQUITY LOAN-BACKED VARIABLE FUNDING NOTES
-------------
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<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
Definitions
1.01. Definitions........................................................ 2
-----------
1.02. Incorporation by Reference of Trust Indenture Act.................. 2
-------------------------------------------------
1.03. Rules of Construction.............................................. 2
---------------------
ARTICLE II
Original Issuance of Notes
2.01. Form............................................................... 4
----
2.02. Execution, Authentication and Delivery............................. 4
--------------------------------------
ARTICLE III
Covenants
3.01. Collection of Payments with respect to the Class A Ownership
Interest........................................................... 6
--------
3.02. Maintenance of Office or Agency.................................... 6
-------------------------------
3.03. Money for Payments To Be Held in Trust; Paying Agent............... 6
----------------------------------------------------
3.04. Existence.......................................................... 7
---------
3.05. Payment of Principal and Interest; Defaulted Interest.............. 8
-----------------------------------------------------
3.06. Protection of Trust Estate......................................... 10
--------------------------
3.07. Opinions as to Trust Estate........................................ 10
---------------------------
3.08. Performance of Obligations; Servicing Agreement.................... 11
-----------------------------------------------
3.09. Negative Covenants................................................. 11
------------------
3.10. Annual Statement as to Compliance.................................. 12
---------------------------------
3.11. Recording of Assignments........................................... 12
------------------------
3.12. Representations and Warranties Concerning the Revolving Credit
--------------------------------------------------------------
Loans.............................................................. 12
-----
3.13. Assignee of Record of the Mortgage Loans........................... 13
----------------------------------------
3.14. Master Servicer as Agent and Bailee of the Class A Ownership
------------------------------------------------------------
Interest Holder.................................................... 13
---------------
3.15. Investment Company Act............................................. 13
----------------------
3.16. Issuer May Consolidate, etc........................................ 13
----------------------------
3.17. Successor or Transferee............................................ 15
-----------------------
3.18. No Other Business.................................................. 15
-----------------
3.19. No Borrowing....................................................... 15
------------
3.20. Guarantees, Loans, Advances and Other Liabilities.................. 15
-------------------------------------------------
3.21. Capital Expenditures............................................... 16
--------------------
3.22. Owner Trustee Not Liable for Certificates or Related Documents..... 16
--------------------------------------------------------------
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<PAGE>
3.23. Restricted Payments................................................ 16
-------------------
3.24. Notice of Events of Default........................................ 16
---------------------------
3.25. Further Instruments and Acts....................................... 16
----------------------------
3.26. Statements to Noteholders.......................................... 16
-------------------------
3.27. Determination of Note Rate and Certificate Rate.................... 16
-----------------------------------------------
3.28. Payments under the Credit Enhancement Instrument................... 17
------------------------------------------------
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
4.01. The Notes; Increase of Maximum Variable Funding Balance; Variable
Funding Notes....................................................... 18
-------------
4.02. Registration of and Limitations on Transfer and Exchange of Notes;
------------------------------------------------------------------
Appointment of Certificate Registrar................................ 19
------------------------------------
4.03. Mutilated, Destroyed, Lost or Stolen Notes.......................... 21
------------------------------------------
4.04. Persons Deemed Owners............................................... 21
---------------------
4.05. Cancellation........................................................ 21
------------
4.06. Book-Entry Notes.................................................... 22
----------------
4.07. Notices to Depository............................................... 23
---------------------
4.08. Definitive Notes.................................................... 23
----------------
4.09. Tax Treatment....................................................... 23
-------------
4.10. Satisfaction and Discharge of Indenture............................. 23
---------------------------------------
4.11. Application of Trust Money.......................................... 24
--------------------------
4.12. Subrogation and Cooperation......................................... 25
---------------------------
4.13. Repayment of Monies Held by Paying Agent............................ 25
----------------------------------------
4.14. Temporary Notes..................................................... 26
---------------
5.01. Events of Default................................................... 27
-----------------
5.02. Acceleration of Maturity; Rescission and Annulment.................. 27
--------------------------------------------------
5.03. Collection of Indebtedness and Suits for Enforcement by Indenture
-----------------------------------------------------------------
Trustee............................................................. 28
5.04. Remedies; Priorities................................................ 30
--------------------
5.05. Optional Preservation of the Trust Estate........................... 31
-----------------------------------------
5.06. Limitation of Suits................................................. 32
-------------------
5.07. Unconditional Rights of Noteholders To Receive Principal and
Interest............................................................ 32
--------
5.08. Restoration of Rights and Remedies.................................. 32
----------------------------------
5.09. Rights and Remedies Cumulative...................................... 33
------------------------------
5.10. Delay or Omission Not a Waiver...................................... 33
------------------------------
5.11. Control by Noteholders.............................................. 33
----------------------
5.12. Waiver of Past Defaults............................................. 34
-----------------------
5.13. Undertaking for Costs............................................... 34
---------------------
5.14. Waiver of Stay or Extension Laws.................................... 34
--------------------------------
5.15. Sale of Trust Estate................................................ 34
--------------------
5.16. Action on Notes..................................................... 36
---------------
ARTICLE VI
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<PAGE>
The Indenture Trustee
6.01. Duties of Indenture Trustee......................................... 38
---------------------------
6.02. Rights of Indenture Trustee......................................... 39
---------------------------
6.03. Individual Rights of Indenture Trustee.............................. 39
--------------------------------------
6.04. Indenture Trustee's Disclaimer...................................... 39
------------------------------
6.05. Notice of Event of Default.......................................... 40
--------------------------
6.06. Reports by Indenture Trustee to Holders............................. 40
---------------------------------------
6.07. Compensation and Indemnity.......................................... 40
--------------------------
6.08. Replacement of Indenture Trustee.................................... 40
--------------------------------
6.09. Successor Indenture Trustee by Merger............................... 41
-------------------------------------
6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee... 42
-----------------------------------------------------------------
6.11. Eligibility; Disqualification....................................... 43
-----------------------------
6.12. Preferential Collection of Claims Against Issuer.................... 43
------------------------------------------------
6.13. Representations and Warranties...................................... 43
------------------------------
6.14. Directions to Indenture Trustee..................................... 44
-------------------------------
6.15. Indenture Trustee May Own Securities................................ 44
------------------------------------
ARTICLE VII
Noteholders' Lists and Reports
7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders......................................................... 45
-----------
7.02. Preservation of Information; Communications to Noteholders.......... 45
----------------------------------------------------------
7.03. Reports by Issuer................................................... 45
-----------------
7.04. Reports by Indenture Trustee........................................ 46
----------------------------
ARTICLE VIII
Accounts, Disbursements and Releases
8.01. Collection of Money................................................. 47
-------------------
8.02. Trust Accounts...................................................... 47
--------------
8.03. Officer's Certificate............................................... 47
---------------------
8.04. Termination Upon Distribution to Noteholders........................ 47
--------------------------------------------
8.05. Release of Trust Estate............................................. 48
-----------------------
8.06. Surrender of Notes Upon Final Payment............................... 48
-------------------------------------
ARTICLE IX
Supplemental Indentures
9.01. Supplemental Indentures Without Consent of Noteholders.............. 49
------------------------------------------------------
9.02. Supplemental Indentures With Consent of Noteholders................. 50
---------------------------------------------------
9.03. Execution of Supplemental Indentures................................ 51
------------------------------------
9.04. Effect of Supplemental Indenture.................................... 52
--------------------------------
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<PAGE>
9.05. Conformity with Trust Indenture Act.................. 52
-----------------------------------
9.06. Reference in Notes to Supplemental Indentures........ 52
---------------------------------------------
ARTICLE X
Miscellaneous
10.01. Compliance Certificates and Opinions, etc............ 53
-----------------------------------------
10.02. Form of Documents Delivered to Indenture Trustee..... 54
------------------------------------------------
10.03. Acts of Noteholders.................................. 55
-------------------
10.04. Notices, etc., to Indenture Trustee, Issuer, Credit Enhancer and
Rating Agencies............................................ 56
---------------
10.05. Notices to Noteholders; Waiver............................. 56
------------------------------
10.06. Alternate Payment and Notice Provisions.................... 57
---------------------------------------
10.07. Conflict with Trust Indenture Act.......................... 57
---------------------------------
10.08. Effect of Headings......................................... 57
------------------
10.09. Successors and Assigns..................................... 57
----------------------
10.10. Separability............................................... 57
------------
10.11. Benefits of Indenture...................................... 57
---------------------
10.12. Legal Holidays............................................. 58
--------------
10.13. GOVERNING LAW.............................................. 58
-------------
10.14. Counterparts............................................... 58
------------
10.15. Recording of Indenture..................................... 58
----------------------
10.16. Issuer Obligation.......................................... 58
-----------------
10.17. No Petition................................................ 58
-----------
10.18. Inspection................................................. 59
----------
Signatures and Seals ................................................... 81
Acknowledgments ........................................................ 82
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<PAGE>
EXHIBITS
Exhibit A-1 - Form of Term Notes
Exhibit A-2 - Form of Variable Funding Notes
Exhibit B - Form of 144A Investment Representation for Capped Funding Notes
Exhibit C - Form of Investor Representation Letter for Capped Funding Notes
Exhibit D - Form of Transferor Representation Letter for Capped Funding Notes
Appendix A Definitions
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<PAGE>
This Indenture, dated as of December 1, 1996, between HOME
EQUITY LOAN TRUST 1996-RHS4, a Delaware business trust, as Issuer (the
"Issuer"), and The Chase Manhattan Bank, as Indenture Trustee (the "Indenture
Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the Issuer's
Series 1996-RHS4 Home Equity Loan-Backed Term Notes and Home Equity Loan-Backed
Variable Funding Notes (together the "Notes").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, as trustee for the benefit of the Holders of the Notes, all of the
Issuer's right, title and interest in and to whether now existing or hereafter
created (a) the Class A Ownership Interest in the 1996-RHS4 LLC created by the
Depositor under Delaware law, (b) all funds on deposit from time to time in the
Payment Account and in all proceeds thereof; (c) the Credit Enhancement
Instrument and (d) all present and future claims, demands, causes and chooses in
action in respect of any or all of the foregoing and all payments on or under,
and all proceeds of every kind and nature whatsoever in respect of, any or all
of the foregoing and all payments on or under, and all proceeds of every kind
and nature whatsoever in the conversion thereof, voluntary or involuntary, into
cash or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, checks, deposit accounts, rights to payment of any
and every kind, and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing (collectively, the "Trust Estate" or the
"Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The foregoing Grant shall inure to the benefit of the Credit
Enhancer in respect of draws made on the Credit Enhancement Instrument and
amounts owing from time to time pursuant to the Insurance Agreement (regardless
of whether such amounts relate to the Notes or the Certificates), and such Grant
shall continue in full force and effect for the benefit of the Credit Enhancer
until all such amounts owing to it have been repaid in full.
The Indenture Trustee, as trustee on behalf of the Holders of
the Notes, acknowledges such Grant, accepts the trust under this Indenture in
accordance with the provisions hereof and agrees to perform its duties as
Indenture Trustee as required herein.
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<PAGE>
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Indenture, except
as otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions attached hereto as Appendix A which is
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture Act (the
"TIA"), the provision is incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other obligor on
the indenture securities.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by
Commission rule have the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural
include the singular; and
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<PAGE>
(vi) 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.
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<PAGE>
ARTICLE II
Original Issuance of Notes
Section 2.01. Form. The Term Notes and the Variable Funding Notes, in
each case together with the Indenture Trustee's certificate of authentication,
shall be in substantially the forms set forth in Exhibits A-1 and A-2,
respectively, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Notes, as
evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibits A-1 and A-2 are part of
the terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and
deliver Term Notes for original issue in an aggregate initial principal amount
of $116,693,000.00 and Variable Funding Notes for original issue in an aggregate
initial principal amount of zero. The Security Balance of the Variable Funding
Notes in the aggregate may not exceed the Maximum Variable Funding Note Balance.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes and the Term Notes shall be issuable in
the minimum initial Security Balances of $1,000 and in integral multiples of
$1,000 in excess thereof.
Each Variable Funding Note shall be initially issued with a Security
Balance of $0 or, if applicable, with a Security Balance in the amount equal to
the Additional Balance Differential for the Collection Period related to the
Payment Date following the date of issuance of such Variable Funding Note
pursuant to Section 4.01(c).
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
4
<PAGE>
form provided for herein executed by the Indenture Trustee by the manual
signature of one of its authorized signatories, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
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<PAGE>
ARTICLE III
Covenants
Section 3.01. Collection of Payments with respect to the Class A
Ownership Interest. The Indenture Trustee shall establish and maintain with
itself the Payment Account in which the Indenture Trustee shall, subject to the
terms of this paragraph, deposit, on the same day as it is received from the
Master Servicer, each remittance received by the Indenture Trustee with respect
to the Class A Ownership Interest. The Indenture Trustee shall make all payments
of principal of and interest on the Notes, subject to Section 3.03 as provided
in Section 3.05 herein from monies on deposit in the Payment Account.
Section 3.02. Maintenance of Office or Agency. The Issuer will maintain
in the City of New York, an office or agency where, subject to satisfaction of
conditions set forth herein, Notes may be surrendered for registration of
transfer or exchange, and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served. The Issuer hereby
initially appoints the Indenture Trustee to serve as its agent for the foregoing
purposes. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust; Paying Agent. (a)
As provided in Section 3.01, all payments of amounts due and payable with
respect to any Notes that are to be made from amounts withdrawn from the Payment
Account pursuant to Section 3.01 shall be made on behalf of the Issuer by the
Indenture Trustee or by the Paying Agent, and no amounts so withdrawn from the
Payment Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section 3.03.
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 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee and the Credit Enhancer
written notice of any default by the Issuer of which it has actual
knowledge in the making of any payment required to be made with respect
to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
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<PAGE>
(iv) immediately resign as Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its appointment;
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Notes of
any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith; and
(vi) deliver to the Indenture Trustee a copy of the
statement to Noteholders prepared with respect to each Payment Date by
the Administrator pursuant to Section 4.01 of the Servicing Agreement.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Request direct any Paying Agent 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 the 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.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for one year
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
an Authorized Newspaper, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee may also adopt and employ,
at the expense and direction of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in monies due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
Section 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Class A Ownership Interest and
each other instrument or agreement included in the Trust Estate.
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<PAGE>
Section 3.05. Payment of Principal and Interest; Defaulted Interest.
(a) On each Payment Date from amounts on deposit in the Payment Account, the
Paying Agent shall pay to the Noteholders, the Certificate Paying Agent, on
behalf of the Certificateholders, and to other Persons the amounts to which they
are entitled, as set forth in the statements delivered to the Indenture Trustee
pursuant to Section 4.01 of the Servicing Agreement, as set forth below in the
following order of priority:
(i) (x) to the Noteholders, interest for the related
Interest Period at the Note Rate on the Security Balances of Notes
immediately prior to such Payment Date and (y) to the Certificate
Paying Agent, the Certificate Preferred Return for such Payment Date,
in each case, other than any Interest Shortfalls;
(ii) to the Noteholders and the Certificate Paying
Agent, as the case may be, as principal on the Term Notes and Variable
Funding Notes, and as a Certificate Distribution Amount to the
Certificates, pro rata based on the Security Balances thereof, the
Principal Collection Distribution Amount for such Payment Date;
(iii) to the Noteholders and the Certificate Paying
Agent, as the case may be, as principal to the Term Notes and Variable
Funding Notes, and as a Certificate Distribution Amount to the
Certificates, pro rata based on the Security Balances thereof, the
Liquidation Loss Distribution Amounts for such Payment Date, except to
the extent attributable to Liquidation Loss Amounts for all previous
Collection Periods with respect to which payments were made on the
Notes and the Certificates by means of a draw on the Credit Enhancement
Instrument or otherwise;
(iv) to the Credit Enhancer, in the amount of the premium for the Credit
Enhancement Instrument (with interest thereon as provided in the Insurance
Agreement);
(v) to the Credit Enhancer, to reimburse it for prior
draws made on the Credit Enhancement Instrument (with interest thereon
as provided in the Insurance Agreement) (except for draws attributable
to Excess Loss Amounts);
(vi) to the Noteholders and the Certificate Paying
Agent, as the case may be, as principal to the Term Notes and Variable
Funding Notes, and as a Certificate Distribution Amount on the
Certificates, pro rata based on the Security Balances thereof, up to
the Special Capital Distribution Amount for such Payment Date;
(vii) to the Credit Enhancer, any other amounts owed to the Credit Enhancer
pursuant to the Insurance Agreement;
(viii) to pay the Term Notes, Variable Funding Notes and
the Certificates, any Interest Shortfalls not previously paid (together
with interest thereon) pro rata, based on the outstanding Security
Balances thereof, but continuing such pro rata payments only, until any
Interest Shortfalls (together with interest thereon) not previously
paid to the Notes and Variable Funding Notes have been paid, and then
thereafter making all payments to the Certificates, to the extent of
any Interest Shortfalls remaining unpaid (together with interest
thereon);
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(ix) [reserved];
(x) any remaining amount, to the Certificate Paying Agent, on behalf
of the holders of the Designated Certificates.
provided, however, in the event that on a Payment Date a Credit Enhancer Default
shall have occurred and be continuing then the priorities of distributions
described above will be adjusted such that payments of the Certificate
Distribution Amount and all other amounts to be paid to the Certificate Paying
Agent will not be paid until the full amount of interest and principal in
accordance with clauses (i) through (iii) and (vi) above that are due and
required to be paid on the Notes on such Payment Date have been paid and
provided, further, that on the Final Scheduled Payment Date or other final
Payment Date, the amount to be paid pursuant to clause (ii) above shall be equal
to the Security Balances of the Securities immediately prior to such Payment
Date. For purposes of the foregoing, required payments of principal on the Notes
on each Payment Date will include the pro rata portion allocable to the Notes of
all Liquidation Loss Amounts for such Payment Date and for all previous
Collection Periods until paid or covered in full, to the extent not otherwise
covered by a Liquidation Loss Distribution Amount, a reduction of the
Outstanding Reserve Amount or a draw on the Credit Enhancement Instrument (up to
the outstanding Security Balance thereof).
On each Payment Date, the Certificate Paying Agent shall deposit in the
Certificate Distribution Account all amounts it received pursuant to this
Section 3.05 for the purpose of distributing such funds to the
Certificateholders.
The amounts paid to Noteholders shall be paid to the Term Notes and the
Variable Funding Notes in accordance with the applicable percentage as set forth
in paragraph (b) below. Interest will accrue on the Notes during an Interest
Period on the basis of the actual number of days in such Interest Period and a
year assumed to consist of 360 days.
Any installment of interest or principal, if any, payable on any Note
that is punctually paid or duly provided for by the Issuer on the applicable
Payment Date shall, if such Holder holds Notes of an aggregate initial Security
Balance of at least $10,000, be paid to each Holder of record on the preceding
Record Date, by wire transfer to an account specified in writing by such Holder
reasonably satisfactory to the Indenture Trustee as of the preceding Record Date
or in all other cases or if no such instructions have been delivered to the
Indenture Trustee, by check to such Noteholder mailed to such Holder's address
as it appears in the Note Register the amount required to be distributed to such
Holder on such Payment Date pursuant to such Holder's Securities; provided,
however, that the Indenture Trustee shall not pay to such Holders any amount
required to be withheld from a payment to such Holder by the Code.
(b) The principal of each Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the related form of
Note set forth in Exhibits A-1 and A-2. All principal payments on each of the
Term Notes and the Variable Funding Notes shall be made to the Noteholders of
such Class entitled thereto in accordance with the Percentage Interests
represented by such Notes. Upon written notice to the Indenture Trustee by the
Issuer, the Indenture Trustee shall notify the Person in whose name a Note is
registered at the close of business on the Record Date preceding the Final
Scheduled Payment Date or other final Payment
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Date. Such notice shall be mailed no later than five Business Days prior to such
Final Scheduled Payment Date or other final Payment Date and shall specify that
payment of the principal amount and any interest due with respect to such Note
at the Final Scheduled Payment Date or other final Payment Date will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for such final payment.
Section 3.06. 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 necessary or
advisable to:
(i) maintain or preserve the lien and security interest (and the priority
thereof) of this Indenture or carry out more effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant made or to
be made by this Indenture;
(iii) cause the 1996-RHS4 LLC to enforce any of the
Revolving Credit Loans; or
(iv) preserve and defend title to the Trust Estate
and the rights of the Indenture Trustee and the Noteholders in such Trust Estate
against the claims of all persons and parties.
(b) Except as otherwise provided in this Indenture, 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 3.07 (or from the jurisdiction in which it
was held as described in the Opinion of Counsel delivered at the Closing Date
pursuant to Section 3.07(a), if no Opinion of Counsel has yet been delivered
pursuant to Section 3.07(b)) unless the 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.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.06.
Section 3.07. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Owner Trustee an Opinion
of Counsel at the expense of the Issuer either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording and
filing of this Indenture, any indentures supplemental hereto, and any other
requisite documents, and with respect to the execution and filing of any
financing statements and continuation statements, as are necessary to perfect
and make effective the lien and security interest in the Class A Ownership
Interest and reciting the details of such action,
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or stating that, in the opinion of such counsel, no such action is necessary to
make such lien and security interest effective.
(b) On or before December 31st in each calendar year, beginning in
1997, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel at
the expense of the Issuer either stating that, in the opinion of such counsel,
such action has been taken with respect to the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the
lien and security interest in the Class A Ownership Interest and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest in the Class A Ownership Interest
until December 31 in the following calendar year.
Section 3.08. Performance of Obligations; Servicing Agreement. (a) The
Issuer will punctually perform and observe all of its obligations and agreements
contained in this Indenture, the Basic Documents and in the instruments and
agreements included in the Trust Estate.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer.
(c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Class A
Ownership Interest or under any instrument included in the Trust Estate, or
which would result in the amendment, hypothecation, subordination, termination
or discharge of, or impair the validity or effectiveness of, any of the
documents relating to the Revolving Credit Loans or any such instrument, except
such actions as the Master Servicer is expressly permitted to take in the
Servicing Agreement.
(d) The Issuer may retain an administrator and may enter into contracts
with other Persons for the performance of the Issuer's obligations hereunder,
and performance of such obligations by such Persons shall be deemed to be
performance of such obligations by the Issuer.
Section 3.09. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture, sell, transfer,
exchange or otherwise dispose of the Trust Estate, unless directed to do so by
the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder
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by reason of the payment of the taxes levied or assessed upon any part of
the Trust Estate;
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or
the proceeds thereof or (C) permit the lien of this Indenture not to
constitute a valid first priority security interest in the Trust
Estate; or
(iv) waive or impair, or fail to assert rights under,
the Class A Ownership Interest, or impair or cause to be impaired the
Class A Ownership Interest in the 1996- RHS4 LLC or the 1996-RHS4 LLC's
interest in the Revolving Credit Loans, the Designated Seller's
Agreement or in any Basic Document, if any such action would materially
and adversely affect the interests of the Noteholders.
Section 3.10. Annual Statement as to Compliance. The Issuer will
deliver to the Indenture Trustee, within 120 days after the end of each fiscal
year of the Issuer (commencing with the fiscal year 1997), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that:
(i) a review of the activities of the Issuer during
such year and of its performance under this Indenture and the Trust
Agreement has been made under such Authorized Officer's supervision;
and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture and the provisions of the Trust
Agreement throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status
thereof.
Section 3.11. Recording of Assignments. The Issuer shall enforce the
obligation, if any, of the Master Servicer under Section 3.16 the Servicing
Agreement to submit or cause to be submitted for recording all Assignments of
Mortgages within the timeframe set forth therein.
Section 3.12. Representations and Warranties Concerning the Revolving
Credit Loans. The Indenture Trustee, as pledgee of the Class A Ownership
Interest, has the benefit of the representations and warranties made by the
Designated Seller in Section 3.1(a) and Section 3.1(b) of the Designated
Seller's Agreement concerning the Revolving Credit Loans and the right to
enforce the remedies against the Designated Seller provided in such Section
3.1(a) or Section 3.1(b) to the same extent as though such representations and
warranties were made directly to the Indenture Trustee.
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Section 3.13. Assignee of Record of the Mortgage Loans. The Issuer, as
Managing Member of and on behalf of the 1996-RHS4 LLC, hereby directs and
authorizes the Indenture Trustee to hold record title to the Revolving Credit
Loans by being named as payee in the endorsements of the Mortgage Notes and
assignee in the Assignments of Mortgage to be recorded under Section 2.1 of the
Designated Seller's Agreement. Except as expressly provided in the Designated
Seller's Agreement or in the Servicing Agreement with respect to any specific
Revolving Credit Loan, the Indenture Trustee shall not execute any endorsement
or assignment or otherwise release or transfer such record title to any of the
Revolving Credit Loans until such time as the remaining Trust Estate may be
released pursuant to Section 8.05(b). The Indenture Trustee's holding of such
record title shall in all respects be subject to its fiduciary obligations to
the Noteholders hereunder.
Section 3.14. Master Servicer as Agent and Bailee of the Class A
Ownership Interest Holder. Solely for purposes of perfection under Section 9-305
of the Uniform Commercial Code or other similar applicable law, rule or
regulation of the state in which such property is held by the Master Servicer,
the Indenture Trustee hereby acknowledges that the Master Servicer is acting as
agent and bailee of the Class A Ownership Interest holder in holding amounts on
deposit in the Custodial Account pursuant to Section 3.02 of the Servicing
Agreement that are allocable to the Class A Ownership Interest, as well as its
agent and bailee in holding any Related Documents released to the Master
Servicer pursuant to Section 3.06(c) of the Servicing Agreement, and any other
items constituting a part of the Trust Estate which from time to time come into
the possession of the Master Servicer. It is intended that, by the Master
Servicer's acceptance of such agency pursuant to Section 3.02 of the Servicing
Agreement, the Indenture Trustee, as a pledgee of the Class A Ownership
Interest, will be deemed to have possession of such Related Documents, such
monies and such other items for purposes of Section 9-305 of the Uniform
Commercial Code of the state in which such property is held by the Master
Servicer.
Section 3.15. Investment Company Act. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.15
if it shall have obtained an order exempting it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.
Section 3.16. Issuer May Consolidate, etc. (a) The Issuer shall not
consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any state or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form reasonably satisfactory to the Indenture Trustee, the due and
punctual payment of the principal of and interest on all Notes and to
the Certificate Paying Agent, on behalf of the Certificateholders and
the performance or observance of every agreement
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and covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Event of
Default shall have occurred and be continuing;
(iii) the Issuer receives consent of the Credit Enhancer
and the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes or the Certificates
to be reduced, suspended or withdrawn or to be considered by either
Rating Agency to be below investment grade without taking into account
the Credit Enhancement Instrument;
(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the Indenture
Trustee and the Credit Enhancer) to the effect that such transaction
will not have any material adverse tax consequence to the Issuer, any
Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and security interest
created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental indenture
comply with this Article III and that all conditions precedent herein
provided for relating to such transaction have been complied with
(including any filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer
the properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any state, (B) expressly assumes, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein, (C) expressly agrees by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes,
(D) unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against and
from any loss, liability or expense arising under or related to this
Indenture and the Notes and (E) expressly agrees by means of such
supplemental indenture that such Person (or if a group of Persons, than
one specified Person) shall make all filings with the Commission (and
any other appropriate Person) required by the Exchange Act in
connection with the Notes;
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(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(iii) the Issuer receives consent of the Credit Enhancer
and the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes or the Certificates
to be reduced, suspended or withdrawn, if determined, without regard to
the Credit Enhancement Instrument;
(iv) the Issuer shall have received an Opinion of
Counsel (and shall have delivered copies thereof to the Indenture
Trustee) to the effect that such transaction will not have any material
adverse tax consequence to the Issuer or any Noteholder;
(v) any action that is necessary to maintain the lien and security interest
created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental indenture comply
with this Article III and that all conditions precedent herein provided
for relating to such transaction have been complied with (including any
filing required by the Exchange Act).
Section 3.17. Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.16(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.16(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee of such conveyance or transfer.
Section 3.18. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning and selling and managing the
Class A Ownership Interest and the issuance of the Notes and Certificates in the
manner contemplated by this Indenture and the Basic Documents and all activities
incidental thereto.
Section 3.19. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
Section 3.20. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by this Indenture or the Basic Documents, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree
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contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.
Section 3.21. Capital Expenditures. The Issuer shall not make any
expenditure (by long- term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.22. Owner Trustee Not Liable for Certificates or Related
Documents. The recitals contained herein shall be taken as the statements of the
Depositor, 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 Indenture, of any Basic Document or of the Certificates
(other than the signatures of the Owner Trustee on the Certificates) or the
Notes, or of any Related Documents. The Owner Trustee shall at no time have any
responsibility or liability with respect to the sufficiency of the Owner Trust
Estate or its ability to generate the payments to be distributed to
Certificateholders under the Trust Agreement or the Noteholders under this
Indenture, including, the compliance by the Depositor or the Designated Seller
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 Certificate Paying Agent, the Certificate Registrar or the
Indenture Trustee taken in the name of the Owner Trustee.
Section 3.23. 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, (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, (x) distributions to the Owner Trustee
and the Certificateholders as contemplated by, and to the extent funds are
available for such purpose under the Trust Agreement and (y) payments to the
Master Servicer pursuant to the terms of the Servicing Agreement. The Issuer
will not, directly or indirectly, make payments to or distributions from the
Custodial Account except in accordance with this Indenture and the Basic
Documents.
Section 3.24. Notice of Events of Default. The Issuer shall give the
Indenture Trustee, the Credit Enhancer and the Rating Agencies prompt written
notice of each Event of Default hereunder and under the Trust Agreement.
Section 3.25. 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.
Section 3.26. Statements to Noteholders. On each Payment Date, the
Indenture Trustee and the Certificate Registrar shall forward by mail to each
Noteholder and Certificateholder, respectively, the Statement delivered to it,
on the Business Day following the related Determination Date pursuant to Section
4.01 of the Servicing Agreement.
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Section 3.27. Determination of Note Rate and Certificate Rate. On the
second LIBOR Business Day immediately preceding (i) the Closing Date in the case
of the first Interest Period and (ii) the first day of each succeeding Interest
Period, the Indenture Trustee shall determine LIBOR and the Note Rate and the
Certificate Rate for such Interest Period and shall inform the Issuer, the
Master Servicer, the Administrator and the Depositor at their respective
facsimile numbers given to the Indenture Trustee in writing thereof.
Section 3.28. Payments under the Credit Enhancement Instrument. (a) On
any Payment Date, the Indenture Trustee shall make a draw on the Credit
Enhancement Instrument in an amount if any equal to the Credit Enhancement Draw
Amount. For purposes of the foregoing, amounts in the Payment Account available
for interest distributions on any Payment Date shall be deemed to include all
amounts distributed on the Class A Ownership Interest for such Payment Date,
other than the Principal Collection Distribution Amount and the Liquidation Loss
Distribution Amount (if any) distributed thereon. On any Dissolution Payment
Date, the Indenture Trustee shall make a draw on the Credit Enhancement
Instrument in an amount, if any, equal to the Dissolution Draw. In addition, on
the Final Scheduled Payment Date, the Indenture Trustee shall make a draw on the
Credit Enhancement Instrument in the amount by which the Security Balances on
the Securities exceeds the payments otherwise available to be made to the
Holders thereof on the Final Scheduled Payment Date.
(b) The Indenture Trustee shall submit, if a Credit Enhancement Draw
Amount or Dissolution Draw is specified in any Statement to Holders prepared by
the Administrator pursuant to Section 4.01 of the Servicing Agreement, the
Notice of NonPayment and Demand for Payment of Insured Amounts (in the form
attached as Exhibit A to the Credit Enhancement Instrument) in the amount of the
Credit Enhancement Draw Amount or Dissolution Draw to the Credit Enhancer no
later than 2:00 P.M., New York City time, on the second Business Day prior to
the applicable Payment Date. Upon receipt of such Credit Enhancement Draw Amount
or Dissolution Draw in accordance with the terms of the Credit Enhancement
Instrument, the Indenture Trustee shall deposit such Credit Enhancement Draw
Amount or Dissolution Draw in the Payment Account for distribution to
Noteholders and to the Certificate Paying Agent on behalf of the Certificates
pursuant to Section 3.05.
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ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
Section 4.01. The Notes; Increase of Maximum Variable Funding Balance;
Variable Funding Notes. (a) The Term Notes shall be registered in the name of a
nominee designated by the Depository. Beneficial Owners will hold interests in
the Term Notes through the book-entry facilities of the Depository in minimum
initial Security Balances of $1,000 and integral multiples of $1,000 in excess
thereof. The Capped Funding Notes will be issued as physical notes in fully
registered form in minimum initial Security Balances of $10,000 and integral
multiples of $1,000 in excess thereof, together with any additional amount
necessary to cover (i) the aggregate initial Security Balance of the Capped
Funding Notes surrendered at the time of the initial denominational exchange
thereof (with such initial Security Balance in each case being deemed to be the
Security Balance of the Capped Funding Notes at the time of such initial
denominational exchange thereof) or (ii) the aggregate initial Security Balance
of any Capped Funding Notes issued in an exchange described in subsection (d)
below.
The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Term Notes for the
purposes of exercising the rights of Holders of Term Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Term Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the Term
Notes as to which they are the Beneficial Owners. Requests and directions from,
and votes of, the Depository as Holder of the Term Notes shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners. The
Indenture Trustee may establish a reasonable record date in connection with
solicitations of consents from or voting by Noteholders and give notice to the
Depository of such record date. Without the consent of the Issuer and the
Indenture Trustee, no Term Note may be transferred by the Depository except to a
successor Depository that agrees to hold such Note for the account of the
Beneficial Owners.
In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint a
successor Depository. If no successor Depository has been appointed within 30
days of the effective date of the Depository's resignation or removal, each
Beneficial Owner shall be entitled to certificates representing the Notes it
beneficially owns in the manner prescribed in Section 4.08.
The Notes shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Note Registrar and delivered by the Indenture
Trustee to or upon the order of the Issuer.
(b) On each Payment Date, the aggregate Security Balance of the
Variable Funding Notes shall be increased by an amount equal to 92.00% of the
Additional Balance Differential for such Payment Date, subject to the Maximum
Variable Funding Note Balance and the terms and conditions set forth below.
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(c) The Variable Funding Note issued on the Closing Date shall bear the
Designation "VFN-1" and each new Variable Funding Note will bear sequential
numerical designations in the order of their issuance.
(d) In addition to the foregoing, if at any time a Variable Funding
Note has a Security Balance of at least $10,000, such Variable Funding Note may
be exchanged pursuant to Section 4.02 for (i) one or more Capped Funding Notes
in minimum denominations as set forth in subsection (a) above, which shall bear
the designation "Capped" in addition to any other applicable designation, and
(ii) a new Variable Funding Note having an initial Security Balance equal to the
excess of the outstanding Security Balance of the Variable Funding Note so
surrendered over the initial Security Balances of the Capped Funding Notes
referred to in clause (i) above.
Section 4.02. Registration of and Limitations on Transfer and Exchange
of Notes; Appointment of Certificate Registrar. The Issuer shall cause to be
kept at the Indenture Trustee's Corporate Trust Office a Note Register in which,
subject to such reasonable regulations as it may prescribe, the Note Registrar
shall provide for the registration of Notes and of transfers and exchanges of
Notes as herein provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the Corporate Trust
Office, the Issuer shall execute and the Note Registrar shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Notes in authorized initial Security Balances evidencing the same aggregate
Percentage Interests.
No Variable Funding Note, other than any Capped Funding Notes, may be
transferred. Subject to the provisions set forth below, Capped Funding Notes may
be transferred, provided that with respect to the initial transfer thereof by
the Designated Seller prior written notification of such transfer shall have
been given to the Rating Agencies and to the Credit Enhancer by the Designated
Seller.
No transfer, sale, pledge or other disposition of a Capped Funding Note
shall be made unless such transfer, sale, pledge or other disposition is exempt
from the registration requirements of the Securities Act of 1933, as amended,
and any applicable state securities laws or is made in accordance with said Act
and laws. In the event of any such transfer, the Indenture Trustee or the Issuer
shall require the transferee to execute either (i)(a) an investment letter in
substantially the form attached hereto as Exhibit B (or in such form and
substance reasonably satisfactory to the Indenture Trustee and the Issuer) which
investment letters shall not be an expense of the Trust, the Owner Trustee, the
Indenture Trustee, the Master Servicer, the Depositor or the Issuer and which
investment letter states that, among other things, such transferee (a) is a
"qualified institutional buyer" as defined under Rule 144A, acting for its own
account or the accounts of other "qualified institutional buyers" as defined
under Rule 144A, and (b) is aware that the proposed transferor intends to rely
on the exemption from registration requirements under the Securities Act of
1933, as amended, provided by Rule 144A or (ii)(a) a written Opinion of Counsel
(which may be in-house counsel) acceptable to and in form and substance
reasonably satisfactory to the Indenture Trustee and the Issuer that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor,
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from said Act and laws or is being made pursuant to said Act and laws, which
Opinion of Counsel shall not be an expense of the Indenture Trustee or the
Issuer and (b) the Indenture Trustee shall require the transferee executes an
investment letter in substantially the form of Exhibit C hereto and the
transferor executes a representation letter, substantially in the form of
Exhibit D hereto acceptable to and in form and substance reasonably satisfactory
to the Issuer and the Indenture Trustee certifying to the Issuer and the
Indenture Trustee the facts surrounding such transfer, which investment letter
shall not be an expense of the Indenture Trustee or the Issuer. The Holder of a
Capped Funding Note desiring to effect such transfer shall, and does hereby
agree to, indemnify the Indenture Trustee the Credit Enhancer and the Issuer
against any liability that may result if the transfer is not so exempt or is not
made in accordance with such federal and state laws. Notwithstanding the
foregoing, the restriction of transfer specified in this paragraph is not
applicable to any Capped Funding Notes that have been registered under the
Securities Act of 1933 pursuant to Section 2.4 of the Designated Seller's
Agreement.
Subject to the foregoing, at the option of the Noteholders, Notes may
be exchanged for other Notes of like tenor, in each case in authorized initial
Security Balances evidencing the same aggregate Percentage Interests upon
surrender of the Notes to be exchanged at the Corporate Trust Office of the Note
Registrar. With respect to any surrender of Capped Funding Notes for exchange
the new Notes delivered in exchange therefor will bear the designation "Capped"
in addition to any other applicable designations. Whenever any Notes are so
surrendered for exchange, the Indenture Trustee shall execute and the Note
Registrar shall authenticate and deliver the Notes which the Noteholder making
the exchange is entitled to receive. Each Note presented or surrendered for
registration of transfer or exchange shall (if so required by the Note
Registrar) be duly endorsed by, or be accompanied by a written instrument of
transfer in form reasonably satisfactory to the Note Registrar duly executed by,
the Holder thereof or his attorney duly authorized in writing with such
signature guaranteed by a commercial bank or trust company located or having a
correspondent located in the city of New York. Notes delivered upon any such
transfer or exchange will evidence the same obligations, and will be entitled to
the same rights and privileges, as the Notes surrendered.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
All Notes surrendered for registration of transfer and exchange shall
be cancelled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.
The Issuer hereby appoints the Indenture Trustee as Certificate
Registrar to keep at its Corporate Trust Office a Certificate Register pursuant
to Section 3.09 of the Trust Agreement in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges thereof pursuant to
Section 3.05 of the Trust Agreement. The Indenture Trustee hereby accepts such
appointment.
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Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, instead
of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.04. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.
Section 4.05. Cancellation. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be
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delivered to the Indenture Trustee and shall be promptly cancelled by the
Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee
for cancellation any Notes previously authenticated and delivered hereunder
which the Issuer may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly cancelled by the Indenture Trustee. No Notes shall
be authenticated in lieu of or in exchange for any Notes cancelled as provided
in this Section 4.05, except as expressly permitted by this Indenture. All
cancelled Notes may be held or disposed of by the Indenture Trustee in
accordance with its standard retention or disposal policy as in effect at the
time unless the Issuer shall direct by an Issuer Request that they be destroyed
or returned to it; provided however, that such Issuer Request is timely and the
Notes have not been previously disposed of by the Indenture Trustee.
Section 4.06. Book-Entry Notes. The Term Notes, upon original issuance,
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Depository,
by, or on behalf of, the Issuer. Such Term Notes shall initially be registered
on the Note Register in the name of Cede & Co., the nominee of the initial
Depository, and no Beneficial Owner will receive a Definitive Note representing
such Beneficial Owner's interest in such Note, except as provided in Section
4.08. Unless and until definitive, fully registered Notes (the "Definitive
Notes") have been issued to Beneficial Owners pursuant to Section 4.08:
(i) the provisions of this Section 4.06 shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee shall
be entitled to deal with the Depository for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole holder of the Term Notes, and shall have no obligation to the
Owners of Term Notes;
(iii) to the extent that the provisions of this Section
4.06 conflict with any other provisions of this Indenture, the
provisions of this Section 4.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised
only through the Depository and shall be limited to those established
by law and agreements between such Owners of Term Notes and the
Depository and/or the Depository Participants. Unless and until
Definitive Term Notes are issued pursuant to Section 4.08, the initial
Depository will make book-entry transfers among the Depository
Participants and receive and transmit payments of principal of and
interest on the Notes to such Depository Participants; and
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Holders of Term
Notes evidencing a specified percentage of the Security Balances of the
Term Notes, the Depository shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect
from Beneficial Owners and/or Depository Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Term Notes and has delivered such instructions to the
Indenture Trustee.
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Section 4.07. Notices to Depository. Whenever a notice or other
communication to the Term Note Holders is required under this Indenture, unless
and until Definitive Term Notes shall have been issued to Beneficial Owners
pursuant to Section 4.08, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Term Notes to the
Depository, and shall have no obligation to the Beneficial Owners.
Section 4.08. Definitive Notes. If (i) the Indenture Trustee determines
that the Depository is no longer willing or able to properly discharge its
responsibilities with respect to the Term Notes and the Indenture Trustee is
unable to locate a qualified successor, (ii) the Indenture Trustee elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of an Event of Default, Owners of Term Notes representing beneficial
interests aggregating at least a majority of the Security Balances of the Term
Notes advise the Depository in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the
Beneficial Owners, then the Depository shall notify all Beneficial Owners and
the Indenture Trustee of the occurrence of any such event and of the
availability of Definitive Term Notes to Beneficial Owners requesting the same.
Upon surrender to the Indenture Trustee of the typewritten Term Notes
representing the Book-Entry Notes by the Depository, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Term Notes in accordance with the instructions of
the Depository. None of the Issuer, the Note Registrar or 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 the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
Section 4.09. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Notes
will qualify as indebtedness of the Issuer. The Issuer, by entering into this
Indenture, and each Noteholder, by its acceptance of its Note (and each
Beneficial Owner by its acceptance of an interest in the applicable Book-Entry
Note), agree to treat the Notes for federal, state and local income, single
business and franchise tax purposes as indebtedness of the Issuer.
Section 4.10. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09,
3.16, 3.18 and 3.19, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.11) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the
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expense of the Issuer, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 4.03 and (ii) Notes for
whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 3.03) have
been delivered to the Indenture Trustee for cancellation; or
(2)all Notes not theretofore delivered to the Indenture Trustee for cancellation
a. have become due and payable,
b. will become due and payable at the Final Scheduled Payment Date
within one year, or
c. have been declared immediately due and payable pursuant to Section
5.02.
and the Issuer, in the case of a. or b. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture
Trustee cash or direct obligations of or obligations guaranteed by the
United States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such Notes
and Certificates then outstanding not theretofore delivered to the
Indenture Trustee for cancellation when due on the Final Scheduled
Payment Date;
(B) the Issuer has paid or caused to be paid all other
sums payable hereunder
and under the Insurance Agreement by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee and the
Credit Enhancer an Officer's Certificate, an Opinion of Counsel and
each meeting the applicable requirements of Section 10.01 each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with
and, if the Opinion of Counsel relates to a deposit made in connection
with Section 4.10(A)(2)b. above, such opinion shall further be to the
effect that such deposit will not have any material adverse tax
consequences to the Issuer, any Noteholders or any Certificateholders.
Section 4.11. Application of Trust Money. All monies deposited with the
Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent or
Certificate Paying Agent, as the Indenture Trustee may determine, to the Holders
of Securities, of all sums due and to become due thereon for principal and
interest; but
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such monies need not be segregated from other funds except to the extent
required herein or required by law.
Section 4.12. Subrogation and Cooperation. (a) The Issuer and the
Indenture Trustee acknowledge that (i) to the extent the Credit Enhancer makes
payments under the Credit Enhancement Instrument on account of principal of or
interest on the Class A Ownership Interest, the Credit Enhancer will be fully
subrogated to the rights of the holder of the Class A Ownership Interest to
receive such principal and interest from the 1996-RHS4 LLC, and (ii) the Credit
Enhancer shall be paid such principal and interest but only from the sources and
in the manner provided herein, in the Operating Agreement and in the Insurance
Agreement for the payment of such principal and interest.
The Indenture Trustee shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce the
Credit Enhancer's rights or interest under this Indenture or the Insurance
Agreement, consistent with this Indenture and without limiting the rights of the
Noteholders as otherwise set forth in the Indenture, including, without
limitation, upon the occurrence and continuance of a default under the Insurance
Agreement, a request to take any one or more of the following actions:
(i) institute Proceedings for the collection of all
amounts then payable on the Notes, or under this Indenture in respect
to the Notes and all amounts payable under the Insurance Agreement and
to enforce any judgment obtained and collect from the Issuer monies
adjudged due;
(ii) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private Sales (as
defined in Section 5.15 hereof) called and conducted in any manner
permitted by law;
(iii) file or record all assignments that have not previously been recorded;
(iv) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture; and
(v) 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 Credit Enhancer
hereunder.
Following the payment in full of the Notes, the Credit
Enhancer shall continue to have all rights and privileges provided to it under
this Section and in all other provisions of this Indenture, until all amounts
owing to the Credit Enhancer have been paid in full.
Section 4.13. Repayment of Monies Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all monies then held by any Person other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.05 and thereupon such Paying Agent shall be released from all further
liability with respect to such monies.
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Section 4.14. Temporary Notes. Pending the preparation of any
Definitive Notes, the Issuer may execute and upon its written direction, the
Indenture Trustee may authenticate and make available for delivery, temporary
Notes that are printed, lithographed, typewritten, photocopied or otherwise
produced, in any denomination, substantially of the tenor of the Definitive
Notes in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of the
Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes
upon surrender of the temporary Notes at the office or agency of the Indenture
Trustee, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Notes, the Issuer shall execute and the Indenture Trustee
shall authenticate and make available for delivery, in exchange therefor,
Definitive Notes of authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as Definitive Notes.
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ARTICLE V
Default and Remedies
Section 5.01. Events of Default. The Issuer shall deliver to the
Indenture Trustee and the Credit Enhancer, within five days after learning of
the occurrence any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (iii) of the definition of "Event
of Default" written notice in the form of an Officer's Certificate of its status
and what action the Issuer is taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing or if the Master Servicer shall
purchase all of the Revolving Credit Loans pursuant to Section 8.08 of the
Servicing Agreement, then and in every such case the Indenture Trustee or the
Holders of Notes representing not less than a majority of the Security Balances
of all Notes with the written consent of the Credit Enhancer, or the Credit
Enhancer may declare the Notes to be immediately due and payable, by a notice in
writing to the Issuer (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration the unpaid principal amount of such class of
Notes, together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity with
respect to an Event of Default 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 V provided, the Holders of Notes representing a
majority of the Security Balances of all Notes, by written notice to the Issuer
and the Indenture Trustee with the written consent of the Credit Enhancer, or
the Credit Enhancer, may in writing waive the related Event of Default and
rescind and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(A) all payments of principal of and interest on the
Notes and all other amounts that would then be due hereunder
or upon the Notes 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 and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of
the principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
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Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.
(a) The Issuer covenants that if default in the payment of (i) any
interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) the principal of or any installment
of the principal of any Note when the same becomes due and payable, the Issuer
shall, upon demand of the Indenture Trustee, pay to it, for the benefit of the
Holders of Notes, the whole amount then due and payable on the Notes for
principal and interest, with interest upon the overdue principal, and in
addition thereto such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, subject to the provisions of Section 10.17 hereof may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon the Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor upon the Notes, wherever
situated, the monies adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee subject to the provisions of Section 10.17 hereof may, as more
particularly provided in Section 5.04, in its discretion, proceed to protect and
enforce its rights and the rights of the Noteholders, by such appropriate
Proceedings as the Indenture Trustee shall deem most effective to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy or legal or equitable right vested
in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel,
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and for reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence, willful misconduct or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of Notes in any election
of a trustee, a standby trustee or Person performing similar functions
in any such Proceedings;
(iii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Holders of Notes allowed in any
judicial proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence, willful
misconduct or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Note-holder in any such proceeding except, as aforesaid, to vote for the
election of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Term Notes or the Variable Funding Notes,
as applicable.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
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Section 5.04. Remedies; Priorities. (a) If an Event of Default shall
have occurred and be continuing, the Indenture Trustee subject to the provisions
of Section 10.17 hereof may with the written consent of the Credit Enhancer or
shall at the written direction of the Credit Enhancer do one or more of the
following (subject to Section 5.05):
(i) institute Proceedings in its own name and as
trustee of an express trust for the collection of all amounts then
payable on the Notes or under this Indenture with respect thereto,
whether by declaration or otherwise, and all amounts payable under the
Insurance Agreement, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Notes monies adjudged due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to
the Trust Estate;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee and the Holders of the
Notes;
(iv) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private sales
called and conducted in any manner permitted by law; and
(v) liquidate the assets of the 1996-RHS4 LLC as
Manager thereof and cause the same to be distributed as provided in
Section 14.3 of the Operating Agreement.
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, unless (A) the
Indenture Trustee obtains the consent of the Holders of 100% of the aggregate
Security Balances of the Notes and the Credit Enhancer, which consent will not
be unreasonably withheld, (B) the proceeds of such sale or liquidation
distributable to Holders are sufficient to discharge in full all amounts then
due and unpaid upon the Notes for principal and interest and to reimburse the
Credit Enhancer for any amounts drawn under the Credit Enhancement Instrument
and any other amounts due the Credit Enhancer under the Insurance Agreement or
(C) the Indenture Trustee determines that the Class A Ownership Interest will
not continue to provide sufficient funds for the payment of principal of and
interest on the Notes as they would have become due if the Notes had not been
declared due and payable, and the Indenture Trustee obtains the consent of the
Credit Enhancer, which consent will not be unreasonably withheld, and of the
Holders of 66 2/3% of the aggregate Security Balances of the Notes. In
determining such sufficiency or insufficiency with respect to clause (B) and
(C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of
an Independent investment banking or accounting firm of national reputation as
to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose. Notwithstanding the foregoing, so long as a
Servicing Default has not occurred, any Sale of the Trust Estate shall be made
subject to the continued servicing of the Revolving Credit Loans by the Master
Servicer as provided in the Servicing Agreement.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
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FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND: to each Class of Noteholders for amounts due and
unpaid on the related Class Notes for interest and to each
Noteholder of such Class in each case, ratably, without
preference or priority of any kind, according to the amounts
due and payable on such Class of Notes for interest from
amounts available in the Trust Estate for such Noteholders;
THIRD: to Holders of each Class of Notes for amounts due and
unpaid on the related Class of Notes for principal, from
amounts available in the Trust Estate for such Noteholders,
and to each Noteholder of such Class in each case ratably,
without preference or priority of any kind, according to the
amounts due and payable on such Class of Notes for principal,
until the Security Balances of each Class of Notes is reduced
to zero;
FOURTH: to the Certificate Paying Agent for amounts required to be
distributed to the Certificateholders in respect of Certificate Preferred Return
and Certificate Distribution Amount pursuant to the Trust Agreement;
FIFTH: to the payment of all amounts due and owing to the Credit Enhancer
under the Insurance Agreement;
SIXTH: to the Certificate Paying Agent for amounts due under Article VIII
of the Trust Agreement; and
SEVENTH: to the payment of the remainder, if any, to the Issuer or any other
person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.04. At least 15 days before
such record date, the Indenture Trustee shall mail to each Noteholder a notice
that states the record date, the payment date and the amount to be paid.
Section 5.05. Optional Preservation of the Trust Estate. If the Notes
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, (but shall at the written
direction of the Credit Enhancer) elect to take and maintain possession of the
Trust Estate. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal of and
interest on the Notes and other obligations of the Issuer including payment to
the Credit Enhancer, and the Indenture Trustee shall take such desire into
account when determining whether or not to take and maintain possession of the
Trust Estate. In determining whether to take and maintain possession of the
Trust Estate, the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.
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Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless and subject to the provisions of Section 10.17 hereof:
(i) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Security
Balances of the Notes have made written request to the Indenture
Trustee to institute such Proceeding in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceedings; and
(v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Holders of a majority of the Security Balances of the Notes or by
the Credit Enhancer.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Security Balances of the Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture 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 5.08. Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and
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thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Indenture Trustee, the Credit Enhancer or to
the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee, the Credit Enhancer or any Holder of any Note to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee or to the Noteholders may be exercised from time to
time, and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
Security Balances of Notes with the consent of the Credit Enhancer, or the
Credit Enhancer (so long as no Credit Enhancer Default exists) shall have the
right to direct the time, method and place of conducting any Proceeding for any
remedy available to the Indenture Trustee with respect to the Notes or
exercising any trust or power conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or with
this Indenture;
(ii) subject to the express terms of Section 5.04, any
direction to the Indenture Trustee to sell or liquidate the Trust
Estate shall be by Holders of Notes representing not less than 100% of
the Security Balances of Notes with the consent of the Credit Enhancer,
or the Credit Enhancer (so long as no Credit Enhancer Default exists);
(iii) if the conditions set forth in Section 5.05 have
been satisfied and the Indenture Trustee elects to retain the Trust
Estate pursuant to such Section, then any direction to the Indenture
Trustee by Holders of Notes representing less than 100% of the Security
Balances of Notes to sell or liquidate the Trust Estate shall be of no
force and effect; and
(iv) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or might materially adversely affect the rights of
any Noteholders not consenting to such action.
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Section 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Security Balances of the
Notes with the consent of the Credit Enhancer, or the Credit Enhancer (so long
as no Credit Enhancer Default exists) may waive any past Event of Default and
its consequences except an Event of Default (a) with respect to payment of
principal of or interest on any of the Notes or (b) in respect of a covenant or
provision hereof which cannot be modified or amended without the consent of the
Holder of each Note. In the case of any such waiver, the Issuer, the Indenture
Trustee and the Holders of the Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Security
Balances of the Notes or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.15. Sale of Trust Estate. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 is expressly subject to the provisions of Section 5.05 and this
Section 5.15. The power to effect any such Sale shall not be exhausted by any
one or more Sales as to any portion of the Trust Estate remaining unsold, but
shall continue unimpaired until the entire Trust Estate shall have been sold or
all amounts payable on the Notes and under this Indenture and under the
Insurance Agreement 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. The Indenture Trustee hereby expressly waives its right to any
amount fixed by law as compensation for any Sale.
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(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless:
(1) the Holders of all Notes and the Credit Enhancer 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 which would be payable to the Noteholders under the Notes, the
Certificateholders under the Certificates and the Credit Enhancer in respect of
amounts drawn under the Credit Enhancement Instrument and any other amounts due
the Credit Enhancer under the Insurance Agreement, in full payment thereof in
accordance with Section 5.02, on the Payment Date next succeeding the date of
such Sale, or
(3) The Indenture Trustee determines, in its sole discretion,
that the conditions for retention of the Trust Estate set forth in Section 5.05
cannot be satisfied (in making any such determination, the Indenture Trustee may
rely upon an opinion of an Independent investment banking firm obtained and
delivered as provided in Section 5.05), and the Credit Enhancer consents to such
Sale, which consent will not be unreasonably withheld and the Holders
representing at least 66-2/3% of the Security Balances of the Notes consent to
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 other disposition thereof for
purposes of this Section 5.15(b).
(c) Unless the Holders and the Credit Enhancer 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 5.15 has not been
established by the Indenture Trustee and no Person bids an amount equal to or
greater than such amount, the Indenture Trustee shall bid an amount at least
$1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate:
(1) any Holder or Holders of Notes may bid for and with the
consent of the Credit Enhancer 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 Notes or claims for interest thereon in lieu of cash
up to the amount which shall, upon distribution of the net proceeds of such
sale, be payable thereon, and such Notes, in case the amounts so payable thereon
shall be less than the amount due thereon, shall be returned to the Holders
thereof after being appropriately stamped to show such partial payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any Sale thereof, and, subject to any
requirements of, and to the extent permitted by, applicable law in connection
therewith, may purchase all or any portion of the Trust Estate in a private
sale, 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 which
would be distributable to the Holders of the Notes and Holders of Certificates
and amounts owing to
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the Credit Enhancer as a result of such Sale in accordance with Section 5.04(b)
on the Payment Date next succeeding the date of such Sale and (B) the expenses
of the Sale and of any Proceedings in connection therewith which are
reimbursable to it, without being required to produce the Notes in order to
complete any such Sale or in order for the net Sale price to be credited against
such Notes, and any property so acquired by the Indenture Trustee shall be held
and dealt with by it in accordance with the provisions of this Indenture;
(3) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion of
the Trust Estate in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its interest in
any portion of the Trust Estate in connection with a Sale thereof, and to take
all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any monies.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders 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
or upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.04(b).
Section 5.17. Performance and Enforcement of Certain Obligations. (a)
Promptly following a written request from the Credit Enhancer or the Indenture
Trustee with the written consent of the Credit Enhancer to do so, the Issuer in
its capacity as holder of the Class A Ownership Interest and as Managing Member,
shall with the written consent of the Credit Enhancer take all such lawful
action as the Indenture Trustee may request to cause the 1996- RHS4 LLC to
compel or secure the performance and observance by the Designated Seller and the
Master Servicer, as applicable, of each of their obligations to the 1996-RHS4
LLC or to the Issuer under or in connection with the Designated Seller's
Agreement and the Servicing Agreement, and to exercise any and all rights,
remedies, powers and privileges lawfully available to the 1996-RHS4 LLC or to
the Issuer under or in connection with the Designated Seller's Agreement and the
Servicing Agreement to the extent and in the manner directed by the Indenture
Trustee, as pledgee of the Class A Ownership Interest, including the
transmission of notices of default on the part of the Designated Seller or the
Master Servicer thereunder and the institution of legal or administrative
actions or proceedings to compel or secure performance by the Designated Seller
or the Master Servicer of each of their obligations under the Designated
Seller's Agreement and the Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee, as pledgee of the Class A Ownership Interest, subject to the
rights of the Credit Enhancer under
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the Servicing Agreement may, and at the direction (which direction shall be in
writing or by telephone (confirmed in writing promptly thereafter)) of the
Holders of 66-2/3% of the Security Balances of the Notes shall, exercise all
rights, remedies, powers, privileges and claims of the 1996-RHS4 LLC or the
Issuer against the Designated Seller or the Master Servicer under or in
connection with the Designated Seller's Agreement and the Servicing Agreement,
including the right or power to take any action to compel or secure performance
or observance by the Designated Seller or the Master Servicer, as the case may
be, of each of their obligations to the 1996-RHS4 LLC or the Issuer thereunder
and to give any consent, request, notice, direction, approval, extension or
waiver under the Designated Seller's Agreement and the Servicing Agreement, as
the case may be, and any right of the 1996-RHS4 LLC or the Issuer to take such
action shall not be suspended. In connection therewith, as determined by the
Indenture Trustee, the Issuer shall take all actions necessary to effect the
transfer of the Class A Ownership Interest to the Indenture Trustee and to cause
the Indenture Trustee (in its capacity as such) to be named as the Managing
Member, or if so provided in the Operating Agreement, to cause the Indenture
Trustee (in its capacity as such) to be designated as the Non-member Manager.
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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 the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 6.01;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it (A) pursuant to Section 5.11
or (B) from the Credit Enhancer, which it is entitled to give under any
of the Basic Documents.
(d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(e) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Trust Agreement.
(f) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds
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to believe that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
Section 6.02. Rights of Indenture Trustee. (a) 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 the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Sections 6.11 and 6.12.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be (i) responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, (ii) accountable for the Issuer's
use of the proceeds from the Notes or (iii) responsible for any statement of the
Issuer in the Indenture or in any document issued in connection with the sale of
the Notes or in the Notes other than the Indenture Trustee's certificate of
authentication.
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Section 6.05. Notice of Event of Default. If an Event of Default occurs
and is continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall give notice thereof to the Credit Enhancer.
The Indenture Trustee shall mail to each Noteholder notice of the Event of
Default within 90 days after it occurs. Except in the case of an Event of
Default in payment of principal of or interest on any Note, the Indenture
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such holder to prepare its federal and state income tax returns. In
addition, upon the Issuer's written request, the Indenture Trustee shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Indenture Trustee to enable the Issuer to perform
its federal and state income tax reporting obligations.
Section 6.07. Compensation and Indemnity. The Issuer shall pay to the
Indenture Trustee on each Payment Date reasonable compensation for its services.
The Indenture Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuer shall reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall indemnify the Indenture Trustee
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the administration of this trust and the
performance of its duties hereunder. The Indenture Trustee shall notify the
Issuer promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend any such claim, and the Indenture
Trustee may have separate counsel and the Issuer shall pay the fees and expenses
of such counsel. The Issuer is not obligated to reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of an Event of Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Credit Enhancer. The
Holders of a majority of Security Balances of the Notes or the Credit Enhancer
may remove the Indenture Trustee by so notifying the Indenture Trustee and the
Credit Enhancer and may appoint a successor Indenture Trustee. The Issuer shall
remove the Indenture Trustee if:
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(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture
Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee with the consent of the
Credit Enhancer which consent will not be unreasonably withheld. In addition,
the Indenture Trustee will resign to avoid being directly or indirectly
controlled by the Issuer.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority of Security Balances
of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's shall continue for the benefit of the retiring
Indenture Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies written notice of any such transaction after the Closing Date.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may
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adopt the certificate of authentication of any predecessor trustee, and deliver
such Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may authenticate
such Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Owner Trust, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Trust Estate, or any part hereof, and, subject to
the other provisions of this Section, such powers, duties, obligations, rights
and trusts as the Indenture Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 6.11 and no notice to
Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture 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 Indenture 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 Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust Estate 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 Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any act
or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every
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provision of this Indenture relating to the conduct of, affecting the liability
of, or affording protection to, the Indenture Trustee. Every such instrument
shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA ss. 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it or its
parent shall have a long-term debt rating of A or better by Moody's. The
Indenture Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 6.13. Representations and Warranties. The Indenture Trustee hereby
represents that:
(i) The Indenture Trustee is duly organized, validly
existing and in good standing under the laws of the State of New York
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 Indenture Trustee has the power and authority to
execute and deliver this Indenture and to carry out its terms; and the
execution, delivery and performance of this Indenture have been duly
authorized by the Indenture Trustee by all necessary corporate action.
(iii) The consummation of the transactions contemplated by
this Indenture 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 articles of organization or bylaws of the Indenture Trustee or any
agreement or other instrument to which the Indenture Trustee is a party
or by which it is bound.
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(iv) To the Indenture Trustee's best knowledge, there are no
proceedings or investigations pending or threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Indenture Trustee or its
properties: (A) asserting the invalidity of this Indenture (B) seeking
to prevent the consummation of any of the transactions contemplated by
this Indenture or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Indenture
Trustee of its obligations under, or the validity or enforceability of,
this Indenture.
(v) The Indenture Trustee does not have notice of any
adverse claim (as such terms are used in Delaware UCC Section 8-302)
with respect to the Class A Ownership Interest.
Section 6.14. Directions to Indenture Trustee. The Indenture Trustee is
hereby directed:
(a) to accept the pledge of the Class A Ownership Interest and
hold the assets of the Trust in trust for the Noteholders and the Credit
Enhancer;
(b) to authenticate and deliver the Notes substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and
(c)
to take all other actions as shall be required to be taken by the terms of this
Indenture.
Section 6.15. Indenture Trustee May Own Securities. The Indenture
Trustee, in its individual or any other capacity may become the owner or pledgee
of Securities with the same rights it would have if it were not Indenture
Trustee.
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ARTICLE VII
Noteholders' Lists and Reports
Section 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
of Noteholders. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after each Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date and, (b) at such other
times as the Indenture Trustee and the Credit Enhancer 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 Note Registrar, no such list shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 and the names and addresses of Holders of Notes received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA ss. 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days
after the Issuer is required to file the same with the Commission,
copies of the annual reports and the information, documents and other
reports (or copies of such portions of any of the foregoing as the
Commission may from time to time by rules and regulations prescribe)
that the Issuer may be required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Commission
in accordance with rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA ss.
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to
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clauses (i) and (ii) of this Section 7.03(a) and by rules and
regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA ss.
313(a), within 60 days after each January 1 beginning with January 1, 1997, the
Indenture Trustee shall mail to each Noteholder as required by TIA ss. 313(c)
and to the Credit Enhancer a brief report dated as of such date that complies
with TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss.
313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Term Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Term Notes are listed on any stock exchange.
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ARTICLE VIII
Accounts, Disbursements and Releases
Section 8.01. Collection of Money. 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 apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
Section 8.02. Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Indenture Trustee to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders and the Certificate
Paying Agent, on behalf of the Certificateholders and the Credit Enhancer, the
Payment Account as provided in Section 3.01 of this Indenture.
(b) All monies deposited from time to time in the Payment Account
pursuant to the Servicing Agreement and all deposits therein pursuant to this
Indenture are for the benefit of the Noteholders and the Certificate Paying
Agent, on behalf of the Certificateholders and all investments made with such
monies including all income or other gain from such investments are for the
benefit of the Master Servicer as provided by the Servicing Agreement.
On each Payment Date, the Indenture Trustee shall distribute all
amounts on deposit in the Payment Account to Noteholders in respect of the Notes
and in its capacity as Certificate Paying Agent to Certificateholders in the
order of priority set forth in Section 3.05 (except as otherwise provided in
Section 5.04(b).
The Master Servicer shall direct the Indenture Trustee in writing to
invest any funds in the Payment Account in Permitted Investments maturing no
later than the Business Day preceding each Payment Date and shall not be sold or
disposed of prior to the maturity.
Section 8.03. Officer's Certificate. The Indenture Trustee shall
receive at least seven days notice when requested by the Issuer to take any
action pursuant to Section 8.05(a), accompanied by copies of any instruments to
be executed, and the Indenture Trustee shall also require, as a condition to
such action, an Officer's Certificate, in form and substance 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.
Section 8.04. Termination Upon Distribution to Noteholders. This Indenture
and the respective obligations and responsibilities of the Issuer and the
Indenture Trustee created
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hereby shall terminate upon the distribution to Noteholders, Certificate Paying
Agent, on behalf of the Certificateholders and the Indenture Trustee of all
amounts required to be distributed pursuant to Article III; provided, however,
that in no event shall the trust created hereby continue beyond the expiration
of 21 years from the death of the survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof.
Section 8.05. Release of Trust Estate. (a) Subject to the payment of
its fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property from
the lien of this Indenture, or convey the Indenture Trustee's interest in the
same, in a manner and under circumstances that are not inconsistent with the
provisions of this Indenture. No party relying upon an instrument executed by
the Indenture Trustee as provided in Article VIII hereunder 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 monies.
(b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this Indenture
have been paid, and (iii) all sums due the Credit Enhancer have been paid,
release any remaining portion of the Trust Estate that secured the Notes from
the lien of this Indenture.
(c) The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of a request from the
Issuer accompanied by an Officers' Certificate and a letter from the Credit
Enhancer, stating that the Credit Enhancer has no objection to such request from
the Issuer.
(d) The Indenture Trustee shall, at the request of the Issuer or the
Depositor, surrender the Credit Enhancement Instrument to the Credit Enhancer
for cancellation, upon final payment of the Class A Ownership Interest.
Section 8.06. Surrender of Notes Upon Final Payment. By acceptance of
any Note, the Holder thereof agrees to surrender such Note to the Indenture
Trustee promptly, prior to such Noteholder's receipt of the final payment
thereon.
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ARTICLE IX
Supplemental Indentures
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies and the Credit Enhancer, the Issuer and the Indenture Trustee,
when authorized by an Issuer Request, at any time and from time to time, may
enter into one or more indentures supplemental hereto (which shall conform to
the provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Indenture Trustee, for any of
the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of this Indenture, or better
to assure, convey and confirm unto the 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;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of the Holders
of the Notes or the Credit Enhancer, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge
any property to or with the Indenture Trustee;
(v) to cure any ambiguity, to
correct or supplement any provision herein or in any supplemental indenture that
may be inconsistent with any other provision herein or in any supplemental
indenture;
(vi) to make any other provisions with respect to matters
or questions arising under this Indenture or in any supplemental
indenture; provided, that such action shall not materially and
adversely affect the interests of the Holders of the Notes or the
Credit Enhancer;
(vii) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(viii) 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;
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provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse tax
consequences to the Noteholders.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with prior notice to the Rating Agencies and the Credit Enhancer, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that such action shall not,
as evidenced by an Opinion of Counsel, (i) adversely affect in any material
respect the interests of any Noteholder or the Credit Enhancer or (ii) cause the
Issuer to be subject to an entity level tax.
Section 9.02. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and with the consent of the
Holders of not less than a majority of the Security Balances of each Class of
Notes affected thereby and the Credit Enhancer, by Act of such Holders delivered
to the Issuer and the Indenture Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Note affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Note, or reduce the principal amount
thereof or the interest rate thereon, change the provisions of this
Indenture relating to the application of collections on, or the
proceeds of the sale of, the Trust Estate to payment of principal of or
interest on the Notes, or change any place of payment where, or the
coin or currency in which, any Note or the interest thereon is payable,
or impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof;
(ii) reduce the percentage of the Security Balances of
the Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition of
the term "Outstanding" or modify or alter the exception in the definition of the
term "Holder";
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(iv) reduce the percentage of the Security Balances of
the Notes required to direct the Indenture Trustee to direct the Issuer
to sell or liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents cannot
be modified or waived without the consent of the Holder of each Note
affected thereby;
(vi) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation); or
(vii) permit the creation of any lien ranking prior to or
on a parity with the lien of this Indenture with respect to any part of
the Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note of the security
provided by the lien of this Indenture; and provided, further, that
such action shall not, as evidenced by an Opinion of Counsel, cause the
Issuer to be subject to an entity level tax.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders (as defined in
Section 10.03) under this Section 9.02 to approve the particular form of any
proposed supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or 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
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
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Section 9.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the 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 Notes.
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ARTICLE X
Miscellaneous
Section 10.01. Compliance Certificates and Opinions, etc. (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 and to the Credit Enhancer (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and (ii) an Opinion of Counsel 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, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(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 or opinion are based;
(3) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with;
(4) a statement as to whether, in the opinion of each such signatory, such
condition or covenant has been complied with; and
(5) if the Signer of such
Certificate or Opinion is required to be Independent, the Statement required by
the definition of the term "Independent".
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 10.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of any signer thereof as
to the matters described in clause (i) above, the Issuer shall also deliver to
the Indenture Trustee an Independent Certificate as to the same matters, if the
fair value to the Issuer of the securities to
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be so deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal year of
the Issuer, as set forth in the certificates delivered pursuant to clause (i)
above and this clause (ii), is 10% or more of the Security Balances of the
Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth in
the related Officer's Certificate is less than $25,000 or less than one percent
of the Security Balances of the Notes.
(iii) Whenever any property or securities are to be released from the lien
of this Indenture, the Issuer shall also furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such release) of the
property or securities proposed to be released and stating that in the opinion
of such person the proposed release will not impair the security under this
Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture Trustee an
Officer's Certificate certifying or stating the opinion of any signer thereof as
to the matters described in clause (iii) above, the Issuer shall also furnish to
the Indenture Trustee an Independent Certificate as to the same matters if the
fair value of the property or securities and of all other property, other than
property as contemplated by clause (v) below or securities released from the
lien of this Indenture since the commencement of the then-current calendar year,
as set forth in the certificates required by clause (iii) above and this clause
(iv), equals 10% or more of the Security Balances of the Notes, but such
certificate need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the then Security
Balances of the Notes.
(v) Notwithstanding any provision of this Indenture, the Issuer may,
without compliance with the requirements of the other provisions of this Section
10.01, (A) collect, sell or otherwise dispose of the Class A Ownership Interest
as and to the extent permitted or required by the Basic Documents or (B) make
cash payments out of the Payment Account as and to the extent permitted or
required by the Basic Documents, so long as the Issuer shall deliver to the
Indenture Trustee every six months, commencing July 31, 1997, an Officer's
Certificate of the Issuer stating that all the dispositions of Collateral
described in clauses (A) or (B) above that occurred during the preceding six
calendar months were in the ordinary course of the Issuer's business and that
the proceeds thereof were applied in accordance with the Basic Documents.
Section 10.02. 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 an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate
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or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Designated Seller or the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Designated Seller or the Issuer, unless such counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the 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 Article VI.
Section 10.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the 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 Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.01) conclusive in favor of the Indenture Trustee and the Issuer, if made in
the manner provided in this Section 10.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Registrar.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
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Section 10.04. Notices, etc., to Indenture Trustee, Issuer, Credit
Enhancer and Rating Agencies. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Noteholders or other documents provided or
permitted by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or Act of Noteholders is to be
made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the
Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at the
Corporate Trust Office. The Indenture Trustee shall promptly transmit
any notice received by it from the Noteholders to the Issuer, or
(ii) the Issuer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed first-class, postage prepaid to the Issuer addressed
to: Home Equity Loan Trust 1996-RHS4, in care of Wilmington Trust
Company, or at any other address previously furnished in writing to the
Indenture Trustee by the Issuer. The Issuer shall promptly transmit any
notice received by it from the Noteholders to the Indenture Trustee, or
(iii) the Credit Enhancer by the Issuer, the Indenture
Trustee or by any Noteholders shall be sufficient for every purpose
hereunder to in writing and mailed, first-class postage pre-paid, or
personally delivered or telecopied to: AMBAC Indemnity Corporation, One
State Street Plaza, 17th Floor, New York, New York 10004, telecopier
number (212) 509-9190. The Credit Enhancer shall promptly transmit any
notice received by it from the Issuer, the Indenture Trustee or the
Noteholders to the Issuer or Indenture Trustee, as the case may be.
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed by certified mail, return receipt requested, to (i) in the case of
Moody's, at the following address: Moody's Investors Service, Inc., ABS
Monitoring Department, 99 Church Street, New York, New York 10007 and (ii) in
the case of Standard & Poor's, at the following address: Standard & Poor's
Ratings Services, 26 Broadway (15th Floor), New York, New York 10004, Attention
of Asset Backed Surveillance Department; or as to each of the foregoing, at such
other address as shall be designated by written notice to the other parties.
Section 10.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Person's address as it appears on the Note Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given regardless of
whether such notice is in fact actually received.
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Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.
Section 10.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee to such Holder, that is different
from the methods provided for in this Indenture for such payments or notices.
The Issuer shall furnish to the Indenture Trustee a copy of each such agreement
and the Indenture Trustee shall cause payments to be made and notices to be
given in accordance with such agreements.
Section 10.07. 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 Trust
Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 10.08. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
Section 10.09. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.
Section 10.10. Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 10.11. Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, the Credit Enhancer,
and any other party secured hereunder,
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and any other Person with an ownership interest in any part of the Trust Estate,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 10.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 10.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.14. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
Section 10.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 10.16. 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 Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the 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 Article VI, VII and VIII of the Trust Agreement.
Section 10.17. No Petition. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Depositor, the
1996-RHS4 LLC or the Issuer, or join in any institution
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against the Depositor, the 1996-RHS4 LLC or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.
Section 10.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it shall permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Indenture Trustee may reasonably determine that such
disclosure is consistent with its obligations hereunder.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
HOME EQUITY LOAN TRUST 1996-RHS4,
as Issuer
Wilmington Trust Company
not in its individual capacity
but solely as Owner Trustee
By:
Name:
Title:
THE CHASE MANHATTAN BANK,
as Indenture Trustee
By:
Name: Regina Bishop
Title: Vice President
THE CHASE MANHATTAN BANK hereby accepts the appointment as Paying Agent pursuant
to Section 3.03 hereof and as Note Registrar pursuant to Section 4.02 hereof.
By:
Name: Regina Bishop
Title: Vice President
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 20th day of December 1996, before me personally appeared Emmett
R. Harmon, to me known, who being by me duly sworn, did depose and say, that he
resides at 106 W. -Sutton Pla. Wilmongton, DE, that he is the Vice President of
the Owner Trustee, one of the corporations described in and which executed the
above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
Notary Public
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 20th day of December, 1996, before me personally appeared
Regina Bishop, to me known, who being by me duly sworn, did depose and say, that
he resides at 450 West 33rd Street, 10th Floor, New York, NY, that she is the
Vice President of The Chase Manhattan Bank, as Indenture Trustee, one of the
corporations described in and which executed the above instrument; that she
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like order.
Notary Public
NOTORIAL SEAL
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Exhibit A-1
FORM OF TERM NOTES
Unless this Term Note is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Issuer or its agent for registration of transfer, exchange or payment,
and any Term Note issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS TERM NOTE IS PAYABLE IN INSTALLMENTS
AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT
OF THIS TERM NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON
THE FACE HEREOF.
THIS TERM NOTE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION
OF THE DESIGNATED SELLER, THE DEPOSITOR, THE MASTER SERVICER, THE ADMINISTRATOR,
THE INDENTURE TRUSTEE, THE OWNER TRUSTEE OR GMAC MORTGAGE CORPORATION OR ANY OF
THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN THE INDENTURE OR
THE BASIC DOCUMENTS.
HOME EQUITY LOAN TRUST 1996-RHS4
Home Equity Loan-Backed Term Note
Registered Principal Amount: $___________
Percentage Interest: 100%
No. _ Note Rate: Floating
CUSIP NO. ___________
Home Equity Loan Trust 1996-RHS4, a business trust duly
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co. or
registered assigns, the principal sum of $___________, payable on each Payment
Date in an amount equal to the Percentage Interest specified above of the
aggregate amount, if any, payable from the Payment Account in respect of
principal on the Term Notes pursuant to Section 3.05 of the Indenture dated as
of December 1, 1996 (the "Indenture") between the Issuer, as Issuer, and The
Chase Manhattan Bank, as Indenture Trustee (the "Indenture Trustee"); provided,
however, that the entire unpaid principal amount of this Term Note shall be due
and payable on the Payment Date in August 2022, to the extent not previously
paid on a prior Payment Date. Capitalized terms used but not defined herein are
defined in Appendix A of the Indenture.
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Interest on the Term Notes will be paid monthly on each
Payment Date at the Note Rate for the related Interest Period subject to
limitations which may result in Interest Shortfalls (as further described in the
Indenture). The Note Rate for each Interest Period will be a floating rate equal
to the lesser of (i) LIBOR plus ____% per annum, or, on any Payment Date when
the aggregate Principal Balance of the Revolving Credit Loans as of the last day
during the related Collection Period is less than 10% of the aggregate Cut-off
Date Balance, LIBOR plus ____% and (ii) the Maximum Net Loan Rate. LIBOR for
each applicable Interest Period will be determined on the second LIBOR Business
Day immediately preceding (i) the Closing Date in the case of the first Interest
Period and (ii) the first day of each succeeding Interest Period by the
Indenture Trustee as set forth in the Indenture. All determinations of LIBOR by
the Indenture Trustee shall, in the absence of manifest error, be conclusive for
all purposes, and each holder of this Term Note, by accepting this Term Note,
agrees to be bound by such determination. Interest on this Term Note will accrue
for each Payment Date from the most recent Payment Date on which interest has
been paid (in the case of the first Payment Date, from the Closing Date) to but
excluding such Payment Date. Interest will be computed on the basis of the
actual number of days in each Interest Period and a year assumed to consist of
360 days. Principal of and interest on this Term Note shall be paid in the
manner specified on the reverse hereof.
Principal of and interest on this Term Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Issuer with respect to this Term Note shall be applied first to interest due
and payable on this Term Note as provided above and then to the unpaid principal
of this Term Note.
Reference is made to the further provisions of this Term Note
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Term Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Term Note shall not be entitled to any benefit under the Indenture referred
to on the reverse hereof, or be valid or obligatory for any purpose.
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<PAGE>
This Term Note is one of a duly authorized issue of Term Notes
of the Issuer, designated as its Home Equity Loan-Backed Term Notes (herein
called the "Term Notes"), all issued under the Indenture, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the holders of the Term Notes. The Term Notes are subject to all
terms of the Indenture.
The Term Notes and the Variable Funding Notes (collectively,
the "Notes") are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
This Term Note is entitled to the benefits of an irrevocable
and unconditional financial guaranty insurance policy issued by AMBAC Indemnity
Corporation.
Principal of and interest on this Term Note will be payable on
each Payment Date, commencing on January 21, 1997, as described in the
Indenture. "Payment Date" means the twentieth day of each month, or, if any such
date is not a Business Day, then the next Business Day.
The entire unpaid principal amount of this Term Note shall be
due and payable in full on the Payment Date in August 2022 pursuant to the
Indenture, to the extent not previously paid on a prior Payment Date.
Notwithstanding the foregoing, if an Event of Default shall have occurred and be
continuing, then the Indenture Trustee or the holders of Notes representing not
less than a majority of the Security Balances of all Notes with the consent of
the Credit Enhancer, or the Credit Enhancer may declare the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the
Indenture. All principal payments on the Term Notes shall be made pro rata to
the holders of Term Notes entitled thereto.
Payments of interest on this Term Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Term Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Term Note (or one or
more Predecessor Notes) on the Note Register as of the close of business on each
Record Date, except that with respect to Term Notes registered on the Record
Date in the name of the nominee of the Depository Agency (initially, such
nominee to be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without requiring
that this Term Note be submitted for notation of payment. Any reduction in the
principal amount of this Term Note (or any one or more Predecessor Term Notes)
effected by any payments made on any Payment Date shall be binding upon all
future holders of this Term Note and of any Term Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Term Note on a Payment Date, then the Indenture Trustee, in the name of and
on behalf of the Issuer, will notify the Person who was the Registered Holder
hereof as of the Record Date preceding such Payment Date by notice mailed or
transmitted by facsimile prior to such Payment
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<PAGE>
Date, and the amount then due and payable shall be payable only upon
presentation and surrender of this Term Note at the address specified in such
notice of final payment.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Term Note may be registered
on the Note Register upon surrender of this Term Note for registration of
transfer at the Corporate Trust Office, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Indenture Trustee
duly executed by, the holder hereof or such holder's attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include
membership or participation in the Securities Transfer Agent's Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended, and thereupon
one or more new Term Notes in authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or transferees. No
service charge will be charged for any registration of transfer or exchange of
this Term Note, but the Note Registrar shall require payment of a sum sufficient
to cover any tax or governmental charge that may be imposed in connection with
any registration of transfer or exchange of this Term Note.
Each holder or Beneficial Owner of a Term Note, by acceptance
of a Term Note, or, in the case of a Beneficial Owner of a Term Note, a
beneficial interest in a Term Note, covenants and agrees that no recourse may be
taken, directly or indirectly, with respect to the obligations of the Issuer,
the Owner Trustee, the Designated Seller, the Master Servicer, the
Administrator, the Depositor, the 1996-RHS4 LLC or the Indenture Trustee on the
Term Notes or under the Indenture or any certificate or other writing delivered
in connection therewith, against (i) the Indenture Trustee or the Owner Trustee
in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee in its individual
capacity, any holder of a beneficial interest in the 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 and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity.
Each holder or Beneficial Owner of a Term Note, by acceptance
of a Term Note or, in the case of a Beneficial Owner of a Term Note, a
beneficial interest in a Term Note, covenants and agrees by accepting the
benefits of the Indenture that such holder or Beneficial Owner of a Term Note
will not at any time institute against the Depositor, the Designated Seller, the
Master Servicer, the Administrator, GMAC Mortgage Corporation, the 1996-RHS4 LLC
or the Issuer, or join in any institution against the Depositor, the Designated
Seller, the Master Servicer, the Administrator, GMAC Mortgage Corporation, the
1996-RHS4 LLC or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Term Notes, the Indenture or the Basic Documents.
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<PAGE>
The Issuer has entered into the Indenture and this Term Note
is issued with the intention that, for federal, state and local income, single
business and franchise tax purposes, the Term Notes will qualify as indebtedness
of the Issuer. Each holder of a Term Note, by acceptance of a Term Note (and
each Beneficial Owner of a Term Note by acceptance of a beneficial interest in a
Term Note), agrees to treat the Term Notes for federal, state and local income,
single business and franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of
this Term Note, the Issuer, the Indenture Trustee and any agent of the Issuer or
the Indenture Trustee may treat the Person in whose name this Term Note is
registered (as of the day of determination or as of such other date as may be
specified in the Indenture) as the owner hereof for all purposes, whether or not
this Term Note be overdue, and none of the Issuer, the Indenture Trustee or any
such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Indenture Trustee and the rights of the
holders of the Term Notes under the Indenture at any time by the Issuer and the
Indenture Trustee with the consent of the holders of Notes representing a
majority of the Security Balances of all Notes at the time Outstanding and the
Credit Enhancer and with prior notice to the Rating Agencies. The Indenture also
contains provisions permitting the holders of Notes representing specified
percentages of the Security Balances of all Notes, on behalf of the holders of
all the Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Term Note (or any one of more
Predecessor Term Notes) shall be conclusive and binding upon such holder and
upon all future holders of this Term Note and of any Term Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Term Note. The
Indenture also permits the Issuer and the Indenture Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
holders of the Term Notes issued thereunder but with prior notice to the Rating
Agencies and the Credit Enhancer.
The term "Issuer" as used in this Term Note includes any
successor or the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the holders of Term Notes under the Indenture.
The Term Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations
therein set forth.
This Term Note and the Indenture shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions and the obligations, rights and remedies of the
parties hereunder and thereunder shall be determined in accordance with such
laws.
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<PAGE>
No reference herein to the Indenture and no provision of this
Term Note or of the Indenture shall alter or impair, the obligation of the
Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Term Note at the times, place and rate, and in the coin or
currency herein prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Basic Documents, none of Wilmington Trust Company in
its individual capacity, The Chase Manhattan Bank, in its individual capacity,
any owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on this Term Note or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The holder of this Term Note by its
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Term Note.
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<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuer
and not in its individual capacity, has caused this Term Note to be duly
executed.
HOME EQUITY LOAN TRUST 1996-RHS4
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as Owner
Trustee
Dated: December [20], 1996
By
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Term Notes referred to in the within mentioned Indenture.
THE CHASE MANHATTAN BANK, not
in its individual capacity but solely as
Indenture Trustee
Dated: December [20], 1996
By
Authorized Signatory
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<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee:__________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto
==============================================================================
(name and address of assignee)
the within Term Note and all rights thereunder, and hereby irrevocably
constitutes and appoints
- ------------------------------------------------------------------------------
___________________________, attorney, to transfer said Term Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:
Signature Guaranteed:
- -------- * NOTICE: The signature to this assignment must correspond with the
name of the -------- registered owner as it appears on the face of the within
Term Note in every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
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<PAGE>
Exhibit A-2
FORM OF VARIABLE FUNDING NOTES
THIS VARIABLE FUNDING NOTE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH
ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND
IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF THE
INDENTURE REFERRED TO HEREIN.
THE PRINCIPAL OF THIS VARIABLE FUNDING NOTE IS PAYABLE IN
INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL AMOUNT OF THIS VARIABLE FUNDING NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS VARIABLE FUNDING NOTE DOES NOT REPRESENT AN INTEREST IN
OR OBLIGATION OF THE DESIGNATED SELLER, THE DEPOSITOR, THE MASTER SERVICER, THE
ADMINISTRATOR, THE INDENTURE TRUSTEE, THE OWNER TRUSTEE OR GMAC MORTGAGE
CORPORATION OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED
IN THE INDENTURE OR THE BASIC DOCUMENTS.
HOME EQUITY LOAN TRUST 1996-RHS4
Home Equity Loan-Backed Variable Funding Note
Registered Initial Maximum Variable
Funding Note Balance: $____________
No. VFN-_ Note Rate: Floating
Home Equity Loan Trust 1996-RHS4, a business trust duly
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to GMAC Mortgage
Corporation or registered assigns, the principal amount set forth on Schedule A
attached hereto (or otherwise owing hereunder as determined pursuant to the
Indenture as defined below), payable on each Payment Date in an amount equal to
the pro rata portion allocable hereto (based on the Security Balances of all
Variable Funding Notes immediately prior to such Payment Date) of the aggregate
amount, if any, payable from the Payment Account in respect of principal on the
Variable Funding Notes pursuant to Section 3.05 of the Indenture dated as of
December 1, 1996 (the "Indenture") between the Issuer, as Issuer, and The Chase
Manhattan Bank, as Indenture Trustee (the "Indenture Trustee"); provided,
however, that the entire unpaid principal amount of this Variable funding Note
shall be due and payable on the Payment Date in August 2022, to the extent not
previously paid on
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<PAGE>
a prior Payment Date. Capitalized terms used but not defined herein are defined
in Appendix A of the Indenture.
The Issuer will pay interest on this Variable Funding Note on
each Payment Date at a floating rate equal to LIBOR plus ____% per annum on the
principal amount of this Variable Funding Note on the preceding Payment Date
after giving effect to all payments of principal made on such preceding Payment
Date (or, in the case of the first Payment Date, the Closing Date); provided,
however, that in no event shall the Note Rate with respect to any Interest
Period exceed the Net Loan Rate Cap for such Interest Period. LIBOR for each
applicable Interest Period will be determined on the second LIBOR Business Day
immediately preceding (i) the Closing Date in the case of the first Interest
Period and (ii) the first day of each succeeding Interest Period by the
Indenture Trustee as set forth in the Indenture. All determinations of LIBOR by
the Indenture Trustee shall, in the absence of manifest error, be conclusive for
all purposes, and each holder of this Variable Funding Note, by accepting this
Variable Funding Note, agrees to be bound by such determination. Interest on
this Variable Funding Note will accrue for each Payment Date from the most
recent Payment Date on which interest has been paid (in the case of the First
Payment Date, from the Closing Date) to but excluding such Payment Date.
Interest will be computed on the basis of the actual number of days in each
Interest Period and a year assumed to consist of 360 days. Principal of and
interest on this Variable Funding Note shall be paid in the manner specified on
the reverse hereof.
Principal of and interest on this Variable Funding Note are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. All payments
made by the Issuer with respect to this Variable Funding Note shall be applied
first to interest due and payable on this Variable Funding Note as provided
above and then to the unpaid principal of this Variable Funding Note.
Reference is made to the further provisions of this Variable
Funding Note set forth on the reverse hereof, which shall have the same effect
as though fully set forth on the face of this Variable Funding Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Variable Funding Note shall not be entitled to any benefit under the
Indenture referred to on the reverse hereof, or be valid or obligatory for any
purpose.
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<PAGE>
This Variable Funding Note is one of a duly authorized issue
of Variable Funding Notes of the Issuer, designated as its Home Equity
Loan-Backed Variable Funding Notes (herein called the "Variable Funding Notes"),
all issued under the Indenture, to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Indenture Trustee and the
holders of the Variable Funding Notes. The Variable Funding Notes are subject to
all terms of the Indenture.
The Variable Funding Notes and the Term Notes (collectively,
the "Notes") are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
This Variable Funding Note is entitled to the benefits of an
irrevocable and unconditional financial guaranty insurance policy issued by
AMMBAC Indemnity Corporation.
Principal of and interest on this Variable Funding Note will
be payable on each Payment Date, commencing on January 21, 1997, as described in
the Indenture. "Payment Date" means the twentieth day of each month, or, if any
such day is not a Business Day, then the next Business Day.
The entire unpaid principal amount of this Variable Funding
Note shall be due and payable in full on the Payment Date in August 2022
pursuant to the Indenture, to the extent not previously paid on a prior Payment
Date. Notwithstanding the foregoing, if an Event of Default shall have occurred
and be continuing, then the Indenture Trustee or the holders of Notes
representing not less than a majority of the Security Balances of all Notes with
the consent of the Credit Enhancer, or the Credit Enhancer may declare the Notes
to be immediately due and payable in the manner provided in Section 5.02 of the
Indenture. All principal payments on the Variable Funding Notes shall be made
pro rata to the holders of Variable Funding Notes entitle thereto.
Payments of interest on this Variable Funding Note due and
payable on each Payment Date, together with the installment of principal, if
any, to the extent not in full payment of this Variable Funding Note, shall be
made by check mailed to the Person whose name appears as the Registered Holder
of this Variable Funding Note (or one or more Predecessor Notes) on the Note
Register as of the close of business on each Record Date, except that with
respect to Variable Funding Notes registered on the Record Date in the name of
the nominee of the Depository Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Variable
Funding Note be submitted for notation of payment. Any reduction in the
principal amount of this Variable Funding Note (or any one or more Predecessor
Variable Funding Notes) effected by any payments made on any Payment Date shall
be binding upon all future holders of this Variable Funding Note and of any
Variable Funding Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Variable Funding Note on a
Payment Date, then the Indenture Trustee, in the name of and on behalf of the
Issuer, will notify the Person who was the Registered Holder
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<PAGE>
hereof as of the Record Date preceding such Payment Date by notice mailed or
transmitted by facsimile prior to such Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Variable
Funding Note at the address specified in such notice of final payment.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Variable Funding Note may be
registered on the Note Register upon surrender of this Variable Funding Note for
registration of transfer at the Corporate Trust Office, duly endorsed by, and
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the holder hereof or such holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Variable Funding Notes in authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Variable Funding Note, but the Note
Registrar shall require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any registration of
transfer or exchange of this Variable Funding Note.
Each holder or Beneficial Owner of a Variable Funding Note, by
acceptance of a Variable Funding Note or, in the case of a Beneficial Owner of a
Variable Funding Note, a beneficial interest in a Variable Funding Note,
covenants and agrees that no recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee, the Designated
Seller, the Master Servicer, the Administrator, the Depositor, the 1996-RHS4 LLC
or the Indenture Trustee on the Variable Funding Notes or under the Indenture or
any certificate or other writing delivered in connection therewith, against (i)
the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director or employee of the Indenture Trustee or
the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the 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 and
except that any such partner, owner or beneficiary shall be fully liable, to the
extent provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call owing to
such entity.
Each holder or Beneficial Owner of a Variable Funding Note, by
acceptance of a Variable Funding Note or, in the case of a Beneficial Owner of a
Variable Funding Note, a beneficial interest in a Variable Funding Note,
covenants and agrees by accepting the benefits of the Indenture that such holder
or Beneficial Owner of a Variable Funding Note will not at any time institute
against the Depositor, the Designated Seller, the Master Servicer, the
Administrator, GMAC Mortgage Corporation, the 1996-RHS4 LLC or the Issuer, or
join in any institution against the Depositor, the Designated Seller, the Master
Servicer, the Administrator, GMAC Mortgage Corporation, the 1996-RHS4 LLC or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States
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<PAGE>
federal or state bankruptcy or similar law in connection with any obligations
relating to the Variable Funding Notes, the Indenture or the Basic Documents.
The Issuer has entered into the Indenture and this Variable
Funding Note is issued with the intention that, for federal, state and local
income, single business and franchise tax purposes, the Variable Funding Notes
will qualify as indebtedness of the Issuer. Each holder of a Variable Funding
Note, by acceptance of a Variable Funding Note (and each Beneficial Owner of a
Variable Funding Note, by acceptance of a beneficial interest in a Variable
Funding Note), agrees to treat the Variable Funding Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of the
Issuer.
Prior to the due presentment for registration of transfer of
this Variable Funding Note, the Issuer, the Indenture Trustee and any agent of
the Issuer or the Indenture Trustee may treat the Person in whose name this
Variable Funding Note (as of the day of determination or as of such other date
as may be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Variable Funding Note be overdue, and none of the
Issuer, the Indenture Trustee or any such agent shall be affected by notice to
the contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the Indenture Trustee and the rights of the
holders of the Variable Funding Notes under the Indenture at any time by the
Issuer and the Indenture Trustee with the consent of the holders of Notes
representing a majority of the Security Balances of all Notes at the time
Outstanding and the Credit Enhancer and with prior notice to the Rating
Agencies. The Indenture also contains provisions permitting the holders of Notes
representing specified percentages of the Security Balances of all Notes, on
behalf of the holders of all the Notes, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the holder of
this Variable Funding Note (or any one of more Predecessor Variable Funding
Notes) shall be conclusive and binding upon such holder and upon all future
holders of this Variable Funding Note and of any Variable Funding Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Variable
Funding Note. The Indenture also permits the Indenture Trustee to amend or waive
certain terms and conditions set forth in the Indenture without the consent of
holders of the Variable Funding Notes issued thereunder but with prior notice to
the Rating Agencies and the Credit Enhancer.
The term "Issuer" as used in this Variable Funding Note
includes any successor to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the holders of Variable Funding Notes under the Indenture.
The Variable Funding Notes are issuable only in registered
form in denominations as provided in the Indenture, subject to certain
limitations therein set forth.
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<PAGE>
This Variable Funding Note and the Indenture shall be
construed in accordance with the laws of the State of New York, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be determined in
accordance with such laws.
No reference herein to the Indenture and no provision of this
Variable Funding Note or of the Indenture shall alter or impair the obligation
of the Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Variable Funding Note at the times, place and rate, and in the
coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Basic Documents, none of Wilmington Trust Company in
its individual capacity, The Chase Manhattan Bank, in its individual capacity,
any owner of a beneficial interest in the Issuer, or any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on this Variable Funding Note or
performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The holder of this Variable Funding
Note by its acceptance hereof agrees that, except as expressly provided in the
Basic Documents, in the case of an Event of Default under the Indenture, the
holder shall have no claim against any of the foregoing for any deficiency, los
or claim therefrom; provided, however, that nothing contained herein shall be
taken to prevent recourse to, and enforcement against, the assets of the Issuer
for any and all liabilities, obligations and undertakings contained in the
Indenture or in this Variable Funding Note.
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<PAGE>
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuer
and not in its individual capacity, has caused this Variable Funding Note to be
duly executed.
HOME EQUITY LOAN TRUST 1996-RHS4
By WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as Owner
Trustee
Dated: December [20], 1996
By
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Variable Funding Notes referred to in the within mentioned
Indenture.
THE CHASE MANHATTAN BANK,
not in its individual capacity but solely as
Indenture Trustee
Dated: December [20], 1996
By
Authorized Signatory
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
______________ ----------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto__________________________________________________________________________
- ------------------------------------------------------------------------------
(name and address of assignee) the within Variable Funding Note and all rights
thereunder, and hereby irrevocably constitutes and
appoints_______________________________________________________, attorney, to
transfer said Variable Funding Note on the books kept for registration thereof,
with full power of substitution in the premises.
Dated:
Signature Guaranteed:
- -------- / NOTICE: The signature to this assignment must correspond with the
name of the -------- registered owner as it appears on the face of the within
Variable Funding Note in every particular, without alteration, enlargement or
any change whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
8
<PAGE>
SCHEDULE A
to
HOME EQUITY LOAN TRUST 1996-RHS4
Home Equity Loan-Backed Variable Funding Note
===============================================================================
Percentage Principal Security Balance Authorized Signature
Date Interest Payments Outstanding of Indenture Trustee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
9
<PAGE>
Exhibit B
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including
numbers:
===============================================
===============================================
The undersigned seller, as registered holder (the "Seller"),
intends to transfer the Rule 144A Securities described above to the undersigned
buyer (the "Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the Seller
hereby certifies the following facts: Neither the Seller nor anyone acting on
its behalf has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the Rule
144A Securities or any other similar security with, any person in any manner, or
made any general solicitation by means of general advertising or in any other
manner, or taken any other action, that would constitute a distribution of the
Rule 144A Securities under the Securities Act of 1933, as amended (the "1933
Act"), or that would render the disposition of the Rule 144A Securities a
violation of Section 5 of the 1933 Act or require registration pursuant thereto,
and that the Seller has not offered the Rule 144A Securities to any person other
than the Buyer or another "qualified institutional buyer" as defined in Rule
144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with,
the Indenture Trustee and the Issuer (as defined in the Indenture (the
"Indenture"), dated as of December 1, 1996, between Home Equity Loan Trust
1996-RHS4, as Issuer, and The Chase Manhattan Bank, as Indenture Trustee,
pursuant to Section 4.02 of the Indenture, as follows:
a. The Buyer understands that the Rule 144A Securities
have not been registered under the 1933 Act or the securities laws of
any state.
b. The Buyer considers itself a substantial,
sophisticated institutional investor having such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of investment in the Rule 144A
Securities.
c. The Buyer has been furnished with all information
regarding the Rule 144A Securities that it has requested from the
Seller, the Indenture Trustee, the Owner Trustee or the Master
Servicer.
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
B-1
<PAGE>
d. Neither the Buyer nor anyone acting on its behalf
has offered, transferred, pledged, sold or otherwise disposed of the
Rule 144A Securities, any interest in the Rule 144A Securities or any
other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, any
interest in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or
taken any other action, that would constitute a distribution of the
Rule 144A Securities under the 1933 Act or that would render the
disposition of the Rule 144A Securities a violation of Section 5 of the
1933 Act or require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in such
manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as
that term is defined in Rule 144A under the 1933 Act and has completed
either of the forms of certification to that effect attached hereto as
Annex 1 or Annex 2. The Buyer is aware that the sale to it is being
made in reliance on Rule 144A. The Buyer is acquiring the Rule 144A
Securities for its own account or the accounts of other qualified
institutional buyers, understands that such Rule 144A Securities may be
resold, pledged or transferred only (i) to a person reasonably believed
to be a qualified institutional buyer that purchases for its own
account or for the account of a qualified institutional buyer to whom
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, or (ii) pursuant to another exemption from
registration under the 1933 Act.
3. This document may be executed in one or more counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same document.
IN WITNESS WHEREOF, each of the parties has executed this
document as of the date set forth below.
Print Name of Seller Print Name of Buyer
By: By:
Name: Name:
Title: Title:
Taxpayer Identification: Taxpayer Identification:
No. No.
Date: Date:
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
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<PAGE>
ANNEX 1 TO EXHIBIT B
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule
144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned and/or invested
on a discretionary basis $______________________** in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and (ii)
the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts
or similar business trust, partnership, or charitable organization
described in Section 501(c)(3) of the Internal Revenue Code.
___ Bank. The Buyer (a) is a national bank or banking institution organized
under the laws of any State, territory or the District of Columbia, the business
of which is substantially confined to banking and is supervised by the State or
territorial banking commission or similar official or is a foreign bank or
equivalent institution, and (b) has an audited net worth of at least $25,000,000
as demonstrated in its latest annual financial statements, a copy of which is
attached hereto.
- --------
** Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
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<PAGE>
___ Savings and Loan. The Buyer (a) is a savings and loan association,
building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and
examined by a State or Federal authority having supervision over
any such institutions or is a foreign savings and loan association
or equivalent institution and (b) has an audited net worth of at
least $25,000,000 as demonstrated in its latest annual financial
statements.
___ Broker-Dealer. The Buyer is a dealer registered pursuant to Section 15
of the -------------
Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company whose primary
and predominant business activity is the writing of insurance or
the reinsuring of risks underwritten by insurance companies and
which is subject to supervision by the insurance commissioner or a
similar official or agency of a State or territory or the District
of Columbia.
___ State or Local Plan. The Buyer is a plan established and maintained by a
State, its political subdivisions, or any agency or instrumentality of the State
or its political subdivisions, for the benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act
of 1974.
___ Investment Adviser. The Buyer is an investment adviser registered under
the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958.
___ Business
Development Company. The Buyer is a business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940.
___ Trust Fund. The
Buyer is a trust fund whose trustee is a bank or trust company ---------- and
whose participants are exclusively (a) plans established and maintained by a
State, its political subdivisions, or any agency or instrumentality of the State
or its political subdivisions, for the benefit of its employees, or (b) employee
benefit plans within the meaning of Title I of the Employee Retirement Income
Security Act of 1974, but is not a trust fund that includes as participants
individual retirement accounts or H.R. 10 plans.
3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
B-4
<PAGE>
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used the
cost of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Rule 144A
Securities are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
___ ___ Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer
agrees that, in connection with any purchase of securities sold to the Buyer for
the account of a third party (including any separate account) in reliance on
Rule 144A, the Buyer will only purchase for the account of a third party that at
the time is a "qualified institutional buyer" within the meaning of Rule 144A.
In addition, the Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer has obtained a current representation letter from
such third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
B-5
<PAGE>
7. The Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification as of the date of such
purchase.
Print Name of Buyer
By:
Name:
Title:
Date:
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
B-6
<PAGE>
ANNEX 2 TO EXHIBIT B
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with
the Rule 144A Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President,
Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer
is a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933 ("Rule 144A") because Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used.
____ The Buyer owned $___________________ in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which owned in
the aggregate $______________ in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year (such
amount being calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps.
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
B-7
<PAGE>
5. The Buyer is familiar with Rule 144A and understands that
each of the parties to which this certification is made are relying and will
continue to rely on the statements made herein because one or more sales to the
Buyer will be in reliance on Rule 144A. In addition, the Buyer will only
purchase for the Buyer's own account.
6. The undersigned will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice, the Buyer's purchase of Rule 144A Securities will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.
Print Name of Buyer
By:
Name:
Title:
IF AN ADVISER:
Print Name of Buyer
Date:
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
B-8
<PAGE>
EXHIBIT C
FORM OF INVESTOR REPRESENTATION LETTER
, 19
Residential Funding Mortgage Securities II, Inc.
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, MN 55437
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, NY 10001
Attention: Corporate Trust Administration
Re: Home Equity Loan-Backed Capped Funding Notes
Series 1996-RHS4
Ladies and Gentlemen:
(the "Purchaser") intends to purchase from
(the "Seller") $ Capped Funding Notes of Series 1996-RHS4 (the "Notes"), issued
pursuant to the Indenture (the "Indenture"), dated as of December 1, 1996
between Home Equity Loan Trust, as issuer (the "Issuer"), and The Chase
Manhattan Bank, as indenture trustee (the "Indenture Trustee"). All terms used
herein and not otherwise defined shall have the meanings set forth in the
Indenture. The Purchaser hereby certifies, represents and warrants to, and
covenants with, the Issuer and the Indenture Trustee that:
1. The Purchaser understands that (a) the Notes have
not been and will not be registered or qualified under the
Securities Act of 1933, as amended (the "Act") or any state
securities law, (b) the Company is not required to so register
or qualify the Notes, (c) the Notes may be resold only if
registered and qualified pursuant to the provisions of the Act
or any state securities law, or if an exemption from such
registration and qualification is available, (d) the Indenture
contains restrictions regarding the transfer of the Notes and
(e) the Notes will bear a legend to the foregoing effect.
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
C-1
<PAGE>
2. The Purchaser is acquiring the Notes for its own
account for investment only and not with a view to or for sale
in connection with any distribution thereof in any manner that
would violate the Act or any applicable state securities laws.
3. The Purchaser is (a) a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters, and, in particular, in such
matters related to securities similar to the Notes, such that
it is capable of evaluating the merits and risks of investment
in the Notes, (b) able to bear the economic risks of such an
investment and (c) an "accredited investor" within the meaning
of Rule 501(a) promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had
an opportunity to review (a) [a copy of the Private Placement
Memorandum, dated _____________ relating to the Notes (b)] a
copy of the Indenture and [b] [c] such other information
concerning the Notes, the Revolving Credit Loans and the
Company as has been requested by the Purchaser from the
Company or the Seller and is relevant to the Purchaser's
decision to purchase the Notes. The Purchaser has had any
questions arising from such review answered by the Company or
the Seller to the satisfaction of the Purchaser. [If the
Purchaser did not purchase the Notes from the Seller in
connection with the initial distribution of the Notes and was
provided with a copy of the Private Placement Memorandum (the
"Memorandum") relating to the original sale (the "Original
Sale") of the Notes by the Company, the Purchaser acknowledges
that such Memorandum was provided to it by the Seller, that
the Memorandum was prepared by the Company solely for use in
connection with the Original Sale and the Company did not
participate in or facilitate in any way the purchase of the
Notes by the Purchaser from the Seller, and the Purchaser
agrees that it will look solely to the Seller and not to the
Company with respect to any damage, liability, claim or
expense arising out of, resulting from or in connection with
(a) error or omission, or alleged error or omission, contained
in the Memorandum, or (b) any information, development or
event arising after the date of the Memorandum.]
5. The Purchaser has not and will not nor has it
authorized or will it authorize any person to (a) offer,
pledge, sell, dispose of or otherwise transfer any Note, any
interest in any Note or any other similar security to any
person in any manner, (b) solicit any offer to buy or to
accept a pledge, disposition of other transfer of any Note,
any interest in any Note or any other similar security from
any person in any manner, (c) otherwise approach or negotiate
with respect to any Note, any interest in any Note or any
other similar security with any person in any manner, (d) make
any general solicitation by means of general advertising or in
any other manner or (e) take any other action, that (as to any
of (a) through (e) above) would constitute a distribution of
any Note under the Act, that would render the disposition of
any Note a violation of Section 5 of the Act or any state
securities law, or that would require
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
C-2
<PAGE>
registration or qualification pursuant thereto. The Purchaser
will not sell or otherwise transfer any of the Notes, except
in compliance with the provisions of the Indenture.
6. The Purchaser is not a non-United States person.
Very truly yours,
By:
Name:
Title:
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C-3
<PAGE>
EXHIBIT D
FORM OF TRANSFEROR REPRESENTATION LETTER
, 19
Residential Funding Mortgage Securities II, Inc.
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, MN 55437
The Chase Manhattan Bank
450 West 33rd Street, 10th Floor
New York, NY 10001
Attention: Corporate Trust Administration
Re: Home Equity Loan-Backed Capped Funding Notes
Series 1996-RHS4
Ladies and Gentlemen:
(the "Purchaser") intends to purchase from
(the "Seller") $ Capped Funding Notes of Series 1996-RHS4 (the "Notes"), issued
pursuant to the (the "Indenture"), dated as of December 1, 1996 between Home
Equity Loan Trust, as issuer (the "Issuer"), and The Chase Manhattan Bank, as
indenture trustee (the "Indenture Trustee"). All terms used herein and not
otherwise defined shall have the meanings set forth in the Indenture. The Seller
hereby certifies, represents and warrants to, and covenants with, the Issuer and
the Indenture Trustee that:
Neither the Seller nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Note, any
interest in any Note or any other similar security to any person in any manner,
(b) has solicited any offer to buy or to accept a pledge, disposition or other
transfer of any Note, any interest in any Note or any other similar security
from any person in any manner, (c) has otherwise approached or negotiated with
respect to any Note, any interest in any Note or any other similar security with
any person in any manner, (d) has made any general solicitation by means of
general advertising or in any other manner, or (e) has taken any other action,
that (as to any of (a) through (e) above) would constitute a distribution of the
Notes under the Securities Act of 1933 (the "Act"), that would render the
disposition of any Note a violation of Section 5 of the Act or any state
securities law, or that would require registration or qualification pursuant
thereto. The Seller will not act, in any manner set forth in the foregoing
sentence with respect to any
[NY01:243629.4] 16069-00382 12/19/96 3:39pm
D-1
<PAGE>
Note. The Seller has not and will not sell or otherwise transfer any of the
Notes, except in compliance with the provisions of the Indenture.
Very truly yours,
(Seller)
By:
Name:
Title:
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D-2
<PAGE>
OPERATING AGREEMENT
OF
1996-RHS4 LLC
<PAGE>
Operating Agreement
of
1996-RHS4 LLC
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Act.......................................................-1-
1.2 Article...................................................-1-
1.3 Certificate of Formation..................................-1-
1.4 Assets....................................................-1-
1.5 Assignee..................................................-1-
1.6 Bankrupt Member...........................................-1-
1.7 [Reserved]................................................-1-
1.8 Capital Account...........................................-1-
1.9 Capital Contribution......................................-1-
1.10 Class A Member............................................-2-
1.11 Class A Ownership Interest................................-2-
1.12 Class A Preferred Return..................................-2-
1.13 [Reserved]................................................-2-
1.14 Class B Members...........................................-2-
1.15 Class B Ownership Interest................................-2-
1.16 Commitment................................................-2-
1.17 Company...................................................-2-
1.18 Company Agreement.........................................-2-
1.19 Company Property..........................................-2-
1.20 Disposition (Dispose).....................................-2-
1.21 Dissociation..............................................-2-
1.22 Dissolution Event.........................................-3-
1.23 Distribution..............................................-3-
1.24 Economic Interest.........................................-3-
1.25 Effective Date............................................-3-
1.26 Exhibit A.................................................-3-
1.27 Fiscal Year...............................................-3-
1.28 [Reserved]................................................-3-
1.29 Initial Capital Account...................................-3-
1.30 Initial Capital Contribution..............................-3-
1.31 Initial Transfer and Admission............................-3-
1.32 Management Right..........................................-3-
1.33 Manager...................................................-3-
1.34 Managing Member...........................................-3-
(i)
<PAGE>
1.35 Member....................................................-3-
1.36 Net Cash Flow.............................................-3-
1.37 Organization..............................................-4-
1.38 Ownership Interest........................................-4-
1.39 [Reserved]................................................-4-
1.40 Principal Office..........................................-4-
1.41 Proceeding................................................-4-
1.42 Property..................................................-4-
1.43 Realized Loss.............................................-4-
1.44 Section...................................................-4-
1.45 Sharing Ratio.............................................-4-
1.46 Substitute Member.........................................-4-
1.47 Tax Characterization and Additional Tax Terms.............-4-
ARTICLE II
FORMATION
2.1 Formation.................................................-6-
2.2 Agreement.................................................-6-
2.3 Name......................................................-6-
2.4 Term......................................................-6-
2.5 Registered Agent and Office...............................-6-
2.6 Principal Office..........................................-7-
ARTICLE III
PURPOSE; NATURE OF BUSINESS
3.1 Limited Purpose...........................................-7-
3.2 Negative Covenants........................................-7-
3.3 No Petition...............................................-7-
ARTICLE IV
ACCOUNTING AND RECORDS
4.1 Records to be Maintained..................................-7-
4.2 Reports to Members........................................-8-
4.3 Tax Returns and Reports...................................-8-
4.4 Separate Books and Records................................-8-
ARTICLE V
NAMES AND ADDRESSES OF MEMBERS
ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS
6.1 Management Rights.........................................-9-
(ii)
<PAGE>
6.2 Liability of Members......................................-9-
6.3 Indemnification...........................................-9-
6.4 Representations and Warranties...........................-10-
6.5 Conflicts of Interest....................................-10-
ARTICLE VII
MANAGING MEMBER
7.1 Managing Member..........................................-10-
7.2 Term of Office as Managing Member........................-11-
7.3 Authority of Managing Member to Bind the Company.........-11-
7.4 Actions of the Managing Members..........................-12-
7.5 Compensation of Managing Member..........................-12-
7.6 Managing Member's Standard of Care.......................-12-
7.7 Resignation; Removal Of Managing Member..................-12-
7.8 Applicability to Manager.................................-12-
ARTICLE VIII
CONTRIBUTIONS AND CAPITAL ACCOUNTS
8.1 Initial Capital Contributions and Initial Capital Accounts.-12-
8.2 Minimum Capital of Managing Member.........................-13-
8.4 No Obligation to Restore Deficit Balance...................-14-
8.5 Withdrawal of Capital; Distributions; Successors...........-14-
8.6 Interest...................................................-14-
8.7 No Personal Liability......................................-14-
ARTICLE IX
ALLOCATIONS AND DISTRIBUTIONS
9.1 Allocation of Profits and Losses.........................-14-
9.2 Special Allocation of Losses.............................-15-
9.3 Special Tax Allocations..................................-15-
9.4 Other Allocation Rules...................................-16-
9.5 Distributions............................................-16-
9.6 Outstanding Reserve Amount...............................-17-
9.7 Minimum Interest of Managing Member......................-18-
9.8 No Distribution in Violation of Law......................-18-
ARTICLE X
TAXES
10.1 Tax Matters Partner......................................-18-
10.2 Mandatory Section 754 Election...........................-18-
ARTICLE XI
TRANSFER OF OWNERSHIP INTEREST
(iii)
<PAGE>
11.1 Compliance with Securities Laws...................................-18-
11.2 Transfer of Economic Interest.....................................-19-
11.3 Status of Transferee of Economic Interest.........................-20-
11.4 Transfer of Management Rights; Admission of Substitute Member.....-20-
11.5 Dissolution or Bankruptcy of a Member.............................-20-
11.6 Dispositions not in Compliance with this Article Void.............-21-
11.7 Approval of Initial Transfer and Admission........................-21-
11.8 Approval of Pledge of Class A Ownership Interest by Trust.........-21-
ARTICLE XII
APPOINTMENT OF MANAGER
12.1 Appointment of Manager............................................-21-
12.2 Specific Performance..............................................-21-
ARTICLE XIII
DISSOCIATION OF A MEMBER
13.1 Dissociation......................................................-21-
ARTICLE XIV
DISSOLUTION AND WINDING UP
14.1 Dissolution.......................................................-22-
14.2 Effect of Dissolution.............................................-22-
14.3 Distribution of Assets on Dissolution Resulting from an Event of
Liquidation.......................................................-22-
14.4 Distribution of Assets on Dissolution for Other Cause.............-23-
14.5 Winding Up and Certificate of Cancellation........................-24-
ARTICLE XV
MISCELLANEOUS
15.1 Notices...........................................................-24-
15.2 Meetings..........................................................-24-
15.3 Headings..........................................................-24-
15.4 Entire Agreement..................................................-24-
15.5 Binding Agreement.................................................-24-
15.6 Saving Clause.....................................................-24-
15.7 Counterparts......................................................-25-
15.8 Governing Law.....................................................-25-
15.9 No Partnership Intended for Nontax Purposes.......................-25-
15.10 No Rights of Creditors and Third Parties under Company
Agreement.........................................................-25-
15.12 General Interpretive Principles..........................-25-
(iv)
<PAGE>
Operating Agreement
of
1996-RHS4 LLC
This Operating Agreement of 1996-RHS4 LLC, a limited liability company
formed pursuant to the Delaware Limited Liability Company Act, is entered into
and shall be effective as of the Effective Date, by and among the Company and
the Persons executing this Company Agreement as Members.
ARTICLE I
DEFINITIONS
For purposes of this Company Agreement, except as otherwise expressly
provided herein or unless the context clearly otherwise requires, capitalized
terms not otherwise defined herein shall have the meanings assigned to such
terms in the Indenture (as hereinafter defined), including Appendix A thereto.
The following terms shall have the following meanings:
1.1 Act. The Delaware Limited Liability Company Act 6 Del.C. ss.18-101, et.
seq., and all amendments to the Act and any successor statute thereto.
1.2
Article. An Article of this Company Agreement.
1.3 Certificate of Formation. The
Certificate of Formation of the Company, as amended from time to time, and filed
with the Secretary of State of Delaware.
1.4 Assets. The Revolving Credit Loans,
including any Additional Balances, contributed to or purchased by the Company
and any REO, and the proceeds therefrom, and all of the Depositor's rights under
the Designated Seller's Agreement.
1.5 Assignee. A transferee of an Economic
Interest who has not been admitted as a Substitute Member. Unless otherwise
clear from the context of its use, the term "transferee" is synonymous with the
term "Assignee."
1.6 Bankrupt Member. A Member who: (1) has become the subject
of an Order for Relief under the United States Bankruptcy Code by voluntary or
involuntary petition, or (2) has initiated, either in an original Proceeding or
by way of answer in any state insolvency or receivership Proceeding, an action
for liquidation arrangement, composition, readjustment, dissolution, or similar
relief.
1.7 [Reserved].
1.8 Capital Account. The account maintained for a Member
or Assignee determined in accordance with Article VIII.
1.9 Capital
Contribution. Any contribution of Property or services made by or on
<PAGE>
behalf of a Member or Assignee.
1.10 Class A Member. The owner of the Class A Ownership Interest in its
capacity as a member of the Company. The initial Class A Member is Residential
Funding Mortgage Securities II, Inc., a Delaware Corporation which, immediately
after the execution of this Company Agreement, shall transfer its entire Class A
Ownership Interest to Home Equity Loan Trust 1996-RHS4, a Delaware business
trust established pursuant the Trust Agreement dated as of December 1, 1996
between Residential Funding Mortgage Securities II, Inc., as Depositor, and
Wilmington Trust Company, as Owner Trustee (the "Trust").
1.11 Class A Ownership Interest. The Class A Member's Economic Interest and
Management Right.
1.12 Class A Preferred Return. For purposes of any
distribution under Section 9.5(a)(i), a rate equal to LIBOR plus 0.50% per annum
(or, on any Payment Date when the aggregate Principal Balance of the Revolving
Credit Loans as of the last day during the related Collection Period is less
than 10% of the aggregate Cut-off Date Balance, LIBOR plus 0.835% per annum),
but not more than the Net Loan Rate Cap plus 0.125%.
1.13 [Reserved].
1.14 Class
B Members. The owners of the Class B Ownership Interest, GMAC Mortgage
Corporation, a Pennsylvania corporation, and Mortgage Assets Trading, Inc., a
Delaware corporation, each in their capacities as Members of the Company
1.15
Class B Ownership Interest. A Class B Member's Economic Interest and Management
Right.
1.16 Commitment. The Capital Contributions that a Member is obligated to
make, including a Member's Initial Capital Contribution.
1.17 Company. 1996-RHS4
LLC, a limited liability company formed under the laws of Delaware, and any
successor limited liability company.
1.18 Company Agreement. This Operating
Agreement, which shall constitute the limited liability company agreement of the
Company for purposes of the Act, including all amendments adopted in accordance
with this Company Agreement and the Act.
1.19 Company Property. Any Property
owned by the Company.
1.20 Disposition (Dispose). Any sale, assignment,
exchange, mortgage, pledge, grant, hypothecation, or other transfer, absolute or
as security or encumbrance (including dispositions by operation of law).
1.21
Dissociation. Any action which causes a Person to cease to be Member as
described in Article XIII hereof.
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<PAGE>
1.22 Dissolution Event. An event, the occurrence of which will result in the
dissolution of the Company under Article XIV.
1.23 Distribution. A transfer of
Property to a Member on account of an Ownership Interest as described in Article
IX
1.24 Economic Interest. The right of a Member to receive allocations of
Profits and Losses, Distributions and returns of capital, as provided in Article
IX, and distribution of assets upon a dissolution of the Company, as provided in
Article XIV.
1.25 Effective Date. December 1, 1996.
1.26 Exhibit A. Exhibit A to
this Company Agreement, setting forth the name, address, Initial Capital
Contribution, Initial Capital Account and Sharing Ratio of each Member.
1.27
Fiscal Year. The calendar year.
1.28 [Reserved].
1.29 Initial Capital Account.
The initial capital account of each Member as described in Exhibit A.
1.30
Initial Capital Contribution. The Capital Contribution agreed to be made by the
Members as described in Article VIII and Exhibit A.
1.31 Initial Transfer and
Admission. The transfer by Residential Funding Mortgage Securities II, Inc.,
upon the execution of this Company Agreement, of its entire Class A Ownership
Interest to the Trust, and the admission of the Trust as a Substitute Member, as
provided in Section 11.7.
1.32 Management Right. The right of a Member to
participate in the management of the Company, to vote on any matter, and to
grant or withhold consent or approval of actions of the Company.
1.33 Manager.
The Indenture Trustee, or its nominee, in the event such party becomes the
Manager as provided in Article XII.
1.34 Managing Member. A Member selected to
manage the affairs of the Company under Article VII hereof.
1.35 Member. A party
(other than the Company) executing this Company Agreement, and a Substitute
Member.
1.36 Net Cash Flow. Net Cash Flow shall mean with any respect to any
Payment Date, all revenues of the Company during the period for that Payment
Date, including the amount deposited in the Distribution Account on the Business
Day prior to such Payment Date pursuant to Section 3.03(i) of the Servicing
Agreement, decreased by (a) cash expenditures for
-3-
<PAGE>
operating expenses for the period ending on such Payment Date, (b) Distributions
to the Class A Member pursuant to paragraph (a)(i),(ii),(iii), (iv), (v) and
(vi) of Section 9.5 for such Payment Date, and (c) Distributions to the Class B
Members pursuant to paragraph (b) of Section 9.5 for such Payment Date.
1.37 Organization. A Person other than a natural person. Organization
includes, without limitation, corporations (both non-profit and other
corporations), partnerships (both limited and general), joint ventures, limited
liability companies, and unincorporated associations, but the term does not
include joint tenancies and tenancies by the entirety.
1.38 Ownership Interest. The Class A Ownership Interest or a Class B Ownership
Interest.
1.39 [Reserved].
1.40 Principal Office. The Principal Office of the
Company set forth in Section 2.6.
1.41 Proceeding. Any administrative, judicial,
or other adversary proceeding, including, without limitation, litigation,
arbitration, administrative adjudication, mediation, and appeal or review of any
of the foregoing.
1.42 Property. Any property, real or personal, tangible or
intangible, including money, and any legal or equitable interest in such
property, but excluding services and promises to perform services in the future.
1.43 Realized Loss. A loss incurred on a defaulted Revolving Credit Loan that
has been finally liquidated.
1.44 Section. A section of this Company Agreement.
1.45 Sharing Ratio. A Member's share of Profits and Losses as set forth in
Exhibit A.
1.46 Substitute Member. An Assignee who has been admitted to all of
the rights of membership pursuant to Section 11.4 or Section 11.5 of this
Company Agreement.
1.47 Tax Characterization and Additional Tax Terms. It is
intended that the Company be characterized and treated as a partnership for, and
solely for, federal, state and local income and franchise tax purposes. Unless
otherwise required by appropriate tax authorities, the Company will file or
cause to be filed annual or other necessary returns, reports and other forms
consistent with the characterization of the Company as a partnership for such
tax purposes, including, to the extent necessary or appropriate to insure such
partnership characterization, an affirmative election to be treated as a
partnership under any future procedure promulgated by the Internal Revenue
Service as contemplated by Notice 95-14 and Proposed Regulation section
301.7701-3. For the foregoing purposes, (i) the Company shall be subject to all
of the provisions of Subchapter K of Chapter 1 of Subtitle A of the Code, (ii)
all references to a "Partner," to "Partners" and to the "Partnership" in this
Company Agreement (including
-4-
<PAGE>
the provisions of Articles VIII and IX) and in the provisions of the Code and
Regulations cited in this Company Agreement shall be deemed to refer to a
Member, the Members and the Company, respectively. In addition, the following
terms shall have the following meanings:
(a) Adjusted Capital Account Deficit shall mean, with respect
to any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the relevant Fiscal Year, after giving effect
to the following adjustments:
(i) Credit to such Capital Account the minimum gain
chargeback that such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and shall be interpreted consistently therewith.
(b) Code shall mean the Internal Revenue Code of 1986.
(c) Profits and Losses shall mean, for each Fiscal Year, an
amount equal to the Company's taxable income or loss for such Fiscal
Year, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss, or deduction required to
be stated separately pursuant to Section 703(a)(1) of the Code shall be
included in taxable income or loss) and by treating Distributions to
the Class A Member under paragraph (a)(i) of Section 9.5 as a
deductible expense of the Company, with the following adjustments:
(i) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this Subsection (i)
shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in
Section 705(a)(2)(B) of the Code or treated as Section
705(a)(2)(B) of the Code expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise
taken into account in computing Profits or Losses pursuant to
this Subsection (i), shall be subtracted from such taxable
income or loss;
(iii) Notwithstanding any other provisions of this
definition, any items which are specially allocated pursuant
to Sections 9.3 or 9.4 shall not be taken into account in
computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss, or
deduction available to be specially allocated pursuant to Sections 9.3
or 9.4 shall be determined by applying rules analogous to those set
forth in clauses (i) through (iii) above.
-5-
<PAGE>
(d) Regulations shall mean the federal income tax regulations
promulgated by the United States Treasury Department under the Code as
such Regulations may be amended from time to time. All references
herein to a specific section of the Regulations shall be deemed also to
refer to any corresponding provision of succeeding Regulations.
ARTICLE II
FORMATION
2.1 Formation. The Members hereby form the Company as a Delaware limited
liability company pursuant to the provisions of the Act.
2.2 Agreement. For and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members executing this Company
Agreement hereby agree to the terms and conditions of this Company Agreement, as
it may from time to time be amended. It is the express intention of the Members
that this Company Agreement shall be the sole source of agreement of the
parties, and, except to the extent a provision of this Company Agreement
expressly incorporates federal income tax rules by reference to sections of the
Code or Regulations or is expressly prohibited or ineffective under the Act,
this Company Agreement shall govern, even when inconsistent with, or different
than, the provisions of the Act or any other law or rule. To the extent any
provision of this Company Agreement is prohibited or ineffective under the Act,
this Company Agreement shall be considered amended to the smallest degree
possible in order to make this Company Agreement effective under the Act. In the
event the Act is subsequently amended or interpreted in such a way to make any
provision of this Company Agreement that was formerly invalid valid, such
provision shall be considered to be valid from the effective date of such
interpretation or amendment.
2.3 Name. The name of the Company is 1996-RHS4 LLC, and all business of
the Company shall be conducted under that name or under any other name but, in
any case, only to the extent permitted by applicable law.
2.4 Term. The Company shall be dissolved and its affairs wound up in
accordance with the Act and this Company Agreement on December 31, 2050, unless
the term shall be extended by amendment to this Company Agreement or unless the
Company shall be sooner dissolved and its affairs wound up in accordance with
the Act or this Company Agreement.
2.5 Registered Agent and Office. The registered agent for the service
of process and the registered office shall be that Person and location reflected
in the Certificate of Formation as filed in the office of the Secretary of State
of Delaware. The Managing Member, may, from time to time, change the registered
agent or office through appropriate filings with the Secretary of State of
Delaware. In the event the registered agent ceases to act as such for any reason
or the registered office shall change, the Managing Member shall promptly
designate a replacement registered agent or file a notice of change of address
as the case may be. If the Managing Member shall fail to designate a replacement
registered agent or change of address of the registered office, any Member may
designate a replacement registered agent or file a notice of change of address.
-6-
<PAGE>
2.6 Principal Office. The Principal Office of the Company shall be located
at 8400 Normandale Lake Boulevard, Suite 700, Minneapolis, Minnesota 55437.
ARTICLE III
PURPOSE; NATURE OF BUSINESS
3.1 Limited Purpose. The purpose of the Company is to own the Assets,
collect the proceeds therefrom and distribute such proceeds in the manner
provided in this Company Agreement, and to exercise any and all rights as
assignee of the Purchase Agreement, including the right to purchase Additional
Balances. The Company shall have the authority to do all things necessary or
convenient to accomplish its purpose and operate its business as described in
this Article III. The Company shall not engage in any activity other than in
connection with or incidental to the foregoing, or other than as contemplated in
the Basic Documents, while any Note or Certificate is outstanding (or thereafter
until all amounts owing to the Credit Enhancer in connection therewith have been
paid in full) without the express prior written consent of the Indenture Trustee
and the Credit Enhancer.
3.2 Negative Covenants. So long as any Note or Certificate is outstanding
(or thereafter until all amounts owing to the Credit Enhancer in connection
therewith have been paid in full), the Company shall not:
(a) incur any debt or
any other liability to any person (other than its obligations to the Members as
provided herein);
(b) consolidate or merge with or into, or transfer any
significant portion of its assets to, any Person; or
(c) sell, transfer, pledge,
hypothecate or otherwise convey any interest in any of the Assets to any Person,
or permit any lien or security interest against any of the Assets to exist in
favor of any Person, other than the Indenture Trustee or the Credit Enhancer;
in each case without the express prior written consent of the Indenture Trustee,
the Credit Enhancer and each Rating Agency.
3.3 No Petition. Each Member hereby covenants and agrees that it will
not at any time institute against the Company, or join in any institution
against the Company of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
under any of the Basic Documents.
ARTICLE IV
ACCOUNTING AND RECORDS
4.1 Records to be Maintained. The Company shall maintain the following
records at the Principal Office:
-7-
<PAGE>
(a) a current list of the full name and last known business address of each
Member;
(b) a copy of the Certificate of Formation and all amendments
thereto, together with executed copies of any powers of attorney
pursuant to which the Certificate of Formation or any such amendment
has been executed;
(c) a copy of the Company's federal, state and local income tax returns and
reports;
(d) a copy of this Company Agreement including all amendments thereto; and
(e) the Company's books and records, including financial
statements of the Company, which shall be open to inspections by the
Members or their agents at reasonable times.
4.2 Reports to Members. The Managing Member shall provide reports,
including a balance sheet, statement of profit and loss and changes in Members'
accounts, and a statement of cash flows, at least annually to the Members at
such time and in such manner as the Managing Member may determine reasonable.
4.3 Tax Returns and Reports. The parties acknowledge that, in
accordance with the provisions of the Servicing Agreement, Residential Funding
Corporation, as Administrator, is required (i) to prepare all income tax returns
of the Company as to all jurisdictions where such returns are in the judgment of
the Administrator required to be filed or as to which the Company may direct
such returns to be prepared, (ii) to deliver such returns to the Tax Matters
Partner at least one week prior to their due dates in order to enable the Tax
Matters Partner to sign and timely file such returns and (iii) to prepare and
deliver to each Member, within ninety (90) days after the expiration of each
Fiscal Year all information returns required by the Code and Company information
necessary for the preparation of the Members' federal income tax returns. The
Tax Matters Partner shall sign and timely file the tax returns supplied to it by
the Administrator, subject to its right to review such returns for completeness
and accuracy.
4.4 Separate Books and Records. The Company shall maintain all of its
books and records separate and apart from those of any Member or any other
Person. The Company shall not permit any commingling of any of its Assets with
the assets of any Member or any other Person, except as expressly set forth in
the Servicing Agreement with respect to funds held in the Custodial Account.
ARTICLE V
NAMES AND ADDRESSES OF MEMBERS
5.1 Residential Funding Mortgage Securities II, Inc. is hereby admitted to
the Company as a Class A Member. GMAC Mortgage Corporation and Mortgage Assets
Trading, Inc. are hereby admitted to the Company as Class B Members. The names
and addresses of the Members are as stated on Exhibit A.
-8-
<PAGE>
ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS
6.1 Management Rights. Except as provided in Article XII, the
management of the Company shall be vested solely in the Managing Member.
Notwithstanding the foregoing, the following actions shall require the consent
of all of the Members (and shall be further subject to any applicable additional
restrictions set forth herein):
(a) any amendment to this Company Agreement;
(b) the assignment of an Economic Interest, except as otherwise provided
under Section 11.2 or Section 11.8;
(c) the admission of any Assignees as a Substitute Members;
(d) the sale of Company Property other than in the ordinary
course of business except in connection with the dissolution of the
Company upon an Event of Liquidation as provided in Section 14.3;
(e) the merger or consolidation of the Company with any other Person;
(f) the continuation of the Company after a Dissolution Event;
(g) the borrowing of funds or the pledging, mortgaging or otherwise
encumbering any Company Property; or
(h) the commencement by the Company of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Company to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Company to the appointment or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official of the Company or for any substantial part of the
Assets.
Neither the Company, nor the Managing Member or the Manager (if applicable) on
behalf of the Company, shall take any of the foregoing actions without first
obtaining from each Member a duly executed instrument evidencing such required
consent.
6.2 Liability of Members. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Member shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member.
6.3 Indemnification. The Company shall indemnify the Members and its
agents for all costs, losses, liabilities, and damages paid or incurred in
connection with the business of the Company, to the fullest extent provided or
allowed by the laws of the State of Delaware.
-9-
<PAGE>
6.4 Representations and Warranties. Each Member, and in the case of a
trust or other entity, the person(s) executing this Company Agreement on behalf
of the entity, hereby represents and warrants to the Company and each other
Member that: (a) if that Member is an entity, it has power to enter into this
Company Agreement and to perform its obligations hereunder and that the
person(s) executing this Company Agreement on behalf of the entity has the power
to do so; and (b) the Member is acquiring its interest in the Company for the
Member's own account as an investment and without an intent to distribute the
interest with the exception of the transfer by the Depositor to the Owner
Trustee of the Class A Ownership Interest. The Members acknowledge that their
interests in the Company have not been registered under the Securities Act of
1933 or any state securities laws, and may not be resold or transferred without
appropriate registration or the availability of an exemption from such
requirements, and that any sale, resale or transfer of such an interest is
further restricted as provided in Article XI.
6.5 Conflicts of Interest.
(a) A Member, including a Managing Member, shall be entitled
to enter into transactions that may be considered to be competitive
with, or a business opportunity that may be beneficial to, the Company,
it being expressly understood that Members may enter into transactions
that are similar to the transactions into which the Company may enter.
Notwithstanding the foregoing, Members shall account to the Company and
hold as trustee for it any Property, profit, or benefit derived by the
Member, without the consent of all of the other Members, in the conduct
and winding up of the Company business or from a use or appropriation
by the Member of Company Property including information developed
exclusively for the Company and opportunities expressly offered to the
Company.
(b) A Member, including a Managing Member, does not violate a
duty or obligation to the Company merely because the Member's conduct
furthers the Member's own interest. A Member may lend money to and
transact other business with the Company on terms that are fair to the
Company. The rights and obligations of a Member who lends money to or
transacts business with the Company are the same as those of a person
who is not a Member, subject to other applicable law. No transaction
with the Company shall be voidable solely because a Member has a direct
or indirect interest in the transaction if the transaction is fair to
the Company.
Notwithstanding the foregoing, each Member hereby consents to
all actions and agreements of all other Members, and all Affiliates thereof, as
contemplated under the Basic Documents.
ARTICLE VII
MANAGING MEMBER
7.1 Managing Member. Except as otherwise provided in this Company
Agreement, the management of the Company and all decisions concerning the
business affairs of the Company shall be made by the Managing Member. The
Managing Member shall be the Class
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<PAGE>
A Member.
7.2 Term of Office as Managing Member. The Managing Member shall serve
as such until the Dissociation of such Managing Member, any removal of such
Managing Member pursuant to Section 7.7, or the appointment of the Manager as
provided in Article XII.
7.3 Authority of Managing Member to Bind the Company. Except as
provided in Article XII, only the Managing Member and authorized agents of the
Company shall have the authority to bind the Company. No Member other than a
Managing Member shall take any action as a Member to bind the Company. A Member
shall indemnify the Company for any costs or damages incurred by the Company as
a result of any unauthorized action of such Member. Subject to Section 6.1, the
Managing Member has the power, on behalf of the Company, to do all things
necessary or convenient to carry out the business and affairs of the Company (as
described in Article III), including, without limitation:
(a) the entering into and carrying out the terms of the Servicing
Agreement and the Custodial Agreement;
(b) the exercise of any and all rights, remedies, powers and
privileges lawfully available to the Company under or in connection
with the Designated Seller's Agreement, the Custodial Agreement and the
Servicing Agreement, and the taking of all lawful action to compel or
secure the performance and observance by the Designated Seller, the
Custodian, the Master Servicer and the Administrator, as applicable, of
each of their obligations to the Company under or in connection with
the Designated Seller's Agreement, the Custodial Agreement and the
Servicing Agreement.
(c) the receipt or other acquisition, ownership, holding,
improvement, use and other dealing with the Assets;
(d) the sale, conveyance, exchange and other disposition of the Assets;
(e) the conduct of the Company's business, the establishment of Company
offices, and the exercise of the powers of the Company;
(f) the appointment of employees and agents of the Company,
the defining of their duties and the establishment of their
compensation, and the dealing with tradespeople, accountants and
attorneys, on such terms as the Managing Member shall determine;
(g) the institution, prosecution and defense of any Proceeding in the
Company's name; and
(h) the making of such elections under the Code and other
relevant tax laws as to the treatment of items of Company income, gain,
loss, deduction and credit, and as to all other relevant matters as the
Managing Member deems necessary or appropriate, including without
limitation, elections referred to in Section 754 of the Code, the
determination of which items of cash outlay shall be capitalized or
treated as current
-11-
<PAGE>
expenses, and the selection of the method of accounting and bookkeeping
procedures to be used by the Company.
7.4 Actions of the Managing Members. The Managing Member has the power
to bind the Company as provided in this Article VII. No Person dealing with the
Company shall have any obligation to inquire into the power or authority of the
Managing Member acting on behalf of the Company.
7.5 Compensation of Managing Member. The Managing Member shall be
reimbursed all reasonable expenses incurred in managing the Company but shall
not be entitled to any compensation for its services as Managing Member. The
Managing Member shall not be required to devote full time to the management of
the Company business, but only so much time as shall be necessary or appropriate
for the proper management of such business.
7.6 Managing Member's Standard of Care. The Managing Member's duty of
care in the discharge of the Managing Member's duties to the Company and the
other Members is limited to refraining from engaging in negligent or reckless
conduct, intentional misconduct, fraud or a knowing violation of law. In
discharging its duties, a Managing Member shall be fully protected in relying in
good faith upon the records required to be maintained under Article IV and upon
such information, opinions, reports or statements by any Person as to matters
the Managing Member reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Company, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits or
losses of the Company or any other facts pertinent to the existence and amount
of assets from which distributions to Members might properly be paid.
7.7 Resignation; Removal Of Managing Member. The Managing Member shall
not have a right to resign and, except as provided in Article XII, may not be
removed for any reason other than a breach of the Managing Member's duty of
care, as set forth in Section 7.6.
7.8 Applicability to Manager. References in this Article to the Managing
Member shall apply to the Manager, if appointed pursuant to Article XII.
ARTICLE VIII
CONTRIBUTIONS AND CAPITAL ACCOUNTS
8.1 Initial Capital Contributions and Initial Capital Accounts. Each
Member shall make the Initial Capital Contribution and shall have the Initial
Capital Account described for that Member on Exhibit A at the time and on the
terms specified in Exhibit A. The Initial Capital Account of the Class A Member
reflects the transfer of the Revolving Credit Loans to the Company by the Class
A Member as its Initial Capital Contribution, net of the value of the Class B
Ownership Interests. The Initial Capital Account of the Class B Members in the
aggregate reflects the right of GMAC Mortgage Corporation, as Designated Seller
under the Designated Seller's Agreement, to receive the Class B Ownership
Interests. No Member shall have the right to withdraw or be repaid any Capital
Contribution or any portion of its Capital Account except as provided in this
Company Agreement.
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8.2 Minimum Capital of Managing Member. The Managing Member shall make
additional contributions from time to time to the extent necessary to maintain
the Managing Member's Capital Account balance at least equal to the lesser of
(a) 1.01% of the total positive balances of the Capital Accounts of the other
Members determined under this Article VIII, or (b) $500,000. Whenever a Member
who is not a Managing Member makes a capital contribution to the Company, the
Managing Member shall immediately contribute to the Company capital equal to
1.01% of such capital contribution or such lesser amount, if any, as shall be
necessary to cause the Managing Member's capital account balance to equal the
lesser of (a) 1.00% of the total positive capital account balance of all Members
or (b) $500,000.
8.3 Capital Account. A separate capital account shall be maintained for
each Member throughout the term of the Company in accordance with the rules of
Section 1.704--1(b)(2)(iv) of the Regulations as in effect from time to time,
and, to the extent not inconsistent therewith, to which the following provisions
apply:
(a) To each Member's Capital Account there shall be credited
(i) the amount of money contributed by such Member to the Company
(including liabilities of the Company assumed by such Member as
provided in Section 1.704-1(b)(2)(iv)(c) of the Regulations); (ii) the
fair market value of any property contributed to the Company by such
Member (net of liabilities secured by such contributed property that
the Company is considered to assume or take subject to under Section
752 of the Code); (iii) such Member's share of Profits and items of
income and gain that are specially allocated to such Member, other than
any guaranteed payments allocated to such Member under Section
9.5(a)(i) and other than any Profits allocated to such Member pursuant
to Section 9.3(c) in accordance with Section 704(c) of the Code.
(b) To each Member's Capital Account there shall be debited
(i) the amount of money distributed to such Member by the Company,
other than any guaranteed payments allocated to such Member under
Section 9.5(a)(i), (including liabilities of such Member assumed by the
Company as provided in Section 1.704-1(b)(2)(iv)(c) of the Regulations)
other than amounts which are in repayment of debt obligations of the
Company to such Member; (ii) the fair market value of property
distributed to such Member (net of liabilities secured by such
distributed property that such Member is considered to assume or take
subject to); and (iii) such Member's share of Losses or items of loss
or deduction that are specially allocated to such Member other than any
Losses allocated to such Member pursuant to Section 9.3(c) in
accordance with Section 704(c) of the Code,
(c) The Capital Account of a transferee Member shall include
the appropriate portion of the Capital Account of the Member from whom
the transferee Member's interest was obtained.
(d) In determining the amount of any liability, there shall be
taken into account Section 752(c) of the Code and any other applicable
provisions of the Code and Regulations.
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The foregoing provisions and the other provisions of this Company
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Section 1.704-1(b) of the Regulations, and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the Managing Member
shall determine that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including, without limitation,
debits or credits relating to liabilities that are secured by contributed or
distributed property or that are assumed by the Company or any Member), are
computed in order to comply with such Regulations, the Managing Member may make
such modification, provided that it is not likely to have a material effect on
the amounts distributable to any Member pursuant to Article XIV hereof upon the
dissolution of the Company. The Managing Member also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company's balance sheet, as computed for book purposes, in accordance with
Section 1.704-1(b)(2)(iv)(g) of the Regulations, and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Section 1.704-1(b) of the Regulations.
8.4 No Obligation to Restore Deficit Balance. No Member shall be required
to restore any deficit balance in its Capital Account.
8.5 Withdrawal of Capital; Distributions; Successors. A Member shall
not be entitled to withdraw any part of its Capital Account, to receive any
distribution from the Company, or to make any capital contribution to the
Company except as specifically provided in this Company Agreement. Any Member,
including any additional or substitute Member, who shall receive an interest in
the Company or whose interest in the Company shall be increased by means of a
transfer to it of all or part of the interest of another Member, shall have a
Capital Account with respect to such interest initially equal to the Capital
Account with respect to such interest of the Member from whom such interest is
acquired except as otherwise required to account for any step up in basis
resulting from a termination of the Company under Section 708 of the Code by
reason of such interest transfer.
8.6 Interest. Except as provided in this Company Agreement, no Member
shall be entitled to interest on such Member's Capital Contribution or on any
Profits retained by the Company.
8.7 No Personal Liability. The Managing Member shall have no personal
liability for the repayment of any Capital Contributions of any Member.
ARTICLE IX
ALLOCATIONS AND DISTRIBUTIONS
9.1 Allocation of Profits and Losses. Except as otherwise provided in
this Article IX, Profits and Losses, and each item of Company income, gain,
loss, deduction, credit and tax preference with respect thereto, for each Fiscal
Year (or shorter period in respect of which such items are to be allocated)
shall be allocated among the Members pro rata, in proportion to their respective
Sharing Ratios.
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9.2 Special Allocation of Losses. Realized Losses in an amount equal to
the amount distributable to the Class A Member under Section 9.5(a)(iii) shall
be allocated to the Class B Members until their capital accounts are zero, and
thereafter to the Class A Member. To the extent that Realized Losses are so
allocated to the Class A Member in any Fiscal Year, if Profits would otherwise
be allocable in any subsequent Fiscal Year to the Class B Members, such Profits
shall instead be allocated to the Class A Member in an amount equal to the
Realized Losses previously allocated to the Class A Member.
9.3 Special Tax Allocations.
(a) Qualified Income Offset. The Managing Member shall
specially allocate items of income and gain when and to the extent
required to satisfy the "qualified income offset" requirement within
the meaning of Section 704-1(b)(2)(ii)(d) of the Regulations.
(b) Gross Income Allocation. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year which is in
excess of the sum of the amount such Member is deemed to be obligated
to restore pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Member
shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 9.3(b) shall be made only if and to
the extent that such Member would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this
Article IX have been made as if this Section 9.3(b) were not in this
Company Agreement.
(c) Mandatory Allocations Under Code Section 704(c).
Notwithstanding the foregoing provisions of this Section 9.3, in the
event Code Section 704(c) or Code Section 704(c) principles applicable
under Section 1.704-1(b)(2)(iv) of the Regulations require allocations
of Profits or Losses in a manner different than that set forth above,
the provisions of Section 704(c) of the Code and the Regulations
thereunder shall control such allocations among the Members. Any item
of Company income, gain, loss and deduction with respect to any
property (other than cash) that has been contributed by a Member to the
capital of the Company or which has been revalued for Capital Account
purposes pursuant to Section 1.704-l(b)(2)(iv) of the Regulations and
which is required or permitted to be allocated to such Member for
income tax purposes under section 704(c) of the Code so as to take into
account the variation between the tax basis of such property and its
fair market value at the time of its contribution shall be allocated
solely for income tax purposes in the manner so required or permitted
under Code section 704(c) using the "traditional method" described in
Section 1.704-3(b) of the Regulations, provided, however, that curative
allocations consisting of the special allocation of gain or loss upon
the sale or other disposition of the contributed property shall be made
in accordance with Section 1.704-3(c) of the Regulations to the extent
necessary to eliminate any disparity, to the extent possible, between
the Members' book and tax Capital Accounts attributable to such
property; further provided, however, that the Managing Member may elect
to use any other method allowable under applicable Regulations.
(d) Curative Allocations. The allocations set forth in Sections 9.3(a) and
(b) (the "Regulatory Allocations") are intended to comply with certain
requirements of the
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Regulations. It is the intent of the Members that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of
Company income, gain, loss, or deduction pursuant to this Section
9.3(d). Therefore, notwithstanding any other provision of this Article
IX (other than the Regulatory Allocations), the Managing Member shall
make such offsetting special allocations of Company income, gain, loss,
or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital
Account balance is, to the extent possible, equal to the Capital
Account balance such Member would have had if the Regulatory
Allocations were not part of this Company Agreement and all Company
items were allocated pursuant to Section 9.1.
9.4 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other item allocable to any period (including allocations to take into
account any changes in any Member's Sharing Ratio during a Fiscal Year
and any transfer of any interest in the Company), Profits, Losses, and
any such other item shall be determined on a daily, monthly, or other
basis, as determined by the Managing Member using any permissible
method under Section 706 of the Code and the Regulations thereunder.
(b) The Members are aware of the income tax consequences of
the allocations made by this Article IX and hereby agree to be bound by
the provisions of this Article IX in reporting their shares of Company
income and loss for income tax purposes.
(c) Except as otherwise provided in this Article IX, an
allocation of Company Profits or Losses to a Member shall be treated as
an allocation to such Member of the same share of each item of income,
gain, loss and deduction taken into account in computing such Profits
or Losses.
9.5 Distributions.
(a) Preferred Distribution to Class A Member. On the Business
Day prior to each Payment Date, the following amounts shall be
distributed by the Master Servicer in accordance with Section 5.01 of
the Servicing Agreement to the Class A Member, to the extent of
available funds in the Distribution Account established by the Master
Servicer pursuant to such section of the Servicing Agreement:
(i) a preferred return in an amount equal to yield
due for such Payment Date at the Class A Preferred Return for
such Payment Date on the Class A Principal Balance immediately
prior to such Payment Date, calculated on the basis of the
actual number of days in the related Interest Period and a
year assumed to consist of 360 days, together with any overdue
accrued interest as so calculated remaining unpaid from any
prior Payment Date with interest thereon at the rate specified
in the Insurance Agreement for amounts owing to the Credit
Enhancer for draws relating to accrued interest on the Class A
Principal Balance; plus
(ii) an amount equal to the Principal Collection Distribution Amount,
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applied to reduce the Class A Principal Balance; plus
(iii) an amount equal to the Liquidation Loss Distribution Amount; plus
(iv) the Special Capital Distribution Amount; plus
(v) an amount equal to any Interest Shortfalls not previously paid; plus
(vi) an amount equal to 10% of the excess on such
Payment Date, if any, of the Outstanding Reserve Amount (as
reduced in connection with any Liquidation Loss Amount on such
Payment Date) over the Reserve Amount Target.
(b) Preferred Distribution to Class B Members. On each Payment
Date, there shall be distributed by the Master Servicer to the Class B
Members, to the extent of available funds in the Distribution Account
and after the Distributions described in paragraphs (a)(i) through
(a)(vi) of this Section 9.5 have been made, an amount equal to 90% of
the excess on such Payment Date, if any, of the Outstanding Reserve
Amount (as reduced in connection with any Liquidation Loss Amount on
such Payment Date) over the Reserve Amount Target.
(c) Tax Treatment of Distributions. For income tax purposes,
(i) the payments described in Section 9.5(a)(i) and (v) shall be
treated as guaranteed payments pursuant to Section 707(c) of the Code
and shall not reduce the balance of Class A Member's Capital Account,
and (ii) the payments described in Section 9.5(a)(ii), (iii), (iv) and
(vi) shall be treated as returns of capital to, and shall reduce the
balance of the Capital Account of, the Class A Member.
(d) Net Cash Flow Distributions. On each Payment Date, Net
Cash Flow for such Payment Date shall be distributed to the Members by
the Master Servicer in proportion to the respective shares of Profits
allocated to each under Section 9.1. Amounts so distributed to the
Class A Members shall be distributed by the Administrator in accordance
with Section 5.01 of the Servicing Agreement.
(e) Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any
payment, distribution, or allocation to the Company or the Members
shall be treated as amounts distributed to the Members pursuant to this
Section 9.5 for all purposes under this Company Agreement. The Managing
Member is authorized to instruct the Master Servicer to withhold from
distributions, or with respect to allocations, to the Members and to
pay over to any federal, state, or local government any amounts
required to be so withheld pursuant to the Code or any provisions of
any other federal, state, or local law, and shall allocate any such
amounts to the Members with respect to which such amount was withheld.
9.6 Outstanding Reserve Amount. On each Payment Date, the Outstanding
Reserve Amount (as in effect immediately prior to such Payment Date) shall be
deemed to be reduced (but not below zero) by an amount equal to any Liquidation
Loss Amounts (other than any
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Excess Loss Amounts) for such Payment Date, except to the extent that such
Liquidation Loss Amounts were covered by a distribution made pursuant to clause
(A) of the definition of Liquidation Loss Distribution Amount pursuant to
Section 9.5 (a)(iii)(A) on such Payment Date.
9.7 Minimum Interest of Managing Member. Notwithstanding anything in
this Article IX to the contrary other than the Regulatory Allocations, the
Managing Member shall at all times during the existence of the Company have a
minimum 1% allocation of each material item of income, gain, loss, deduction and
credit of the Company.
9.8 No Distribution in Violation of Law. Notwithstanding any provision
of the contrary contained in this Company Agreement, the Company shall not make
a distribution to any Member on account of its interest in the Company if such
distribution would violate ss.18-607 of the Act or any other applicable law.
ARTICLE X
TAXES
10.1 Tax Matters Partner. The Managing Member shall be the Tax Matters
Partner of the Company pursuant to Section 6231(a)(7) of the Code. The Managing
Member shall not resign as the Tax Matters Member unless, on the effective date
of such resignation, the Company has designated another Member as Tax Matters
Member and such Member has given its consent in writing to its appointment as
Tax Matters Member. The Tax Matters Member shall receive no additional
compensation from the Company for its services in that capacity, but all
expenses incurred by the Tax Matters Member in such capacity shall be borne by
the Company. The Tax Matters Member is authorized to employ such accountants,
attorneys and agents as it, in its sole discretion, determines is necessary to
or useful in the performance of its duties. In addition, the Managing Member
shall serve in a similar capacity with respect to any similar tax related or
other election provided by state or local laws.
10.2 Mandatory Section 754 Election. Upon a transfer by a Member of an
interest in the Company, which transfer is permitted by the terms of this
Company Agreement, or upon the death of a Member or the distribution of any
Company Property to one or more Members, the Managing Member, upon the request
of one or more of the transferees or distributees, shall cause the Company to
file an election on behalf of the Company, pursuant to Section 754 of the Code,
to cause the basis of the Company's property to be adjusted for federal income
tax purposes in the manner prescribed in Section 734 or Section 743 of the Code,
as the case may be. The cost of preparing such election, and any additional
accounting expenses of the Company occasioned by such election, shall be borne
by such transferees or distributees.
ARTICLE XI
TRANSFER OF OWNERSHIP INTEREST
11.1 Compliance with Securities Laws. No Ownership Interest has been
registered under the Securities Act of 1933, as amended, or under any applicable
state securities laws. A Member may not transfer (a transfer, for purposes of
this Company Agreement, shall be deemed
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to include, but not be limited to, any sale, transfer, assignment, pledge,
creation of a security interest or other disposition) all or any part of such
Member's interest, except upon compliance with the applicable federal and state
securities laws. The Managing Member shall have no obligation to register any
Member's interest under the Securities Act of 1933, as amended, or under any
applicable state securities laws, or to make any exemption therefrom available
to any Member.
11.2 Transfer of Economic Interest. Except for (i) the transfer from
the Depositor to the Owner Trustee of the Class A Ownership Interest, (ii) the
transfer under the Indenture of the Class A Ownership Interest to the Indenture
Trustee, (iii) a transfer pursuant to the Indenture by the Indenture Trustee or
any subsequent transferee of the Class A Ownership Interest following an Event
of Default and (iv) the transfer of any Class B Membership Interest owned by
Mortgage Asset Trading, Inc. to the Designated Seller or an Affiliate of the
Designated Seller, the Economic Interest of any Member may not be transferred in
whole or in part unless the following terms and conditions have been satisfied:
(a) All of the other Members shall have consented in writing to the
transfer, which consent may be given or withheld in the sole discretion of any
such Member;
(b) Except with respect to the Initial Transfer and Admission,
the transferor shall have: (i) assumed all costs incurred by the
Company in connection with the transfer; (ii) furnished the Company
with a written opinion of counsel, satisfactory in form and substance
to counsel for the Company, that such transfer complies with applicable
federal and state securities laws and this Company Agreement and that
such transfer, for federal income tax purposes, will not cause the
termination of the Company under section 708(b) of the Code, cause the
Company to be treated as an association taxable as a corporation for
income tax purposes or otherwise adversely affect the Company or the
Members; and (iii) complied with such other conditions as the Manager
may reasonably require from time to time;
(c) The transferee shall have assumed the obligations, if any,
of the transferor to the Company, including the obligation to fulfill
the pro rata portion of the transferor's then existing or subsequently
arising Commitment allocable to the transferred Ownership Interest or
portion thereof; and
(d) With respect to a transfer by Mortgage Assets Trading, Inc. of its
Class B Ownership Interest, each of the Rating Agencies shall have consented in
writing to the transfer.
Except with respect to (i) the Initial Transfer and Admission, and (ii)
the transfer under the Indenture of the Class A Ownership Interest to the
Indenture Trustee, each of which shall be effective as of the date of this
Company Agreement, and (iii) a transfer pursuant to the Indenture by the
Indenture Trustee or any subsequent transferee of the Class A Ownership Interest
following an Event of Default, which shall be effective immediately upon such
transfer, transfers of Economic Interests will be recognized by the Company as
effective only upon the close of business on the last day of the calendar month
following satisfaction of the above conditions. Any transfer in contravention of
this Article XI and any transfer which if made
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would cause a termination of the Company for federal income tax purposes under
section 708(b) of the Code shall be void ab initio and ineffectual and shall not
bind the Company or the other Members.
11.3 Status of Transferee of Economic Interest. A transferee of an
Economic Interest who is not admitted as a Substitute Member shall be entitled
only to receive that share of Profits, Losses and Distributions, return of
Capital Contribution and other distributions of capital and distributions upon a
dissolution of the Company, to which the transferor would otherwise be entitled
with respect to the interest transferred, and shall not have any Management
Rights of a Member of the Company under the Act or this Company Agreement
including, without limitation, the right to obtain any information on account of
the Company's transactions, to inspect the Company's books or to vote with the
Members on, or to grant or withhold consents or approvals to, any matter. The
Company shall, however, if a transferee and transferor jointly advise the
Company in writing of a transfer of the Economic Interest, furnish the
transferee with pertinent tax information at the end of each Fiscal Year.
11.4 Transfer of Management Rights; Admission of Substitute Member. A
Member may transfer Management Rights and give the transferee the right to
become a Substitute Member only after the following terms and conditions have
been satisfied:
(a) The transferee shall also be the transferee of all or part of the
transferor's Economic Interest, or shall be the owner of an Economic Interest;
(b) All of the other Members shall have consented in writing to the
substitution, which consent may be arbitrarily withheld by any such Member; and
(c) The transferor and the transferee shall have complied with such other
requirements as the non-transferring Members may reasonably impose, including
the conditions that the transferee: (i) adopt and approve in writing all the
terms and provisions of this Company Agreement then in effect; and (ii) pay such
fees as may be reasonable to pay the costs of the Company in effecting such
substitution.
11.5 Dissolution or Bankruptcy of a Member. Upon the dissolution of a
Member or a Member becoming a Bankrupt Member, such Member's successors shall
have all the rights of a Member (except as provided by the last sentence of this
Section 11.5) for the purpose of settling or managing such Member's estate,
including such power as such Member possessed to substitute a successor as a
transferee of such Member's interest in the Company and to join with such
transferee in making the application to substitute such transferee as a Member.
However, such successors will not have the right to become a Substitute Member
in the place of their predecessor in interest unless all of the other Members
shall so consent as provided in Section 11.4(b) hereof.
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11.6 Dispositions not in Compliance with this Article Void. Any
attempted Disposition of an Ownership Interest, or any part thereof, not in
compliance with this Article shall be void ab initio and ineffectual and shall
not bind the Company.
11.7 Approval of Initial Transfer and Admission. Notwithstanding
anything in this Agreement or the Act to the contrary, the Members hereby
consent to the Initial Transfer and Admission and acknowledge that by reason
thereof the Trust shall be the sole Class A Member.
11.8 Approval of Pledge of Class A Ownership Interest by Trust. The Members
hereby consent to the pledge by the Trust of the Class A Ownership Interest to
the Indenture Trustee pursuant to the Indenture.
ARTICLE XII
APPOINTMENT OF MANAGER
12.1 Appointment of Manager. If an Event of Default shall have occurred
and be continuing, then immediately upon notice by the Indenture Trustee to the
Members: (a) the Class A Member shall cease to be the Managing Member, (b) the
Indenture Trustee, or its nominee, shall be the Manager, (c) the management of
the Company shall be vested solely in the Manager, and (d) the Manager shall be
vested with all of the right, power and authority with respect to the management
of the Company theretofore vested in the Managing Member as provided in, and
subject to the limitations of, this Company Agreement. However, the Manager
shall not become a Substitute Member unless all of the Members shall have
consented in writing to such substitution, which consent may be arbitrarily
withheld by any Member.
12.2 Specific Performance. Upon the occurrence of an Event of Default,
the Indenture Trustee, in addition to all other remedies available to it, shall
be entitled to a temporary or permanent injunction, without showing any actual
damage, and/or a decree for specific performance of the terms of Section 12.1.
ARTICLE XIII
DISSOCIATION OF A MEMBER
13.1 Dissociation. A Person shall cease to be a Member upon the happening of any
of the following events:
(a) A Member becoming a Bankrupt Member;
(b) in the
case of a Member that is a trust or who is acting as a Member by virtue of being
a trustee of a trust, the termination of the trust (but not merely the
substitution of a new trustee);
(c) in the case of a Member that is a
corporation, the filing of a certificate of dissolution, or its equivalent, for
the corporation or the revocation of its charter;
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(d) in the case of a Member that is an individual, the death of such Member; or
(e) the occurrence of any other event under the Act that terminates the
continued membership of a member in the Company.
ARTICLE XIV
DISSOLUTION AND WINDING UP
14.1 Dissolution. The Company shall be dissolved without further action
by the Members and its affairs wound up, upon the first to occur of any of the
following events (each of which shall constitute a Dissolution Event):
(a) the expiration of the term of this Company Agreement as
set forth in Section 2.4 of this Company Agreement, unless the Company
is continued with the consent of all of the Members;
(b) the occurrence of an Event of Liquidation;
(c) the Dissociation of any Managing Member, unless at the
time of such Dissociation there are at least two remaining Members and
the Company is continued with the consent of all of the remaining
Members within 90 days after such Dissociation;
(d) the unanimous written consent of all of the Members;
(e) at any time when there is but one Member, and
(f) the entry of a decree of judicial dissolution under ss.18-802 of the Act.
Other than in connection with a dissolution pursuant to Section
14.1(c), the death, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of any other event under the Act that
terminates the continued membership of a Member in the Company shall not
dissolve the Company, and the Company shall thereafter be continued without
dissolution.
14.2 Effect of Dissolution. Upon dissolution, the Company shall not be
terminated and shall continue until the winding up of the affairs of the Company
is completed and a certificate of cancellation has been filed with the Secretary
of State of Delaware.
14.3 Distribution of Assets on Dissolution Resulting from an Event of
Liquidation. Upon the dissolution of the Company caused by the occurrence of an
Event of Liquidation, as provided in paragraph (b) of Section 14.1, the Manager
shall take full account of the assets and liabilities of the Company, shall
liquidate the assets, in a commercially reasonable manner and on commercially
reasonable terms, as promptly as is consistent with obtaining the fair value
thereof, and shall apply and distribute the proceeds therefrom in the following
order:
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(a) first to the payment of the debts and liabilities of the Company to
creditors in satisfaction of such debts and liabilities, and to the payment of
necessary expenses of liquidation;
(b) second, to the Indenture Trustee, as pledgee of the Class
A Ownership Interest, the aggregate of (1) an amount equal to all
accrued and unpaid preferred return on the Class A Principal Balance,
calculated as provided in Section 9.5(a)(i) hereof through the Payment
Date immediately following the date on which such proceeds are
distributed, (2) 100% of the Class A Principal Balance outstanding
immediately prior to such Payment Date, and (3) any additional amount
necessary to provide for the reimbursement in full to the Credit
Enhancer for all prior draws made under the Credit Enhancement
Instrument (with interest thereon) and any other amounts owing under
the Insurance Agreement; and
(c) then, to the Class B Members, on a pro rata basis, the remaining
amounts, if any, of such proceeds to be distributed.
14.4 Distribution of Assets on Dissolution for Other Cause. Except as
provided in Section 14.3, upon the dissolution of the Company, the Managing
Member (or, if there is no Managing Member then remaining, such other Person(s)
designated by the Members representing at least a majority of the Members'
Sharing Ratios) (the Managing Member or such other Person being hereinafter
referred to as the "Liquidating Trustee") shall take full account of the assets
and liabilities of the Company, shall liquidate the assets (unless the Managing
Member determines that a distribution of any Company Property in-kind would be
more advantageous to the Members than the sale thereof) as promptly as is
consistent with obtaining the fair value thereof, and shall apply and distribute
the proceeds therefrom in the following order:
(a) first, to the payment of the debts and liabilities of the
Company to creditors, including Members who are creditors, to the
extent permitted by law, in satisfaction of such debts and liabilities,
and to the payment of necessary expenses of liquidation;
(b) second, to the setting up of any reserves which the
Managing Member may deem necessary or appropriate for any anticipated
obligations or contingencies of the Company arising out of or in
connection with the operation or business of the Company. Such reserves
may be paid over by the Liquidating Trustee to an escrow agent or
trustee selected by the Liquidating Trustee to be disbursed by such
escrow agent or trustee in payment of any of the aforementioned
obligations or contingencies and, if any balance remains at the
expiration of such period as the Liquidating Trustee shall deem
advisable, shall be distributed by such escrow agent or trustee in the
manner hereinafter provided;
(c) then, to the Members in accordance with positive Capital
Account balances taking into account all Capital Account adjustments
for the Company's taxable year in which the liquidation occurs.
Liquidation proceeds shall be paid within 60 days of the end of the
Company's taxable year in which the liquidation occurs. Such
distributions shall be in cash or Property (which need not be
distributed proportionately) or partly in both, as determined by the
Liquidating Trustee.
-23-
<PAGE>
If at the time of liquidation the Liquidating Trustee shall determine
that an immediate sale of some or all Company Property would cause undue loss to
the Members, the Liquidating Trustee may, in order to avoid such loss, defer
liquidation.
14.5 Winding Up and Certificate of Cancellation. The winding up of the
Company shall be completed when all debts, liabilities, and obligations of the
Company have been paid and discharged or reasonable provision therefor has been
made, and all of the remaining Property of the Company has been distributed to
the Members. Upon the completion of the winding up of the Company, a certificate
of cancellation shall be delivered to the Secretary of State of Delaware for
filing. The certificate of cancellation shall set forth the information required
by the Act.
ARTICLE XV
MISCELLANEOUS
15.1 Notices. Notices to the Managing Member shall be sent to the
principal office of the Company. Notices to the other Members shall be sent to
their addresses set forth on Exhibit A. Any Member may require notices to be
sent to a different address by giving notice to the other Members in accordance
with this Section 15.1. Any notice or other communication required or permitted
hereunder shall be in writing, and shall be deemed to have been given with
receipt confirmed if and when delivered personally, given by prepaid telegram or
mailed first class, postage prepaid, delivered by courier, or sent by facsimile,
to such Members at such address.
15.2 Meetings. A meeting of the Members may be called by the Managing
Member at any time, and shall be called at the written request of any other
Member. Written notice stating the place and time of the meeting, and the
purpose thereof shall be given by the Managing Member to each Member at least
ten (10) days before the meeting.
15.3 Headings. All Article and section headings in this Company
Agreement are for convenience of reference only and are not intended to qualify
the meaning of any Article or section.
15.4 Entire Agreement. This Company Agreement constitutes the entire
agreement between the parties and supersedes any prior agreement or
understanding between them respecting the subject matter of this Company
Agreement.
15.5 Binding Agreement. This Company Agreement shall be binding upon,
and inure to the benefit of, the parties hereto, their successors, heirs,
legatees, devisees, assigns, legal representatives, executors and
administrators, except as otherwise provided herein.
15.6 Saving Clause. If any provision of this Company Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby. If the operation of any provision of this Company
Agreement would contravene the provisions of the Act, such provision shall
-24-
<PAGE>
be void and ineffectual.
15.7 Counterparts. The Company Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on all
the parties hereto, even though all parties are not signatory to the original or
the same counterpart. Any counterpart of either this Company Agreement or the
Certificate of Formation shall for all purposes be deemed a fully executed
instrument.
15.8 Governing Law. This Company Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflict of law.
15.9 No Partnership Intended for Nontax Purposes . The Members have
formed the Company under the Act, and expressly do not intend hereby to form a
partnership under either the Delaware Uniform Partnership Act nor the Delaware
Uniform Limited Partnership Act. The Members do not intend to be partners one to
another, or partners as to any third party. To the extent any Member, by word or
action, represents to another person that any Member is a partner or that the
Company is a partnership, the Member making such wrongful representation shall
be liable to any other Members who incur personal liability by reason of such
wrongful representation.
15.10 No Rights of Creditors and Third Parties under Company Agreement.
This Company Agreement is entered into among the Company and the Members for the
exclusive benefit of the Company, its Members, the Indenture Trustee, to the
extent expressly provided herein, and their successors and assignees. This
Company Agreement is expressly not intended for the benefit of any creditor of
the Company or any other Person, other than the Indenture Trustee as expressly
provided herein. Except and only to the extent provided by applicable statute,
no such creditor or any third party, other than the Indenture Trustee as
expressly provided herein, shall have any rights under this Company Agreement or
any agreement between the Company and any Member with respect to any Capital
Contribution or otherwise.
15.11 Amendment. This Company Agreement shall not be amended or
modified in any respect, unless pursuant to an instrument duly executed by or
consented to in writing by each Member and, so long as any Note or Certificate
is outstanding (or thereafter until all amounts owing to the Credit Enhancer in
connection therewith have been paid in full), by the Indenture Trustee, the
Credit Enhancer and each Rating Agency. In addition, no such amendment shall be
made unless the Company shall have obtained an Opinion of Counsel to the effect
that such amendment will not adversely affect the status of the Company as a
partnership for federal income tax purposes.
15.12 General Interpretive Principles. For purposes of this Company
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Company Agreement include the plural as well
as the singular, and the use of any gender herein shall be deemed to include the
other gender;
(b) accounting terms not otherwise defined herein have the meanings given
to them
-25-
<PAGE>
in the United States in accordance with generally accepted accounting
principles;
(c) references herein to "Sections", "paragraphs", and other
subdivisions without reference to a document are to designated Sections,
paragraphs and other subdivisions of this Company Agreement;
(d) a reference to a paragraph without further reference to a Section
is a reference to such paragraph as contained in the same Section in which the
reference appears, and this rule shall also apply to other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer
to this Company Agreement as a whole and not to any particular provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of
enumeration.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals this 20th day of December, 1996.
-26-
<PAGE>
CLASS A MEMBER:
Residential Funding Mortgage Securities II, Inc.
By:
Name: Diane Wold
Title: Vice President
CLASS B MEMBERS:
GMAC Mortgage Corporation
By:
Name:
Title:
and
Mortgage Assets Trading, Inc.
By:
Name:
Title:
-27-
<PAGE>
ASSIGNMENT OF CLASS A OWNERSHIP INTEREST
For valuable consideration in hand received, Residential Funding
Mortgage Securities II, Inc. hereby assigns it entire Class A Ownership Interest
in 1996-RHS4 LLC to Home Equity Loan Trust 1996-RHS4 and shall cease to be a
member of the Company.
Residential Funding Mortgage Securities II, Inc.
By:
Name: Diane Wold
Title: Vice President
ACCEPTANCE OF ASSIGNMENT AND APPROVAL OF COMPANY AGREEMENT
Home Equity Loan Trust 1996-RS4, hereby accepts the assignment of the
Class A Ownership Interest of Residential Funding Mortgage Securities II, Inc.
in Home Equity Loan Trust 1996-RHS4, and as such assignee and Substitute Class A
Member, hereby adopts and approves, and agrees to be bound by, all the terms and
provisions of this Company Agreement and agrees to be the Managing Member of the
Company.
Home Equity Loan Trust 1996-RHS4
By: Wilmington Trust Company, not in
its individual capacity, but
solely as Owner Trustee
By:
Name: Emmett R. Harmon
Title: Vice President
-28-
<PAGE>
Operating Agreement
OF
1996-RHS4 LLC
EXHIBIT A
===============================================================================
Member Name and Address Class Initial Capital Contribution
- -------------------------------------------------------------------------------
Residential Funding Mortgage Class A The Revolving Credit Loans,
Securities II, Inc.("Depositor") together with Depositor's
Interest under
the Designated
Seller's
Agreement, to be
transferred to
the Company as
of the Effective
Date.
- -------------------------------------------------------------------------------
GMAC Mortgage Corporation Class B n/a
- -------------------------------------------------------------------------------
Mortgage Assets Trading, Inc. Class B n/a
- -------------------------------------------------------------------------------
TOTAL: n/a n/a
===============================================================================
======================================================
Initial Capital ...Sharing
Account Ratio
- ------------------------------------------------------
$ 10.0%
- ------------------------------------------------------
$ 89.1%
- ------------------------------------------------------
$ 0.9%
- ------------------------------------------------------
$ 100%
======================================================
[NY01:243244.3] 16069-00382 12/19/96 10:56pm
-29-
<PAGE>
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC.
as Purchaser,
and
GMAC MORTGAGE CORPORATION
as Designated Seller
DESIGNATED SELLER'S AGREEMENT
Dated as of December 1, 1996
Revolving Credit Loans
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.................................................. 2
-----------
ARTICLE II
SALE OF REVOLVING CREDIT LOANS AND RELATED PROVISIONS
Section 2.1. Sale of Revolving Credit Loans............................... 2
------------------------------
Section 2.2. Payment of Purchase Price.................................... 5
-------------------------
Section 2.3. Variable Funding Notes on or after the Closing Date.......... 6
---------------------------------------------------
Section 2.4. Draws After an Amortization Event............................ 7
---------------------------------
ARTICLE III
EXAMINATION OF MORTGAGE FILES;
DUE DILIGENCE
Section 3.1. Delivery of Files............................................ 8
-----------------
Section 3.2. Due Diligence................................................ 8
-------------
Section 3.3. Information in Prospectus Supplement......................... 9
------------------------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 4.1. Designated Seller Representations and Warranties............. 9
------------------------------------------------
ARTICLE V
DESIGNATED SELLER'S COVENANTS
Section 5.1. Covenants of the Designated Seller........................... 17
----------------------------------
ARTICLE VI
-i-
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
Page
Section 6.1. Closing....................................... 17
-------
Section 6.2. Closing Documents............................. 18
-----------------
ARTICLE VII
SERVICING
Section 7.1. Servicing..................................... 20
---------
ARTICLE VIII
INDEMNIFICATION BY THE DESIGNATED SELLER
WITH RESPECT TO THE REVOLVING CREDIT LOANS
Section 8.1. Indemnification With Respect to the Revolving Credit Loans.... 20
----------------------------------------------------------
Section 8.2. Limitation on Liability of the Designated Seller.............. 20
------------------------------------------------
ARTICLE IX
INDEMNIFICATION
Section 9.1. Indemnification............................................... 20
---------------
ARTICLE X
TERMINATION
Section 10.1. Termination................................................... 23
-----------
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. Amendment......................................... 23
---------
Section 11.2. GOVERNING LAW..................................... 23
-------------
Section 11.3. Costs............................................. 23
-----
Section 11.4. Notices........................................... 24
-------
Section 11.5. Severability of Provisions........................ 24
--------------------------
Section 11.6. Relationship of Parties........................... 24
-----------------------
-ii-
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
Section 11.7. Counterparts................................................ 24
------------
Section 11.8. Further Agreements.......................................... 25
------------------
Section 11.9. Intention of the Parties.................................... 25
------------------------
Section 11.10. Successors and Assigns; Assignment of This Agreement........ 25
----------------------------------------------------
Section 11.11. Survival.................................................... 26
--------
-iii-
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
Page
Exhibits
Exhibit 1 Revolving Credit Loan Schedule
Exhibit 2 Officer's Certificate of the Designated Seller
Exhibit 3 Board Resolutions of the Designated Seller
Exhibit 4 Opinion of the Designated Seller
Exhibit 5 Form of Underwriting Agreement
-iv-
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
This DESIGNATED SELLER'S AGREEMENT (this "Agreement"), dated
as of December 1, 1996, is made between GMAC Mortgage Corporation (the
"Designated Seller") and Residential Funding Mortgage Securities II, Inc. (the
"Purchaser").
W I T N E S S E T H :
WHEREAS, the Designated Seller owns Cut-off Date Loan Balances
and the Related Documents for the home equity lines of credit indicated on the
Revolving Credit Loan Schedule attached as Exhibit 1 hereto (collectively, the
"Revolving Credit Loans"), including rights to (a) any property acquired by
foreclosure or deed in lieu of foreclosure or otherwise, and (b) the proceeds of
any insurance policies covering the Revolving Credit Loans;
WHEREAS, the parties hereto desire that the Designated Seller
sell the Cut-off Date Loan Balances of the Revolving Credit Loans to the
Purchaser pursuant to the terms of this Agreement together with the Related
Documents on the Closing Date, and thereafter all Additional Balances created on
or after the Cut-off Date;
WHEREAS, the Purchaser will create the 1996-RHS4 LLC, a
limited liability company under Delaware law, and will transfer the Revolving
Credit Loans and all of its rights under this Agreement to the 1996-RHS4 LLC, as
a capital contribution to the 1996-RHS4 LLC;
WHEREAS, pursuant to the terms of the Operating Agreement, the Purchaser
will establish two classes of "ownership interests" in the 1996-RHS4 LLC: the
Class A Ownership Interest and the Class B Ownership Interest;
WHEREAS, pursuant to the terms of the Servicing Agreement, the
Master Servicer will service the Revolving Credit Loans directly or through one
or more Subservicers;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Purchaser will sell the Class A Ownership Interest to the Issuer in exchange for
the cash proceeds of the Securities;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Issuer will issue and transfer to or at the direction of the Purchaser, the
Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer
will issue and transfer to or at the direction of the Purchaser, the Notes,
consisting of the Term Notes and the Variable Funding Notes, secured by the
Class A Ownership Interest;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
-2-
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. For all purposes of this Designated
Seller's Agreement, except as otherwise expressly provided herein or unless the
context otherwise requires, capitalized terms not otherwise defined herein shall
have the meanings assigned to such terms in the Definitions contained in
Appendix A to the Indenture which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
ARTICLE II
SALE OF REVOLVING CREDIT LOANS AND RELATED PROVISIONS
Section 2.1. Sale of Revolving Credit Loans.
(a) The Designated Seller, by the execution and delivery of
this Agreement, does hereby sell, assign, set over, and otherwise convey to the
Purchaser, without recourse, all of its right, title and interest in, to and
under the following, and wherever located: (i) the Revolving Credit Loans
(including without limitation the Cut-off Date Loan Balances and all Additional
Balances; provided, however, that following the occurrence of an Amortization
Event, any subsequent loan balance represented by each Draw and interest thereon
will not be deemed transferred to the 1996-RHS4 LLC, and the Designated Seller
(in such event) shall retain ownership of each loan balance represented by each
such Draw made thereafter and interest thereon), all interest accruing thereon
and all collections in respect thereof received on or after the Cut-off Date;
(ii) the interest of the Designated Seller in any insurance policies in respect
of the Revolving Credit Loans; and (iii) all proceeds of the foregoing;
provided, however, that the Purchaser does not assume the obligation under each
Loan Agreement to fund Draws to the Mortgagor thereunder, and the Purchaser
shall not be obligated or permitted to fund any such Draws, it being agreed that
the Designated Seller will retain the obligation to fund future Draws. Such
conveyance shall be deemed to be made: (1) with respect to the Cut-off Date Loan
Balances, as of the Closing Date; and (2) with respect to the amount of each
Additional Balance created on or after the Cut-off Date, as of the later of the
Closing Date and the date that the corresponding Draw was made pursuant to the
related Loan Agreement, subject to the receipt by the Designated Seller of
consideration therefor as provided herein under clause (b) of Section 2.2. The
sale of the Revolving Credit Loans shall take place on December 20, 1996, or
such other date as shall be mutually acceptable to the parties hereto, subject
to and simultaneously with the deposit of the Revolving Credit Loans into the
Trust, the issuance of the Notes and Certificates, and the sale of the Notes by
the Purchaser pursuant to the Underwriting
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
-3-
Agreement to be entered into by the Purchaser, the Designated Seller and the
Underwriter, a form of which is attached hereto as Exhibit 5.
(b) In connection with such conveyance, the Designated Seller
further agrees, at its own expense, on or prior to the Closing Date with respect
to the Loan Balance of the Revolving Credit Loans to indicate in its books and
records that the Revolving Credit Loans have been sold to the Purchaser pursuant
to this Agreement and to deliver to the Purchaser true and complete lists of all
of the Revolving Credit Loans specifying for each Revolving Credit Loan (i) its
account number and (ii) its Cut-off Date Loan Balance. Such lists, which form
part of the Revolving Credit Loan Schedule, shall be marked as Exhibit 1 to this
Agreement and are hereby incorporated into and made a part of this Agreement.
(c) In connection with such conveyance by the Designated
Seller, the Designated Seller shall on behalf of the Purchaser deliver to, and
deposit with the respective Custodian, on or before the Closing Date, with
respect to (i) below, or within 90 days of the Closing Date, with respect to
(ii) through (v) below, the following documents or instruments with respect to
each Revolving Credit Loan:
(i) the original Credit Line Agreement endorsed without
recourse in blank or, with respect to any Revolving Credit Loan as to
which the original Credit Line Agreement has been permanently lost or
destroyed and has not been replaced, a Lost Note Affidavit;
(ii) the original Mortgage with evidence of recording
thereon, or, if the original Mortgage has not yet been returned from
the public recording office, a copy of the original Mortgage certified
by the public recording office in which such original Mortgage has been
recorded, or a certified copy of such Mortgage in the event the
recording office keeps the original or if the original is lost;
(iii) assignments (which may be included in one or more
blanket assignments if permitted by applicable law) of the Mortgage in
recordable form as follows: (A) from the related originator to the
Designated Seller, and (B) from the Designated Seller to "The Chase
Manhattan Bank as trustee under that certain Indenture dated as of
December 1, 1996, for Residential Funding Mortgage Securities II, Inc.,
Home Equity Loan-Backed Term Notes, Series 1996-RHS4" c/o the
Designated Seller at an address specified by the Designated Seller;
(iv) originals of any intervening assignments of the
Mortgage, with evidence of recording thereon, or, if the original of
any such intervening assignment has not yet been returned from the
public recording office, a copy of such original intervening assignment
certified by the public recording office in which such original
intervening assignment has been recorded; and
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
-4-
(v) a true and correct copy of each assumption,
modification, consolidation or substitution agreement, if any, relating
to the Revolving Credit Loan.
Within the time period for the review of each Mortgage File
set forth in Section 2.3 of the Custodial Agreement, if a material defect in any
Mortgage File is discovered which may materially and adversely affect the value
of the related Revolving Credit Loan, or the interests of the Indenture Trustee
(as pledgee of the Class A Ownership Interest), the Noteholders, the
Certificateholders or the Credit Enhancer in such Revolving Credit Loan,
including the Designated Seller's failure to deliver any document required to be
delivered to the Custodian on behalf of the Indenture Trustee (provided that a
Mortgage File will not be deemed to contain a defect for an unrecorded
assignment under clause (iii) above if the Designated Seller has submitted such
assignment for recording pursuant to the terms of the following paragraph), the
Designated Seller shall cure such defect, repurchase the related Revolving
Credit Loan at the Repurchase Price or substitute an Eligible Substitute Loan
for the related Revolving Credit Loan upon the same terms and conditions set
forth in Section 3.1 hereof for breaches of representations and warranties as to
the Revolving Credit Loans.
In instances where an original Mortgage or any original
intervening assignment of Mortgage was not, in accordance with clause (iv)
above, delivered by the Designated Seller to the respective Custodian in
accordance with the execution and delivery of this Agreement, the Designated
Seller will deliver or cause to be delivered the originals or certified copies
of such documents to such Custodian promptly upon receipt thereof.
Upon sale of the Revolving Credit Loans, the ownership of each
mortgage note, the mortgage and the contents of the related Mortgage File is
vested in the Purchaser and the ownership of all records and documents with
respect to the related Revolving Credit Loan prepared by or which come into the
possession of the Designated Seller as seller of the Revolving Credit Loans
hereunder or in its capacity as Master Servicer under the Servicing Agreement
shall immediately vest in the Purchaser and shall be retained and maintained in
trust by the Designated Seller or the Master Servicer at the will of the
Purchaser in such custodial capacity only. In the event that any original
document held by the Designated Seller of the Revolving Credit Loans hereunder
in its capacity as Master Servicer is required pursuant to the terms of this
Section to be part of a Mortgage File, such document shall be delivered promptly
to the Custodian. The Designated Seller's records will accurately reflect the
sale of each Revolving Credit Loan to the Purchaser.
The Purchaser hereby acknowledges its acceptance of all right,
title and interest to the property, conveyed to it pursuant to this Section 2.1.
(d) The parties hereto intend that the transactions set forth
herein constitute a sale by the Designated Seller to the Purchaser of all the
Designated Seller's right, title and interest in and to the Revolving Credit
Loans and other property as and to the extent described
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
-5-
above. In the event the transactions set forth herein are deemed not to be a
sale, the Designated Seller hereby grants to the Purchaser a security interest
in all of the Designated Seller's right, title and interest in, to and under the
Revolving Credit Loans and such other property, to secure all of the Designated
Seller's obligations hereunder, and this Agreement shall constitute a security
agreement under applicable law. The Designated Seller agrees to take or cause to
be taken such actions and to execute such documents, including without
limitation the filing of any continuation statements with respect to the UCC-1
financing statements filed with respect to the Revolving Credit Loans by the
Purchaser on the Closing Date, and any amendments thereto required to reflect a
change in the name or corporate structure of the Designated Seller or the filing
of any additional UCC-1 financing statements due to the change in the principal
office of the Designated Seller, as are necessary to perfect and protect the
Purchaser's interests in each Revolving Credit Loan and the proceeds thereof.
(e) The Designated Seller hereby sells the Revolving Credit
Loans to the Purchaser without any obligation of the Purchaser or any successor
transferee to provide any amounts to General Motors Corporation, or any
affiliate or subsidiary thereof ("GM"), in connection with any program, whether
documented or not, including, without limitation, the GM Card Financial Network
Home Equity Credit Line, Home Equity Earnings Program, or any future program
between the Designated Seller and GM, whereby the borrower under any Revolving
Credit Loan receives any benefit or rebate or other amounts in connection with
the future purchase of a new car or otherwise. The Designated Seller hereby
retains all such obligations.
Section 2.2. Payment of Purchase Price.
(a) The "Purchase Price" for the Revolving Credit Loans
(including the Additional Balances) shall be (i) (A) an amount equal to
$126,739,700.00 in immediately available funds, the Variable Funding Notes and
Variable Funding Certificates, together with 1.0% of the Initial Certificates,
in respect of the Cut-off Date Loan Balances thereof and (B) in the case of each
Additional Balance transferred hereunder created on or after the Cut-off Date,
the principal amount of the related Draw under the Loan Agreement on the later
of the Closing Date and the date of the creation of such Additional Balance,
together with (ii) the Class B Ownership Interest.
(b) In consideration of the sale of the Revolving Credit Loans
from the Designated Seller to the Purchaser on the Closing Date, the Purchaser
shall pay to the Designated Seller on the Closing Date by wire transfer of
immediately available funds to a bank account designated by the Designated
Seller, the amount specified above in clause (a)(i)(A) for each Revolving Credit
Loan and the Purchaser shall transfer to the Designated Seller on the Closing
Date the Class B Ownership Interest; provided, that such payment may be on a net
funding basis if agreed by the Designated Seller and the Purchaser. With respect
to each Additional Balance transferred hereunder with respect to any Revolving
Credit Loan, the 1996-
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
-6-
RHS4 LLC as assignee of the Purchaser shall pay or cause to be paid to the
Designated Seller or its designee the portion of the Purchase Price specified
above in clause (a)(i)(B) for such Additional Balance in one of the following
ways, as applicable: (i) for any Collection Period during the Revolving Period,
so long as an Amortization Event has not occurred, (a) a cash payment pursuant
to Section 3.03(ii) of the Servicing Agreement and Section 2.2(a)(i)(B) hereof
in an amount equal to the related Draw, if then available from Principal
Collections during the related Collection Period on the Revolving Credit Loans,
and (b) to the extent aggregate Draws exceed Principal Collections for such
Collection Period, an increase in the aggregate principal amount of the Variable
Funding Notes and Variable Funding Certificates or an issuance of new Variable
Funding Notes and Variable Funding Certificates in the proportions specified in
the Indenture and the Trust Agreement respectively, as of the Payment Date
corresponding to the Collection Period in which such Additional Balances were
created, equal to the amount by which Additional Balances exceeded Principal
Collections for such Collection Period, and (ii) for any Collection Period after
the end of the Revolving Period, so long as an Amortization Event has not
occurred, an increase in the aggregate principal amount of Variable Funding
Notes and Variable Funding Certificates or an issuance of new Variable Funding
Notes and Variable Funding Certificates in the proportions specified in the
Indenture and the Trust Agreement respectively as of each Payment Date in an
aggregate amount equal to the total of the related Draws for the corresponding
Collection Period.
Section 2.3. Variable Funding Notes on or after the Closing Date.
Subject to Section 4.02 of the Indenture, if at any time, the
Designated Seller holds Variable Funding Notes that have been exchanged for
Capped Funding Notes, the Purchaser agrees that, upon written request made by
the Designated Seller at any time, the Purchaser shall use its best reasonable
efforts to cause such Capped Funding Notes held by the Designated Seller to be
registered for resale by the Designated Seller pursuant to an effective
registration statement filed by the Purchaser in accordance with, and meeting
all requirements of, the Securities Act of 1933, as amended. The Purchaser shall
use its best reasonable efforts to cause such registration statement to become
effective with respect to such Capped Funding Notes as soon as practicable
within a mutually agreed reasonable time period after the Designated Seller's
request. It is contemplated that such registration statement will be the shelf
registration statement pursuant to which the Term Notes issued on the Closing
Date are to be offered, or one substantially similar thereto. In connection with
such registration statement and offering, the Designated Seller shall reimburse
the Purchaser for costs related thereto including registration fees, printing
fees, rating fees, legal fees, accountant's fees, blue sky registration fees and
expenses (if any), related expenses of the Credit Enhancer and other
out-of-pocket costs, if any. In connection with such registration statement and
related prospectus, the Designated Seller shall provide the Purchaser with an
updated Revolving Credit Loan Schedule and all other information reasonably
necessary to assure that the statements in the prospectus
[NY01:240674.6] 16069-00382 12/19/96 11:18pm
<PAGE>
-7-
with respect to the Revolving Credit Loans and the Designated Seller (including
in its capacity as servicer of the Revolving Credit Loans) are complete and
correct in all material respects as of the date of sale of such Capped Funding
Notes by the Designated Seller. The registration statement shall not include any
information with respect to the Credit Enhancer, except for information approved
by the Credit Enhancer for use therein.
Section 2.4. Draws After an Amortization Event.
In the event that an Amortization Event occurs, any Draws made
on the Revolving Credit Loans thereafter shall not be deemed to be "Additional
Balances" hereunder, and the ownership of the related balances shall be retained
by the Designated Seller. Following an Amortization Event, on any Payment Date,
with respect to the related Collection Period, all Interest Collections and
Principal Collections in respect of each individual Revolving Credit Loan shall
be allocated on a pro rata basis as between the 1996-RHS4 LLC and the Designated
Seller, based on the relative proportions of the Loan Balance and the Excluded
Amount, respectively, as of the end of the calendar month immediately prior to
such Collection Period. Any losses incurred with respect to any individual
Revolving Credit Loan following an Amortization Event shall be allocated on a
pro rata basis between the 1996-RHS4 LLC and the Designated Seller, based on the
Loan Balance and the Excluded Amount thereof as of the date of liquidation of
such Revolving Credit Loan. Notwithstanding any other provision hereof or of the
Servicing Agreement, the payments and collections allocable to the Excluded
Amount need not be deposited in the Custodial Account and shall not be deposited
in the Distribution Account or the Payment Account, and shall be distributed by
the Master Servicer to the Designated Seller not less frequently than monthly in
accordance with reasonable instructions provided by the Designated Seller.
ARTICLE III
EXAMINATION OF MORTGAGE FILES;
DUE DILIGENCE
Section 3.1. Delivery of Files.
On such dates agreed to by the Designated Seller and the
Purchaser, the Designated Seller shall (a) deliver to the Purchaser magnetic
tapes acceptable to the Purchaser which contain such information about the
Mortgage Loans as may be reasonably requested by the Purchaser, and (b) either,
as specified by the Purchaser, deliver to the Purchaser, or its designee, in
escrow, or make available for examination during normal business hours, all
credit files, underwriting documentation and Mortgage Files relating to the
Mortgage Loans. If the Purchaser identifies any Mortgage Loans which in its sole
discretion do not conform to the Designated Seller's underwriting standards or
the representations and warranties in Section
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4.01(b) hereof such Mortgage Loans shall be deleted from the Mortgage Loan
Schedule. The Purchaser may, at its sole option and without notice to the
Designated Seller, accept all or part of the Mortgage Loans without conducting
any partial or complete examination. The fact that the Purchaser has conducted
or has failed to conduct any partial or complete examination of the credit
files, underwriting documentation or Mortgage Files relating to the Mortgage
Loans shall not affect the Purchaser's, the Indenture Trustee's or any
Securityholder's right to demand repurchase of the Mortgage Loans or other
relief as provided under this Agreement or to be provided under the Servicing
Agreement.
Section 3.2. Due Diligence.
On or prior to the Closing Date, in addition to the foregoing
examination of the Mortgage Files and related documents, the Designated Seller
agrees to allow the Purchaser, or its designee, or any representative of
Standard & Poor's Ratings Services or Moody's Investors Service, Inc. (together,
the "Rating Agencies") to examine and audit all books, records and files
pertaining to the Mortgage Loans, the Designated Seller's underwriting
procedures and the Designated Seller's ability to perform or observe all of the
terms, covenants and conditions of this Agreement and the Servicing Agreement.
Such examinations and audits shall take place at one or more offices of the
Designated Seller during normal business hours and shall not be conducted in a
manner that is disruptive to the Designated Seller's normal business operations,
and in the course of such examinations and audits, the Designated Seller will
make available to the Purchaser, or its designee, reasonably adequate
facilities, as well as the assistance of a sufficient number of knowledgeable
and responsible individuals who are familiar with the Mortgage Loans and the
terms of this Agreement and the Designated Seller shall cooperate fully with any
such review in all respects. On or prior to the Closing Date, the Designated
Seller agrees to provide the Purchaser, its affiliates or its designee with all
material information regarding the Designated Seller's financial condition as is
customarily provided to lenders, and to provide access to knowledgeable
financial or accounting officers for the purpose of answering questions with
respect to the Designated Seller's financial condition, financial statements as
provided to the Purchaser or other developments affecting the Designated Seller.
Section 3.3. Information in Prospectus Supplement.
The Purchaser and the Designated Seller shall agree on the
information relating to the Designated Seller to be included in the Prospectus
Supplement, including but not limited to financial information and information
regarding the status of the Designated Seller with respect to any regulatory
body or entity, and the presentation of such information in the Prospectus
Supplement. In connection therewith each party shall promptly inform the other
party of any information it reasonably wishes to include or exclude from the
Prospectus Supplement, and upon being so informed, the parties shall use their
best efforts to mutually agree, as promptly as possible, on the presentation and
content of information to be included in the Prospectus Supplement. The
Purchaser shall keep confidential any information regarding
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the Designated Seller which has been delivered into the Purchaser's possession
and which is not otherwise publicly available; provided, however, that such
information shall not be kept confidential (and the right to require
confidentiality under any confidentiality agreement shall be waived) to the
extent the parties agree to include such information in the Prospectus
Supplement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 4.1. Designated Seller Representations and Warranties. The
Designated Seller represents and warrants to the Purchaser, as of the Closing
Date (or if otherwise specified below, as of the date so specified):
(a) As to the Designated Seller:
(i) The Designated Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power to own its
assets and to transact the business in which it is currently engaged.
The Designated Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure to so
qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of the Designated
Seller;
(ii) The Designated Seller has the power and authority
to make, execute, deliver and perform its obligations under this
Agreement and all of the transactions contemplated under this
Agreement, and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement;
(iii) The Designated Seller is not required to obtain the
consent of any other Person or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, license, approvals or
authorization, or registration or declaration, as shall have been
obtained or filed, as the case may be;
(iv) The execution and delivery of this Agreement and
the performance of the transactions contemplated hereby by the
Designated Seller will not violate any material provision of any
existing law or regulation or any order or decree of any court
applicable to the Designated Seller or any provision of the Articles of
Incorporation or
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Bylaws of the Designated Seller, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the
Designated Seller is a party or by which the Designated Seller may be
bound; and
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Designated Seller threatened, against the
Designated Seller or any of its properties or with respect to this
Agreement or the Certificates which in the opinion of the Designated
Seller has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Agreement.
(vi) This Agreement constitutes a legal, valid and
binding obligation of the Designated Seller, enforceable against the
Designated Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a proceeding at law or in equity);
(vii) This Agreement constitutes a valid transfer and
assignment to the Purchaser of all right, title and interest of the
Designated Seller in and to the Cut-off Date Loan Balances with respect
to the Revolving Credit Loans, all monies due or to become due with
respect thereto, and all proceeds of such Cut-off Date Loan Balances
with respect to the Revolving Credit Loans and such funds as are from
time to time deposited in the Custodial Account (excluding any
investment earnings thereon) as assets of the Trust and all other
property specified in the definition of "Trust" as being part of the
corpus of the Trust conveyed to the Purchaser by the Designated Seller,
and upon payment for the Additional Balances, will constitute a valid
transfer and assignment to the Purchaser of all right, title and
interest of the Designated Seller in and to the Additional Balances,
all monies due or to become due with respect thereto, and all proceeds
of such Additional Balances and all other property specified in the
definition of "Trust" relating to the Additional Balances;
(viii) The Designated Seller is not in default with
respect to any order or decree of any court or any order, regulation or
demand or any federal, state, municipal or governmental agency, which
default might have consequences that would materially and adversely
affect the condition (financial or other) or operations of the Master
Servicer or its properties or might have consequences that would
materially adversely affect its performance hereunder;
(b) As to the Revolving Credit Loans:
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(i) The information set forth in the Revolving Credit
Loan Schedule for such Revolving Credit Loans is true and correct in
all material respects as of the date or dates respecting which such
information is furnished;
(ii) The Cut-off Date Loan Balances have not been
assigned or pledged, the Designated Seller has good and marketable
title thereto and the Designated Seller is the sole owner and holder of
such Cut-off Date Loan Balances free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges,
charges of security interests of any nature and has full right and
authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the applicable Revolving Credit
Loans to sell and assign the same pursuant to this Agreement;
(iii) The related Credit Line Agreement and the Mortgage
have not been assigned or pledged, the Designated Seller has good and
marketable title thereto and the Designated Seller is the sole owner
and holder of the Revolving Credit Loan free and clear of any and all
liens, claims, encumbrances, participation interests, equities,
pledges, charges of security interests of any nature and has full right
and authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the applicable Revolving Credit
Loans to sell and assign the same pursuant to this Agreement;
(iv) To the best of the Designated Seller's knowledge, there is no valid
offset, defense or counterclaim of any obligor under any Loan Agreement or
Mortgage;
(v) To the best of the Designated Seller's knowledge, there is no
delinquent recording or other tax or fee or assessment lien against any related
Mortgaged Property;
(vi) To the best of the Designated Seller's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation of the
related Mortgaged Property;
(vii) To the best of the Designated Seller's knowledge,
there are no mechanics' or similar liens or claims which have been
filed for work, labor or material affecting the related Mortgaged
Property which are, or may be liens prior or equal to, or subordinate
with, the lien of the related Mortgage, except liens which are fully
insured against by the title insurance policy referred to in clause
(xi);
(viii) As of the Cut-off Date, no Revolving Credit Loan was 30 days or more
delinquent;
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(ix) For each Revolving Credit Loan, the related Mortgage File contains
each of the documents and instruments specified to be included therein;
(x) To the best of the Designated Seller's knowledge,
the related Credit Line Agreement and the related Mortgage at the time
it was made complied in all material respects with applicable local,
state and federal laws;
(xi) A policy of title insurance was obtained by the
Designated Seller for credit line amounts in excess of $100,000 for the
entire line amount and a title search or other assurance of title
customary in the relevant jurisdiction was obtained with respect to
each Revolving Credit Loan as to which no title insurance policy or
binder was issued;
(xii) None of the Mortgaged Properties is a mobile home or a manufactured
housing unit that is not permanently attached to its foundation;
(xiii) As of the Cut-off Date no more than 22.4% of the
Revolving Credit Loans, by aggregate principal balance, are secured by
Mortgaged Properties located in Michigan and no more than 2.6% of the
Revolving Credit Loans, by aggregate principal balance, are secured by
Mortgaged Properties located in planned unit developments or
townhouses;
(xiv) As of the Cut-off Date the Combined Loan-to-Value Ratio for each
Revolving Credit Loan was not in excess of 100%;
(xv) [Reserved];
(xvi) The Designated Seller has not transferred the Revolving Credit Loans
to the Purchaser with any intent to hinder, delay or defraud any of its
creditors;
(xvii) The minimum monthly payment with respect to any
Revolving Credit Loan is not less than the interest accrued at the
applicable Loan Rate on the average daily Loan Balance during the
interest period relating to the date on which such minimum monthly
payment is due;
(xviii) Within a loan type, and except as required by
applicable law, each Loan Agreement and each Mortgage is substantially
similar one to the other and is an enforceable obligation of the
related Mortgagor;
(xix) To the best knowledge of the Designated Seller, the physical property
subject to each Mortgage is free of material damage and is in good repair;
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(xx) The Designated Seller has not received a notice of
default of any senior mortgage loan related to a Mortgaged Property
which has not been cured by a party other than the Master Servicer;
(xxi) Except with Revolving Credit Loans originated in
the State of Washington, each of the Credit Line Agreements has a
substantially similar definition of Prime as the Index applicable to
the related Loan Rate; each Revolving Credit Loan originated in
Washington has a substantially similar definition of Six-Month Treasury
Rate as the Index applicable to the related Loan Rate;
(xxii) None of the Revolving Credit Loans are reverse mortgage loans;
(xxiii) (A) No Revolving Credit Loan has an original term
to maturity in excess of 192 months. Except with respect to 10% of the
Revolving Credit Loans, on each date that the Loan Rates have been
adjusted prior to the Cut-off Date interest rate adjustments on the
Revolving Credit Loans were made in compliance with the related
Mortgage and Credit Line Agreement and applicable law. Over the term of
any Revolving Credit Loan, the Loan Rate may not exceed the related
Maximum Loan Rate, if any. (B) The Revolving Credit Loans have Maximum
Loan Rates which range between 14.00% and 21.00%. The Gross Margins for
the Revolving Credit Loans range between -0.25% and 4.00%, and the
weighted average Gross Margin for the Revolving Credit Loans is
approximately 1.90% as of the Cut-off Date. As of the Cut-off Date, the
Loan Rates on the Revolving Credit Loans range between 8.00 and 11.25%
and the weighted average Loan Rate is approximately 10.13% The weighted
average remaining term to scheduled maturity of the Revolving Credit
Loans on a contractual basis as of the Cut-off Date is approximately
117 months;
(xxiv) (A) Each Mortgaged Property with respect to the
Revolving Credit Loans consists of a single parcel of real property
with a single family or two- to four-family residence erected thereon,
or an individual condominium unit, planned unit development unit or
townhouse. (B) With respect to the Revolving Credit Loans (i)
approximately 4.59% (by Cut-off Date Balance are secured by real
property improved by individual condominium units, planned development
units or townhouses, (ii) approximately 94.30% (by Cut-off Date
Balance) are secured by real property with a single family residence
erected thereon, and (iii) approximately 1.11% (by Cut-off Date
Balance) are secured by real property with a two- to four-family
residence erected thereon;
(xxv) As of the Cut-off Date, the Credit Limits on the
Revolving Credit Loans range between approximately $10,000 and $500,000
with an average of $37,393. As of the Cut-off Date, no Revolving Credit
Loan had a principal balance in excess of
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$401,715 and the weighted average Credit Utilization Rate, based on the
Credit Limits of the Revolving Credit Loans is equal to approximately
66.8%;
(xxvi) No more than approximately 96.6% of the Revolving Credit Loans, by
aggregate principal balance as of the Cut-off Date are second liens;
(xxvii) A policy of hazard insurance and flood insurance,
if applicable, has been required from the Borrower for his Revolving
Credit Loan when the Revolving Credit Loan was originated;
(xxviii) There is no material default, breach, violation or
event of acceleration existing under the terms of any Credit Line
Agreement or Mortgage and, to the best of the Seller's knowledge, no
event which, with notice and expiration of any grace or cure period,
would constitute a material default, breach, violation or event of
acceleration under the terms of any Credit Line Agreement or Mortgage,
and no such material default, breach, violation or event of
acceleration has been waived by the Designated Seller involved in
originating or servicing a Revolving Credit Loan;
(xxix) No instrument of release or waiver has been
executed in connection with the Revolving Credit Loans, and no
Mortgagor has been released, in whole or in part from its obligations
in connection with a Revolving Credit Loan;
(xxx) With respect to each Revolving Credit Loan that is
a second lien, either (i) no consent for the Revolving Credit Loan was
required by the holder of the related prior lien, (ii) such consent has
been obtained and is contained in the mortgage file or (iii) no consent
for the Revolving Credit Loan was required by relevant law;
(xxxi) To the extent permitted by applicable law, the
Mortgage contains a customary provision for the acceleration of the
payment of the unpaid principal balance of the Revolving Credit Loan in
the event the related Mortgaged Property is sold without the prior
consent of the mortgagee thereunder.
Upon discovery by Designated Seller or upon notice from the
Purchaser, the Credit Enhancer, the 1996-RHS4 LLC, the Trustee, the Indenture
Trustee or any Custodian, as applicable, of a breach of any representation or
warranty in clause (a) above which materially and adversely affects the
interests of the Securityholders or the Credit Enhancer, as applicable, in any
Revolving Credit Loan, the Designated Seller shall, within 90 days of its
discovery or its receipt of notice of such breach, either (i) cure such breach
in all material respects or (ii) to the extent that such breach is with respect
to a Revolving Credit Loan or a Related Document, either (A) repurchase such
Revolving Credit Loan from the 1996-RHS4 LLC at the Repurchase Price, or (B)
substitute one or more Eligible Substitute Loans for such Revolving Credit Loan,
in each case in the manner and subject to the conditions and limitations set
forth below.
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Upon discovery by the Designated Seller or upon notice from
the Purchaser, the Credit Enhancer, the 1996-RHS4 LLC, the Trustee, the
Indenture Trustee or any Custodian, as applicable, of a breach of any
representation or warranty in this Subsection (b) with respect to any Revolving
Credit Loan, or upon the occurrence of a Repurchase Event, which materially and
adversely affects the interests of any Securityholders or the Credit Enhancer,
as applicable, or of the Purchaser in such Revolving Credit Loan (notice of
which shall be given to the Purchaser by the Designated Seller, if it discovers
the same), notwithstanding the Designated Seller's lack of knowledge with
respect to the substance of such representation and warranty, the Designated
Seller shall, within 90 days after the earlier of its discovery or receipt of
notice thereof, either cure such breach or Repurchase Event in all material
respects or either (i) repurchase such Revolving Credit Loan from the 1996-RHS4
LLC at the Repurchase Price, or (ii) substitute one or more Eligible Substitute
Loans for such Revolving Credit Loan, in each case in the manner and subject to
the conditions set forth below. The Repurchase Price for any such Revolving
Credit Loan repurchased by the Designated Seller shall be deposited or caused to
be deposited by the Master Servicer in the Custodial Account maintained by it
pursuant to Section 3.02 of the Servicing Agreement.
In the event that the Designated Seller elects to substitute
an Eligible Substitute Loan or Loans for a Deleted Loan pursuant to this Section
4.1, the Designated Seller shall deliver to the Custodian on behalf of the
1996-RHS4 LLC, with respect to such Eligible Substitute Loan or Loans, the
original Credit Line Agreement and all other documents and agreements as are
required by Section 2.1(c), with the Credit Line Agreement endorsed as required
by Section 2.1(c). No substitution will be made in any calendar month after the
Determination Date for such month. Monthly Payments due with respect to Eligible
Substitute Loans in the month of substitution shall not be part of the Trust and
will be retained by the Master Servicer and remitted by the Master Servicer to
the Designated Seller on the next succeeding Payment Date, provided that a
payment at least equal to the applicable Minimum Monthly Payment has been
received by the Trust, for such month in respect of the Deleted Loan. For the
month of substitution, distributions to the Distribution Account pursuant to the
Servicing Agreement will include the Monthly Payment due on a Deleted Loan for
such month and thereafter the Designated Seller shall be entitled to retain all
amounts received in respect of such Deleted Loan. The Master Servicer shall
amend or cause to be amended the Revolving Credit Loan Schedule to reflect the
removal of such Deleted Loan and the substitution of the Eligible Substitute
Loan or Loans and the Master Servicer shall deliver the amended Revolving Credit
Loan Schedule to the Trustee. Upon such substitution, the Eligible Substitute
Loan or Loans shall be subject to the terms of this Agreement and the Servicing
Agreement in all respects, the Designated Seller shall be deemed to have made
the representations and warranties with respect to the Eligible Substitute Loan
contained herein set forth in Section 4.1(b) (other than clauses (viii), (xiii),
(xiv) (xxiii)(B), (xxiv)(B), (xxv), and (xxvi) thereof) as of the date of
substitution, and the Designated Seller shall be obligated to repurchase or
substitute for any Eligible Substitute Loan as to which a Repurchase Event has
occurred as provided herein. In connection with the substitution of one or more
Eligible Substitute Loans for one or more
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Deleted Loans, the Master Servicer will determine the amount (such amount, a
"Substitution Adjustment Amount"), if any, by which the aggregate principal
balance of all such Eligible Substitute Loans as of the date of substitution is
less than the aggregate principal balance of all such Deleted Loans (after
application of the principal portion of the Monthly Payments due in the month of
substitution that are to be distributed to the Payment Account in the month of
substitution). The Designated Seller shall deposit the amount of such shortfall
into the Custodial Account on the day of substitution, without any reimbursement
therefor.
Upon receipt by the 1996-RHS4 LLC and the Custodian of written
notification, signed by a Servicing Officer, of the deposit of such Repurchase
Price or of such substitution of an Eligible Substitute Loan (together with the
complete related Mortgage File) and deposit of any applicable Substitution
Adjustment Amount as provided above, the Custodian, on behalf of the 1996-RHS4
LLC shall release to the Designated Seller the related Mortgage File for the
Revolving Credit Loan being repurchased or substituted for and the 1996-RHS4 LLC
shall execute and deliver such instruments of transfer or assignment prepared by
the Master Servicer, in each case without recourse, as shall be necessary to
vest in the Designated Seller or its designee such Revolving Credit Loan
released pursuant hereto and thereafter such Revolving Credit Loan shall not be
an asset of the 1996-RHS4 LLC.
It is understood and agreed that the obligation of the
Designated Seller to cure any breach, or to repurchase or substitute for, any
Revolving Credit Loan as to which such a breach has occurred and is continuing
shall, except to the extent provided in Section 6.1 of this Agreement,
constitute the sole remedy respecting such breach available to the Purchaser,
the 1996-RHS4 LLC, the Certificateholders (or the Trustee on behalf of the
Certificateholders) and the Noteholders (or the Indenture Trustee on behalf of
the Noteholders) against the Designated Seller.
It is understood and agreed that the representations and
warranties set forth in this Section 4.1 shall survive delivery of the
respective Mortgage Files to the 1996-RHS4 LLC, or its Custodians.
ARTICLE V
DESIGNATED SELLER'S COVENANTS
Section 5.1. Covenants of the Designated Seller. The
Designated Seller hereby covenants that, except for the transfer hereunder, the
Designated Seller will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur or assume any Lien on any Revolving Credit Loan, or any
interest therein, except with respect to any Excluded Amount; the Designated
Seller will notify the 1996-RHS4 LLC, as assignee of the Purchaser, of the
existence of any Lien (other than as provided above) on any Revolving Credit
Loan immediately
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upon discovery thereof; and the Designated Seller will defend the right, title
and interest of the 1996-RHS4 LLC, as assignee of the Purchaser, in, to and
under the Revolving Credit Loans against all claims of third parties claiming
through or under the Designated Seller; provided, however, that nothing in this
Section 5.1 shall be deemed to apply to any Liens for municipal or other local
taxes and other governmental charges if such taxes or governmental charges shall
not at the time be due and payable or if the Designated Seller shall currently
be contesting the validity thereof in good faith by appropriate proceedings.
ARTICLE VI
CLOSING
Section 6.1. Closing. The closing of the sale of the Mortgage Loans shall
be held at the office of Thacher Proffitt & Wood at 10:00 A.M., New York time,
on the Closing Date.
The closing shall be subject to each of the following
conditions:
(a) All of the representations and warranties of the Designated Seller
herein shall be true and correct as of the Closing Date;
(b) All Closing Documents specified in Section 6.2 of
this Agreement, in such forms as are agreed upon and
acceptable to the Purchaser, shall be duly executed and
delivered by all signatories as required pursuant to the
respective terms thereof;
(c) The Designated Seller shall have delivered and
released to the Purchaser or its designee, all documents
required to be delivered to the Purchaser pursuant to Section
2 of this Agreement;
(d) The result of the examination and audit performed
by the Purchaser pursuant to Section 3 hereof shall be
satisfactory to the Purchaser in its reasonable determination
and the parties shall have agreed to the information to be
disclosed in the Prospectus Supplement pursuant to the final
paragraph of Section 3 hereof;
(e) All other terms and conditions of this Agreement
required to be complied with on or before the Closing Date
shall have been complied with and the Designated Seller shall
have the ability to comply with all terms and conditions and
perform all duties and obligations required to be complied
with or performed after the Closing Date;
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(f) The Closing Date may be postponed or cancelled in
the reasonable discretion of the Purchaser in the event of any
material failure by the Designated Seller to meet its
obligations on a timely basis;
(g) All of the terms and conditions of the Underwriting Agreement
required to be complied with on or before the Closing Date shall have been
complied with; and
(h) The Designated Seller shall have paid all fees and expenses payable
by it to the Purchaser.
Both parties agree to use their best efforts to perform their
respective obligations hereunder in a manner which will enable the Purchaser to
purchase the Mortgage Loans on the Closing Date. In the event any of the
foregoing conditions is not satisfied and the failure to satisfy such condition
is attributable to the Designated Seller and is not a direct result of the
Purchaser's failure to perform its duties hereunder, (i) the Purchaser shall
have no obligation to consummate this transaction or continue to participate in
this transaction in any manner and (ii) the Designated Seller shall be
responsible for all net costs and out of pocket expenses for which the Purchaser
may be liable pursuant to this Agreement.
Section 6.2. Closing Documents. The Closing Documents shall consist of the
-----------------
following:
(a) the Mortgage Loan Files;
(b) This Agreement duly executed by the Purchaser and the Designated
Seller;
(c) Copies of all Basic Documents duly executed by the signatories
thereto, including all exhibits thereto;
(d) The Underwriting Agreement duly executed by the Purchaser and
the Underwriter, and all exhibits thereto duly executed by all applicable
signatories;
(e) An Officer's Certificate of the Designated Seller
in the form of Exhibit 2 annexed hereto, dated the Closing
Date, and attached thereto resolutions of the board of
directors of the Designated Seller, in a form substantially
similar to Exhibit 3 annexed hereto, together with copies of
the documents governing the Designated Seller's organization
and certificate of good standing of the Designated Seller;
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(f) A true and complete copy, certified as such by an
officer of the Designated Seller, of each certificate or other
evidence of merger or change of name, signed or stamped by the
applicable regulatory authority, if any of the Mortgage Loans
were acquired by the Designated Seller by merger or acquired
or originated by the Designated Seller while conducting
business under a name other than its present name;
(g) A cross-receipt dated the Closing Date duly executed by the
Designated Seller and the Underwriter;
(h) A written opinion of General Counsel for the
Designated Seller, substantially in the form of Exhibit 4
annexed hereto, with any modifications required by the Rating
Agencies and the Credit Enhancer, dated the Closing Date and
such other written opinions as may be reasonably required by
the Rating Agencies and the Credit Enhancer; and
(i) Such other documents, certificates and opinions
as may be reasonably required by the Purchaser, Purchaser's
counsel, the Rating Agencies or the Credit Enhancer.
ARTICLE VII
SERVICING
Section 7.1. Servicing. The Designated Seller will service the
Revolving Credit Loans pursuant to the terms and conditions of the Servicing
Agreement and will service the Revolving Credit Loans directly or through one or
more sub-servicers in accordance therewith.
ARTICLE VIII
INDEMNIFICATION BY THE DESIGNATED SELLER
WITH RESPECT TO THE REVOLVING CREDIT LOANS
Section 8.1. Indemnification With Respect to the Revolving
Credit Loans. The Designated Seller shall indemnify and hold harmless the
Purchaser from and against any loss, liability or expense directly arising from
the breach by the Designated Seller of its representations and warranties in
Section 4.1 of this Agreement which materially and adversely affects the
Purchaser's interest in any Revolving Credit Loan or from the failure by the
Designated Seller to perform its obligations under this Agreement in any
material respect, provided that the Designated Seller shall have no obligation
to indemnify the Purchaser in
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respect of any loss, liability or expense that arises as a result of the
Purchaser's willful malfeasance, bad faith or negligence or as a result of the
breach by the Purchaser of its obligations hereunder.
Section 8.2. Limitation on Liability of the Designated Seller.
None of the directors, officers, employees or agents of the Designated Seller
shall be under any liability to the Purchaser, it being expressly understood
that all such liability is expressly waived and released as a condition of, and
as consideration for, the execution of this Agreement. Except as and to the
extent expressly provided in the Servicing Agreement, the Designated Seller
shall not be under any liability to the 1996-RHS4 LLC, the Trust, the Trustee,
the Indenture Trustee or the Securityholders. The Designated Seller and any
director, officer, employee or agent of the Designated Seller 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.
ARTICLE IX
INDEMNIFICATION
Section 9.1. Indemnification. (a) The Designated Seller agrees
to indemnify and hold harmless the Purchaser and its respective officers and
directors, and each person, if any who controls the Purchaser within the meaning
of either Section 15 of the Securities Act of 1933 (the "1933 Act") or Section
20 of the Securities Exchange Act of 1934 (the "1934 Act") from and against any
and all losses, claims, damages and liabilities caused by any untrue statement
or alleged untrue statement of a material fact contained in any information
furnished by Designated Seller for the Prospectus Supplement, it being
acknowledged that the only information furnished by the Designated Seller for
the Prospectus Supplement and to which this indemnity applies is the information
set forth under the following captions in the Prospectus Supplement:
"Description of the Mortgage Pool", "Servicing of Revolving Credit
Loans--Delinquency and Loss Experience of the Master Servicer's Portfolio",
"Description of the Servicing Agreement--The Master Servicer" and in the
subsections entitled "Master Servicer" and "The Mortgage Pool" under the caption
entitled "Summary" or elsewhere in the Prospectus Supplement with respect to the
subjects discussed under such captions if the information is furnished and
approved by the Designated Seller, or caused by any omission or alleged omission
by the Designated Seller to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading.
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either Section 9.1(a) above, such person
(the "indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and
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the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the reasonable fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the reasonable fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all such
indemnified parties. The indemnifying party may, at its option, at any time upon
written notice to the indemnified party, assume the defense of any proceeding
and may designate counsel satisfactory to the indemnified party in connection
therewith provided that the counsel so designated would have no actual or
potential conflict of interest in connection with such representation. Unless it
shall assume the defense of any proceeding, the indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
If the indemnifying party assumes the defense of any proceeding, it shall be
entitled to settle such proceeding with the consent of the indemnified party or,
if such settlement provides for release of the indemnified party in connection
with all matters relating to the proceeding which have been asserted against the
indemnified party in such proceeding by the other parties to such settlement,
without the consent of the indemnified party.
(c) If the indemnification provided for in this Section 9.1 is
unavailable to an indemnified party under Section 9.1(a) hereof then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities, in such proportion as is
appropriate to reflect the relative fault of the indemnified and indemnifying
parties in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the indemnified and indemnifying parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such parties and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(d) The Purchaser and the Designated Seller agree that it
would not be just and equitable if contribution pursuant to Section 9.1(c) were
determined by pro rata allocation or by
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any other method of allocation which does not take account of the considerations
referred to in Section 9.1(c) above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in this Section 9.1 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim, except where the indemnified party is required to bear such
expenses pursuant to this Section 9.1, which expenses the indemnifying party
shall pay as and when incurred, at the request of the indemnified party, to the
extent that the indemnifying party will be ultimately obligated to pay such
expenses. In the event that any expenses so paid by the indemnifying party are
subsequently determined to not be required to be borne by the indemnifying party
hereunder, the party which received such payment shall promptly refund the
amount so paid to the party which made such payment. 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.
(e) The indemnity and contribution agreements contained in
this Section 9.1 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by the
Purchaser or any person controlling the Purchaser or by or on behalf of the
Designated Seller and their respective directors or officers or any person
controlling the Designated Seller, and (iii) acceptance of and payment for any
of the Certificates.
ARTICLE X
TERMINATION
Section 10.1. Termination. The respective obligations and
responsibilities of the Designated Seller and the Purchaser created hereby shall
terminate, except for the Designated Seller's indemnity obligations as provided
herein, upon the termination of the 1996-RHS4 LLC pursuant to the terms of the
Operating Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1. Amendment. This Agreement may be amended from
time to time by the Designated Seller and the Purchaser by written agreement
signed by the Designated Seller and the Purchaser, with the consent of the
Credit Enhancer (which consent shall not be unreasonably withheld).
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Section 11.2. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.3. Costs. The Designated Seller shall pay directly
all of its own expenses, including out-of-pocket expenses and its attorney fees,
and its rating agency fees. In addition, the Designated Seller shall pay a fee
to the Purchaser, by wire transfer of immediately available funds on the Closing
Date, an amount equal to $375,000. In addition, in the event that this Agreement
is terminated, the Designated Seller will pay to the Purchaser an amount equal
to the Purchaser's out-of-pocket expenses, including but not limited to
attorney's fees and costs related to any examination by the Purchaser or its
designee of the Mortgage Files of the Designated Seller.
Section 11.4. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, postage prepaid, addressed
as follows:
(i) if to the Designated Seller:
GMAC Mortgage Corporation
100 Witmer Road
Horsham, Pennsylvania 10944
David M. Applegate, Chief Financial Officer
Attention: Home Equity Loan Trust 1996-RHS4
or, such other address as may hereafter be furnished to the Purchaser in writing
by the Designated Seller.
(ii) if to the Purchaser:
Residential Funding Mortgage Securities II, Inc.
8400 Normandale Lake Boulevard
Suite 700
Minneapolis, Minnesota 55437
Attention: Home Equity Loan Trust 1996-RHS4
or such other address as may hereafter be furnished to the Designated Seller in
writing by the Purchaser.
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Section 11.5. Severability of Provisions. If any one or more
of the covenants, agreements, provisions of terms of this Agreement shall be
held invalid for any reason whatsoever, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity of enforceability of the other provisions of this Agreement.
Section 11.6. Relationship of Parties. Nothing herein
contained shall be deemed or construed to create a partnership or joint venture
between the parties hereto, and the services of the Designated Seller shall be
rendered as an independent contractor and not as agent for the Purchaser.
Section 11.7. Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an original
and such counterparts, together, shall constitute one and the same agreement.
Section 11.8. Further Agreements. The Purchaser and the Designated Seller
each agree to execute and deliver to the other such additional documents,
instruments or agreements as may be necessary or appropriate to effectuate the
purposes of this Agreement.
Section 11.9. Intention of the Parties. It is the intention of
the parties that the Purchaser is purchasing, and the Designated Seller is
selling, the Revolving Credit Loans, rather than a loan by the Purchaser to the
Designated Seller secured by the Revolving Credit Loans. Accordingly, the
parties hereto each intend to treat the transaction for Federal income tax
purposes as a sale by the Designated Seller, and a purchase by the Purchaser, of
the Revolving Credit Loans. The Purchaser will have the right to review the
Revolving Credit Loans and the Related Documents to determine the
characteristics of the Revolving Credit Loans which will affect the Federal
income tax consequences of owning the Revolving Credit Loans and the Designated
Seller will cooperate with all reasonable requests made by the Purchaser in the
course of such review.
Section 11.10. Successors and Assigns; Assignment of This
Agreement. This Agreement shall bind and inure to the benefit of and be
enforceable by the Designated Seller, Purchaser and their respective successors
and assigns. The obligations of the Designated Seller under this Agreement
cannot be assigned or delegated to a third party without the consent of the
Credit Enhancer and the Purchaser, which consent shall be at the Purchaser's
sole discretion, except that the Purchaser and the Credit Enhancer acknowledge
and agree that the Designated Seller may assign its obligations hereunder to any
Affiliate of the Designated Seller, to any Person succeeding to the business of
the Designated Seller, to any Person into which the Designated Seller is merged
and to any Person resulting from any merger, conversion or consolidation to
which the Designated Seller is a party. The parties hereto acknowledge that the
Purchaser is acquiring the Revolving Credit Loans for the purpose of
contributing them to the
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1996-RHS4 LLC who will in turn transfer the Class A Ownership Interest in the
1996-RHS4 LLC to an Trust that will issue Certificates representing interests in
and Notes secured by such Class A Ownership Interest. As an inducement to the
Purchaser to purchase the Revolving Credit Loans, the Designated Seller
acknowledges and consents to (i) the assignment by the Purchaser to the
1996-RHS4 LLC of all of the Purchaser's rights against the Designated Seller
pursuant to this Agreement insofar as such rights relate to Revolving Credit
Loans transferred to the 1996-RHS4 LLC and to the enforcement or exercise of any
right or remedy against the Designated Seller pursuant to this Agreement by the
1996-RHS4 LLC, (ii) the enforcement or exercise of any right or remedy against
the Designated Seller pursuant to this Agreement by or on behalf of the Issuer
as Managing Member and holder of the Class A Ownership Interest and (iii) the
Issuer's pledge of its interest in this Agreement to the Indenture Trustee and
the enforcement by the Indenture Trustee of any such right or remedy against the
Designated Seller following an Event of Default under the Indenture. Such
enforcement of a right or remedy by the 1996-RHS4 LLC, the Issuer or the
Indenture Trustee, as applicable, shall have the same force and effect as if the
right or remedy had been enforced or exercised by the Purchaser directly.
Section 11.11. Survival. The representations and warranties made herein by
the Designated Seller and the provisions of Article VIII hereof shall survive
the purchase of the Revolving Credit Loans hereunder.
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IN WITNESS WHEREOF, the Designated Seller and the Purchaser
have caused their names to be signed to this Designated Seller's Agreement by
their respective officers thereunto duly authorized as of the day and year first
above written.
RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.
as Purchaser
By:
Name: Diane Wold
Title: Vice President
GMAC MORTGAGE CORPORATION
as Designated Seller
By:
Name:
Title:
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<PAGE>
EXHIBIT 1
REVOLVING CREDIT LOAN SCHEDULE
TO BE PROVIDED UPON REQUEST
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EXHIBIT 2
OFFICER'S CERTIFICATE
I, _______________, hereby certify that I am the duly elected
_____________________ of GMAC Mortgage Corporation ("Designated Seller") a
corporation organized under the laws of the State of ________, and further
certify as follows:
1. Attached hereto as Exhibit A is a true and correct copy of
the Charter and By-laws of the Designated Seller, all of which are in
full force and effect on the date hereof. Attached hereto as Exhibit B
is a Certificate of Good Standing, dated __________. No event has
occurred since _________ which has affected the good standing of the
Designated Seller under the laws of the State of ________.
2. There are no actions, suits or proceedings pending or
threatened against or affecting the Designated Seller which if
adversely determined, individually or in the aggregate, would
materially adversely affect the Designated Seller's obligations under
the Designated Seller's Agreement dated _____________________ __, 1996
between the Designated Seller and Residential Funding Mortgage
Securities II, Inc. (the "Purchaser"), or the Underwriting Agreement
dated _________________________ __, 1996 among the Designated Seller,
the Purchaser and ___________________ (collectively, the "Agreements").
3. Each person who, as an officer or representative of the
Designated Seller, signed the Agreements and any other document
delivered prior hereto or on the date hereof in connection with the
transactions described in the Agreements was, at the respective times
of such signing and delivery, and is now, duly elected or appointed,
qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their
genuine signatures.
4. All of the Designated Seller's representations and
warranties contained in the Agreements are true and correct as of the
respective dates thereof and are true and correct in all material
respects as of the Closing Date, and no event of default in the
performance of any of the Designated Seller's covenants or agreements
under the Agreements has occurred and is continuing, nor has an event
occurred which with the passage of time or notice or both would become
such an event of default.
5. With respect to its transfer of the Mortgage Loans and the
transactions contemplated by the Agreements, the Designated Seller has
complied in all respects with all the agreements by which it is bound
and has satisfied in all respects all the conditions on its part to be
performed or satisfied prior to the Closing Date.
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6. The statements contained in the Prospectus Supplement dated
December 11, 1996 under the caption "Description of the Mortgage Pool"
to the extent such statements are based upon information regarding the
Mortgage Loans (as defined in the Designated Seller's Agreement) and
under the captions ["Servicing of Revolving Credit Loans--Delinquency
and Loss Experience of the Master Servicer's Portfolio," "Description
of the Servicing Agreement--The Master Servicer" and in the subsections
entitled "Master Servicer" and "The Mortgage Pool" under the caption
entitled "Summary"] or elsewhere in the Prospectus Supplement with
respect to the subjects discussed under such captions furnished or
approved by the Designated Seller is true and accurate in all material
respects and does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements
therein not misleading.
7. Attached hereto as Exhibit C is a certified true copy of
the resolutions of the Board of Directors of the Designated Seller with
respect to the sale of the Mortgage Loans subject to the Agreements,
and the same are in full force and effect and have not been revoked,
repealed or amended.
8. Attached hereto as Exhibit D is a true and complete copy of
each certificate or other evidence of merger or change of name, signed
or stamped by the applicable regulatory authority.
9. The representations and warranties contained in paragraph
(b) of Section 4 of the Designated Seller's Agreement are true and
correct as of the Closing Date and the Designated Seller's obligations
to cure any breaches thereof and to repurchase or effect substitution
of any Mortgage Loan as to which such breaches are not cured as
described in such exhibits are enforceable against the Designated
Seller in accordance with its terms (subject to bankruptcy insolvency,
reorganization, receivership or moratorium, other similar laws
effecting the rights of creditors generally and by general equity
principles). The Designated Seller acknowledges and consents to the
assignment pursuant to the Designated Seller's Agreement of such
representations and warranties and related rights to the Trustee for
the benefit of Certificateholders.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of the Designated Seller.
Dated: _________________, 1996
---------------------------------
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Name:
Title:
I, , a [Assistant] Secretary of , hereby certify that
_______________________ is the duly elected, qualified and acting
________________ of the Designated Seller and that the signature appearing above
is [her] [his] genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: _________________, 1996
------------------------------------
Name:
Title: [Assistant] Secretary
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EXHIBIT 3
RESOLUTION
[To be supplied by __________________________________.]
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EXHIBIT 4
December __, 1996
Residential Funding Mortgage
Securities II, Inc.
8400 Normandale Lake Boulevard
Minneapolis, Minnesota 55432
Standard & Poor's Ratings Services
26 Broadway - 10th Floor
New York, New York 10004
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Re: Home Equity Loan-Backed Term Notes
Series 1996-RHS4
Dear Sirs:
I have acted as counsel to GMAC Mortgage Corporation (the "Designated
Seller"), a ________ corporation, in connection with the execution and delivery
by the Designated Seller of the Designated Seller's Agreement ("Designated
Seller's Agreement") between the Designated Seller and Residential Funding
Mortgage Securities II, Inc. (the "Purchaser") dated as of
___________________________ __, 1996 and the Underwriting Agreement
("Underwriting Agreement") among the Designated Seller, the Purchaser,
____________________________ and ___________________ dated as of
_______________________ __, 1996. The Designated Seller's Agreement and the
Underwriting Agreement are collectively referred to as the "Agreements". This
opinion is being delivered to you pursuant to Section 6.02(g) of the Designated
Seller's Agreement. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreements.
As to matters of fact material to this opinion, I have relied, without
independent investigation, on (i) the representations and warranties of the
Designated Seller in the Agreements, (ii) relevant resolutions of the Board of
Directors of the Designated Seller and
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certificates of responsible officers of the Designated Seller and (iii)
certificates of public officials.
I have examined and relied on originals or copies, certified or
otherwise identified to my satisfaction, of the certificate of incorporation and
by-laws of the Designated Seller, records of proceedings taken by the Designated
Seller and such other corporate documents and records of the Designated Seller,
and have made such other investigations, as I have deemed relevant or necessary
for the purpose of this opinion. I have assumed, without independent
investigation, the genuineness of all signatures, the authenticity of all
documents submitted to me as originals and the conformity to original documents
of all documents submitted to me as certified, conformed or reproduction copies.
Based on the foregoing, I am of the opinion that:
1. The Designated Seller is a corporation validly existing and in good
standing under the laws of the State of ________ and is duly authorized and has
full power and authority to transact the business contemplated by the
Agreements, and to execute, deliver and comply with its obligations under the
Agreements, the execution, delivery and performance of which have been duly
authorized by all necessary corporate action on the part of the Designated
Seller.
2. The Designated Seller has the full power and authority and legal
right to own the Mortgage Loans and to transfer and convey the Mortgage Loans to
the Purchaser and has the power to engage in the transactions contemplated by
the Agreements and all requisite power, authority and legal right to execute and
deliver the Agreements and to perform and observe the terms and conditions of
such instruments.
3. The execution and delivery of the Agreements by the Designated
Seller and the Designated Seller's performance and compliance with the terms of
the Agreements do not (a) violate the Designated Seller's certificate of
incorporation or by-laws, (b) violate any ________ or federal law or regulation
or, to the best of my knowledge, any administrative decree or order known to me
to which the Designated Seller is subject or (c) to the best of my knowledge,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any material
contract, agreement or other instrument known to me to which the Designated
Seller is a party or by which it is bound or to which any of its assets are
subject, which violation, default or breach would materially and adversely
affect the Designated Seller's ability to perform its obligations under the
Agreements.
4. Each of the Agreements constitute, assuming due authorization,
execution and delivery by the other parties thereto, the valid and binding
obligation of the Designated Seller enforceable against the Designated Seller in
accordance with its terms, except as enforcement may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights in general, (b) general equity principles
(regardless
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of whether such enforcement is considered in a proceeding in equity or at law)
and (c) limitations of public policy under applicable securities laws as to
rights of indemnity and contribution thereunder.
5. No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Designated Seller of the Agreements or the consummation of
the transactions contemplated by the Agreements except for such consents,
approvals, authorizations and orders (if any) that have been obtained.
6. To the best of my current actual knowledge, there are no actions,
proceedings or investigations pending or threatened against the Designated
Seller before any court, administrative agency or other tribunal (i) asserting
the invalidity of the Agreements, (ii) seeking to prevent the consummation of
any of the transactions contemplated in the Agreements, or (iii) which might
materially and adversely affect the performance by the Designated Seller of its
obligations under, or the validity or enforceability of, the Agreements.
I do not purport to be an expert on, or to express any opinion
concerning, any law other than the law of the State of New York and the federal
law of the United States of America.
This opinion is being delivered only to the parties to which
it is addressed, and is not to be used, quoted or relied upon by anyone other
than such parties.
Very truly yours,
------------------------------
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EXHIBIT 5
FORM OF UNDERWRITING AGREEMENT
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