SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: April 15, 1999
(Date of earliest event reported)
Bear Stearns Asset Backed Securities, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 333-9532 13-3836437
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
245 Park Avenue
4th Floor
New York, New York 10167
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (212) 272-4095
No Change
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(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events
Reference is hereby made to the Registrant's Registration Statement on
Form S-3 (File No. 333-9532) pursuant to which the Registrant registered
Asset-Backed Certificates and Asset-Backed Notes, issuable in various series,
for sale in accordance with the provisions of the Securities Act of 1933, as
amended (the "Act"). Reference is also hereby made to the Prospectus dated
January 4, 1999, and the related Prospectus Supplement, dated April 12, 1999
(collectively, the "Prospectus"), which were previously filed with the
Commission pursuant to Rule 424(b)(5), relating to the publicly offered
American Residential Eagle Bond Trust 1999-1 Mortgage-Backed LIBOR Notes,
Class A, Series 1999-1 (the "Notes). Capitalized terms used but not defined
herein have the meanings assigned to such terms in the Prospectus.
American Residential Eagle Bond Trust 1999-1 (the "Trust" or the
"Issuer") is a Delaware statutory business trust created pursuant to a Deposit
Trust Agreement (the "Trust Agreement"), dated as of April 1, 1999, by and
between Bear Stearns Asset Back Securities, Inc., a Delaware corporation and
wholly owned special purpose subsidiary of The Bear Stearns Companies Inc.
(the "Depositor"), and Wilmington Trust Company, a Delaware banking
corporation (the "Owner Trustee"). The primary asset of the Trust will consist
of a pool (the "Mortgage Pool") of conventional, fixed and adjustable rate
mortgage loans (the "Mortgage Loans") with original terms to maturity of not
more than 30 years, secured by first liens on one-to four-family residential
properties (the "Mortgaged Properties"). A copy of the Trust Agreement is
filed herewith as Exhibit 4.3.
The Notes will be issued pursuant to an Indenture (the "Indenture"),
dated as of April 1, 1999, by and between the Issuer and Norwest Bank
Minnesota, National Association, as indenture trustee (the "Indenture
Trustee"). A copy of the Indenture is filed herewith as Exhibit 4.1.
American Residential Investment Trust, Inc. ("AmREIT") will perform
certain administrative and ministerial duties required under the Master
Servicing Agreement with respect to the Mortgage Loans and under the Indenture
with respect to the Notes on behalf of the Issuer pursuant to a Management
Agreement, dated as of April 1, 1999 (the "Management Agreement"), between
AmREIT and the Issuer. The Management Agreement is filed herewith as Exhibit
4.2.
Advanta Mortgage Corp. USA, a Delaware corporation (the "Master
Servicer"), will perform master servicing of the Mortgage Loans, including all
collection, reporting and advancing obligations, pursuant to a Master
Servicing Agreement (the "Master Servicing Agreement"), dated of April 1,
1999, by and among the Master Servicer, the Issuer and the Indenture Trustee.
The Master Servicing Agreement is filed herewith as Exhibit 10.1.
The Depositor entered into and underwriting agreement dated as of April
12, 1999 (the "Underwriting Agreement") with Bear, Stearns & Co. Inc., as sole
underwriter (the "Underwriter"), with respect to the offering and sale of the
Notes. A copy of the Underwriting Agreement is filed herewith as Exhibit 1.1.
The Depositor, AmREIT and the American Residential Eagle, Inc. (the "Seller")
also entered into an Indemnification and Contribution Agreement in connection
with the Underwriting Agreement which is filed herewith as Exhibit 1.3.
The Notes will have the benefit of an irrevocable and unconditional
financial guaranty insurance policy (the "Insurance Policy") issued by
Financial Security Assurance Inc., a New York stock insurance company (the
"Note Insurer"). The Issuer, the Depositor, AmREIT, the Seller, and the Note
Insurer will enter into an Insurance and Indemnity Agreement (the "Insurance
Agreement") pursuant to which the Depositor, AmREIT and the Seller will agree
to reimburse with interest, the Note Insurer for amounts paid pursuant to
claims under the Insurance Policy. The Insurance Agreement is filed herewith
as Exhibit 4.4. The same parties to the Insurance Agreement also entered into
an Indemnification Agreement in connection with disclosure contained in the
Prospectus, which is filed herewith as Exhibit 4.5.
Item 7. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Exhibits
Exhibit No. Description
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1.1 Underwriting Agreement;
1.2 Indemnification and Contribution Agreement;
4.1 Indenture;
4.2 Management Agreement;
4.3 Trust Agreement;
4.4 Insurance Agreement;
4.5 Indemnification Agreement; and
10.1 Master Servicing Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
BEAR STEARNS ASSET BACKED
SECURITIES, INC.
By: /s/ Jonathan Lieberman
---------------------------
Name: Jonathan Lieberman
Title: Managing Director
Dated: April 28, 1999
EXHIBIT INDEX
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Exhibit No. Description Page No.
- ----------- ----------- --------
1.1 Underwriting Agreement
1.2 Indemnification and Contribution Agreement
4.1 Indenture
4.2 Management Agreement
4.3 Trust Agreement
4.4 Insurance Agreement
4.5 Indemnification Agreement
10.1 Master Servicing Agreement
EXECUTION
$229,000,000 (Approximate)
BEAR STEARNS ASSET BACKED SECURITIES, INC.
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
MORTGAGE-BACKED LIBOR NOTES, CLASS A, SERIES 1999-1
UNDERWRITING AGREEMENT
April 9, 1999
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
Dear Sirs:
Bear Stearns Asset Backed Securities, Inc. (the "Depositor"), a
Delaware corporation, has authorized the issuance and sale of Mortgage-Backed
LIBOR Notes, Class A, Series 1999-1, in the original principal amount and with
the designations set forth in Schedule A hereto (the "Notes"), evidencing
obligations of American Residential Eagle Bond Trust 1999-1 (the "Issuer" or
"Trust"). The Issuer, which is a Delaware statutory business trust, was
created pursuant to a Deposit Trust Agreement, dated as of April 1, 1999 by
and between Wilmington Trust Company, as Owner Trustee (the "Owner Trustee")
and the Depositor. Bear, Stearns & Co. Inc. (the "Underwriter") is purchasing
all of the Notes from the Depositor at the price set forth on Schedule A
hereto. The Notes, which will be secured primarily by a pool of fixed and
adjustable rate, first lien residential mortgage loans (the "Mortgage Loans"),
will be issued pursuant to an indenture, dated as of April 1, 1999 (the
"Indenture"), by and between the Issuer and Norwest Bank Minnesota, National
Association, as indenture trustee (the "Indenture Trustee").
The Notes are more fully described in the Registration Statement (as
defined below), which the Depositor has furnished to the Underwriter.
CAPITALIZED TERMS USED HEREIN THAT ARE NOT OTHERWISE DEFINED SHALL HAVE THE
MEANINGS ASCRIBED THERETO IN THE INDENTURE.
SECTION 1. Representations and Warranties of the Depositor. The Depositor
represents and warrants to, and agrees with you that:
(a) A Registration Statement on Form S-3 (No. 333-9532) has (i) been
prepared by the Depositor in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules
and regulations (the "Rules and Regulations") of the United States
Securities and Exchange Commission (the "Commission") thereunder, (ii)
been filed with the Commission under the Securities Act and (iii) become
effective under the Securities Act. Copies of such Registration Statement
have been delivered by the Depositor to the Underwriter. As used in this
Agreement, "Effective Time" means the date and the time as of which such
Registration Statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission. "Effective
Date" means the date of the Effective Time. "Registration Statement"
means such registration statement, as amended, at the Effective Time,
including any documents incorporated by reference therein at such time.
"Preliminary Prospectus" means each prospectus, if any, included in such
Registration Statement, or amendments thereto, including a preliminary
prospectus supplement that, as completed, is proposed to be used in
connection with the sale of the Notes and any prospectus filed with the
Commission by the Depositor with the consent of the Underwriter pursuant
to Rule 424(b) of the Rules and Regulations. "Prospectus" means the final
prospectus dated June 4, 1998, as supplemented by the final prospectus
supplement dated April 9, 1999 (the "Prospectus Supplement") relating to
the Notes, to be filed with the Commission pursuant to paragraph (2), (3)
or (5) of Rule 424(b) of the Rules and Regulations. Reference herein to
the Prospectus shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Securities Act as of the date of the Prospectus. Any reference to any
amendment or supplement to the Prospectus shall be deemed to refer to and
include any document filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") after the date of the Preliminary Prospectus
or the Prospectus, as the case may be, and incorporated by reference in
the Preliminary Prospectus or the Prospectus, as the case may be. Any
reference to any amendment to the Registration Statement shall be deemed
to include any report of the Depositor filed with the Commission pursuant
to Section 13(a) or 15(d) of the Exchange Act after the Effective Time
that is incorporated by reference in the Registration Statement. The
Commission has not issued any order preventing or suspending the use of
the Preliminary Prospectus or the Prospectus. There are no contracts or
documents of the Depositor that are required to be filed as exhibits to
the Registration Statement pursuant to the Securities Act or the Rules
and Regulations that have not been so filed or incorporated by reference
therein on or prior to the Effective Date of the Registration Statement.
The conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Securities Act and the Rules and Regulations. The
Registration Statement, as of the Effective Date thereof and of any
amendment thereto, did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus,
as of its date and as amended or supplemented as of the Closing Date,
does not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein not misleading; provided, however, that no representation or
warranty is made as to (i) information contained in or omitted from the
Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Depositor in writing
by the Underwriter expressly for use therein, (ii) information contained
in or omitted from the Statement of Eligibility and Qualification on Form
T-1 of the Indenture Trustee (the "Form T-1") under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act") or (iii) information
contained in or omitted from the Registration Statement or the Prospectus
in reliance upon and in conformity with written information furnished to
the Depositor in writing by AmREIT, the Seller, the Master Servicer or
the Note Insurer, which information is the subject of separate
indemnification and contribution agreements among the Underwriter, the
Depositor and each such above-named party. The only information furnished
by the Underwriter or on behalf of the Underwriter for use in connection
with the preparation of the Registration Statement or the Prospectus is
described in Section 8(h) hereof.
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder, and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Since the respective dates as of which information is given in
the Prospectus, there has not been any material adverse change in the
general affairs, management, financial condition or results of operations
of the Depositor, other than as set forth or contemplated in the
Prospectus as supplemented or amended as of the Closing Date.
(e) The Depositor has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease
of property or the conduct of its business requires such qualification,
and has all power and authority necessary to own or hold its properties,
to conduct the business in which it is engaged and to enter into and
perform its obligations under this Agreement and the other Basic
Documents (as defined below) to which it is a party, and to cause the
Notes and the Investor Certificate (collectively, the "Securities") to be
issued.
(f) There are no actions, proceedings or investigations pending with
respect to which the Depositor has received service of process before, or
threatened by, any court, administrative agency or other tribunal to
which the Depositor is a party or of which any of its properties is the
subject (i) that if determined adversely to the Depositor would have a
material adverse effect on the business or financial condition of the
Depositor, (ii) that assert the invalidity of this Agreement or the other
Basic Documents, (iii) that seek to prevent the issuance of the
Securities or the consummation by the Depositor of any of the
transactions contemplated by the Basic Documents, or (iv) that might
materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, the Basic
Documents to which it is a party.
(g) This Agreement has been, and the other Basic Documents to which
the Depositor is a party, when executed and delivered as contemplated
hereby and thereby, will have been, duly authorized, executed and
delivered by the Depositor, and this Agreement constitutes, and such
other Basic Documents, when executed and delivered as contemplated
herein, will constitute, legal, valid and binding instruments enforceable
against the Depositor in accordance with their respective terms, subject
as to enforceability to (i) applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (ii) general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and (iii) with
respect to rights of indemnity, limitations of public policy under
applicable securities laws.
(h) At the Closing Date, the execution and delivery of the Trust
Agreement and the Mortgage Loan Purchase Agreement will have been duly
authorized by the Depositor and the other parties thereto, and upon due
execution and delivery thereof by the parties thereto, the Trust
Agreement and the Mortgage Loan Purchase Agreement will each constitute a
legal, valid and binding instrument of the Depositor enforceable against
the Depositor in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or
at law). The direction by the Owner Trustee to the Indenture Trustee to
execute, authenticate, issue and deliver the Notes has been duly
authorized by the Depositor (as the initial holder of the Investor
Certificate), and assuming the Indenture Trustee has been duly authorized
to do so, when executed, authenticated, issued and delivered by the
Indenture Trustee in accordance with the Indenture, the Notes will be
validly issued and outstanding and will be entitled to the benefits
provided by the Indenture.
(i) The execution, delivery and performance by the Depositor of this
Agreement and the other Basic Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby, and the
issuance and delivery of the Notes do not and will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Depositor is a
party, by which the Depositor is bound or to which any of the properties
or assets of the Depositor or any of its subsidiaries is subject, which
breach or violation would have a material adverse effect on the business,
operations or financial condition of the Depositor, nor will such actions
result in any violation of the provisions of the certificate of
incorporation or by-laws of the Depositor or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Depositor or any of its properties or assets, which
breach or violation would have a material adverse effect on the business,
operations or financial condition of the Depositor.
(j) The Depositor has no reason to believe that Deloitte & Touche
LLP are not independent public accountants with respect to the Depositor
as required by the Securities Act and the Rules and Regulations.
(k) As of the Closing Date, the Notes will be duly and validly
authorized by the Issuer and, when duly and validly executed by the
Issuer, authenticated by the Indenture Trustee and delivered in
accordance with the Indenture, and delivered to you against payment
therefor as provided herein, will be duly and validly issued and
outstanding and entitled to the benefits of the Indenture. The Notes will
be "mortgage related securities," as such term is defined in the singular
in the Exchange Act and in the Secondary Mortgage Market Enhancement Act
of 1984, as amended ("SMMEA").
(l) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States is required for the issuance of the Securities and the sale
of the Notes to the Underwriter, or the consummation by the Depositor of
the other transactions contemplated by this Agreement, the Trust
Agreement, the Indenture, the Management Agreement, the Initial Mortgage
Loan Purchase Agreement, the Mortgage Loan Purchase Agreement (together
with the Initial Mortgage Loan Purchase Agreement, the "Mortgage Loan
Sale Agreements"), the Master Servicing Agreement, the Insurance
Agreement, the Securities, the Indemnification and Contribution Agreement
(in connection with this Agreement) and the Indemnification Agreement (in
connection with the insurance documents) (collectively, the "Basic
Documents"), except such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or blue sky laws in connection with the purchase and distribution of the
Notes by the Underwriter or as have been obtained.
(m) The Depositor possesses all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct the business
now conducted by it and as described in the Prospectus, and the Depositor
has not received notice of any proceedings relating to the revocation or
modification of any such license, certificate, authority or permit which
if decided adversely to the Depositor would, singly or in the aggregate,
materially and adversely affect the conduct of its business, operations
or financial condition.
(n) At the time of execution and delivery of the Trust Agreement and
the Mortgage Loan Purchase Agreement, the Depositor will: (i) be the sole
beneficial owner of the Mortgage Loans conveyed to it by the Seller, free
and clear of any lien, mortgage, pledge, charge, encumbrance, adverse
claim or other security interest (collectively, "Liens"); (ii) not have
assigned to any Person any of its right or title in the Mortgage Loans or
in the Mortgage Loan Purchase Agreement and (iii) have the power and
authority to sell its interest in the Mortgage Loans to the Trust without
recourse. At the time of execution and delivery of the Trust Agreement
and the Mortgage Loan Purchase Agreement, the Depositor will not have
assigned to any Person any of its right or title in the Notes and (ii)
have the power and authority to sell the Notes to the Underwriter. Upon
execution and delivery of the Trust Agreement by the Owner Trustee, the
Trust will have acquired beneficial ownership of all of the Depositor's
right, title and interest in and to the Mortgage Loans. Upon execution
and delivery of the Indenture by the Issuer and the Indenture Trustee,
the Indenture Trustee will have a perfected first priority security
interest in the Mortgage Loans. Upon delivery, the Underwriter will have
good title to the Notes, free and clear of any Liens.
(o) As of the Cut-Off Date, each of the Mortgage Loans will meet the
eligibility criteria described in the Prospectus, the Master Servicing
Agreement and the Mortgage Loan Sale Agreements. At the Closing Date, the
Securities, the Basic Documents and each of the Mortgage Loans will
conform in all material respects to the descriptions thereof contained in
the Prospectus.
(p) Neither the Depositor nor the Trust created pursuant to the
Trust Agreement is an "investment company" within the meaning of such
term under the Investment Company Act of 1940 (the "1940 Act") and the
rules and regulations of the Commission thereunder.
(q) At the Closing Date, the Notes will have been rated in the
highest rating category by at least two "nationally recognized
statistical rating organizations" as such term is defined in SMMEA.
(r) Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of this Agreement or any other
Basic Document have been paid or will be paid at or prior to the Closing
Date.
(s) At the Closing Date, each of the representations and warranties
of the Depositor set forth in the Trust Agreement, the Insurance
Agreement or any other Basic Document to which it is a party will be true
and correct in all material respects.
Any certificate signed by an officer of the Depositor in connection
with an offering of the Notes shall be deemed to be a representation and
warranty as to the matters covered thereby to each person to whom the
representations and warranties in this Section 1 are made.
SECTION 2. Purchase and Sale. The commitment of the Underwriter to
purchase the Notes pursuant to this Agreement shall be deemed to have been
made on the basis of the representations and warranties herein contained and
shall be subject to the terms and conditions herein set forth. The Depositor
(as the initial holder of the Investor Certificate) agrees to instruct the
Owner Trustee to issue the Notes and agrees to sell to the Underwriter, and
the Underwriter agrees (except as provided in Section 10) to purchase from the
Depositor the aggregate principal amount of the Notes at the purchase price or
prices set forth in Schedule A.
SECTION 3. Delivery and Payment. Delivery of and payment for the Notes to
be purchased by the Underwriter shall be made at the offices of Brown & Wood
LLP, 815 Connecticut Avenue, N.W., Suite 701, Washington, D.C. 20006-4004, or
at such other place as shall be agreed upon by the Underwriter and the
Depositor at 10:00 a.m. Washington, D.C. time on or about April 15, 1999 or at
such other time or date as shall be agreed upon in writing by the Underwriter
and the Depositor (such date being referred to as the "Closing Date"). Payment
shall be made to the Depositor by wire transfer of same day funds payable to
the account of the Depositor. Delivery of the Notes shall be made to the
Underwriter for the account of the Underwriter against payment of the purchase
price thereof. The Notes shall be in such authorized denominations and
registered in such names as the Underwriter may request in writing at least
two business days prior to the Closing Date. The Notes will be made available
for examination by the Underwriter no later than 2:00 p.m. New York City time
on the first business day prior to the Closing Date.
SECTION 4. Offering by the Underwriter. It is understood that, subject to
the terms and conditions hereof, the Underwriter proposes to offer the Notes
from time to time to the public in the United States and Europe as set forth
in the Prospectus.
SECTION 5. Covenants of the Depositor. The Depositor agrees as follows:
(a) To prepare the Prospectus in a form approved by the Underwriter
and to file such Prospectus pursuant to Rule 424(b) under the Securities
Act not later than the Commission's close of business on the second
business day following the availability of the Prospectus to the
Underwriter and to make no further amendment or any supplement to the
Registration Statement or to the Prospectus prior to the Closing Date
except as permitted herein; to advise the Underwriter, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective prior to the
Closing Date or any supplement to the Prospectus or any amended
Prospectus has been filed prior to the Closing Date and to furnish the
Underwriter with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Depositor with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of the Prospectus and,
for so long as the delivery of a prospectus is required in connection
with the offering or sale of the Notes to advise the Underwriter promptly
of its receipt of notice of the issuance by the Commission of any stop
order or of: (i) any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus; (ii) the suspension of the
qualification of the Notes for offering or sale in any jurisdiction;
(iii) the initiation of or threat of any proceeding for any such purpose;
(iv) any request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional
information. In the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus or suspending any such qualification, the Depositor
promptly shall use its best efforts to obtain the withdrawal of such
order by the Commission.
(b) To furnish promptly to the Underwriter and to counsel for the
Underwriter a signed copy of the Registration Statement as originally
filed with the Commission, and of each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith.
(c) To deliver promptly to the Underwriter such number of the
following documents as the Underwriter shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with
the Commission and each amendment thereto (in each case including
exhibits); (ii) each Preliminary Prospectus (if any), the Prospectus and
any amended or supplemented Prospectus; and (iii) any document
incorporated by reference in the Prospectus (including exhibits thereto).
If the delivery of a prospectus is required at any time in connection
with the offering or sale of the Notes, and if at such time any events
shall have occurred as a result of which the Prospectus as then amended
or supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such same period to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the
Securities Act or the Exchange Act, the Depositor shall notify the
Underwriter and, upon the Underwriter's request, shall file such document
and prepare and furnish without charge to the Underwriter and to any
dealer in securities as many copies as the Underwriter may from time to
time reasonably request of an amended Prospectus or a supplement to the
Prospectus which corrects such statement or omission or effects such
compliance.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Depositor or the Underwriter,
be required by the Securities Act or requested by the Commission.
(e) The Depositor will (i) cause any Computational Materials or any
Structural Term Sheet (each as defined below in this subsection) with
respect to the Notes which are delivered by the Underwriter to the
Depositor to be filed with the Commission on Additional Materials 8-K (as
defined below) (A) at or before the time of filing of the Prospectus
pursuant to Rule 424(b) under the Securities Act in the case of
Computational Materials or any Structural Term Sheets provided to
investors prior to the availability of such Prospectus, and (B) within
two business days of first use in the case of Computational Materials or
any Structural Term Sheet provided to investors subsequent to the
availability of, but before the sending or giving of, such Prospectus and
(ii) cause any Collateral Term Sheet (as defined below in this
subsection) with respect to the Notes which are delivered by the
Underwriter to the Depositor to be filed with the Commission on an
Additional Materials 8-K within two business days after the date on which
the Underwriter advises the Depositor that such Collateral Term Sheet was
first used; provided, however, that the Depositor shall have --------
------- no obligation to file any materials which, in the reasonable
determination of the Depositor after consultation with the Underwriter,
(x) are not required to be filed pursuant to the Kidder Letters and/or
the PSA Letter (each as defined below) or (y) contain any erroneous
information or untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; it being understood, however, that the
Depositor shall have no obligation to review or pass upon the accuracy or
adequacy of, or to correct, any Computational Materials, Structural Term
Sheets or Collateral Term Sheets provided by the Underwriter to the
Depositor as aforesaid. For purposes of this subsection (e), (1) the term
"Computational Materials" shall mean those materials which constitute
"computational materials" within the meaning of the no-action letter
dated May 20, 1994 issued by the Division of Corporation Finance of the
Commission to Kidder, Peabody Acceptance Corporation I and certain
affiliates and the no-action letter dated May 27, 1994 issued by the
Division of Corporation Finance of the Commission to the Public
Securities Association (together, the "Kidder Letters") and the no-action
letter dated February 17, 1995 issued by the Division of Corporation
Finance to the Public Securities Association (the "PSA Letter") for which
the filing of such material on an Additional Materials 8-K is a condition
of the relief granted in such letters, (2) the terms "Structural Term
Sheet" and "Collateral Term Sheet" shall mean those materials which
constitute "structural term sheets" and "collateral term sheets" within
the meaning of the PSA Letter for which the filing of such material on an
Additional Materials 8-K is a condition of the relief granted in such
letter and (3) the term "Additional Materials 8-K" shall mean a Current
Report on Form 8-K used to file Computational Materials, Structural Term
Sheets and/or Collateral Term Sheets.
(f) To furnish the Underwriter and counsel for the Underwriter,
prior to filing with the Commission, and to obtain the consent of the
Underwriter for the filing of the following documents relating to the
Securities: any (i) Preliminary Prospectus, (ii) amendment to the
Registration Statement or supplement to the Prospectus, or document
incorporated by reference in the Prospectus, or (iii) Prospectus pursuant
to Rule 424 of the Rules and Regulations.
(g) To use its best efforts, in cooperation with the Underwriter, to
qualify the Notes for offering and sale under the applicable securities
laws of such states and other jurisdictions of the United States or
elsewhere as the Underwriter may designate, and maintain or cause to be
maintained such qualifications in effect for as long as may be required
for the distribution of the Notes; provided, however, that in connection
therewith, the Depositor shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction. The Depositor will file or cause the filing of such
statements and reports as may be required by the laws of each
jurisdiction in which the Notes have been so qualified.
(h) Unless the Underwriter shall otherwise have given its written
consent, the Depositor shall not enter into a contractual arrangement
with the Seller which contemplates the public offering or sale of notes
or pass-through certificates backed by residential mortgage loans or
other similar securities representing interests in or secured by other
mortgage-related assets originated or owned by the Seller for a period of
seven business days following the commencement of the offering of the
Notes to the public.
(i) So long as the Notes shall be outstanding the Depositor shall
cause the Master Servicer to deliver to the Underwriter as soon as such
statements are available to be furnished: (i) the annual statement as to
compliance delivered to the Indenture Trustee pursuant to Section 3(j) of
the Master Servicing Agreement and (ii) the annual statement of a firm of
independent public accountants furnished to the Indenture Trustee
pursuant to Section 3(k) of the Master Servicing Agreement.
(j) To apply the net proceeds from the sale of the Notes in the
manner set forth in the Prospectus.
SECTION 6. Conditions to the Underwriter's Obligations. The obligations
of the Underwriter to purchase the Notes pursuant to this Agreement are
subject to: (a) the accuracy on and as of the Closing Date of the
representations and warranties on the part of the Depositor herein contained;
(b) the performance by the Depositor of all of its obligations hereunder; and
(c) the following conditions as of the Closing Date:
(i) The Underwriter shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission. Any request of the Commission
for inclusion of additional information in the Registration Statement or
the Prospectus shall have been complied with.
(ii) The Prospectus shall have been filed with the Commission
pursuant to Rule 424 not later than the second business day following the
date it is first used after effectiveness in connection with a public
offering or sale, or transmitted by a means reasonably calculated to
result in filing with the Commission by that date.
(iii) The Underwriter shall not have discovered and disclosed to the
Depositor on or prior to the Closing Date that the Registration Statement
or the Prospectus or any amendment or supplement thereto contains an
untrue statement of a fact or omits to state a fact which, in the opinion
of the Underwriter and its counsel, is material and is required to be
stated therein or is necessary to make the statements therein not
misleading.
(iv) All corporate proceedings and other legal matters relating to
the authorization, form and validity of this Agreement, the Securities,
the other Basic Documents, the Registration Statement and the Prospectus,
and all other legal matters relating to this Agreement, the Securities,
the other Basic Documents and the transactions contemplated hereby and
thereby shall be satisfactory in all respects to the Underwriter and its
counsel, and the Depositor shall have furnished to the Underwriter and
its counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
(v) Brown & Wood LLP, special counsel to the Depositor (or internal
counsel to the Depositor, in the case of opinions set forth in
sub-paragraphs (2), (4), (6), and (7) below), shall have furnished to the
Underwriter a written opinion, addressed to the Underwriter and dated the
Closing Date, in form and substance satisfactory to the Underwriter, to
the effect that:
(1) The Depositor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware and has corporate power and authority necessary to
own or hold its properties and to conduct the business in which it
is engaged and to enter into and perform its obligations under this
Agreement, the Mortgage Loan Purchase Agreement, the Trust
Agreement, the Indemnification and Contribution Agreement, the
Insurance Agreement, the Indemnification Agreement and to cause the
Securities to be issued;
(2) The Depositor is not in violation of its certificate of
incorporation or by-laws or to such counsel's knowledge in default
in the performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument
to which the Depositor is a party or by which it or its properties
may be bound, which default might result in any material adverse
changes in the financial condition, earnings, affairs or business of
the Depositor or which might materially and adversely affect the
properties or assets, taken as a whole, of the Depositor;
(3) This Agreement has been duly authorized, executed and
delivered by the Depositor. The Trust Agreement, the Mortgage Loan
Purchase Agreement, the Indemnification and Contribution Agreements,
the Insurance Agreement and the Indemnification Agreement each have
been duly authorized, executed and delivered by the Depositor and,
assuming the due authorization, execution and delivery of such
agreements by the other parties thereto, such agreements constitute
valid and binding obligations, enforceable against the Depositor in
accordance with their respective terms, subject as to enforceability
to (A) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally, (B) general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law)
and (C) with respect to rights of indemnity under this Agreement and
the Insurance Agreement, limitations of public policy under
applicable securities and insurance laws.
(4) To such counsel's knowledge, the execution, delivery and
performance of this Agreement, the Mortgage Loan Purchase Agreement,
the Trust Agreement, the Indemnification and Contribution
Agreements, the Insurance Agreement and the Indemnification
Agreement by the Depositor, the consummation of the transactions
contemplated hereby and thereby, and the issuance and delivery of
the Securities do not and will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the
Depositor is a party or by which the Depositor is bound or to which
any of the property or assets of the Depositor or any of its
subsidiaries is subject, which breach or violation would have a
material adverse effect on the business, operations or financial
condition of the Depositor, nor will such actions result in a
violation of the provisions of the certificate of incorporation or
by-laws of the Depositor or, to such counsel's knowledge, any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Depositor
or any of its properties or assets, which breach or violation would
have a material adverse effect on the business, operations or
financial condition of the Depositor.
(5) The direction by the Depositor (on behalf of the Issuer) to
the Indenture Trustee to issue, authenticate and deliver the Notes
has been duly authorized by the Depositor and, assuming that the
Indenture Trustee has been duly authorized to do so, when executed,
authenticated and delivered by the Indenture Trustee in accordance
with the Indenture, the Notes will be validly issued and outstanding
and will be entitled to the benefits of the Indenture.
(6) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of
the United States is required in connection with the issuance of the
Securities, the sale of the Notes to the Underwriter, or the
consummation by the Depositor of the other transactions contemplated
by the Basic Documents, except such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Securities Act or state securities or "blue sky" laws in
connection with the purchase and distribution of the Notes by the
Underwriter and as have been previously obtained.
(7) There are not, to such counsel's knowledge, any actions,
proceedings or investigations pending with respect to which the
Depositor has received service of process before, or threatened by
any court, administrative agency or other tribunal to which the
Depositor is a party or of which any of its properties is the
subject: (a) which, if determined adversely to the Depositor, would
have a material adverse effect on the business, results of
operations or financial condition of the Depositor; (b) which assert
the invalidity of this Agreement, the Trust Agreement, the Mortgage
Loan Purchase Agreement, the Indemnification and Contribution
Agreement, the Insurance Agreement, the Indemnification Agreement or
the Securities; (c) seeking to prevent the issuance of the
Securities or the consummation by the Depositor of any of the
transactions contemplated by any of the foregoing agreements; or (d)
which might materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or
enforceability of any of the foregoing agreements.
(8) The Securities have been duly and validly authorized and
issued and, immediately prior to the sale of the Notes to the
Underwriter, such Securities are owned by the Depositor, free and
clear of all Liens.
(9) The conditions to the use a registration statement on Form
S-3 under the Securities Act, as set forth in the General
Instructions to Form S-3, have been satisfied with respect to the
Registration Statement and the Prospectus.
(10) The Registration Statement and any amendments thereto have
become effective under the Securities Act; to the best of such
counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and not withdrawn and no
proceedings for that purpose have been instituted or threatened and
not terminated; and the Registration Statement, the Prospectus and
each amendment or supplement thereto, as of their respective
effective or issue dates (other than the financial and statistical
information contained therein and the Form T-1 as to which such
counsel need express no opinion), complied as to form in all
material respects with the applicable requirements of the Securities
Act and the Rules and Regulations.
(11) To the best of such counsel's knowledge, there are no
material contracts, indentures or other documents of a character
required to be described or referred to in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement other than those described or referred to
therein or filed or incorporated by reference as exhibits thereto.
(12) The statements set forth in the Basic Prospectus under the
captions "Description of the Securities" and "The Agreements" and in
the Prospectus Supplement under the captions "Description of the
Notes" to the extent such statements purport to summarize certain
provisions of the Securities, the Trust Agreement or the Indenture
are fair and accurate in all material respects.
(13) The statements set forth in the Prospectus under the
captions "ERISA Considerations" and "Certain Federal Income Tax
Considerations" and in the Prospectus Supplement under the captions
"ERISA Considerations" and "Certain Federal Income Tax
Considerations," and "Legal Investment Considerations" to the extent
that they constitute matters of federal law, provide a fair and
accurate summary of such law or conclusions.
(14) Neither the Depositor nor the Trust is an "investment
company" or under the "control" of an "investment company" as such
terms are defined in the 1940 Act.
(15) The Notes will constitute "mortgage related securities"
under the SMMEA for so long as the Notes are rated in one of the two
highest rating categories by one or more nationally recognized
statistical rating agencies.
(16) The Indenture is qualified under the Trust Indenture Act
of 1939, as amended.
Such counsel shall also have furnished to the Underwriter a written
statement, addressed to the Underwriter and dated the Closing Date, in form
and substance satisfactory to the Underwriter, to the effect that no facts
have come to the attention of such counsel which lead them to believe that:
(i) the Registration Statement, at the time such Registration Statement became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except as to the Form T-1 and financial or
statistical data contained in the Registration Statement); or (ii) the
Prospectus, as of its date and as of the Closing Date, contained or contains
an untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except as to financial and statistical data contained in
the Prospectus and statements set forth in the Prospectus Supplement under the
captions "Servicing of the Mortgage Loans -- Advanta", and "The Note Insurer"
with respect to which no opinion need be expressed).
(vi) Tobin & Tobin, Counsel for the Seller and AmREIT, shall have
furnished to the Underwriter a written opinion, addressed to the
Underwriter and the Depositor and dated the Closing Date, in form and
substance satisfactory to the Underwriter, to the effect that:
(1) Each of the Seller and AmREIT has been duly incorporated
and is validly existing and in good standing as a corporation under
the laws of the jurisdiction of its incorporation and has duly
authorized all actions contemplated in the Basic Documents to be
taken by it.
(2) AmREIT has full power and authority to sell the Mortgage
Loans to the Seller and the Seller has full power and authority to
serve in the capacity of "Seller" of the Mortgage Loans and to
transfer the Mortgage Loans to the Depositor as contemplated in the
Mortgage Loan Sale Agreements.
(3) The Mortgage Loan Sale Agreements, the Indemnification and
Contribution Agreement (in connection with this Agreement), the
Insurance Agreement, the Indemnification Agreement (in connection
with the insurance documents) and any other Basic Document to which
either the Seller or AmREIT is a party have been duly authorized,
executed and delivered by the Seller or AmREIT, as applicable, and,
assuming the due authorization, execution and delivery of such
agreements by the other parties thereto, constitute the legal, valid
and binding agreements of the Seller or AmREIT, as applicable,
enforceable against such parties in accordance with their terms,
subject as to enforceability to (A) bankruptcy, insolvency,
reorganization, moratorium, receivership or other similar laws now
or hereafter in effect relating to creditors' rights generally and
(B) the qualification that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion, with respect to such
remedies, of the court before which any proceedings with respect
thereto may be brought and (C) with respect to rights of indemnity
under the Indemnification and Contribution Agreement, the
Indemnification Agreement and the Insurance Agreement, limitations
of public policy under applicable securities and insurance laws.
(4) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body
having jurisdiction over the Seller or AmREIT is required for the
consummation by the Seller or AmREIT, as applicable, of the
transactions contemplated by the Basic Documents except such
consents, approvals, authorizations, registrations and
qualifications as have been obtained.
(5) Neither the transfer of the Mortgage Loans by AmREIT to the
Seller, or by the Seller to the Depositor, pursuant to the Mortgage
Loan Sale Agreements, nor the execution, delivery or performance by
either AmREIT or the Seller of the Basic Documents to which either
are a party and the transactions contemplated therein (A) conflict
with or result in a breach of, or constitute a default under, (1)
any term or provision of their respective incorporation documents;
(2) to the best of such counsel's knowledge, any term or provision
of any material agreement, deed of trust, mortgage loan agreement,
contract, instrument or indenture, or other agreement to which
either is bound or to which any of their respective property or
assets (including property or assets of their respective
subsidiaries) is subject; (3) to the best of such counsel's
knowledge, any order, judgment, writ, injunction or decree of any
court or governmental authority having jurisdiction over the Seller
or AmREIT or (4) to the best of such counsel's knowledge, any law,
rule or regulations applicable to the Seller or AmREIT, or (B) to
the best of such counsel's knowledge, results in the creation or
imposition of any lien, charge or encumbrance upon the corpus of the
Trust or upon the Securities.
(6) There are no actions, proceedings or investigations pending
with respect to which the Seller or AmREIT has received service of
process, nor, to the best of such counsel's knowledge, are there any
actions, proceedings or investigations threatened against the Seller
or AmREIT by any court, administrative agency or other tribunal (a)
contesting the validity of any of the Basic Documents, (b) seeking
to prevent the consummation of any of the transactions contemplated
by any of the Basic Documents or (c) which would materially and
adversely affect the performance by either the Seller or AmREIT, as
applicable, of its obligations under, or the validity or
enforceability of, the Basic Documents to which they are a party.
Such counsel shall also have furnished to the Underwriter a written
statement, addressed to the Underwriter and dated the Closing Date, in form
and substance satisfactory to the Underwriter, to the effect that no facts
have come to the attention of such counsel which lead them to believe that:
(i) the Registration Statement, at the time such Registration Statement became
effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except as to the Form T-1 and financial or
statistical data contained in the Registration Statement); or (ii) the
Prospectus, as of its date and as of the Closing Date, contained or contains
an untrue statement of a material fact or omitted or omits to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except as to financial and statistical data contained in
the Prospectus and statements set forth in the Prospectus Supplement under the
captions" "Servicing of the Mortgage Loans -- Advanta" and "The Note Insurer,"
with respect to which no opinion need be expressed).
(vii) Hunton & Williams, counsel to the Indenture Trustee, and/or
internal counsel to the Indenture Trustee, shall have furnished to the
Underwriter a written opinion, addressed to the Underwriter and the
Depositor and dated the Closing Date, in form and substance satisfactory
to the Underwriter, to the effect that:
(1) The Indenture Trustee is duly incorporated and as a
national banking association validly existing and has the power and
authority to enter into, and to take all action required of it
under, the Indenture, the Master Servicing Agreement and the other
Basic Documents to which it is a party.
(2) Each of the Indenture, the Master Servicing Agreement and
any other Basic Documents to which the Indenture Trustee is a party
has been duly authorized, executed and delivered by the Indenture
Trustee and, assuming due authorization, execution and delivery
thereof by the other parties thereto, constitutes a valid and
binding obligation of the Indenture Trustee, enforceable against the
Indenture Trustee in accordance with its terms, subject, as to
enforceability, to limitations of bankruptcy, insolvency,
moratorium, fraudulent conveyance and other laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and to general principles of equity.
(3) No consent, approval, authorization or order of any
Minnesota or federal court or governmental agency or body is
required for the consummation of the Indenture Trustee of the
transactions contemplated by the terms of the Indenture, the Master
Servicing Agreement or any other Basic Document to which it is a
party, except any such as may be required under the blue sky laws of
any jurisdiction in connection with the offering, sale or
acquisition of the Notes, and any approvals as have been obtained.
(4) The consummation of the transactions contemplated by the
terms of the Indenture, the Master Servicing Agreement and the other
Basic Documents to which it is a party do not, to such counsel's
knowledge, conflict with or result in a breach or violation of any
material term or provision of, or constitute a default under, the
articles of incorporation or bylaws of the Indenture Trustee, an
indenture or other agreement or instrument to which the Indenture
Trustee is a party or by which it is bound, any Minnesota or federal
statute or regulation applicable to the Indenture Trustee or any
order of any Minnesota or federal court, regulatory body,
administrative agency or governmental body having jurisdiction over
the Indenture Trustee.
(5) To the best of such counsel's knowledge after due inquiry,
there are no legal or governmental actions, investigations or
proceedings pending to which the Indenture Trustee is a party, or
threatened against the Indenture Trustee (a) asserting the
invalidity of the Indenture, the Master Servicing Agreement or any
other Basic Document to which it is a party or (b) which might
materially and adversely affect the performance by the Indenture
Trustee of its obligations under, or the validity or enforceability
of, the Indenture, the Master Servicing Agreement or any other Basic
Document to which it is a party.
(viii) Richards, Layton & Finger, counsel to the Owner Trustee,
shall have furnished to the Underwriter a written opinion, addressed to
the Underwriter and the Depositor and dated the Closing Date, in form and
substance satisfactory to the Underwriter and their counsel, to the
effect that:
(1) The Owner Trustee is duly incorporated and validly existing
as a banking corporation under the laws of the State of Delaware and
has the power and authority to execute and deliver the Trust
Agreement.
(2) The Trust Agreement has been duly authorized, executed and
delivered by the Owner Trustee and is the legal, valid and binding
agreement of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its terms.
(3) Neither the execution, delivery and performance by the
Owner Trustee of the Trust Agreement, nor the consummation of the
transactions contemplated thereby, nor compliance with the terms
thereof, will conflict with or result in a breach of, or constitute
a default under the charter or bylaws of the Owner Trustee.
(4) No consent, approval or other authorization of, or
registration, declaration or filing with, any court or governmental
agency or commission of the State of Delaware is required by or with
respect to the Owner Trustee for the valid execution and delivery of
the Trust Agreement, or for the validity or enforceability thereof,
other than the filing of the Certificate of Trust.
(ix) Richards, Layton & Finger, Delaware counsel to the Issuer,
shall have furnished to the Underwriter a written opinion, addressed to
the Underwriter and the Depositor and dated the Closing Date, in form and
substance satisfactory to the Underwriter and their counsel, to the
effect that:
(1) The Trust Agreement is the legal, valid and binding
agreement of the Depositor and the Owner Trustee, enforceable
against the Depositor and the Owner Trustee, in accordance with its
terms.
(2) The Trust has been duly formed and is validly existing as a
business trust under the Delaware Business Trust Act, 12 Del. C. ss.
3801 et seq. (the "Act").
(3) The Trust has the power and authority under the Act and the
Trust Agreement, and the Trust Agreement authorizes the Owner
Trustee to execute, deliver and perform its obligations under the
Basic Documents.
(x) Counsel to the Master Servicer (which may include in-house
counsel) shall have furnished to the Underwriter a written opinion,
addressed to the Underwriter and the Depositor and dated the Closing
Date, in form and substance satisfactory to the Underwriter and their
counsel, to the effect that:
(1) The Master Servicer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
(2) The Master Servicer has full power and authority to serve
as Master Servicer as contemplated in the Master Servicing
Agreement.
(3) The Master Servicing Agreement and any other Basic Document
to which the Master Servicer is a party has been duly authorized,
executed and delivered by the Master Servicer.
(4) The Master Servicing Agreement and any other Basic Document
to which the Master Servicer is a party each constitutes the legal,
valid and binding agreement of the Master Servicer, enforceable
against the Master Servicer in accordance with its terms, subject to
limitations of bankruptcy, insolvency, moratorium, fraudulent
conveyance and other laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and to general
principles of equity.
(5) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body
having jurisdiction over the Master Servicer is required for the
consummation by the Master Servicer of the transactions contemplated
by the Master Servicing Agreement or any other Basic Document to
which the Master Servicer is a party, except such consents,
approvals, authorizations, registrations and qualification as have
been obtained.
(6) The execution, delivery and performance of the Master
Servicing Agreement and any other Basic Document to which the Master
Servicer is a party by the Master Servicer and the consummation of
the transactions contemplated thereby do not and will not (a)
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Master Servicer is a party or by which the
Master Servicer is bound or to which any of the property or assets
of the Master Servicer or any of its subsidiaries is subject or (b)
result in any violation of the provisions of the charter or by-laws
of the Master Servicer or any statute or any order, rule or
regulation of any court or government agency or body having
jurisdiction over the Master Servicer or any of its properties or
assets.
(7) To the best of such counsel's knowledge after due inquiry,
there are no legal or governmental actions, investigations or
proceedings pending to which the Master Servicer is a party (other
than these disclosed in the Prospectus Supplement) to which the
Master Servicer is a party, or threatened against the Master
Servicer (a) asserting the invalidity of the Master Servicing
Agreement or any other of the Basic Documents to which the Master
Servicer is a party or (b) which might materially and adversely
affect the performance by the Master Servicer of its obligations
under the Master Servicing Agreement or any other Basic Document to
which it is a party.
(8) The statements contained in the Prospectus Supplement under
the heading "Servicing of the Mortgage Loans -- Advanta", insofar as
such statements constitute summaries of the matters referred to
therein, accurately reflect and fairly present the information
purported to be shown and, insofar as such statements describes the
Master Servicer, fairly and accurately describe the Master Servicer,
other than any financial or statistical information contained or
incorporated by reference therein, as to which such counsel need
express no opinion.
(xi) Counsel to the Note Insurer (which may be internal counsel),
shall have furnished to the Underwriter a written opinion, addressed to
the Underwriter and the Depositor and dated the Closing Date, in form and
substance satisfactory to the Underwriter and their counsel, to the
effect that:
(1) The Note Insurer is a monoline insurance company duly
organized, validly existing and authorized to transact a financial
guaranty insurance business under the laws of the State of New York.
(2) The Insurance Policy and the other insurance documents have
been duly authorized, executed and delivered by the Note Insurer.
(3) The Insurance Policy and the other insurance documents
constitute valid and binding obligations of the Note Insurer,
enforceable against the Note Insurer in accordance with their terms,
subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights
generally applicable in the event of the bankruptcy or insolvency of
the Note Insurer and to the application of general principles of
equity and subject, in the case of the Indemnification Agreement, to
principles of public policy limiting the right to enforce the
indemnification provisions contained therein insofar as they relate
to indemnification for liabilities arising under applicable
securities laws.
(4) The Insurance Policy is exempt from registration under the
Securities Act.
(5) Neither the execution or delivery by the Note Insurer of
the Insurance Policy or the other insurance documents, nor
performance by the Note Insurer of its obligations thereunder, will
conflict with any provision of the certificate of incorporation or
the by-laws of the Note Insurer or, to the best knowledge of such
counsel, result in breach of, or constitute a default under, any
agreement or other instrument to which the Note Insurer is a party
or by which it or any of its property is bound or, to the best
knowledge of such counsel, violate any judgment, order or decree
applicable to the Note Insurer of any governmental or regulatory
body, administrative agency, court or arbitrator having jurisdiction
over the Note Insurer (except that in the published opinion of the
Commission the indemnification provisions of the Indemnification
Agreement, insofar as they relate to indemnification for liabilities
arising under the Securities Act, are against public policy as
expressed in the Securities Act and are therefore unenforceable).
In addition, such counsel shall have reviewed the description
of the Note Insurer under the caption "The Note Insurer" in the
Prospectus Supplement and shall have delivered his written statement
that although the information provided in the Prospectus Supplement
with respect to the Note Insurer is limited and does not purport to
provide the scope of disclosure required to be included in a
prospectus with respect to a registrant under the Securities Act in
connection with a public offering and sale of securities of such
registrant, within such limited scope of disclosure, however, there
has not come to the attention of such counsel any information which
would cause such counsel to believe that the description of the Note
Insurer referred to above, as of the date of the Prospectus
Supplement or as of the date of this opinion, contained or contains
any untrue statement of material fact or omitted or omits to state a
material fact necessary to make statements therein, in the light of
the circumstances under which they were made, not misleading (except
that such counsel need express no opinion with respect to any
financial statements or other financial information contained or
referred to therein).
(xii) Jeffers, Wilson, Shaff & Falk, LLP , special tax counsel to
the Seller, the Depositor and the Underwriter, shall have furnished to
the Underwriter a written opinion, addressed to the Underwriter, the
Depositor and the Seller and dated the Closing Date, in form and
substance satisfactory to the Underwriter and the Seller to the effect
that:
(1) The statements set forth in the Prospectus Supplement under
the caption "Certain Federal Income Tax Consideration", to the
extent that they constitute matters of law, provide a fair and
accurate summary of such law or conclusions.
(2) For federal income tax purposes, the Notes will be
characterized as indebtedness and the Trust will not be
characterized as an association (or a publicly traded partnership)
taxable as a corporation or as a taxable mortgage pool with the
meaning of Section 7701(c) of the Code.
(xiii) The Underwriter shall have received the favorable opinion or
opinions, dated the date of the Closing Date, of Brown & Wood LLP, as
counsel for the Underwriter, or Tobin & Tobin, counsel for AmREIT and the
Seller, with respect to bankruptcy matters in connection with the sale of
the Mortgage Loans (including the perfected first priority interest of
the Trust and the Indenture Trustee in the Mortgage Loans) as may be
required by the Rating Agencies or the Note Insurer, and such other
related matters as the Underwriter may reasonably require.
(xiv) The Depositor shall have furnished to the Underwriter a
certificate, dated the Closing Date and signed by the Chairman of the
Board, the President or a Vice President of the Depositor, stating as it
relates to such entity:
(1) The representations and warranties made by the Depositor in
this Agreement, the Trust Agreement, the Mortgage Loan Purchase
Agreement (excluding the representations and warranties made with
respect to the Mortgage Loans), the Insurance Agreement, the
Indemnification Agreement and any other Basic Document to which it
is a party, are true and correct as of the Closing Date; and the
Depositor has complied with all agreements contained herein which
are to have been complied with on or prior to the Closing Date.
(2) Nothing has come to his or her attention that would lead
such officer to believe that the Registration Statement or the
Prospectus includes any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein
not misleading.
(3) There has been no amendment or other document filed
affecting the Certificate of Incorporation or by-laws of the
Depositor since June 2, 1995 and no such amendment has been
authorized. No event has occurred since the date of the most
recently received certificate of good standing with respect to the
Depositor as certified by the Secretary of State of Delaware which
has affected the good standing of such entity under the laws of the
State of Delaware.
(4) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of such entity from April 1, 1999.
(xv) The Seller and AmREIT shall have furnished a certificate, dated
the Closing Date, signed by their respective Chairman of the Board, the
President or a Vice President and addressed to the Underwriter and
counsel to the Underwriter, stating as it relates to such entity:
(1) The representations and warranties made by AmREIT and the
Seller in the Mortgage Loan Sale Agreements (excluding the
representations and warranties relating to the Mortgage Loans) and
any other Basic Document to which it is a party are true and correct
as of the Closing Date; and AmREIT and the Seller has complied with
all agreements contained herein which are to have been complied with
on or prior to the Closing Date.
(2) Nothing has come to his or her attention that would lead
such officer to believe that the Registration Statement or the
Prospectus (except as to financial or statistical data contained in
the Registration Statement or the Prospectus) includes any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein not misleading.
(3) There are no actions, proceedings or investigations pending
with respect to which the Seller or AmREIT, as applicable, nor has
either such entity received service of process before, nor are there
any actions, proceedings or investigations threatened by, any court,
administrative agency or other tribunal to which the Seller or
AmREIT is a party or of which any of its properties is the subject
(A) which if determined adversely to the Seller or AmREIT would have
a material adverse effect on the business or financial condition of
the Seller or AmREIT (B) which assert the invalidity of any Basic
Document, (C) which seek to prevent the issuance of the Securities
or the consummation by the Seller or AmREIT of any of the
transactions contemplated by the Basic Documents, or (D) which might
materially and adversely affect the performance by the Seller or
AmREIT of their respective obligations under, or the validity or
enforceability of, any Basic Documents to which they are a party.
(4) The Mortgage Loan Sale Agreements, the Indemnification and
Contribution Agreement, the Insurance Agreement, the Indemnification
Agreement and any other Basic Document to which either the Seller or
AmREIT is a party, when executed and delivered as contemplated
thereby, will have been, duly authorized, executed and delivered by
the Seller or AmREIT, as applicable, and the Mortgage Loan Sale
Agreements, the Indemnification and Contribution Agreement, the
Insurance Agreement, the Indemnification Agreement and any other
Basic Document to which either the Seller or AmREIT is a party, when
executed and delivered as contemplated herein, will constitute,
legal, valid and binding instruments enforceable against the Seller
or AmREIT, as applicable, in accordance with their respective terms,
subject as to enforceability to (x) applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws
affecting creditors' rights generally, (y) general principles of
equity (regardless of whether enforcement is sought in a proceeding
in equity or at law), and (z) with respect to rights of indemnity
and contribution under the Indemnification and Contribution
Agreement, the Indemnification Agreement and the Insurance
Agreement, limitations of public policy under applicable securities
or insurance laws.
(5) The execution, delivery and performance of the Mortgage
Loan Sale Agreements, the Indemnification and Contribution
Agreement, the Insurance Agreement, the Indemnification Agreement
and any other Basic Document to which the Seller or AmREIT is a
party, by the Seller or AmREIT, as applicable, and the consummation
of the transactions contemplated thereby, do not and will not
conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Seller or AmREIT is a party or by which the
Seller or AmREIT is bound or to which any of the properties or
assets of the Seller or AmREIT (or their respective subsidiaries) is
subject, which breach or violation would have a material adverse
effect on the business, operations or financial condition of the
Seller or AmREIT, nor will such actions result in any violation of
the provisions of the articles of incorporation or by-laws of the
Seller or AmREIT or any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over
the Seller or AmREIT or any of their respective properties or
assets, which breach or violation would have a material adverse
effect on the business, operations or financial condition of the
Seller or AmREIT.
(6) The Seller and AmREIT each possess all material licenses,
certificates, authorities or permits issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary to
conduct the business now conducted by it and as described in the
Prospectus, and the Seller and AmREIT has not received notice of any
proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which if decided adversely
to the Seller or AmREIT would, singly or in the aggregate,
materially and adversely affect the conduct of its business,
operations or financial condition.
(7) At the time of execution and delivery of the Mortgage Loan
Purchase Agreement, the Seller will: (A) be the sole beneficial
owner of the Mortgage Loans conveyed by the Seller to the Depositor,
free and clear of any Lien; (B) not have assigned to any Person any
of its right or title in the Mortgage Loans; and (C) have the power
and authority to sell its interest in the Mortgage Loans to the
Depositor. Upon execution and delivery of the Mortgage Loan Purchase
Agreement by the Depositor, the Depositor will have acquired
beneficial ownership of all of the Seller's right, title and
interest in and to the Mortgage Loans.
(8) The Seller is not an "investment company" within the
meaning of such term under the 1940 Act and the rules and
regulations of the Commission thereunder.
(xvi) The Owner Trustee shall have furnished to the Underwriter a
certificate of the Owner Trustee, signed by one or more duly authorized
officers of the Owner Trustee, dated the Closing Date, as to the due
authorization, execution and delivery by the Owner Trustee of the Trust
Agreement and the other Basic Documents to which it is a party and the
acceptance by the Owner Trustee of the trusts created by the Trust
Agreement and the due execution, authentication and delivery of the
Investor Certificate by the Owner Trustee thereunder and such other
matters as the Underwriter shall reasonably request.
(xvii) The Indenture Trustee shall have furnished to the Underwriter
a certificate of the Indenture Trustee, signed by one or more authorized
officers of the Indenture Trustee, dated the Closing Date, as to the due
authorization, execution and delivery by the Indenture Trustee of the
Indenture and the other Basic Documents to which it is a party and the
acceptance by the Indenture Trustee of the trusts created by the
Indenture and the due execution, authentication and delivery of the Notes
by the Indenture Trustee thereunder and such other matters as the
Underwriter shall reasonably request.
(xviii) The Master Servicer shall have furnished to the Underwriter
a certificate of the Master Servicer, signed by one or more duly
authorized officers of the Master Servicer, dated the Closing Date, as to
the due authorization, execution and delivery by the Master Servicer of
the Master Servicing Agreement and any other Basic Document to which it
is a party.
(xix) The Insurance Policy and the Insurance Agreement shall have
been issued by the Note Insurer and shall have been duly authenticated by
an authorized agent of the Note Insurer, if so required under applicable
state law or regulations.
(xx) The Interest Rate Agreement shall have been issued by Bear
Stearns Financial Products Inc. and shall be in full force and effect.
(xxi) The Notes shall have been rated "AAA" by Standard & Poor's and
"Aaa" by Moody's.
(xxii) The Depositor shall have furnished to the Underwriter such
further information and documents as the Underwriter may reasonably have
requested not less than three full business days prior to the Closing
Date.
(xxiii) Prior to the Closing Date, counsel for the Underwriter shall
have been furnished with such documents, opinions and certifications as
they may reasonably require for the purpose of enabling them to pass upon
the issuance and sale of the Notes as herein contemplated and related
proceedings or in order to evidence the accuracy and completeness of any
of the representations and warranties, or the fulfillment of any of the
conditions, herein contained, and all proceedings taken by the Depositor
in connection with the issuance and sale of the Notes as herein
contemplated shall be satisfactory in form and substance to the
Underwriter and counsel for the Underwriter.
(xxiv) Subsequent to the execution and delivery of this Agreement
none of the following shall have occurred: (A) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or
the over-the-counter market shall have been suspended or minimum prices
shall have been established on either of such exchanges or such market by
the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction; (B) a banking moratorium
shall have been declared by federal or state authorities; (C) the United
States shall have become engaged in hostilities, there shall have been an
escalation of hostilities involving the United States or there shall have
been a declaration of a national emergency or war by the United States;
or (D) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets of the United States
shall be such) as to make it in each of the instances set forth in
clauses (A) through (D) herein, in the reasonable judgment of the
Underwriter, impractical or inadvisable to proceed with the public
offering or delivery of the Notes on the terms and in the manner
contemplated in the Prospectus.
(xxv) The Underwriter shall have received from Deloitte & Touche
LLP, a letter dated the date hereof and satisfactory in form and
substance to the Underwriter and its counsel, to the effect that they
have performed certain specified procedures, all of which have been
agreed to by the Underwriter, as a result of which they determined that
certain information of an accounting, financial or statistical nature set
forth in the Prospectus Supplement agrees with the records of the Seller,
the Servicers and/or the Master Servicer excluding any questions of legal
interpretation. The Underwriter shall have received from Deloitte &
Touche LLP, a letter dated the Closing Date and satisfactory in form and
substance to the Underwriter and its counsel, confirming as of such date
the information set forth in the letter provided pursuant to this clause
(xx).
(xxvi) The Underwriter shall have received from Deloitte & Touche
LLP, certified public accountants, a letter dated the date hereof and
satisfactory in form and substance to the Underwriter and its counsel, to
the effect that they have performed certain specified procedures and
recomputations as a result of which they have confirmed the information
set forth in the Prospectus Supplement in the table entitled "Percentage
of Note Balance Outstanding" under the caption "Certain Prepayment and
Yield Considerations".
(xxvii) The Underwriter shall have received from Arthur Andersen,
independent certified public accountants, a letter dated the date hereof
and satisfactory in form and substance to the Underwriter, to the effect
they have performed certain procedures and representations as a result of
which they have confirmed the information set forth in the Prospectus
under the caption "Servicing of the Mortgage Loans -- Advanta."
(xxviii) The Underwriter shall have received the consent of
PricewaterhouseCoopers LLP to the incorporation by reference in the
Prospectus of their report with respect to the consolidated financial
statements of the Note Insurer.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriter by notice to the Depositor at any time at or prior to the Closing
Date, and such termination shall be without liability of any party to any
other party except as provided in Section 7.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriter.
SECTION 7. Payment of Expenses. By executing the acknowledgment on the
execution page of this Agreement, American Residential Investment Trust, Inc.
has agreed to pay the following costs and expenses in connection with the
offering of the Securities: (a) the costs incident to the authorization,
issuance, sale and delivery of the Securities and any taxes payable in
connection therewith; (b) the costs incident to the preparation, printing and
filing under the Securities Act of the Prospectus and any amendments and
exhibits to the Registration in connection therewith; (c) the costs of
distributing the Prospectus and any amendment or supplement to the Prospectus
or any document incorporated by reference therein, all as provided in this
Agreement; (d) the costs of reproducing and distributing this Agreement or any
other Basic Document; (e) the fees and expenses of qualifying the Securities
under the securities laws of the several jurisdictions as provided in Section
5(g) hereof; (f) any fees charged by securities rating services for rating the
Notes; (g) all fees, expenses and charges of (i) Financial Security Assurance,
Inc. in connection with obtaining the financial guaranty insurance policy with
respect to the Notes and (ii) Commonwealth Mortgage Assurance Company in
connection with obtaining the primary Mortgage Insurance policy with respect
to certain of the Mortgage Loans; (h) the cost of any accountants' procedure
or comfort letters relating to the collateral and other financial and
statistical disclosure in the Prospectus or to any Computational Materials,
Structural Term Sheets or Collateral Term Sheets (each as defined in Section
5(e) hereof); and (i) the fees and expenses of counsel to the Underwriter.
Except as provided in this Section 7, the Underwriter shall pay its own costs
and expenses, including the costs and expenses of its counsel (but not to
exceed $25,000), any transfer taxes on the Notes which it may sell and the
expenses of advertising any offering of the Notes made by the Underwriter.
If this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 6 or Section 10, the Depositor shall cause the
Underwriter to be reimbursed for all reasonable out-of-pocket expenses,
including fees and disbursements of Brown & Wood LLP, counsel for the
Underwriter.
SECTION 8. Indemnification and Contribution.
(a) The Depositor agrees to indemnify and hold harmless the Underwriter
and each person, if any, who controls the Underwriter within the meaning of
Section 15 of the Securities Act from and against any and all loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of the Notes), to which the Underwriter or any
such controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, or any amendment
thereof or supplement thereto, (ii) the omission or alleged omission to state
in the Registration Statement or any amendment thereof or supplement thereto a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) any untrue statement or alleged
untrue statement of a material fact contained in the Prospectus, or any
amendment thereof or supplement thereto, or (iv) the omission or alleged
omission to state in the Prospectus or any amendment thereof or supplement
thereto a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and shall reimburse the Underwriter and each such
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Underwriter or such controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, -------- however, that the Depositor shall not be liable in any such
case to the extent that any such loss, claim, ------- damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in the Prospectus, or any
amendment thereof or supplement thereto, or the Registration Statement, or any
amendment thereof or supplement thereto, in reliance upon and in conformity
with written information furnished to the Depositor by or on behalf of the
Underwriter specifically for inclusion therein, it being understood that the
only information furnished by the Underwriter or on behalf of the Underwriter
for use in connection with the preparation of the Registration Statement or
the Prospectus is described in Section 8(i) hereof; and provided further,
however, that the -------- ------- Depositor will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement in or
omission or alleged omission from any Preliminary Prospectus that was
eliminated or remedied in the Prospectus, if a copy of the Prospectus was not
sent or given with or prior to the written confirmation of the sale of any
Security to the person asserting the loss, claim, damage or liability, if
required by the Act. The foregoing indemnity agreement is in addition to any
liability which the Depositor may otherwise have to the Underwriter or any
controlling person of the Underwriter.
(b) The Underwriter agrees to indemnify and hold harmless the Depositor,
each of its directors, each of the officers of the Depositor who signed the
Registration Statement, and each person, if any, who controls the Depositor
within the meaning of Section 15 of the Securities Act against any and all
loss, claim, damage or liability, or any action in respect thereof, to which
the Depositor or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereof or supplement thereto, (ii)
the omission or alleged omission to state in the Registration Statement or any
amendment thereof or supplement thereto a material fact required to be stated
therein or necessary to make the statements therein not misleading, (iii) any
untrue statement or alleged untrue statement of a material fact contained in
the Prospectus, or any amendment thereof or supplement thereto, or (iv) the
omission or alleged omission to state in the Prospectus, or any amendment
thereof or supplement thereto a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, but in each case only to the
extent that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Depositor by or on behalf of the Underwriter
specifically for inclusion therein, and shall reimburse the Depositor and any
such director, officer or controlling person for any legal or other expenses
reasonably incurred by the Depositor or any director, officer or controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which the Underwriter may otherwise have to the Depositor or any such
director, officer or controlling person. The only information furnished by the
Underwriter or on behalf of the Underwriter for use in connection with the
preparation of the Registration Statement or the Prospectus is described in
Section 8(h) hereof.
(c) Promptly after receipt by any indemnified party under this Section 8
of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, except to
the extent provided in the next following paragraph, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
Any indemnified party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if
such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the reasonable fees and expenses of more than one separate firm of attorneys
(in addition to one local counsel per jurisdiction) at any time for all such
indemnified parties, which firm shall be designated in writing by the
Underwriter, if the indemnified parties under this Section 8 consist of the
Underwriter or any of its controlling persons, or the Depositor, if the
indemnified parties under this Section 8 consist of the Depositor or any of
the Depositor's directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(a) and (b), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any loss
or liability by reason of such settlement or judgment.
Notwithstanding the foregoing paragraph, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
(d) The Underwriter agrees to provide the Depositor, with a copy to
Seller, for filing with the Commission on an Additional Materials 8-K (i)
no later than two (2) Business Days prior to the day on which the
Prospectus Supplement is required to be filed pursuant to Rule 424 with a
copy of any Computational Materials and Structural Term Sheets (each as
defined in Section 5(e) hereof) distributed by the Underwriter and (ii)
no later than one (1) business day after first use with a copy of any
Collateral Term Sheets (as defined in Section 5(e) hereof) distributed by
the Underwriter. If the Underwriter does not provide any Computational
Materials, Structural Term Sheets and Collateral Term Sheets to the
Depositor and the Seller pursuant to this Section, the Underwriter shall
be deemed to have represented, as of the Closing Date, that it did not
provide any prospective investors with any information in written or
electronic form in connection with the offering of the Notes that is
required to be filed with the Commission in accordance with the Kidder
Letters and the PSA Letter.
(e) The Underwriter agrees, assuming all Seller-Provided Information
(as defined in Section 8(g)) is accurate and complete in all material
respects, to indemnify and hold harmless the Depositor, the Seller each
of the their officers and directors and each person who controls the
Depositor or the Seller within the meaning of Section 15 of the
Securities Act against any and all losses, claims, damages or
liabilities, joint or several, or any action in respect thereof, to which
they may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Computational
Materials, Structural Term Sheets and Collateral Term Sheets provided by
the Underwriter or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and agrees to reimburse each such indemnified
party for any legal or other expenses reasonably incurred by him, her or
it in connection with investigating or defending or preparing to defend
any such loss, claim, damage, liability or action as such expenses are
incurred. The obligations of the Underwriter under this Section 8(e)
shall be in addition to any liability which the Underwriter may otherwise
have.
The procedures set forth in Section 8(c) shall be equally applicable to
this paragraph.
(f) If the indemnification provided for in this Section 8 shall for
any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a), (b) or (e) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability,
or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Depositor on
the one hand and the Underwriter on the other from the offering of the
related Securities or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law or if the indemnified party failed to
give the notice required under Section 8(c), in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Depositor on the one
hand and the Underwriter on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations.
The relative benefits of the Underwriter and the Depositor shall be
deemed to be in such proportion as the total net proceeds from the offering
(before deducting expenses) received by the Depositor bear to the total
underwriting discounts and commissions received by the related Underwriter
from time to time in negotiated sales of the related Securities.
The relative fault of the Underwriter and the Depositor shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Depositor or by the Underwriter, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission and other
equitable considerations.
The Depositor and the Underwriter agree that it would not be just and
equitable if contributions pursuant to this paragraph were to be determined by
pro rata allocation (even if the Underwriter were treated as one entity for
such purposes) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this paragraph
shall be deemed to include, for purposes of this paragraph, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
For purposes of this Section, in no case shall the Underwriter be
responsible for any amount in excess of (i) the amount received by the
Underwriter in connection with its resale of the Notes over (ii) the amount
paid by the Underwriter to the Depositor for the Notes by the Underwriter
hereunder. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(g) For purposes of this Section (except as otherwise provided) the
terms "Computational Materials", "Structural Term Sheets" and "Collateral
Term Sheets" mean such portion, if any, of the information delivered to
the Depositor by the Underwriter pursuant to Section 8(d) for filing with
the Commission on an Additional Materials 8-K as:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference through an
Additional Materials 8-K; and
(ii) does not constitute Seller-Provided Information.
"Seller-Provided Information" means (i) the information and data set
forth on any computer tape (or other electronic or printed medium) furnished
to the Underwriter by or on behalf of the Seller concerning the assets
comprising the Trust, (ii) the information describing the characteristics of
the Mortgage Loans under the captions "Summary of Terms", "Risk Factors" and
"The Mortgage Pool" in the Prospectus Supplement and (iii) the information
contained in the Prospectus Supplement under the heading "The Seller".
(h) The Underwriter confirms that the information set forth in the
penultimate paragraph of the cover page, the information regarding the
Underwriter set forth under the caption "Underwriting" in the Prospectus
Supplement and the Computational Materials, Structural Term Sheets and
Collateral Term Sheets (excluding in each case Seller-Provided
Information) are correct, and the parties hereto acknowledge that such
information constitutes the only information furnished in writing by or
on behalf of the Underwriter for use in connection with the preparation
of the Registration Statement or the Prospectus.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Depositor submitted
pursuant hereto shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter or
controlling persons thereof, or by or on behalf of the Depositor and shall
survive delivery of any Notes to the Underwriter.
SECTION 10. Termination of Agreement. The Underwriter may terminate this
Agreement immediately upon notice to the Depositor, at any time at or prior to
the Closing Date if any of the events or conditions described in Section
6(xxiv) of this Agreement shall occur and be continuing. In the event of any
such termination, the covenant set forth in Section 5(g), the provisions of
Section 7, the indemnity agreement set forth in Section 8, and the provisions
of Sections 9 and 15 shall remain in effect.
SECTION 11. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriter, shall be delivered or sent by mail, telex
or facsimile transmission to Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167 Attention: Asset Backed Securities Group (Fax:
212-272-7294);
(b) if to the Depositor, shall be delivered or sent by mail, telex
or facsimile transmission to care of Bear Stearns Asset Backed
Securities, Inc., 245 Park Avenue, 4th Floor, New York, New York 10167,
Attention: Chief Counsel (Fax: 212-272-4095); and
(c) if to the Seller, shall be delivered or sent by mail, telex or
facsimile transmission to American Residential Holdings, Inc., 455 Marine
View Avenue, Suite 230, Del Mar, California 92014.
SECTION 12. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriter
and the Depositor and their respective successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that the representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control the Underwriter within the meaning of
Section 15 of the Securities Act, and for the benefit of directors of the
Depositor, officers of the Depositor who have signed the Registration
Statement and any person controlling the Depositor within the meaning of
Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 12, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
SECTION 13. Survival. The respective indemnities, representations,
warranties and agreements of the Depositor and the Underwriter contained in
this Agreement, or made by or on behalf of them, respectively, pursuant to the
shall survive the delivery of and payment for the Securities and shall remain
in full force and effect, regardless of any investigation made by or on behalf
of any of them or any person controlling any of them.
SECTION 14. Definition of the Term "Business Day". For purposes of this
Agreement, "Business Day" means any day on which the New York Stock Exchange
is open for trading.
SECTION 15. Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without giving effect to the conflict of law rules thereof.
The parties hereto hereby submit to the jurisdiction of the United States
District Court for the Southern District of New York and any court in the
State of New York located in the City and County of New York, and appellate
court from any thereof, in any action, suit or proceeding brought against it
or in connection with this Agreement or any of the related documents or the
transactions contemplated hereunder or for recognition or enforcement of any
judgment, and the parties hereto hereby agree that all claims in respect of
any such action or proceeding may be heard or determined in New York State
court or, to the extent permitted by law, in such federal court.
SECTION 16. Counterparts. This Agreement may be executed in counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
SECTION 17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
* * *
If the foregoing correctly sets forth the agreement between the Depositor
and the Underwriter, please indicate your acceptance in the space provided for
the purpose below.
Very truly yours,
BEAR STEARNS ASSET BACKED
SECURITIES, INC.
By: /s/ Jonathan Lieberman
----------------------
CONFIRMED AND ACCEPTED, as
of the date first above written:
BEAR, STEARNS & CO. INC.
By: /s/ Jonathan Lieberman
---------------------------
ACKNOWLEDGED AND AGREED,
as of the date first above written,
but solely for the purpose of
Section 7 hereof:
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
By: /s/ Jay M. Fuller
--------------------------------------
SCHEDULE A
Mortgage Backed LIBOR Notes
Underwriter Principal Purchase Price
- ----------- --------- --------------
Bear, Stearns & Co. Inc. $229,000,000 100%
EXECUTION
INDEMNIFICATION AND CONTRIBUTION AGREEMENT
This Indemnification and Contribution Agreement, dated as of April 9,
1999 (the "Agreement") is by and among Bear Stearns Asset Backed Securities,
Inc., a Delaware corporation ("BSABS"), Bear, Stearns & Co. Inc., a Delaware
corporation ("BEAR STEARNS"), American Residential Eagle, Inc., a Delaware
corporation ("EAGLE") and American Residential Investment Trust, Inc., a real
estate investment trust organized under the laws of the State of Maryland
("AmREIT").
WITNESSETH:
WHEREAS, AmREIT, EAGLE and BSABS will be parties to certain mortgage loan
purchase and sale agreements (each, a "Sale Agreement") pursuant to which
AmREIT will sell and transfer a pool of mortgage loans (the "Mortgage Pool")
to EAGLE and EAGLE, in turn, will sell and transfer the Mortgage Pool to
BSABS, with the understanding that BSABS will transfer such Mortgage Pool to
American Residential Eagle Bond Trust 1999-1, a Delaware statutory business
trust (the "Trust"), for the purpose of providing security for the Trust's
issuance of its Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
(hereinafter, the "Securitization Transaction");
WHEREAS, AmREIT and EAGLE stand to derive substantial financial and other
benefits in connection with the Securitization Transaction;
WHEREAS, BEAR STEARNS and BSABS will enter into an underwriting agreement
of even date herewith pursuant to which BEAR STEARNS has agreed to purchase
the Notes;
WHEREAS, BEAR STEARNS intends to offer the Notes to the public pursuant
to the Prospectus Supplement (as defined herein); and
WHEREAS, as an inducement to BSABS to enter into the Sale Agreement and
to BEAR STEARNS to enter into the Underwriting Agreement with BSABS, the
parties hereto have agreed to provide for cross-indemnification and
contribution on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Definitions. The following terms shall have the meanings
set forth below, unless the context clearly indicates otherwise:
"Agreement" means this Indemnification and Contribution Agreement, as the
same may be amended in accordance with the terms hereof.
"AmREIT" means American Residential Investment Trust, Inc., a Maryland
corporation.
"AmREIT Information" means all information contained in the Prospectus
Supplement OTHER THAN (i) the BEAR STEARNS Information; (ii) the statements
under the following subheadings under the caption "Summary": "-- The
Depositor; "-- Description of the Notes"; "-- Payment of the Notes"; "--
Credit Enhancement"; "-- ERISA Considerations"; "-- Legal Investment
Considerations" "-- Rating of the Notes"; and (iii) the statements under the
following captions: "The Trust"; "The Depositor"; "Description of the Notes";
"The Insurance Policy"; "The Note Insurer"; "Certain Prepayment and Yield
Considerations"; "Certain Federal Income Tax Considerations"; "State Tax
Considerations"; "ERISA Considerations"; "Legal Investment Considerations";
"Underwriting"; "Experts"; "Legal Matters"; and "Ratings"; and "Annex A --
Global Clearance Settlement and Tax Documentation Procedures."
"BEAR STEARNS" means Bear, Stearns & Co. Inc., a Delaware corporation.
"BEAR STEARNS's INFORMATION" means, with respect to the Prospectus
Supplement, (i) the information set forth in the penultimate paragraph of the
front cover page, and (ii) the information under the caption "UNDERWRITING".
"BSABS" means Bear Stearns Asset Backed Securities, Inc., a Delaware
corporation.
"Prospectus" means the prospectus dated June 4, 1998 of BSABS.
"Prospectus Supplement" means the prospectus supplement dated April 9,
1999, relating to the public offering of the Notes, in the form attached
hereto as Exhibit A.
For all purposes of this Agreement, except as otherwise expressly
provided herein or unless the context otherwise requires, capitalized terms
used herein that are not otherwise defined shall have the meanings ascribed
thereto in the Indenture dated as of April 1, 1999 (the "Indenture"), by and
between the Issuer and Norwest Bank Minnesota, National Association, as
Indenture Trustee. All other capitalized terms used herein shall have the
meanings specified herein.
Section 1.02. Interpretive Provisions.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(b) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; the term "including" shall mean
"including without limitation"; and "or" includes "and/or".
(c) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as the feminine and neuter genders of such terms.
(d) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes in the case of agreements or instruments references
to all attachments thereto and instruments incorporated therein; references to
a Person are also to its permitted successors and assigns.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
Section 2.01. Representations and Warranties. Each party hereto
represents that:
(a) such party is validly existing and in good standing under the laws of
their respective jurisdiction of formation or incorporation, as applicable,
and has full power and authority to own its assets and to transact the
business in which it is currently engaged. Such party is duly qualified to do
business and is in good standing in each jurisdiction in which the character
of the business transacted by it or any properties owned or leased by it
requires such qualification and in which the failure so to qualify would have
a material adverse effect on the business, properties, assets or condition
(financial or otherwise) of such party;
(b) such party 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;
(c) the execution, delivery and performance of this Agreement by such
party will not violate any provision of any existing law or regulation or any
order, judgment or decree of any court applicable to such party or any
provision of the charter or bylaws of such party, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which such
party is a party or by which it or its property may be bound;
(d) no Proceeding of or before any court, tribunal or governmental body
is currently pending or, to the knowledge of such party, threatened against
such party or any of its properties or with respect to this Agreement or the
Notes;
(e) such party has full power and authority to make, execute, deliver and
perform this Agreement and all of the transactions contemplated hereunder, and
has taken all necessary corporate action to authorize the execution, delivery
and performance of this Agreement. When executed and delivered, this Agreement
will constitute the legal, valid and binding obligation of such party
enforceable in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally, or by the
availability of equitable remedies; and
(f) this Agreement has been duly executed and delivered by such party.
ARTICLE III.
INDEMNIFICATION
Section 3.01. Indemnification by AmREIT, EAGLE, BSABS and BEAR STEARNS.
(a) AmREIT and EAGLE, jointly and severally, shall indemnify and hold
harmless each of BSABS and BEAR STEARNS, each of their respective directors,
each of their respective officers and each Person, if any, that controls BSABS
or BEAR STEARNS, as the case may be, within the meaning of the Act, against
any and all losses, claims, damages or liabilities, as incurred, to which
BSABS or BEAR STEARNS or any such director, officer or controlling person may
become subject, under the Act or otherwise, to the extent that such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Prospectus Supplement or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission relates to the AmREIT Information in the Prospectus Supplement, and
AmREIT and EAGLE shall in each case be jointly and severally liable to
reimburse BSABS, BEAR STEARNS and each such director, officer or controlling
person of either such entity for any legal or other expenses reasonably
incurred by BSABS or BEAR STEARNS and each such director, officer or
controlling person, as incurred, in connection with investigating or defending
any such loss, claim, damage, liability or action. AmREIT's and EAGLE's
liability under this Section shall be in addition to any other liability
AmREIT or EAGLE may otherwise have.
(b) BSABS shall indemnify and hold harmless AmREIT and EAGLE, each of
their respective directors, each of their respective officers and each Person,
if any, that controls AmREIT or EAGLE, as the case may be, within the meaning
of the Act, against any and all losses, claims, damages or liabilities, as
incurred, to which AmREIT or EAGLE or any such director, officer or
controlling person may become subject, under the Act or otherwise, to the
extent that such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Prospectus Supplement or the
Prospectus or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission,
in the case of the Prospectus Supplement, does not relate to the AmREIT
Information, the BEAR STEARNS's Information or the information in the
Prospectus Supplement under the caption "THE NOTE INSURER"; and BSABS shall
reimburse AmREIT, EAGLE and each such director, officer and controlling person
of either such entity for any legal or other expenses reasonably incurred by
AmREIT, EAGLE or any such director, officer or controlling person, as
incurred, in connection with investigating or defending any such loss, claim,
damage, liability or action. BSABS's liability under this Section shall be in
addition to any liability that BSABS may otherwise have.
(c) BEAR STEARNS shall indemnify and hold harmless AmREIT and EAGLE, each
of their respective directors, each of their respective officers and each
Person, if any, that controls AmREIT or EAGLE, as the case may be, within the
meaning of the Act, against any and all losses, claims, damages or
liabilities, as incurred, to which AmREIT or EAGLE or any such director,
officer or controlling person may become subject, under the Act or otherwise,
to the extent that such losses, claims, damage or liabilities (or actions in
respect thereof) arise out of or are based upon any written information
provided by BEAR STEARNS specifically for use in connection with the
preparation of the Prospectus Supplement or the Prospectus, and BEAR STEARNS
shall reimburse AmREIT, EAGLE and each such director, officer and controlling
person for any legal or other expenses reasonably incurred by AmREIT, EAGLE or
any such director, officer or controlling person, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action. BEAR STEARNS's liability under this Section shall be in addition to
any liability that BEAR STEARNS may otherwise have. Each party hereto
acknowledges that the BEAR STEARNS's Information constitutes the only
information furnished in writing by BEAR STEARNS for inclusion in the
Prospectus Supplement, and BEAR STEARNS confirms that such information is true
and correct.
(d) If the indemnification provided for in this Section shall for any
reason be unavailable to an party seeking indemnification under this Section,
then AmREIT and EAGLE, on the one hand, and BSABS and BEAR STEARNS, on the
other, shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated herein and incurred by AmREIT, EAGLE,
BSABS or BEAR STEARNS, as the case may be (collectively, "Losses"), in such
proportion as is appropriate to reflect the relative benefits received by
BSABS, BEAR STEARNS, AmREIT and, EAGLE, respectively, from the public offering
of the Notes; provided, however, that in no case shall BEAR STEARNS be
responsible for any amount in excess of the underwriting discount applicable
to the public offering of the Notes. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, BSABS, BEAR
STEARNS, AmREIT and EAGLE shall contribute in such proportion as is
appropriate to reflect not only the relative benefits received by BSABS, BEAR
STEARNS, AmREIT, or EAGLE, respectively, but also the relative fault of BSABS,
BEAR STEARNS, AmREIT or EAGLE, in connection with the statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by BSABS, AmREIT and EAGLE shall be deemed
equal to the total net proceeds of the public offering (before deducting
expenses) received by BSABS, EAGLE or AmREIT, respectively, and benefits
received by BEAR STEARNS shall be deemed to be equal to the total underwriting
discounts received by BEAR STEARNS from BSABS in connection with the public
offering of the Notes. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to the AmREIT
Information, the information provided by BSABS, or the information provided by
BEAR STEARNS. BSABS, AmREIT and BEAR STEARNS agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation that does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph, no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any Person that was not guilty of such fraudulent misrepresentation. For
purposes of this Section, (i) each director of BSABS, BEAR STEARNS, each
officer of BSABS or BEAR STEARNS and each Person, if any, that controls BSABS
or BEAR STEARNS within the meaning of Section 15 of the Act shall have the
same rights to contribution as BSABS and BEAR STEARNS and (ii) each director
of AmREIT or EAGLE, each officer of AmREIT or EAGLE and each Person, if any,
that controls AmREIT or EAGLE within the meaning of Section 15 of the Act
shall have the same rights to contribution as AmREIT or EAGLE.
Section 3.02. Notification; Procedural Matters.
(a) Promptly after receipt by an indemnified party under Section 3.01 of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party (or if a
claim for contribution is to be made against another party) under Section
3.01, notify the indemnifying party (or other contributing party) in writing
of the commencement thereof; but the omission so to notify the indemnifying
party (or other contributing party) shall not relieve it from any liability it
may have to any indemnified party (or to the party requesting contribution)
otherwise than under Section 3.01. In case any such action shall be brought
against any indemnified party, and such indemnified party notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that, by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, the indemnifying party elects to assume
the defense thereof, it may participate (jointly with any other indemnifying
party hereunder similarly notified) with counsel satisfactory to such
indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party or parties shall have reasonably concluded that there may be
legal defenses available to it or them or other indemnified parties hereunder
that are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to assert such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified party
of its election so to assume the defense of such action and approval by the
indemnified party of such counsel, the indemnifying party shall not be liable
to such indemnified party under this paragraph for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
(including any local counsel) in connection with the assertion of legal
defenses in accordance with the proviso to the immediately preceding sentence,
(ii) the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party. No party shall be liable for
contribution with respect to any action or claim settled without its consent,
which shall not be unreasonably withheld.
ARTICLE IV.
GENERAL
Section 4.01. Survival. This Agreement and the obligations hereunder of
the parties hereto shall survive the purchase and sale of the Notes.
Section 4.02. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns, and the officers, directors and controlling
persons referred to in Article III hereof and their respective permitted
successors and assigns, and no other Person shall have any right or obligation
hereunder.
Section 4.03. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section 4.04. Miscellaneous. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated except by a writing signed by
the party against whom enforcement of such change, waiver, discharge or
termination is sought. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, and which taken
together shall constitute but one and the same instrument.
Section 4.05. Notices. All communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case
of BSABS, 245 Park Avenue, 4th Floor, New York, New York 10167, Attention:
Chief Counsel, (b) in the case of Bear, Stearns & Co. Inc., 245 Park Avenue,
New York, New York 10167, Attention: Asset Backed Securities Group, (c) in the
case of AmREIT, 455 Marine View Avenue, Suite 230, Del Mar, California 92014,
Attention: Mark Conger, Chief Financial Officer, and (d) in the case of EAGLE,
445 Marine View Avenue, Suite 100, Del Mar, California 92104, Attention:
Rollie Lynn, Senior Vice President, Portfolio Manager.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized officers as of the date first above written.
BEAR STEARNS ASSET BACKED
SECURITIES, INC.
By:/s/ Jonathan Lieberman
--------------------------
Name: Jonathan Lieberman
Title: Managing Director
BEAR, STEARNS & CO. INC.
By:/s/ Jonathan Lieberman
---------------------------
Name: Jonathan Lieberman
Title: Managing Director
AMERICAN RESIDENTIAL INVESTMENT
TRUST, INC.
By: /s/ Jay M. Fuller
---------------------------
Name: Jay M. Fuller
Title:
AMERICAN RESIDENTIAL EAGLE, INC.
By: /s/ Jay M. Fuller
---------------------------
Name: Jay M. Fuller
Title:
EXECUTION
INDENTURE
BETWEEN
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1,
AS ISSUER,
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE
Dated as of April 1, 1999
Relating to
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
MORTGAGE-BACKED LIBOR NOTES, CLASS A, SERIES 1999-1
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
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ARTICLE I
DEFINITIONS
<S> <C>
Section 1.01. General Definitions................................................................................2
ARTICLE II
THE NOTES
Section 2.01. Forms Generally...................................................................................24
Section 2.02. Forms Of Certificate Of Authentication............................................................24
Section 2.03. General Provisions With Respect To Principal And Interest Payment.................................24
Section 2.04. Denominations.....................................................................................25
Section 2.05. Execution, Authentication, Delivery And Dating....................................................25
Section 2.06. Registration, Registration Of Transfer And Exchange...............................................26
Section 2.07. Mutilated, Destroyed, Lost Or Stolen Notes........................................................27
Section 2.08. Payments Of Principal And Interest................................................................27
Section 2.09. Persons Deemed Owner..............................................................................29
Section 2.10. Cancellation......................................................................................29
Section 2.11. Authentication And Delivery Of Notes..............................................................29
Section 2.12. Book-Entry Note...................................................................................31
Section 2.13. Termination Of Book Entry System..................................................................32
ARTICLE III
COVENANTS
Section 3.01. Payment Of Notes..................................................................................32
Section 3.02. Maintenance Of Office Or Agency...................................................................33
Section 3.03. Money For Note Payments To Be Held In Trust.......................................................33
Section 3.04. Existence Of Issuer...............................................................................35
Section 3.05. Protection Of Trust Estate........................................................................35
Section 3.06. [Reserved]........................................................................................36
Section 3.07. Performance Of Obligations; Master Servicing Agreement............................................36
Section 3.08. Investment Company Act............................................................................37
Section 3.09. Negative Covenants................................................................................37
Section 3.10. Annual Statement As To Compliance.................................................................38
Section 3.11. Restricted Payments...............................................................................38
Section 3.12. Treatment Of Notes As Debt For Tax Purposes.......................................................38
Section 3.13. Notice Of Events Of Default.......................................................................38
Section 3.14. Further Instruments And Acts......................................................................39
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction And Discharge Of Indenture...........................................................39
Section 4.02. Application Of Trust Money........................................................................40
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Event Of Default..................................................................................40
Section 5.02. Acceleration Of Maturity; Rescission And Annulment................................................42
Section 5.03. Collection Of Indebtedness And Suits For Enforcement By Indenture Trustee.........................42
Section 5.04. Remedies..........................................................................................43
Section 5.05. Indenture Trustee May File Proofs Of Claim........................................................43
Section 5.06. Indenture Trustee May Enforce Claims Without Possession Of Notes..................................44
Section 5.07. Application Of Money Collected....................................................................44
Section 5.08. Limitation On Suits...............................................................................45
Section 5.09. Unconditional Rights Of Noteholders To Receive Principal And Interest.............................46
Section 5.10. Restoration Of Rights And Remedies................................................................46
Section 5.11. Rights And Remedies Cumulative....................................................................46
Section 5.12. Delay Or Omission Not Waiver......................................................................47
Section 5.13. Control By Noteholders............................................................................47
Section 5.14. Waiver Of Past Defaults...........................................................................47
Section 5.15. Undertaking For Costs.............................................................................48
Section 5.16. Waiver Of Stay Or Extension Laws..................................................................48
Section 5.17. Sale Of Trust Estate..............................................................................48
Section 5.18. Action On Notes...................................................................................50
Section 5.19. No Recourse To Other Trust Estates Or Other Assets Of The Issuer..................................50
Section 5.20. Application Of The Trust Indenture Act............................................................50
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties Of Indenture Trustee.......................................................................50
Section 6.02. Notice Of Default.................................................................................52
Section 6.03. Rights Of Indenture Trustee.......................................................................52
Section 6.04. Not Responsible For Recitals Or Issuance Of Notes.................................................52
Section 6.05. May Hold Notes....................................................................................53
Section 6.06. Money Held In Trust...............................................................................53
Section 6.07. Eligibility, Disqualification.....................................................................53
Section 6.08. Indenture Trustee's Capital And Surplus...........................................................53
Section 6.09. Resignation And Removal; Appointment Of Successor.................................................53
Section 6.10. Acceptance Of Appointment By Successor............................................................55
Section 6.11. Merger, Conversion, Consolidation Or Succession To Business Of Indenture Trustee..................55
Section 6.12. Preferential Collection Of Claims Against Issuer..................................................56
Section 6.13. Co-Indenture Trustees And Separate Indenture Trustees.............................................56
Section 6.14. Authenticating Agents.............................................................................57
Section 6.15. [Reserved]........................................................................................58
Section 6.16. Indenture Trustee Fees And Expenses...............................................................58
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Indenture Trustee Names And Addresses Of Noteholders............................59
Section 7.02. Preservation Of Information; Communications To Noteholders........................................59
Section 7.03. Reports by Indenture Trustee......................................................................59
Section 7.04. Reports By Issuer.................................................................................60
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Collection Of Moneys..............................................................................60
Section 8.02. Note Payment Account; Supplemental Interest Payment Account.......................................60
Section 8.03. Claims Against The FSA Policy.....................................................................63
Section 8.04. General Provisions Regarding The Note Payment Account, the Supplemental Interest Payment Account And Mortgage
Loans..........................................................................................64
Section 8.05. Releases Of Defective Mortgage Loans..............................................................65
Section 8.06. Reports By Indenture Trustee To Noteholders; Access To Certain Information........................66
Section 8.07. Trust Estate Mortgage Files.......................................................................66
Section 8.08. Amendment To Master Servicing Agreement...........................................................66
Section 8.09. Delivery Of The Trustee Mortgage Files Pursuant To Master Servicing Agreement.....................67
Section 8.10. [Reserved]........................................................................................67
Section 8.11. Termination Of Master Servicer....................................................................67
Section 8.12. Opinion Of Counsel................................................................................67
Section 8.13. Appointment Of Custodians.........................................................................67
Section 8.14. Rights Of The Note Insurer To Exercise Rights Of Noteholders......................................68
Section 8.15. Trust Estate And Accounts Held For Benefit Of The Note Insurer....................................68
Section 8.16. Rights in Respect of Insolvency Proceedings.......................................................69
Section 8.17. Effect of Payments by the Note Insurer; Subrogation...............................................70
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent Of Noteholders............................................70
Section 9.02. Supplemental Indentures With Consent Of Noteholders...............................................71
Section 9.03. Execution Of Supplemental Indentures..............................................................72
Section 9.04. Effect Of Supplemental Indentures.................................................................73
Section 9.05. Conformity With Trust Indenture Act...............................................................73
Section 9.06. Reference In Notes To Supplemental Indentures.....................................................73
Section 9.07. Amendments To Governing Documents.73
<PAGE>
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.......................................................................................74
Section 10.02. Form Of Redemption Notice........................................................................75
Section 10.03. Notes Payable On Optional Redemption.............................................................76
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates And Opinions.............................................................76
Section 11.02. Form Of Documents Delivered To Indenture Trustee.................................................77
Section 11.03. Acts Of Noteholders..............................................................................77
Section 11.04. Notices, Etc., To Indenture Trustee, The Note Insurer And Issuer.................................78
Section 11.05. Notices And Reports To Noteholders; Waiver Of Notices............................................79
Section 11.06. Rules By Indenture Trustee.......................................................................80
Section 11.07. Conflict With Trust Indenture Act................................................................80
Section 11.08. Effect Of Headings And Table Of Contents.........................................................80
Section 11.09. Successors And Assigns...........................................................................80
Section 11.10. Separability.....................................................................................80
Section 11.11. Benefits Of Indenture............................................................................81
Section 11.12. Legal Holidays...................................................................................81
Section 11.13. Governing Law....................................................................................81
Section 11.14. Counterparts.....................................................................................81
Section 11.15. Recording Of Indenture...........................................................................81
Section 11.16. Issuer Obligation................................................................................81
Section 11.17. No Petition......................................................................................82
Section 11.18. Inspection.......................................................................................82
Section 11.19. Usury............................................................................................82
Section 11.20. Third Party Beneficiary..........................................................................83
Section 11.21. Limitation of Liability of Wilmington Trust Company..............................................83
Section 11.21. Limitation of Wilmington Trust Company...........................................................82
</TABLE>
SCHEDULES AND EXHIBITS
Schedule 1 Schedule of Mortgage Loans
Exhibit A Form of Note
Exhibit B FSA Policy
Exhibit C Form of Notice of Claim
THIS INDENTURE, dated as of April 1, 1999 (as amended or supplemented
from time to time as permitted hereby, this "Indenture"), is between AMERICAN
RESIDENTIAL EAGLE BOND TRUST 1999-1, a Delaware statutory business trust
(together with its permitted successors and assigns, the "Issuer"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association,
as indenture trustee (together with its permitted successors in the trusts
hereunder, the "Indenture Trustee").
Preliminary Statement
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Mortgage-Backed LIBOR Notes, Class A, Series
1999-1 (the "Notes"), issuable as provided in this Indenture. All covenants
and agreements made by the Issuer herein are for the benefit and security of
the Holders of the Notes and the Note Insurer. The Issuer is entering into
this Indenture, and the Indenture Trustee is accepting the trusts created
hereby, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
Granting Clause
The Issuer hereby Grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Notes and the Note Insurer, all of the Issuer's
right, title and interest in and to (a) the Mortgage Loans listed in Schedule
I to this Indenture (including property that secures a Mortgage Loan that
becomes an REO Property), including the related Mortgage Files delivered or to
be delivered to the Custodian, on behalf of the Indenture Trustee, pursuant to
the Custody Agreement, all payments of principal received, collected or
otherwise recovered on and after the Cut-off Date for each Mortgage Loan
(other than any principal or interest payments due prior to the Cut-off Date),
all payments of interest (but not including prepayment charges) accruing on
each Mortgage Loan on and after the Cut-off Date therefor whenever received
and all other proceeds received in respect of such Mortgage Loans, (b)
security interests in the Mortgaged Properties; (c) rights under certain
primary mortgage and hazard insurance policies, if any, covering the Mortgaged
Properties; (d) the Issuer's rights under the underlying Purchase and Sale
Agreements; (e) the Issuer's rights under the Sale Agreements; (f) the
Issuer's rights under the Master Servicing Agreement; (g) amounts on deposit
relating to the Mortgage Loans in the Collection Account and Note Payment
Account; (h) all other ancillary or incidental funds, rights and properties
related to the foregoing; and (i) all proceeds of the foregoing. Such Grants
are made, however, in trust, to secure the Notes equally and ratably without
prejudice, priority or distinction between any Note and any other Note by
reason of difference in time of issuance or otherwise, and for the benefit of
the Note Insurer to secure (x) the payment of all amounts due on the Notes in
accordance with their terms, (y) the payment of all other sums payable under
this Indenture and (z) compliance with the provisions of this Indenture, all
as provided in this Indenture. All terms used in the foregoing granting
clauses that are defined in Section 1.01 are used with the meanings given in
said Section.
The Indenture Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions of this Indenture and agrees to
perform the duties herein required to the end that the interests of the
Holders of the Notes may be adequately and effectively protected. The
Indenture Trustee agrees that it will hold the FSA Policy in trust and that it
will hold any proceeds of any claim upon the FSA Policy, solely for the use
and benefit of the Noteholders in accordance with the terms hereof and the FSA
Policy.
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Indenture, and the definitions of such terms are applicable
to the singular as well as to the plural forms of such terms and to the
masculine as well as to the feminine genders of such terms. Whenever reference
is made herein to an Event of Default or a Default known to the Indenture
Trustee or of which the Indenture Trustee has notice or knowledge, such
reference shall be construed to refer only to an Event of Default or Default
of which the Indenture Trustee is deemed to have notice or knowledge pursuant
to Section 6.01(d). All other terms used herein that are defined in the Trust
Indenture Act (as hereinafter defined), either directly or by reference
therein, have the meanings assigned to them therein.
"5/25 Delayed Adjustment Date Adjustable Rate Mortgage Loans": The
Delayed Adjustment Date Adjustable Rate Mortgage Loans the first Mortgage Rate
adjustment for which occurs after an initial period of five years as
identified in the Schedule of Mortgage Loans.
"Accountant": A Person engaged in the practice of accounting who (except
when this Indenture provides that an Accountant must be Independent) may be
employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"Act": With respect to any Noteholder, as defined in Section 11.03.
"Adjustable Rate Mortgage Loans": Those Mortgage Loans identified in the
Schedule of Mortgage Loans which provide for adjustment of the applicable
Mortgage Rate as specified in the related Mortgage Note.
"Administrative Fee Amount": With respect to any Payment Date, the sum of
the Master Servicing Fee, the Indenture Trustee Fee, the Management Fee, the
Mortgage Insurance Premium, the Note Insurance Premium and any fee or expense
owing to the Owner Trustee relating to such Payment Date.
"Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of
voting securities, by contract, relation to individuals or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent": Any Note Registrar, Paying Agent, Authenticating Agent or
Custodian.
"Aggregate Expense Rate": The sum of (a) the Master Servicing Fee Rate,
(b) the Indenture Trustee Fee Rate, (c) the Note Insurance Premium Rate, (d)
the Mortgage Insurance Premium Rate, (e) the Management Fee Rate, and (f) the
applicable Minimum Spread.
"Aggregate Principal Balance": With respect to any Payment Date, the
aggregate of the Principal Balances of the Mortgage Loans as of the related
Determination Date (or other specified date).
"AmREIT": American Residential Investment Trust, Inc., a Maryland
corporation operating as a real estate investment trust, and its successors
and assigns.
"Annual Loss Percentage": With respect to any Payment Date, the product
of (i) 2 and (ii) a fraction, expressed as a percentage, the numerator of
which is the aggregate of all Realized Losses for the six preceding Due
Periods and the denominator of which is the aggregate Principal Balances of
the Mortgage Loans and REO Properties as of the day immediately preceding the
first day of the sixth preceding Due Period.
"Assignments": The original instrument of assignment of a Mortgage,
including any interim assignments, from the originator or any other holder of
any Mortgage Loan to the Indenture Trustee (that in each case may, to the
extent permitted by the laws of the state in which the related Mortgaged
Property is located, be a blanket instrument of assignment covering other
Mortgages and Mortgage Notes as well and that may also be an instrument of
assignment running directly from the mortgagee of record under the related
Mortgage to the Indenture Trustee).
"Authenticating Agent": The Person, if any, appointed as Authenticating
Agent by the Issuer pursuant to Section 6.14, until any successor
Authenticating Agent for the Notes is named, and thereafter "Authenticating
Agent" shall mean such successor. The initial Authenticating Agent shall be
the Indenture Trustee. Any Authenticating Agent other than the Indenture
Trustee shall sign an instrument under which it agrees to be bound by all of
the terms of this Indenture applicable to the Authenticating Agent.
"Authorized Officer": With respect to (i) the Indenture Trustee, any
Responsible Officer, (ii) the Owner Trustee, the president, any vice
president, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer, any
financial services officer or any other officer of the Owner Trustee
customarily performing functions similar to those performed by the above
officers and (iii) any other Person, the Chairman, Chief Operating Officer,
President or any Vice President of such Person.
"Available Funds": With respect to any Payment Date, the sum of the
amounts described in clauses (a) through (h) below, less, (i) the
Administrative Fee Amount in respect of such Payment Date; (ii) Monthly
Advances and Servicing Advances, including Nonrecoverable Advances, previously
made that are reimbursable to the Master Servicer (other than those included
in liquidation expenses for any Liquidated Mortgage Loan and already
reimbursed from the related Liquidation Proceeds) in such Collection Period to
the extent permitted by the Master Servicing Agreement; (iii) any unpaid
Master Servicing Fees attributable to prior periods due to the Master
Servicer; (iv) any unpaid fees and expenses or other amounts owing the
Indenture Trustee as provided in clauses (vi) and (vii) of the first sentence
of Section 8.02(d) hereof, and any unpaid fees and expenses or other amounts
owing to the Owner Trustee or the Manager attributable to prior periods; and
(v) the aggregate amounts (A) deposited into the Collection Account or Note
Payment Account that may not be withdrawn therefrom pursuant to a final and
nonappealable order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the Bankruptcy Code
and that would otherwise have been included in Available Funds on such Payment
Date and (B) received by the Master Servicer or the Indenture Trustee that are
recoverable and sought to be recovered from the Issuer as avoidable preference
by a trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with
a final nonappealable order of a court of competent jurisdiction:
(a) all scheduled payments of interest received with respect to the
Mortgage Loans due during the related Due Period and all other interest
payments on or in respect of such Mortgage Loans received by or on behalf
of the Master Servicer during the related Collection Period, net of
amounts representing interest due on such Mortgage Loans in respect of
any period prior to the Cut-off Date, plus any Compensating Interest
payments made by the Master Servicer in respect of the Mortgage Loans and
any net income from related REO Properties for such Collection Period;
(b) all scheduled payments of principal received with respect to the
Mortgage Loans and due during the related Due Period and all other
principal payments (including Principal Prepayments, but excluding
amounts described elsewhere in this definition) received or deemed to be
received during the related Collection Period in respect of such Mortgage
Loans;
(c) the aggregate of any Insurance Proceeds received during the
related Collection Period;
(d) the aggregate of any Net Liquidation Proceeds received during
the related Collection Period;
(e) the aggregate of the amounts received in respect of any Mortgage
Loans that are required or permitted to be repurchased, released, removed
or substituted by the Seller or Initial Seller during the related
Collection Period, to the extent such amounts are received by the
Indenture Trustee on or before the related Remittance Date;
(f) the amount of any Monthly Advances made for such Payment Date;
and
(g) the aggregate of amounts deposited in the Note Payment Account
by the Indenture Trustee, the Issuer or the Note Insurer, as the case may
be, during such Collection Period in connection with a redemption of the
Notes.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"Basic Documents": This Agreement, the Trust Agreement, the Master
Servicing Agreement, the Initial Mortgage Loan Purchase Agreement, the
Mortgage Loan Purchase Agreement, the Management Agreement, the FSA Insurance
Agreement, the Indemnification Agreement, the FSA Premium Letter and the
Custody Agreement.
"Basis Risk Shortfall": An amount equal to the excess of (i) the Monthly
Interest Amount calculated on the basis of One-Month LIBOR plus the applicable
Note Margin (but subject to the Cap Rate) over (ii) the Monthly Interest
Amount for such Payment Date calculated on the basis of the Net Funds Cap.
"Beneficial Owner": With respect to a Book-Entry Note, the Person who is
the beneficial owner of such Note as reflected on the books of the Clearing
Agency for the Notes or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance
with the rules of such Clearing Agency).
"Best Efforts": Efforts determined to be in good faith and reasonably
diligent by the Person performing such efforts, specifically the Issuer, or
its Manager, as the case may be, in its reasonable discretion. Such efforts do
not require the Issuer or its Manager, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Issuer or its Manager, as the case may be, to advance or expend
fees or sums of money in addition to those specifically set forth in this
Indenture.
"Book-Entry Notes": Any Notes registered in the name of the Clearing
Agency or its nominee, ownership of which is reflected on the books of the
Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (directly or as an indirect participant in accordance with the
rules of such Clearing Agency).
"Book-Entry Termination": The time at which the book-entry registration
of the Book-Entry Notes shall terminate, as specified in Section 2.13.
"Business Day": Any day other than (i) a Saturday or Sunday or (ii) a day
that is either a legal holiday or a day on which the Note Insurer is closed or
banking institutions in the states of Maryland or Minnesota or the city of New
York or the city in which the Corporate Trust Office is located are authorized
or obligated by law, regulation or executive order to be closed.
"CAP Agreement": The Confirmation and Agreement (Ref. No. NCC4105), dated
April 15, 1999, by and between the Note Insurer and Bear Stearns Financial
Products Inc.
"CAP Rate": 15.00% per annum.
"Certificate Distribution Account": The segregated trust account
established and maintained by the Certificate Paying Agent pursuant to Section
3.09 of the Trust Agreement.
"Certificate Paying Agent": The certificate paying agent appointed under
the Trust Agreement which initially shall be the Indenture Trustee.
"Clearing Agency": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities and Exchange Act of 1934, as
amended, and the regulations of the Commission thereunder and shall initially
be The Depository Trust Company of New York, the nominee for which is Cede &
Co.
"Clearing Agency Participants": The entities for whom the Clearing Agency
will maintain book-entry records of ownership and transfer of Book-Entry
Notes, which may include securities brokers and dealers, banks and trust
companies and clearing corporations and certain other organizations.
"Closing Date": April 15, 1999.
"Code": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, as successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form and proposed regulations thereunder to the extent
that, by reason of their proposed effective date, such proposed regulations
would apply.
"Collection Account": As defined in the Master Servicing Agreement.
"Collection Period": As defined in the Master Servicing Agreement.
"Commission": The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or if at
any time such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing such
duties at such time under the Trust Indenture Act or similar legislation
replacing the Trust Indenture Act.
"Compensating Interest Payments": As to any Payment Date, the payments
made by the Master Servicer pursuant to Section 3(v) of the Master Servicing
Agreement.
"Corporate Trust Office": The principal office of the Indenture Trustee
at which at any particular time its corporate trust business with respect to
this Indenture shall be principally administered, which office at the date of
the execution of this Indenture is located at Sixth Street and Marquette
Avenue, Minneapolis, MN 55479, Attention: American Residential Eagle Bond
Trust 1999-1, Class A, Series 1999-1, with a copy to the Indenture Trustee at
11000 Broken Land Parkway, Columbia, Maryland 21044, Attention: American
Residential Eagle Bond Trust 1999-1, Class A, Series 1999-1.
"Cumulative Loss Percentage": With respect to any Payment Date, a
fraction, expressed as a percentage, the numerator of which is the aggregate
amount of Realized Losses incurred from the Closing Date through the end of
the related Due Period, and the denominator of which is the Cut-off Date
Aggregate Principal Balance of the Mortgage Loans.
"Custodian": Bankers Trust Company of California, N.A., as custodian
under the Custodial Agreement and its successors and assigns.
"Custody Agreement": The agreement between the Indenture Trustee, the
Issuer and the Custodian dated as of April 1, 1999.
"Cut-Off Date": April 1, 1999.
"Cut-Off Date Aggregate Principal Balance": The aggregate of the
Principal Balances of the Mortgage Loans as of the Cut-off Date.
"Default": Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
"Defective Mortgage Loan": Any Mortgage Loan that is required to be
repurchased or substituted by the Initial Seller pursuant to Section 2(a) of
the Master Servicing Agreement.
"Definitive Notes": Notes other than Book-Entry Notes.
"Delayed Adjustment Date Adjustable Rate Mortgage Loans": The Adjustable
Rate Mortgage Loans, the first Mortgage Rate adjustment for which occurs after
an initial period ranging from two to five years as identified in the Schedule
of Mortgage Loans.
"Deleted Mortgage Loan": As defined in the Master Servicing Agreement.
"Delinquency Amount": As of any Payment Date, the product of the
Delinquency Percentage for such Payment Date and the Aggregate Principal
Balance of the Mortgage Loans as of the Determination Date relating to such
Payment Date.
"Delinquency Percentage": For any Due Period, a fraction, expressed as a
percentage, (i) the numerator of which is the aggregate of the Scheduled
Principal Balance as of the last day of such Due Period of all Mortgage Loans
that were 90 or more days contractually Delinquent, in foreclosure, REO
Property or for which the related Mortgagor was in a bankruptcy proceeding or
paying a reduced Monthly Payment as a result of a bankruptcy workout as of the
last day of such Due Period and the denominator of which is the aggregate
unpaid Scheduled Principal Balance of all Mortgage Loans as of the last day of
such Due Period.
"Delinquent": As defined in the Master Servicing Agreement.
"Depositor": Bear Stearns Asset Backed Securities, Inc., a Delaware
corporation and a wholly owned subsidiary of The Bear Stearns Companies Inc.,
and its successors and assigns.
"Determination Date": As to any Payment Date, the last day of the Due
Period relating to such Payment Date.
"Due Date": With respect to any Mortgage Loan, the date on which a
scheduled payment is due under the related Mortgage Note.
"Due Period": With respect to any Payment Date, the period commencing on
the second day of the calendar month immediately preceding the calendar month
in which such Payment Date occurs (or, with respect to the first Payment Date,
on the Cut-off Date) and ending on the first day of the calendar month in
which such Payment Date occurs.
"Eligible Account": As defined in the Master Servicing Agreement.
"Event Of Default": As defined in Section 5.01.
"Excess Cash": With respect to any Payment Date, Available Funds for such
Payment Date, minus the sum of (i) any amounts payable to the Note Insurer
pursuant to the FSA Insurance Agreement, (ii) the Monthly Interest Amount for
the related Payment Date and (iii) the Monthly Principal Amount for the
related Payment Date.
"Excess Cash Payment": As defined in clause fourth of Section 8.02(d).
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"Final Maturity Date": The Payment Date in April 25, 2029.
"Fixed Rate Mortgage Loans": Those Mortgage Loans identified in the
Schedule of Mortgage Loans that bear interest rates which are fixed for the
lives of such Mortgage Loans.
"Formula Rate": One-Month LIBOR plus the applicable Note Margin.
"FSA": Financial Security Assurance, Inc., its successors and assigns.
"FSA Insurance Agreement": As defined in the Master Servicing Agreement.
"FSA Policy": As defined in the Master Servicing Agreement.
"Grant": To assign, transfer, mortgage, pledge, create and grant a
security interest in, deposit, set-over and confirm. A Grant of a Mortgage
Loan and related Mortgage Files, a Permitted Investment, the Master Servicing
Agreement, the Mortgage Loan Purchase Agreement, or any other instrument shall
include all rights, powers and options (but none of the obligations) of the
Granting party thereunder, including, without limitation, the immediate and
continuing right to claim for, collect, receive and give receipts for
principal and interest payments thereunder, insurance proceeds, Purchase
Prices and all other moneys payable thereunder and all proceeds thereof, to
give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring Proceedings in the
name of the Granting party or otherwise, and generally to do and receive
anything that the Granting party is or may be entitled to do or receive
thereunder or with respect thereto.
"Highest Lawful Rate": As defined in Section 11.19.
"Indenture": This instrument as originally executed and, if from time to
time supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, as so supplemented
or amended. All references in this instrument to designated "Articles",
"Sections", "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this instrument as
originally executed. The words "herein", "hereof', "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section, Subsection or other subdivision.
"Indenture Trustee": Norwest Bank Minnesota, National Association, a
national banking association, and any Person resulting from or surviving any
consolidation or merger to which it may be a party until a successor Person
shall have become the Indenture Trustee pursuant to the applicable provisions
of this Indenture, and thereafter "Indenture Trustee" shall mean such
successor Person.
"Indenture Trustee Fee": With respect to any Payment Date, the monthly
fee payable to the Indenture Trustee equal to the product of the Indenture
Trustee Fee Rate and the aggregate Scheduled Principal Balance of the Mortgage
Loans as of the first day of the related Due Period.
"Indenture Trustee Fee Rate": One-twelfth of 0.005%.
"Independent": When used with respect to any specified Person, means such
a Person who (i) is in fact independent of the Issuer and any other obligor
upon the Notes, (ii) does not have any direct financial interest or any
material indirect financial interest in the Issuer or in any such other
obligor or in an Affiliate of the Issuer or such other obligor, and (iii) is
not connected with the Issuer or any such other obligor as an officer,
employee, promoter, underwriter, trustee, partner, director or person
performing similar functions. Whenever it is herein provided that any
Independent Person's opinion or certificate shall be furnished to the
Indenture Trustee, such Person shall be appointed by an Issuer Order and such
opinion or certificate shall state that the signer has read this definition
and that the signer is Independent within the meaning hereof.
"Individual Note": A Note of an original principal amount of $50,000
(provided, however, one Note may be less than that amount); a Note of an
original principal amount in excess of $50,000 shall be deemed to be a number
of Individual Notes equal to the quotient obtained by dividing such original
principal amount by $50,000.
"Initial Mortgage Loan Purchase Agreement": The Mortgage Loan Purchase
Agreement, dated as of April 1, 1999, between the Initial Seller, as seller,
and the Seller, as purchaser, with respect to the Mortgage Loans.
"Initial Redemption Date": The first Payment Date on which the aggregate
Principal Balance of the Mortgage Loans is less than 20% of their Cut-off Date
Principal Balance.
"Initial Seller": AmREIT and its successors and assigns.
"Indemnification Agreement": The Indemnification Agreement dated as of
April 9, 1999 among the Note Insurer, AmREIT, the Seller, the Issuer, the
Depositor and the Underwriter.
"Insurance Policy": As defined in the Master Servicing Agreement.
"Insured Expenses": As defined in the Master Servicing Agreement.
"Insurance Proceeds": As defined in the Master Servicing Agreement.
"Interest Accrual Period": With respect to any Payment Date, the period
from the Payment Date in the month preceding the month of such Payment Date
(or, in the case of the first Payment Date, from the Closing Date) through the
day before such Payment Date.
"Investor Certificate": As defined in the Trust Agreement.
"Investor Certificateholder": As defined in the Trust Agreement.
"Issuer": American Residential Eagle Bond Trust 1999-1, a Delaware
business trust.
"Issuer Order" and "Issuer Request": A written order or request of the
Issuer signed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or, in the case of such order or request required by Section 2.11, by
an Authorized Officer of the holder of the Investor Certificate and delivered
to the Indenture Trustee or the Authenticating Agent, as applicable.
"Letter Agreement": The Letter of Representations to The Depository Trust
Company from the Indenture Trustee and the Issuer dated April 14, 1999.
"LIBOR Business Day": Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York or in the
city of London, England are required or authorized by law to be closed.
"LIBOR Carryover Amount": With respect to any Payment Date, the sum of
(i) the excess, if any, of the Monthly Interest Amount calculated on the basis
of the Note Interest Rate (with regard to the CAP Rate but without regard to
the Net Funds Cap applicable to such Payment Date) over the sum of (a) related
Monthly Interest Amount calculated on the basis of the Net Funds Cap and (b)
the Supplemental Interest Payment (if any) for such Payment Date, (ii) any
LIBOR Carryover Amount remaining unpaid from prior Payment Dates and (iii)
interest on the amount in clause (ii) calculated on the basis of the Note
Interest Rate (with regard to the CAP Rate but without regard to the Net Funds
Cap applicable to such Payment Date).
"LIBOR Determination Date": With respect to any Payment Date, the second
LIBOR Business Day prior to the first day of the relate Interest Accrual
Period (or the second LIBOR Business Day prior to the Closing Date, in the
case of the first Payment Date).
"Liquidated Mortgage Loan": As defined in the Master Servicing Agreement.
"Liquidation Date": With respect to any Mortgage Loan, the date of the
final receipt of all Liquidation Proceeds, Insurance Proceeds or other
payments with respect to such Mortgage Loan.
"Liquidation Proceeds": As defined in the Master Servicing Agreement.
"Loan-To-Value Ratio": As defined in the Master Servicing Agreement.
"Manager": means AmREIT as manager of the Issuer under the Management
Agreement and its successors and assigns.
"Management Agreement": The management agreement dated as of April 1,
1999 between the Issuer and AmREIT, as manager.
"Management Fee": With respect to any Payment Date, the monthly fee of
$1,000 payable to AmREIT, as manager under the Management Agreement.
"Management Fee Rate": With respect to any Payment Date, the Management
Fee expressed as a percentage of the Aggregate Principal Balance as of the
last day of the Due Period preceding such Payment Date.
"Master Servicer": As defined in the Master Servicing Agreement.
"Master Servicing Agreement": The Master Servicing Agreement dated as of
April 1, 1999 among the Issuer, Advanta Mortgage Corp. USA, as Master
Servicer, and the Indenture Trustee.
"Master Servicing Fee": As defined in the Master Servicing Agreement.
"Master Servicing Fee Rate": As defined in the Master Servicing
Agreement.
"Maturity": With respect to any Note, the date on which the entire unpaid
principal amount of such Note becomes due and payable as therein or herein
provided, whether at the Final Maturity Date or by declaration of
acceleration, call for redemption or otherwise.
"Minimum Spread": 0.00% for the first fifteen Payment Dates, 0.50% from
the sixteenth Payment Date to the sixtieth Payment Date and 0.75% thereafter.
"Monthly Advance": As defined the Master Servicing Agreement.
"Monthly Interest Amount": With respect to any Payment Date, an amount
equal to interest accrued during the related Interest Accrual Period at the
Note Interest Rate on the Note Balance as of the preceding Payment Date (after
giving effect to payments, if any, in reduction of principal made on the Notes
on such preceding Payment Date), minus any Relief Act Shortfalls.
"Monthly Payment": As defined in the Master Servicing Agreement.
"Monthly Principal Amount": With respect to any Payment Date, an amount
equal to (A) the aggregate of (i) all scheduled payments of principal received
with respect to the Mortgage Loans due during the related Due Period and all
other amounts collected, received or otherwise recovered in respect of
principal on such Mortgage Loans (including Principal Prepayments) during or
in respect of the related Collection Period, and (ii) the aggregate of all
amounts allocable to principal deposited in the Note Payment Account on the
related Remittance Date by the Initial Seller, the Seller or the Master
Servicer in connection with a repurchase, release, removal or substitution of
any such Mortgage Loans pursuant to the Master Servicing Agreement, reduced by
(B) the amount of any Overcollateralization Surplus with respect to such
Payment Date.
"Moody's": Moody's Investors Service, Inc. and its successors in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage
Loan.
"Mortgage Insurance Policy": The primary mortgage insurance policy issued
by the Mortgage Insurer insuring certain of those Mortgage Loans with original
Loan-to-Value ratios in excess of 80% as indicated in the schedule to such
policy.
"Mortgage Insurance Premium": With respect to any Payment Date, the
aggregate monthly premiums payable with respect to the Mortgage Loans covered
by the Mortgage Insurance Policy.
"Mortgage Insurance Premium Rate": With respect to any Payment Date, the
Mortgage Insurance Premium expressed as an annual percentage of the Aggregate
Principal Balance as of the last day of the Due Period preceding such Payment
Date.
"Mortgage Insurer": Commonwealth Mortgage Assurance Company and its
successors and assigns.
"Mortgage Loan": Each of the mortgage loans Granted to the Indenture
Trustee under this Indenture as security for the Notes and that from time to
time comprise part of the Trust Estate, including any property that secures a
Mortgage that becomes REO Property. The Mortgage Loans are listed on the
Schedule of Mortgage Loans annexed hereto as Schedule I.
"Mortgage Loan Purchase Agreement": The Mortgage Loan Purchase Agreement,
dated as of April 1, 1999, by and between the Seller, as seller, and the
Depositor, as purchaser.
"Mortgage Note": The note or other instrument evidencing the indebtedness
of a Mortgagor under the related Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans.
"Mortgaged Property": The underlying property securing a Mortgage Note.
"Mortgage Rate": As defined in the Master Servicing Agreement.
"Mortgagor": The obligor under a Mortgage Note.
"Net Funds Cap": With respect to any Payment Date, (i) the average of the
Mortgage Rates of the Mortgage Loans as of the first day of the month
preceding the month of such Payment Date (or in the case of the first Payment
Date, the Cut-off Date), weighted on the basis of the Scheduled Principal
Balances of the Mortgage Loans as of such date minus (ii) the Aggregate
Expense Rate.
"Net Liquidation Proceeds": As defined in the Master Servicing Agreement.
"Nonrecoverable Advance": As defined in the Master Servicing Agreement.
"Note Balance": The Original Note Balance minus the aggregate of amounts
actually paid as principal to the Holders.
"Noteholder" or "Holder": The Person in whose name a Note is registered
in the Note Register, except that, solely for the purpose of taking any action
under Section 5.02 or giving of any consent pursuant to this Indenture, any
Note registered in the name of the Issuer, the Initial Seller, the Seller, the
Master Servicer or the Depositor or any Persons actually known by a
Responsible Officer of the Indenture Trustee to be an Affiliate of the Issuer,
the Initial Seller, the Seller, the Master Servicer or the Depositor shall be
deemed not to be Outstanding and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether Holders of the
requisite Percentage Interests necessary to take any such action or effect any
such consent have acted or consented unless the Issuer, the Initial Seller,
the Seller, the Master Servicer, the Depositor or any such Person is an owner
of record of all of the Notes.
"Note Insurance Premium": With respect to any Payment Date, the monthly
premium as set forth in the Premium Letter to be paid to the Note Insurer.
"Note Insurance Premium Rate": With respect to any Payment Date, the rate
specified in the Premium Letter.
"Note Insurer": Financial Security Assurance Inc., a New York stock
insurance company, and successors thereto.
"Note Insurer Default" shall mean any one of the following events shall
have occurred and be continuing:
(a) The Note Insurer fails to make a payment required under the FSA
Policy in accordance with its terms;
(b) The Note Insurer (A) files any petition or commences any case or
proceeding under any provision or chapter of the Bankruptcy Code or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (B) makes a general
assignment for the benefit of its creditors, or (C) has an order for
relief entered against it under the Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (1) appointing a custodian,
trustee, agent or receiver for the Note Insurer or for all or any
material portion of its property or (2) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the Note Insurer
(or the taking of possession of all or any material portion of the
property of the Note Insurer).
"Note Interest Rate": With respect to any Payment Date, a per annum rate
equal to the least of (i) the Formula Rate, (ii) the CAP Rate and (iii) the
Net Funds Cap. Interest in respect of any Payment Date will accrue during the
related Interest Accrual Period on the basis of a 360-day year and the actual
number of days elapsed during such period.
"Note Margin": 0.35% on or prior to the Initial Redemption Date and 0.70%
after the Initial Redemption Date.
"Note Payment Account": The segregated trust account, which shall be an
Eligible Account, established and maintained pursuant to Section 8.02 and
entitled "Norwest Bank Minnesota, National Association, as Indenture Trustee
for American Residential Eagle Bond Trust 1999-1 Mortgage-Backed LIBOR Notes,
Class A, Series 1999-1, Note Payment Account," on behalf of the Noteholders
and the Note Insurer.
"Note Register": As defined in Section 2.06.
"Note Registrar": As defined in Section 2.06.
"Notes": The American Residential Eagle Bond Trust 1999-1 Mortgage-Backed
LIBOR Notes, Class A, Series 1999-1.
"Notice Of Claim": The notice required to be furnished by the Indenture
Trustee to the Note Insurer in the event an Insured Payment is required to be
paid under the FSA Policy with respect to any Payment Date, in the form set
forth as Exhibit C hereto.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer
or a Vice President of the Seller, the Depositor, the Master Servicer or, in
the case of the Issuer, an Authorized Officer of the Owner Trustee or of its
Manager (to the extent the delivery of such certificates by the Manager is
permitted under the Management Agreement), as the case may be, and delivered
to the Indenture Trustee, Note Insurer or each Rating Agency, as the case may
be.
"One-Month LIBOR": With respect to each Payment Date, the rate for one
month United States dollar deposits quoted on Telerate Page 3750 as of 11:00
A.M., London time, on the related LIBOR Determination Date. If such rate does
not appear on such page (or other page as may replace that page on that
service, or if such service is no longer offered, such other service for
displaying LIBOR or comparable rates as may be reasonably selected by the
Manager), the rate shall be the Reference Bank Rate. The "Reference Bank Rate"
shall be determined on the basis of the rates at which deposits in U.S.
Dollars are offered by the reference banks (which shall be three major banks
that are engaged in transactions in the London interbank market, selected by
the Manager) as of 11:00 A.M. London time, on the date that is two LIBOR
Business Days prior to the immediately preceding Payment Date to prime banks
in the London interbank market for a period of one month in amounts
approximately equal to the Note Balance then outstanding. The Indenture
Trustee shall request the principal London office of each of the reference
banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate shall be the arithmetic mean (rounding such arithmetic mean
upwards, if necessary, to the nearest whole multiple of 1/16%) of the
quotations. If on such date fewer than two quotations are provided as
requested, the rate shall be the arithmetic mean (rounding such arithmetic
mean upwards, if necessary, to the nearest whole multiple of 1/16%) of the
rates quoted by one or more major banks in New York City, selected by the
Manager as of 11:00 A.M., New York City time, on such date for loans in U.S.
Dollars to leading European banks for a period of one month in amounts
approximately equal to the Note Balance then outstanding. If no such
quotations can be obtained, the rate shall be LIBOR for the prior Payment
Date.
"Opinion Of Counsel": A written opinion of counsel reasonably acceptable
to the Indenture Trustee and, in the case of opinions delivered to the Note
Insurer, reasonably acceptable to it. Any expense related to obtaining an
Opinion of Counsel for an action requested by a party shall be borne by the
party required to obtain such opinion or seeking to effect the action that
requires the delivery of such Opinion of Counsel, except in such instances
where such opinion is at the request of the Indenture Trustee, in which case
such expense shall be an expense of the Issuer.
"Original Note Balance": The principal balance of the Notes at the issue
date thereof, equal to $229,000,000.
"Outstanding": As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Definitive Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent (other than the Issuer) in trust for the
Holders of such Notes; provided, however, that if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Indenture Trustee,
has been made;
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes
are held by a bona fide purchaser (as defined by the Uniform Commercial
Code of the applicable jurisdiction); and
(iv) Notes alleged to have been destroyed, lost or stolen that have
been paid as provided for in Section 2.07;
provided, however, that in determining whether the Holders of the requisite
percentage of the Note Balance of the Outstanding Notes have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Issuer, any other obligor upon the Notes or any
Affiliate of the Issuer, the Indenture Trustee, the Initial Seller, the
Seller, the Master Servicer or the Depositor or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Notes that the Indenture Trustee knows to be so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes or any Affiliate
of the Issuer, the Initial Seller, the Seller, the Master Servicer or the
Depositor or such other obligor; provided, further, however, that Notes that
have been paid with the proceeds of the FSA Policy shall be deemed to be
Outstanding for the purposes of this Indenture, such payment to be evidenced
by written notice from the Note Insurer to the Indenture Trustee, and the Note
Insurer shall be deemed to the Holder thereof to the extent of any payments
thereon made by the Note Insurer.
"Overcollateralization Amount": With respect to any Payment Date, the
amount, if any, by which (x) the aggregate Principal Balance of the Mortgage
Loans as of the end of the related Due Period exceeds (y) the Note Balance of
the Notes as of such Payment Date after taking into account payments of the
Monthly Principal Amount (disregarding any permitted reduction in Monthly
Principal Amount due to an Overcollateralization Surplus) made on such Payment
Date.
"Overcollateralization Deficit": The amount, if any, by which (x) the
Note Balance, after taking into account all payments to be made on such
Payment Date in reduction thereof, including any Excess Cash Payments, exceeds
(y) the aggregate Principal Balance of the Mortgage Loans as of the end of the
applicable Due Period.
"Overcollateralization Surplus": With respect to any Payment Date, the
amount, if any, by which (x) the Overcollateralization Amount for such Payment
Date exceeds (y) the then applicable Required Overcollateralization Amount for
such Payment Date.
"Owner Trustee": Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity, but solely as owner trustee under
the Trust Agreement, and any successor owner trustee thereunder.
"Paying Agent": The Indenture Trustee or any other depository institution
or trust company that is authorized by the Issuer pursuant to Section 3.03 to
pay the principal of, or interest on, any Notes on behalf of the Issuer, which
agent, if not the Indenture Trustee, shall have signed an instrument agreeing
to be bound by the terms of this Indenture applicable to the Paying Agent.
"Payment Date": The 25th day of each month or, if any such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
May 25, 1999.
"Payment Date Statement": The statement prepared pursuant to Section
2.08(d) with respect to collections on or in respect of the Mortgage Loans and
other assets of the Trust Estate and payments on or in respect of the Notes,
based upon the information contained in the report prepared pursuant to
Section 3(i) of the Master Servicing Agreement and setting forth the following
information with respect to each Payment Date (to the extent the Master
Servicer has made such information (other than the information described in
clause (b) below) available to the Indenture Trustee):
(a) the amount of such payment to the Noteholders on the related
Payment Date allocable to (i) the Monthly Principal Amount (separately
setting forth Principal Prepayments) and (ii) any Excess Cash Payment;
(b) the amount of such payment to the Noteholders on such Payment
Date allocable to the Monthly Interest Amount;
(c) the Note Balance after giving effect to the payment of Monthly
Principal Amount and any Excess Cash applied to reduce the Note Balance
on such Payment Date;
(d) the Aggregate Principal Balance of the Mortgage Loans as of the
end of the related Due Period;
(e) the amount of Monthly Advances made with respect to such Payment
Date;
(f) the number and the aggregate of the Principal Balances of the
Mortgage Loans Delinquent (i) one month, (ii) two months and (iii) three
or more months as of the end of the related Collection Period;
(g) the aggregate of the Principal Balances of the Mortgage Loans in
foreclosure or other similar proceeding or in which the borrower is in
bankruptcy and the book value of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure during the related
Collection Period as of the last day of such Collection Period;
(h) the aggregate of the Principal Balances of the Mortgage Loans
repurchased by the Initial Seller, the Seller or the Issuer, separately
setting forth the aggregate of the Principal Balances of Mortgage Loans
Delinquent for three consecutive monthly installments purchased by the
Issuer at its option pursuant to the Indenture;
(i) the Insured Payment, if any, for such Payment Date;
(j) the amount of the Master Servicing Fee paid to or retained by
the Master Servicer with respect to such Payment Date;
(k) the Overcollateralization Amount, the then applicable Required
Overcollateralization Amount, the Overcollateralization Surplus, if any,
and the Overcollateralization Deficit, if any, with respect to such
Payment Date;
(l) the aggregate outstanding principal balance of the three largest
outstanding Mortgage Loans;
(m) the Weighted Average Net Mortgage Rate on the Mortgage Loans as
of the first day of the month prior to the Payment Date;
(n) the Aggregate Expense Rate with respect to such Payment Date;
(o) the Note Interest Rate for such Payment Date;
(p) the amount of any Supplemental Interest Payment made by the Note
Insurer on such Payment Date and deposited in the Supplemental Interest
Payment Account; and
(q) the Step Down Cumulative Loss Test, the Step Down Rolling
Delinquency Test, the Step Down Rolling Loss Test, the Step Down Trigger,
the Stepped Down Required Overcollateralized Percentage, the Step Up
Cumulative Loss Test, the Step Up MI Trigger, the Step Up Rolling
Delinquency Test, the Step Up Rolling Loss Test and the Step Up Trigger
for such Payment Date and the percentage difference (if any) between the
calculated percentage and the threshold or trigger percentage specified
in such test or trigger event.
In the case of information furnished pursuant to clauses (a) and (b)
above, the amounts shall be expressed as a dollar amount per Note with a
$1,000 principal denomination. In addition, for each Payment Date, the
Indenture Trustee shall also be required to provide the Underwriter and
Bloomberg Financial Services a loan level amortization tape in standard
industry format.
"Percentage Interest": With respect to a Note, the undivided percentage
interest (carried to eight places rounded down) obtained by dividing the
original principal balance of such Note by the Original Note Balance and
multiplying the result by 100.
"Permitted Investments": As defined in the Master Servicing Agreement.
"Person": Any individual, corporation, limited liability company,
partnership, joint venture, association joint-stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"Policy Payments Account": The special purpose trust account established
by the Indenture Trustee pursuant to Section 8.03(b) hereof.
"Predecessor Notes": With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or
stolen Note shall be deemed to evidence the same debt as the lost, destroyed
or stolen Note.
"Preference Amount": Any amount previously distributed to a Noteholder
that is recoverable and sought to be recovered as a avoidable preference by a
trustee in bankruptcy pursuant to the Bankruptcy Code in accordance with a
final nonappealable order of a court having competent jurisdiction.
"Premium Letter": The premium letter dated April 15, 1999 between the
Initial Seller and the Note Insurer.
"Prepayment Interest Shortfall": As defined in the Master Servicing
Agreement.
"Principal Balance": As to any Mortgage Loan and any Determination Date,
the actual outstanding principal amount thereof as of the close of business on
the Determination Date in the preceding month (or, in the case of the first
Payment Date, as of the Cut-off Date) less (i) all scheduled payments of
principal received) with respect to the Mortgage Loan and due during the
related Due Period and all other amounts collected, received or otherwise
recovered in respect of principal on the Mortgage Loan (including Principal
Prepayments) during or in respect of the related Collection Period, Net
Liquidation Proceeds allocable to principal recovered or collected in respect
of such Mortgage Loan during the related Collection Period and (ii) the
portion of the Purchase Price allocable to principal to be remitted by the
Initial Seller to the Indenture Trustee on or prior to the related Deposit
Date in connection with a repurchase of such Mortgage Loan pursuant to the
Sale Agreements, Master Servicing Agreement or Section 8.05 hereof, to the
extent such amount is actually remitted on or prior to such Deposit Date;
provided, however, that Mortgage Loans that have become Liquidated Mortgage
Loans since the end of the preceding Determination Date (or, in the case of
the first Determination Date, since the Cut-off Date) will be deemed to have a
Principal Balance of zero on the current Determination Date.
"Principal Prepayment": As defined in the Master Servicing Agreement.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase Price": As defined in the Master Servicing Agreement.
"Purchase and Sale Agreements": As defined in the Master Servicing
Agreement.
"Rating Agencies": Standard & Poor's and Moody's (each, a "Rating
Agency"). If either such agency or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical credit rating
agency, or other comparable Person, designated by the Master Servicer, notice
of which designation shall be given to the Indenture Trustee.
"Realized Loss": As defined in the Master Servicing Agreement.
"Record Date": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any
Notes (or notice of a payment in full of principal) due and payable on such
Payment Date are determined; such date shall be the last Business Day
preceding such Payment Date or, with respect to Definitive Notes, the last
Business Day of the month preceding the month of such Payment Date. With
respect to a vote of Noteholders required or allowed hereunder, the Record
Date shall be the later of (i) 30 days prior to the first solicitation of
consents or (ii) the date of the most recent list of Noteholders furnished to
the Indenture Trustee pursuant to Section 7.01(a) prior to such solicitation.
"Redemption Date": The Payment Date, if any, on which the Notes are
redeemed pursuant to Article X hereof which date may occur (i) on the Initial
Redemption Date or (ii) after the Indenture Trustee has received an acceptable
offer to purchase the Trust Estate as set forth in Section 10.01(c) hereof.
"Redemption Price": An amount at least equal to the sum of (i) 100% of
the then outstanding Note Balance, plus accrued interest thereon through the
end of the Interest Accrual Period immediately preceding the related Payment
Date, (ii) any amounts due and owing to the Note Insurer under the Insurance
Agreement (including any amounts that will become due as a result of such
redemption), (iii) any unreimbursed Master Servicing Fees, Monthly Advances
and Servicing Advances, including Nonrecoverable Advances and (iv) all unpaid
fees and expenses of, and other amounts due and owing to, the Owner Trustee
and the Indenture Trustee.
"Relief Act Shortfalls": With respect to any Due Period, the aggregate
reductions in interest collected on the Mortgage Loans as a result of The
Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
"Remittance Amount": As defined in the Master Servicing Agreement.
"Remittance Date": The date each month on which funds on deposit in the
Collection Account are remitted by the Master Servicer to the Indenture
Trustee for deposit into the Note Payment Account, which date shall be with
respect to any Payment Date, the 18th day of the month in which such Payment
Date occurs, or the next succeeding Business Day, if such 18th day is not a
Business Day.
"REO Property": As defined in the Master Servicing Agreement.
"Replacement Mortgage Loan": As defined in the Master Servicing
Agreement.
"Required Overcollateralization Amount": With respect to any Payment
Date, an amount equal to 2.25% of the Cut-off Date Aggregate Principal Balance
of the Mortgage Loans, subject to the following: (i) if the Step Up Trigger
has occurred, the Required Overcollateralization Amount for such Payment Date
will be an amount equal to either (A) if the Step Up Trigger has occurred
solely because the Step Up Rolling Delinquency Trust is met on such Payment
Date, an amount equal to the aggregate Principal Balance of all Mortgage Loans
that are 60 or more days Delinquent, or in foreclosure or have been converted
to REO Properties or (B) in all other cases, the Aggregate Principal Balance
of the Mortgage Loans as of the end of the related Due Period; (ii) if the
Spread Squeeze Condition is met, the Required Overcollateralization Amount for
such Payment Date will be an amount equal to the sum of (A) the Required
Overcollateralization Amount for such Payment Date determined as though the
Spread Squeeze Condition were not met plus (B) the Spread Squeeze
Overcollateralization Increase Amount or (ii) if neither the Step Up Trigger
has occurred nor the Spread Squeeze Condition is met but the Step Down Trigger
has occurred, the Required Overcollateralization Amount for such Payment Date
will be an amount equal to the greater of (A) 0.50% of the Cut-off Date
Aggregate Principal Balance of the Mortgage Loans and (B) the lesser of (x)
2.25% of the Cut-off Date Aggregate Principal Balance of the Mortgage Loans,
and (y) the Stepped Down Required Overcollateralized Percentage of the
aggregate Principal Balance of the Mortgage Loans and REO Properties as of the
end of the related Due Period. Notwithstanding, any provision to the contrary
contained herein, the Required Overcollateralization Amount may be reduced by
the Note Insurer.
"Required Payment Amount": With respect to any Payment Date, the Monthly
Interest Amount (net of Prepayment Interest Shortfalls which are not covered
by Compensating Interest Payments) for such Payment Date plus the amount of
any Overcollateralization Deficit for such Payment Date.
"Responsible Officer": With respect to the Indenture Trustee, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, any assistant vice president, the secretary,
any assistant secretary, the treasurer, any assistant treasurer, the cashier,
any trust officer or assistant trust officer, the controller, any assistant
controller or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Rolling Delinquency Percentage": With respect to any Payment Date, the
average of the Delinquency Percentages as of the last day of each of the three
(or one or two, in the case of the first or second Payment Dates,
respectively) preceding Due Periods.
"Sale": The meaning specified in Section 5.17.
"Sale Agreements": The Initial Mortgage Loan Purchase Agreement together
with the Mortgage Loan Purchase Agreement.
"Schedule of Mortgage Loans": As defined in the Master Servicing
Agreement.
"Scheduled Payments": As defined in the FSA Policy.
"Scheduled Principal Balance": (i) with respect to any Mortgage Loan as
of any Payment Date, the principal balance of such Mortgage Loan at the close
of business on the Cut-off Date, after giving effect to principal payments due
on or before the Cut-off Date, whether or not received, less an amount equal
to principal payments due after the Cut-off Date and on or before the Due Date
in the related Due Period, whether or not received from the mortgagor, and all
amounts allocable to unscheduled principal payments (including Principal
Prepayments, Liquidation Proceeds, Insurance Proceeds and condemnation
proceeds, in each case to the extent identified and applied prior to or during
the Collection Period ending in the month prior to the month of such Payment
Date) and (ii) with respect to any REO Property as of any Payment Date, the
Scheduled Principal Balance of the related Mortgage Loan on the Due Date
immediately preceding the date of acquisition of such REO Property by the
Master Servicer (reduced by any amount applied as a reduction of principal on
the Mortgage Loan).
"Seller": American Residential Eagle, Inc., a Delaware corporation.
"Servicing Advance": As defined in the Master Servicing Agreement.
"Servicing Fee Rate": As defined in the Master Servicing Agreement.
"Spread Squeeze Condition": The Spread Squeeze Condition will be met with
respect to a Payment Date following the fourteenth Payment Date if, with
respect to the fifteenth Payment Date through the twenty-seventh Payment Date,
the Spread Squeeze Percentage for such Payment Date is less than 2.00% and for
any Payment Date after the twenty-seventh Payment Date, the Spread Squeeze
Percentage for such Payment Date is less than 2.75%.
"Spread Squeeze Overcollateralization Increase Amount": For any Payment
Date on which the Spread Squeeze Condition is met, an amount equal to the
product obtained by multiplying (i) three, (ii) the excess, if any, of 2.00%
(with respect to the fifteenth Payment Date through the twenty-seventh Payment
Date) or 2.75% (with respect to any Payment Date after the twenty-seventh
Payment Date) over the Spread Squeeze Percentage for such Payment Date and
(iii) the Cut-off Date Aggregate Principal Balance of the Mortgage Loans.
"Spread Squeeze Percentage": With respect to any Payment Date, the
percentage equivalent of a fraction, the numerator of which is the product of
12 and the Excess Cash for such Distribution Date, and the denominator of
which is the aggregate Principal Balance of the Mortgage Loans as of such
Payment Date.
"Standard & Poor's": Standard & Poor's Rating Services, a Division of The
McGraw-Hill Companies, Inc., and its successors in interest.
"Step Down Cumulative Loss Test": The Step Down Cumulative Loss Test will
be met with respect to a Payment Date as follows: (i) for the 31st through the
41st Payment Dates, if the Cumulative Loss Percentage for such Payment Date is
1.65% or less; (ii) for the 42nd through the 53rd Payment Dates, if the
Cumulative Loss Percentage for such Payment Date is 2.15% or less; (iii) for
the 54th through the 65th Payment Dates, if the Cumulative Loss Percentage for
such Payment Date is 2.55% or less; (iv) for 66th through the 77th Payment
Dates, if the Cumulative Loss Percentage for such Payment Date is 2.90% or
less; and (v) after the 77th Payment Date, if the Cumulative Loss Percentage
for such Payment Date is 3.50% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling Delinquency
Test will be met with respect to a Payment Date if the Rolling Delinquency
Percentage for such Distribution Date is 10.00% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test will be
met with respect to a Payment Date if the Annual Loss Percentage is less than
0.80%.
"Step Down Trigger": For any Payment Date after the 30th Payment Date,
the Step Down Trigger will have occurred if each of the Step Down Cumulative
Loss Test, the Step Down Rolling Delinquency Test and the Step Down Rolling
Loss Test is met. In no event will the Step Down Trigger be deemed to have
occurred for the 30th Payment Date or any preceding Payment Date.
"Stepped Down Required Overcollateralized Percentage": For any Payment
Date for which the Step Down Trigger has occurred, a percentage equal to (i)
the percentage equivalent of a fraction, the numerator of which is 2.25% of
the Cut-off Date Aggregate Principal Balance of the Mortgage Loans, and the
denominator of which is the aggregate Principal Balance of the Mortgage Loans
as of the end of the immediately preceding Due Period, minus (ii) the
percentage equivalent of a fraction, the numerator of which is the product of
(A) the percentage calculated under clause (i) above minus 4.50%, multiplied
by (B) the number of consecutive Payment Dates through and including the
Payment Date for which the Stepped Down Required Overcollateralized Percentage
is being calculated, up to a maximum of three, for which the Step Down Trigger
has occurred, and the denominator of which is three.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss Test will be
met with respect to a Payment Date as follows: (i) for the 1st through the
12th Payment Dates, if the Cumulative Loss Percentage for such Payment Date is
more than 0.85%; (ii) for the 13th through the 24th Payment Dates, if the
Cumulative Loss Percentage for such Payment Date is more than 1.20%; (iii) for
the 25th through the 36th Payment Dates, if the Cumulative Loss Percentage for
such Payment Date is more than 1.95%; (iv) for the 37th through the 48th
Payment Dates, if the Cumulative Loss Percentage for such Payment Date is more
than 2.75%; (v) for the 49th through the 60th Payment Dates, if the Cumulative
Loss Percentage for such Payment Date is more than 3.30% and (vi) for the 61st
Payment Date and any Payment Date thereafter, if the Cumulative Loss
Percentage for such Payment Date is more than 4.10%.
"Step Up MI Trigger": For any Payment Date, the Step Up MI Trigger will
be met if either (i) the rating assigned to the Mortgage Insurer is withdrawn
by either Rating Agency or reduced below "AA-" or "Aa3" by S&P or Moody's,
respectively, or the cumulative amount of claim denials under the Mortgage
Insurance Policy exceeds either (i) 0.45% of the Cut-off Date Aggregate
Principal Balance, if the current Aggregate Principal Balance of the Mortgage
Loans is greater than or equal to 50% of the Cut-off Date Aggregate Principal
Balance or (ii) 1.15% of the current Pool Balance, if the Aggregate Principal
Balance of the Mortgage Loans is less than 50% of the Cut-off Date Aggregate
Principal Balance.
"Step Up Rolling Delinquency Test": The Step Up Rolling Delinquency Test
will be met with respect to a Payment Date if the Rolling Delinquency
Percentage for such Payment Date is more than 12%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test will be met
with respect to a Payment Date, if the Annual Loss Percentage is more than
1.10%.
"Step Up Trigger": For any Payment Date, the Step Up Trigger will have
occurred if any one of the Step Up Cumulative Loss Test, the Step Up Rolling
Delinquency Test, the Step Up Rolling Loss Test or Step Up MI Trigger is met.
"Supplemental Interest Payments": With respect to any Payment Date, the
amount due to the Note Insurer in respect of such Payment Date pursuant to the
Cap Agreement.
"Supplemental Interest Payment Account": The trust account established by
the Indenture Trustee pursuant to Section 8.02(b) of the Indenture.
"Telerate Page 3750": The display designated as page 3750 on the Telerate
Service (or such other page as may replace page 3750 on that service for the
purpose of displaying London interbank offered rates of major banks).
"Trust Agreement": That certain Deposit Trust Agreement, dated as of
April 1, 1999, between the Depositor and the Owner Trustee.
"Trust Estate": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Noteholders and the Note Insurer as of any particular time (including, without
limitation, all property and interests Granted to the Indenture Trustee,
including all proceeds thereof).
"Trust Indenture Act" or "TIA": The Trust Indenture Act of 1939, as it
may be amended from time to time.
"Trustee Mortgage Files": As defined in the Master Servicing Agreement.
"Trust Paying Agent": The entity appointed to act as paying agent
pursuant to the Trust Agreement with respect to amounts on deposit from time
to time in the Certificate Distribution Account and distributions thereof to
Certificateholders. The initial Trust Paying Agent is Norwest Bank Minnesota,
National Association.
"Underwriter": Bear, Stearns & Co. Inc.
"Vice President": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
ARTICLE II
THE NOTES
Section 2.01. Forms Generally.
The Notes shall be in substantially the form set forth on Exhibit A
attached hereto. Each Note may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the
Notes may be listed, or as may, consistently herewith, be determined by the
Issuer, as evidenced by its execution thereof. Any portion of the text of any
Note may be set forth on the reverse thereof with an appropriate reference on
the face of the Note.
The Definitive Notes may be produced in any manner determined by the
Issuer, as evidenced by its execution thereof.
Section 2.02. Forms Of Certificate Of Authentication.
The form of the Authenticating Agent's certificate of authentication is
as follows: This is one of the Notes referred to in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Authenticating Agent
By:
----------------------------------
Authorized Signatory
Section 2.03. General Provisions With Respect To Principal And Interest
Payment.
The Notes shall be designated generally as the "Mortgage-Backed LIBOR
Notes, Class A, Series 1999-1" of the Issuer.
The aggregate principal amount of Notes that may be authenticated and
delivered under the Indenture is limited to $229,000,000, except for the Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, or 9.06 of
this Indenture. The Notes shall consist of one class, having an Original Note
Balance of $229,000,000 and Final Maturity Date of April 25, 2029.
The Notes shall be issued in the form specified in Section 2.01.
Subject to the provisions of Section 3.01, Section 5.07, Section 5.09 and
Section 8.02(d), the principal of the Notes shall be payable in installments
ending no later than the Final Maturity Date unless the unpaid principal of
such Notes becomes due and payable at an earlier date by declaration of
acceleration or call for redemption or otherwise.
All payments made with respect to any Note shall be applied first to the
interest then due and payable on such Note and then to the principal thereof.
All computations of interest accrued on any Note shall be made on the basis of
a 360-day year and the actual number of days elapsed in the Interest Accrual
Period.
Interest on the Notes shall accrue at the Note Interest Rate during each
Interest Accrual Period on the Note Balance of each Outstanding Note at the
end of such Interest Accrual Period. Interest accrued during an Interest
Accrual Period shall be payable on the next following Payment Date.
All payments of principal of and interest on any Note shall be made in
the manner specified in Section 2.08.
Notwithstanding any of the foregoing provisions with respect to payments
of principal of and interest on the Notes, if the Notes have become or been
declared due and payable following an Event of Default and such acceleration
of maturity and its consequences have not been rescinded and annulled, then
payments of principal of and interest on the Notes shall be made in accordance
with Section 5.07.
Section 2.04. Denominations.
The Notes shall be issuable only as registered Notes in the minimum
denomination of $50,000 and integral multiples of $1 in excess thereof, with
the exception of one Note which may be issued in a lesser amount.
Section 2.05. Execution, Authentication, Delivery And Dating.
The Notes shall be executed on behalf of the Issuer by an Authorized
Officer of the Owner Trustee. The signature of such Authorized Officer of the
Owner Trustee on the Notes may be manual or by facsimile.
Notes bearing the manual or facsimile signature of an individual who was
at any time an Authorized Officer of the Owner Trustee shall bind the Issuer,
notwithstanding that such individual has ceased to be an Authorized Officer of
the Owner Trustee prior to the authentication and delivery of such Notes or
was not an Authorized Officer of the Owner Trustee at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Issuer may deliver Notes executed on behalf of the Issuer
to the Authenticating Agent for authentication; and the Authenticating Agent
shall authenticate and deliver such Notes as in this Indenture provided and
not otherwise.
Each Note authenticated on the Closing Date shall be dated the Closing
Date. All other Notes that are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by
the Authenticating Agent by the manual signature of one of its authorized
officers or employees, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated
and delivered hereunder.
Section 2.06. Registration, Registration Of Transfer And Exchange.
The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers
of Notes. The Indenture Trustee is hereby initially appointed "Note Registrar"
for the purpose of registering Notes and transfers of Notes as herein
provided. The Indenture Trustee shall remain the Note Registrar throughout the
term hereof. Upon any resignation of the Indenture Trustee, the Issuer shall
promptly appoint a successor, with the approval of the Note Insurer, or, in
the absence of such appointment, the Issuer shall assume the duties of Note
Registrar.
Upon surrender for registration of transfer of any Note at the office or
agency of the Note Registrar to be maintained as provided in Section 3.02, the
Owner Trustee on behalf of the Issuer, shall execute, and the Authenticating
Agent shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Notes of any authorized denominations and of a
like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denominations, and of a like aggregate initial principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Owner Trustee shall
execute, and the Authenticating Agent shall authenticate and deliver, the
Notes that the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar duly executed by the
Holder thereof or its attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer and the Note Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge as may be
imposed in connection with any registration of transfer or exchange of Notes.
Section 2.07. Mutilated, Destroyed, Lost Or Stolen Notes.
If (1) any mutilated Note is surrendered to the Note Registrar or the
Note Registrar receives evidence to its satisfaction of the destruction, loss
or theft of any Note, and (2) there is delivered to the Note Registrar such
security or indemnity as may be required by the Note Registrar to save each of
the Issuer, the Note Insurer and the Note Registrar harmless, then, in the
absence of notice to the Issuer or the Note Registrar that such Note has been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Issuer
shall execute and upon its request the Authenticating Agent shall authenticate
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Note, a new Note or Notes of the same tenor and aggregate initial
principal amount bearing a number not contemporaneously outstanding. If, after
the delivery of such new Note, a bona fide purchaser of the original Note in
lieu of which such new Note was issued presents for payment such original
Note, the Issuer and the Note Registrar shall be entitled to recover such new
Note from the person to whom it was delivered or any person taking therefrom,
except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage,
cost or expenses incurred by the Issuer or the Note Registrar in connection
therewith. If any such mutilated, destroyed, lost or stolen Note shall have
become or shall be about to become due and payable, or shall have become
subject to redemption in full, instead of issuing a new Note, the Issuer may
pay such Note without surrender thereof, except that any mutilated Note shall
be surrendered.
Upon the issuance of any new Note under this Section, the Issuer or the
Note Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other reasonable expenses (including the fees and expenses of the Indenture
Trustee or the Note Registrar) connected therewith.
Every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Issuer, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.08. Payments Of Principal And Interest.
(a) Payments on Notes issued as Book-Entry Notes will be made by or
on behalf of the Indenture Trustee to the Clearing Agency or its nominee. Any
installment of interest or principal payable on any Definitive Notes shall be
paid to the Person in whose name such Note (or one or more Predecessor Notes)
is registered at the close of business on the Record Date for such Payment
Date by either (i) check mailed to such Person's address as it appears in the
Note Register on such Record Date, or (ii) by wire transfer of immediately
available funds to the account of a Noteholder, if such Noteholder (A) is the
registered holder of Definitive Notes having an initial principal amount of at
least $1,000,000 and (B) has provided the Indenture Trustee with wiring
instructions in writing by five Business Days prior to the related Record Date
or has provided the Indenture Trustee with such instructions for any previous
Payment Date, except for the final installment of principal payable with
respect to such Note (or the Redemption Price for any Note called for
redemption, if such redemption will result in payment of the then entire
unpaid principal amount of such Note), which shall be payable as provided in
subsection (b) below of this Section 2.08. A fee may be charged by the
Indenture Trustee to a Noteholder of Definitive Notes for any payment made by
wire transfer. Any installment of interest or principal not punctually paid or
duly provided for by the Issuer shall be payable as soon as funds are
available to the Indenture Trustee for payment thereof, or if Section 5.07
applies, pursuant to Section 5.07.
(b) All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by payments of installments of principal made on
any Payment Date shall be binding upon all Holders of such Note and of any
Note issued upon the registration of transfer thereof or in exchange therefor
or in lieu thereof, whether or not such payment is noted on such Note. The
final installment of principal of each Note (including the Redemption Price of
any Note called for optional redemption, if such optional redemption will
result in payment of the entire unpaid principal amount of such Note) shall be
payable only upon presentation and surrender thereof on or after the Payment
Date therefor at the Indenture Trustee's presenting office located within the
United States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire remaining unpaid
principal amount of any Note will become due and payable on the next Payment
Date other than pursuant to a redemption pursuant to Article X, it shall, no
later than two days prior to such Payment Date, telecopy or hand deliver to
each Person in whose name a Note to be so retired is registered at the close
of business on such otherwise applicable Record Date a notice to the effect
that:
(i) the Indenture Trustee expects that funds sufficient to pay such
final installment will be available in the Note Payment Account on such
Payment Date; and
(ii) if such funds are available, (A) such final installment will be
payable on such Payment Date, but only upon presentation and surrender of
such Note at the office or agency of the Note Registrar maintained for
such purpose pursuant to Section 3.02 (the address of which shall be set
forth in such notice) and (B) no interest shall accrue on such Note after
such Payment Date.
A copy of such form of notice shall be sent to the Note Insurer by the
Indenture Trustee.
Notices in connection with redemptions of Notes shall be mailed to
Noteholders in accordance with Section 10.02.
(c) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to unpaid principal
and interest that were carried by such other Note. Any checks mailed pursuant
to subsection (a) of this Section 2.08 and returned undelivered shall be held
in accordance with Section 3.03.
(d) Each Payment Date Statement, prepared by the Indenture Trustee
based on the payment date statement delivered to the Indenture Trustee by the
Master Servicer pursuant to Section 2(h) of the Master Servicing Agreement,
shall be delivered by the Indenture Trustee to the Note Insurer, the Rating
Agencies, the Owner Trustee, the Underwriters and each Noteholder as the
statement required pursuant to Section 8.06. Neither the Indenture Trustee nor
the Paying Agent shall have any responsibility to recalculate, verify or
recompute information contained in any such tape, electronic data file or disk
or any such payment date statement delivered by the Master Servicer except to
the extent necessary to satisfy all obligations under this Section 2.08(d).
Within 90 days after the end of each calendar year, the Indenture Trustee
will be required to furnish to each person who at any time during the calendar
year was a Noteholder, if requested in writing by such person, a statement
containing the information set forth in subclauses (i) and (ii) of Payment
Date Statement, aggregated for such calendar year or the applicable portion
thereof during which such person was a Noteholder. Such obligation will be
deemed to have been satisfied to the extent that substantially comparable
information is provided pursuant to any requirements of the Code as are from
time to time in force.
Section 2.09. Persons Deemed Owner.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Indenture Trustee, any Paying Agent and any other agent of the
Issuer, the Note Insurer or the Indenture Trustee may treat the Person in
whose name any Note is registered as the owner of such Note (a) on the
applicable Record Date for the purpose of receiving payments of the principal
of and interest on such Note and (b) on any other date for all other purposes
whatsoever, and neither the Issuer, the Indenture Trustee, any Paying Agent
nor any other agent of the Issuer, the Note Insurer or the Indenture Trustee
shall be affected by notice to the contrary.
Section 2.10. Cancellation.
All Notes surrendered for payment, registration of transfer, exchange or
redemption shall, if surrendered to any Person other than the Note Registrar,
be delivered to the Note Registrar and shall be promptly canceled by it. The
Issuer may at any time deliver to the Note Registrar for cancellation any Note
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Note Registrar. No Notes shall be authenticated in
lieu of or in exchange for any Notes canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Notes held by
the Note Registrar shall be held by the Note Registrar in accordance with its
standard retention policy, unless the Issuer shall direct by an Issuer Order
that they be destroyed or returned to it.
Section 2.11. Authentication And Delivery Of Notes.
The Notes shall be executed by an Authorized Officer of the Owner Trustee
on behalf of the Issuer and delivered to the Authenticating Agent for
authentication, and thereupon the same shall be authenticated and delivered by
the Authenticating Agent, upon Issuer Request and upon receipt by the
Authenticating Agent of all of the following:
(a) An Issuer Order authorizing the execution, authentication and
delivery of the Notes and specifying the Final Maturity Date, the principal
amount and the Note Interest Rate (or the manner in which such Note Interest
Rate is to be determined) of such Notes to be authenticated and delivered.
(b) An Issuer Order authorizing the execution and delivery of this
Indenture.
(c) One or more Opinions of Counsel addressed to the Authenticating
Agent and the Note Insurer or upon which the Authenticating Agent and the Note
Insurer is expressly permitted to rely, complying with the requirements of
Section 11.01, reasonably satisfactory in form and substance to the
Authenticating Agent and the Note Insurer.
In rendering the opinions set forth above, such counsel may rely upon
officer's certificates of the Issuer (or its Manager to the extent delivery of
such certificate by the Manager on behalf of the Issuer is permitted under the
Management Agreement), the Owner Trustee, the Master Servicer and the
Indenture Trustee, without independent confirmation or verification with
respect to factual matters relevant to such opinions. In rendering the
opinions set forth above, such counsel need express no opinion as to (A) the
existence of, or the priority of the security interest created by the
Indenture against, any liens or other interests that arise by operation of law
and that do not require any filing or similar action in order to take priority
over a perfected security interest or (B) the priority of the security
interest created by this Indenture with respect to any claim or lien in favor
of the United States or any agency or instrumentality thereof (including
federal tax liens and liens arising under Title IV of the Employee Retirement
Income Security Act of 1974).
The acceptability to the Note Insurer of the Opinion of Counsel delivered
to the Indenture Trustee and the Note Insurer at the Closing Date shall be
conclusively evidenced by the delivery on the Closing Date of the FSA Policy.
(d) An Officers' Certificate of the Issuer (or its Manager)
complying with the requirements of Section 11.01 and stating that:
(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, the Issuer's
Certificate of Trust or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Issuer is a party or by which it is
bound, or any order of any court or administrative agency entered in any
proceeding to which the Issuer is a party or by which it may be bound or
to which it may be subject, and that all conditions precedent provided in
this Indenture relating to the authentication and delivery of the Notes
have been complied with;
(ii) the Issuer is the owner of each Mortgage Loan, free and
clear of any lien, security interest or charge, has not assigned any
interest or participation in any such Mortgage Loan (or, if any such
interest or participation has been assigned, it has been released) and
has the right to Grant each such Mortgage Loan to the Indenture Trustee;
(iii) the information set forth in the Schedule of Mortgage
Loans attached as Schedule I to this Indenture is correct;
(iv) the Issuer has Granted to the Indenture Trustee all of its
right, title and interest in each Mortgage Loan;
(v) as of the Closing Date, no lien in favor of the United
States described in Section 6321 of the Code, or lien in favor of the
Pension Benefit Guaranty Corporation described in Section 4068(a) of the
Employee Retirement Income Security Act of 1974, as amended, has been
filed as described in subsections 6323(f) and 6323(g) of the Code upon
any property belonging to the Issuer; and
(vi) attached thereto is a true and correct copy of letters
signed by each Rating Agency confirming that the Notes have been rated in
the highest rating category of such Rating Agency.
(e) An executed counterpart of the Master Servicing Agreement.
(f) Executed counterparts of the Sale Agreements.
(g) An executed counterpart of the Trust Agreement.
(h) The Mortgage Insurance Policy as issued by the Mortgage Insurer.
(i) The FSA Policy as issued by the Note Insurer.
(j) An executed counterpart of the Cap Agreement.
Section 2.12. Book-Entry Note.
The Notes will be issued initially as one or more certificates in the
name of the Cede & Co., as nominee for the Clearing Agency maintaining
book-entry records with respect to ownership and transfer of such Notes, and
registration of the Notes may not be transferred by the Note Registrar except
upon Book-Entry Termination. In such case, the Note Registrar shall deal with
the Clearing Agency as representatives of the Beneficial Owners of such Notes
for purposes of exercising the rights of Noteholders hereunder. Each payment
of principal of and interest on a Book-Entry Note shall be paid to the
Clearing Agency, which shall credit the amount of such payments to the
accounts of its Clearing Agency Participants in accordance with its normal
procedures. Each Clearing Agency Participant shall be responsible for
disbursing such payments to the Beneficial Owners of the Book-Entry Notes that
it represents and to each indirect participating brokerage firm (a "brokerage
firm" or "indirect participating firm") for which it acts as agent. Each
brokerage firm shall be responsible for disbursing funds to the Beneficial
Owners of the Book-Entry Notes that it represents. All such credits and
disbursements are to be made by the Clearing Agency and the Clearing Agency
Participants in accordance with the provisions of the Notes. None of the
Indenture Trustee, the Note Registrar, the Issuer, any Paying Agent or the
Note Insurer shall have any responsibility therefor except as otherwise
provided by applicable law. Requests and directions from, and votes of, such
representatives shall not be deemed to be inconsistent if they are made with
respect to different Beneficial Owners.
Section 2.13. Termination Of Book Entry System.
(a) The book-entry system through the Clearing Agency with respect
to the Book-Entry Notes may be terminated upon the happening of any of the
following:
(i) The Clearing Agency advises the Indenture Trustee that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities as nominee and depositary with respect to the Notes and
the Indenture Trustee is unable to locate a qualified successor clearing
agency satisfactory to the Issuer;
(ii) The Issuer, in its sole discretion, elects to terminate
the book-entry system by notice to the Clearing Agency and the Indenture
Trustee; or
(iii) After the occurrence of an Event of Default (at which
time the Indenture Trustee shall use all reasonable efforts to promptly
notify each Beneficial Owner through the Clearing Agency of such Event of
Default), the Beneficial Owners of no less than 51% of the Note Balance
of the Book-Entry Notes advise the Indenture Trustee in writing, through
the related Clearing Agency Participants and the Clearing Agency, that
the continuation of a book-entry system through the Clearing Agency to
the exclusion of any Definitive Notes being issued to any person other
than the Clearing Agency or its nominee is no longer in the best
interests of the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection (a)
above, the Indenture Trustee shall use all reasonable efforts to notify all
Beneficial Owners, through the Clearing Agency, of the occurrence of such
event and of the availability of Definitive Notes to Beneficial Owners
requesting the same, in an aggregate Current Note Balance representing the
interest of each, making such adjustments and allowances as it may find
necessary or appropriate as to accrued interest and previous calls for
redemption. Definitive Notes shall be issued only upon surrender to the
Indenture Trustee of the global Note by the Clearing Agency, accompanied by
registration instructions for the Definitive Notes. Neither the Issuer nor the
Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions. Upon issuance of the Definitive Notes, all references
herein to obligations imposed upon or to be performed by the Clearing Agency
shall cease to be applicable and the provisions relating to Definitive Notes
shall be applicable.
ARTICLE III
COVENANTS
Section 3.01. Payment Of Notes.
The Issuer will pay or cause to be duly and punctually paid the principal
of, and interest on, the Notes in accordance with the terms of the Notes and
this Indenture. The Notes shall be non-recourse obligations of the Issuer and
shall be limited in right of payment to amounts available from the Trust
Estate as provided in this Indenture and the Issuer shall not otherwise be
liable for payments on the Notes. No person (including the Note Registrar, the
Paying Agent, if any, the Indenture Trustee and, except to the extent provided
by the FSA Policy, the Note Insurer) shall be personally liable for any
amounts payable under the Notes. If any other provision of this Indenture
conflicts or is deemed to conflict with the provisions of this Section 3.01,
the provisions of this Section 3.01 shall control.
Section 3.02. Maintenance Of Office Or Agency.
The Issuer will cause the Note Registrar to maintain its corporate trust
office at a location where Notes may be surrendered for registration of
transfer or exchange, and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served.
The Issuer may also from time to time at its own expense designate one or
more other offices or agencies within the United States of America where the
Notes may be presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however, any
designation of an office or agency for payment of Notes shall be subject to
Section 3.04. The Issuer will give prompt written notice to the Indenture
Trustee and the Note Insurer of any such designation or rescission and of any
change in the location of any such other office or agency.
Section 3.03. Money For Note Payments To Be Held In Trust.
All payments of amounts due and payable with respect to any Notes that
are to be made from amounts withdrawn from the Note Payment Account pursuant
to Section 8.02(c) or Section 5.07 shall be made on behalf of the Issuer by
the Paying Agent, and no amounts so withdrawn from the Note Payment Account
for payments of Notes shall be paid over to the Issuer under any circumstances
except as provided in this Section 3.03 or in Section 5.07 or Section 8.02.
With respect to Definitive Notes, if the Issuer shall have a Paying Agent
that is not also the Note Registrar, such Note Registrar shall furnish, no
later than the fifth calendar day after each Record Date, a list, in such form
as such Paying Agent may reasonably require, of the names and addresses of the
Holders of Notes and of the number of Individual Notes held by each such
Holder.
Whenever the Issuer shall have a Paying Agent other than the Indenture
Trustee, it will, on or before the Business Day next preceding each Payment
Date direct the Indenture Trustee to deposit with such Paying Agent an
aggregate sum sufficient to pay the amounts then becoming due (to the extent
funds are then available for such purpose in the Note Payment Account), such
sum to be held in trust for the benefit of the Persons entitled thereto. Any
moneys deposited with a Paying Agent in excess of an amount sufficient to pay
the amounts then becoming due on the Notes with respect to which such deposit
was made shall, upon Issuer Order, be paid over by such Paying Agent to the
Indenture Trustee for application in accordance with Article VIII.
Subject to the prior consent of the Note Insurer, any Paying Agent other
than the Indenture Trustee may be appointed by Issuer Order and at the expense
of the Issuer. The Issuer shall not appoint any Paying Agent (other than the
Indenture Trustee) that is not, at the time of such appointment, a depository
institution or trust company whose obligations would be Permitted Investments
pursuant to clause (c) of the definition of the term Permitted Investments.
The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section, that such Paying Agent will:
(1) allocate all sums received for payment to the Holders of
Notes on each Payment Date among such Holders in the proportion
specified in the applicable Payment Date Statement, in each case to
the extent permitted by applicable law;
(2) hold all sums held by it for the payment of amounts due
with respect to the 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;
(3) if such Paying Agent is not the Indenture Trustee,
immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of
the Notes if at any time the Paying Agent ceases to meet the
standards set forth above required to be met by a Paying Agent at
the time of its appointment;
(4) if such Paying Agent is not the Indenture Trustee, give the
Indenture Trustee notice of any Default by the Issuer (or any other
obligor upon the Notes) in the making of any payment required to be
made with respect to any Notes for which it is acting as Paying
Agent;
(5) if such Paying Agent is not the Indenture Trustee, at any
time during the continuance of any such Default, upon the written
request of the Indenture Trustee, forthwith pay to the Indenture
Trustee all sums so held in trust by such Paying Agent; and
(6) comply with all requirements of the Code, and all
regulations thereunder, with respect to withholding from any
payments made by it on any Notes of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting
requirements in connection therewith; provided, however, that with
respect to withholding and reporting requirements applicable to
original issue discount (if any) on any of the Notes, the Issuer has
provided the calculations pertaining thereto to the Indenture
Trustee and the Paying Agent.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or any other purpose, by Issuer Order direct
any Paying Agent, if other than the Indenture Trustee, to pay to the Indenture
Trustee all sums held in trust by such Paying Agent, such sums to be held by
the Indenture Trustee upon the same trusts as those upon which such sums were
held by such Paying Agent; and upon such payment by any Paying Agent to the
Indenture Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Any money held by the Indenture Trustee or any Paying Agent in trust for
the payment of any amount due with respect to any Note and remaining unclaimed
for two and one-half years after such amount has become due and payable to the
Holder of such Note (or if earlier, three months before the date on which such
amount would escheat to a governmental entity under applicable law) shall be
discharged from such trust and paid to the Issuer; 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. The Indenture Trustee may
adopt and employ, at the expense of the Issuer, any reasonable means of
notification of such repayment (including, but not limited to, mailing notice
of such repayment to Holders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Indenture
Trustee or any Agent, at the last address of record for each such Holder).
Section 3.04. Existence Of Issuer.
(a) Subject to Sections 3.04(b) and (c), the Issuer will keep in
full effect its existence, rights and franchises as a business trust under the
laws of the State of Delaware or under the laws of any other state or the
United States of America, and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Master Servicing Agreement and the FSA Insurance Agreement.
(b) Subject to Section 3.09(vii) and the prior written consent of
the Note Insurer, any entity into which the Issuer may be merged or with which
it may be consolidated, or any entity resulting from any merger or
consolidation to which the Issuer shall be a party, shall be the successor
Issuer under this Indenture without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto,
anything in any agreement relating to such merger or consolidation, by which
any such Issuer may seek to retain certain powers, rights and privileges
therefore obtaining for any period of time following such merger or
consolidation to the contrary notwithstanding (other than Section 3.09(vii)).
(c) Upon any consolidation or merger of or other succession to the
Issuer in accordance with this Section 3.04, the Person formed by or surviving
such consolidation or merger (if other than the Issuer) may exercise every
right and power of, and shall have all of the obligations of, the Issuer under
this Indenture with the same effect as if such Person had been named as the
Issuer herein.
Section 3.05. Protection Of Trust Estate.
(a) The Issuer will from time to time execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other
instruments, and will take such other action as may be necessary or advisable
to:
(i) Grant more effectively all or any portion of the Trust
Estate;
(ii) maintain or preserve the lien of this Indenture or carry
out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Mortgage Loans, the Master Servicing
Agreement or the Mortgage Loan Purchase Agreement; or
(v) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee, and of the Noteholders, in the Mortgage
Loans and the other property held as part of the Trust Estate against the
claims of all Persons and parties.
(b) The Indenture Trustee shall not remove any portion of the Trust
Estate that consists of money or is evidenced by an instrument, certificate or
other writing from the jurisdiction in which it was held, or to which it is
intended to be removed, as described in the Opinion of Counsel delivered at
the Closing Date pursuant to Section 2.1l(c), or cause or permit ownership or
the pledge of any portion of the Trust Estate that consists of book-entry
securities to be recorded on the books of a Person located in a different
jurisdiction from the jurisdiction in which such ownership or pledge was
recorded at such time unless the Indenture Trustee shall have first received
an Opinion of Counsel to the effect that the lien and security interest
created by this Indenture with respect to such property will continue to be
maintained after giving effect to such action or actions.
Section 3.06. [Reserved]
Section 3.07. Performance Of Obligations; Master Servicing Agreement.
(a) The Issuer shall (or cause its Manager to) punctually perform
and observe all of its obligations under this Indenture , the Custodial
Agreement and the Master Servicing Agreement.
(b) The Issuer shall not take any action and will use its Best
Efforts not to permit any action to be taken by its Manager that would release
any Person from any of such Person's covenants or obligations under any of the
Trustee Mortgage Files or under any instrument included in the Trust Estate,
or that would result in the amendment, hypothecation, subordination,
termination or discharge of, or impair the validity or effectiveness of, any
of the documents or instruments contained in the Trustee Mortgage Files,
except as expressly permitted in this Indenture, the Master Servicing
Agreement or such document included in the Trustee Mortgage File or other
instrument or unless such action will not adversely affect the interests of
the Holders of the Notes.
(c) If the Issuer shall have knowledge of the occurrence of a
default under the Master Servicing Agreement or a Default hereunder, the
Issuer shall (or cause its Manager to) promptly notify the Indenture Trustee,
the Note Insurer and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer (or its Manager) is taking with respect
to such default or Default, as the case may be.
(d) Upon any termination of the Master Servicer's rights and powers
pursuant to the Master Servicing Agreement, the Indenture Trustee shall
promptly notify the Rating Agencies. As soon as any successor Master Servicer
is appointed, the Indenture Trustee shall notify the Rating Agencies,
specifying in such notice the name and address of such successor Master
Servicer.
Section 3.08. Investment Company Act.
The Issuer shall at all times conduct its operations so as not to be
subject to, or shall comply with, the requirements of the Investment Company
Act of 1940, as amended (or any successor statute), and the rules and
regulations thereunder.
Section 3.09. Negative Covenants.
The Issuer shall not:
(i) sell, transfer, exchange or otherwise dispose of any portion of
the Trust Estate except as expressly permitted by this Indenture or the
Master Servicing Agreement;
(ii) claim any credit on, or make any deduction from, the principal
of, or interest on, any of the Notes by reason of the payment of any
taxes levied or assessed upon any portion of the Trust Estate;
(iii) engage in any business or activity other than as permitted by
the Trust Agreement or other than in connection with, or relating to, the
issuance of the Notes pursuant to this Indenture or amend the Trust
Agreement, as in effect on the Closing Date, other than in accordance
with Section 11.01;
(iv) incur, issue, assume or otherwise become liable for a
indebtedness other than the Notes;
(v) incur, assume, guaranty or agree to indemnify any Person with
respect to any indebtedness of any Person, except for such indebtedness
as may be incurred by the Issuer in connection with the issuance of the
Notes pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part (until the Notes are
paid in full);
(vii) (1) permit the validity or effectiveness of this Indenture or
any Grant to be impaired, or permit the lien of this Indenture to be
impaired, amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or obligations
under this Indenture, except as may be expressly permitted hereby, (2)
permit any lien, charge, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part thereof or
any interest therein or the proceeds thereof, or (3) permit the lien of
this Indenture not to constitute a valid perfected first priority
security interest in the Trust Estate; or
(viii) take any other action that should reasonably be expected to,
or fail to take any action if such failure should reasonably be expected
to, cause the Issuer to be taxable as (a) an association pursuant to
Section 7701 of the Code or (b) a taxable mortgage pool pursuant to
Section 7701(i) of the Code.
Section 3.10. Annual Statement As To Compliance.
On or before December 31, 1999, and each December 31 thereafter, the
Issuer shall (or cause its Manager to) deliver to the Indenture Trustee, the
Note Insurer and the Underwriters a written statement, signed by an Authorized
Officer of the Owner Trustee, stating that:
(1) a review of the fulfillment by the Issuer during such year
of its obligations under this Indenture has been made under such
Authorized Officer's supervision; and
(2) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there
has been a Default in the fulfillment of any such covenant or
condition, specifying each such Default known to such Authorized
Officer and the nature and status thereof.
Section 3.11. Restricted Payments.
The Issuer shall not, directly or indirectly, (i) pay any dividend or
make any distribution (by reduction of capital or otherwise), whether in cash,
property, securities or a combination thereof, to the Owner Trustee or any
owner of a beneficial interest in the Issuer or otherwise with respect to any
ownership or equity interest or security in or of the Issuer or to the Master
Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any
such ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose; provided, however, that the Issuer
may make, or cause to be made, distributions to the Master Servicer, the
Indenture Trustee, the Custodian, the Owner Trustee, the Note Insurer and the
Certificateholders as contemplated by, and to the extent funds are available
for such purpose under this Indenture, the Master Servicing Agreement or the
Trust Agreement and the Issuer will not, directly or indirectly, make or cause
to be made payments to or distributions from the Note Payment Account except
in accordance with this Indenture.
Section 3.12. Treatment Of Notes As Debt For Tax Purposes.
The Issuer shall treat the Notes as indebtedness for all federal and
state tax purposes.
Section 3.13. Notice Of Events Of Default.
The Issuer shall give the Indenture Trustee, the Note Insurer, the Rating
Agencies and the Underwriters prompt written notice of each Default and Event
of Default hereunder, each default on the part of the Master Servicer of its
obligations under the Master Servicing Agreement and each default on the part
of the Initial Seller of its obligations under the Sale Agreements.
Section 3.14. Further Instruments And Acts.
Upon request of the Indenture Trustee or the Note Insurer, the Issuer
will execute and deliver such further instruments and do such further acts as
may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction And Discharge Of Indenture.
Whenever the following conditions shall have been satisfied:
(1) either
(A) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section
2.07, and (ii) Notes for whose payment money has
theretofore been deposited in trust and thereafter repaid
to the Issuer, as provided in Section 3.03) have been
delivered to the Note Registrar for cancellation; or
(B) all Notes not theretofore delivered to the Note Registrar
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the Final Maturity
Date within one year, or
(iii)are to be called for redemption within one year under
irrevocable arrangements satisfactory to the
Indenture Trustee for the giving of notice of
redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
and the Issuer, in the case of clauses (B)(i), (B)(ii) or (B)(iii)
above, has irrevocably deposited or caused to be deposited with the
Indenture Trustee cash or direct obligations of, or obligations
guaranteed by, the United States of America (which will mature prior
to the date such amounts are payable) in trust for such purpose, in
an amount sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee for
cancellation, for principal and interest to the Final Maturity Date
or to the applicable Redemption Date, as the case may be, and in the
case of Notes that were not paid at the Final Maturity Date of their
entire unpaid principal amount, for all overdue principal and all
interest payable on such Notes to the next succeeding Payment Date
therefor;
(2) the latest of (a) 18 months after payment in full of all
outstanding obligations under the Notes, (b) the date on which the
Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer and the Indenture Trustee (including,
without limitation, amounts due the Note Insurer hereunder); and
(3) the Issuer has delivered to the Indenture Trustee and the
Note Insurer an Officers' Certificate and an Opinion of Counsel
satisfactory in form and substance to the Indenture Trustee and the
Note Insurer each stating that all conditions precedent herein
providing for the satisfaction and discharge of this Indenture have
been complied with;
then, upon Issuer Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then
acting as such hereunder shall, at the expense of the Issuer (or of the Master
Servicer in the case of a redemption by the Master Servicer), execute and
deliver all such instruments as may be necessary to acknowledge the
satisfaction and discharge of this Indenture and shall pay, or assign or
transfer and deliver, to the Issuer or upon Issuer Order all cash, securities
and other property held by it as part of the Trust Estate remaining after
satisfaction of the conditions set forth in clauses (1) and (2) above.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Indenture Trustee and the Paying Agent to the Issuer and
the Holders of Notes under Section 3.03, the obligations of the Indenture
Trustee to the Holders of Notes under Section 4.02 and the provisions of
Section 2.07 with respect to lost, stolen, destroyed or mutilated Notes,
registration of transfers of Notes and rights to receive payments of principal
of and interest on the Notes shall survive.
Section 4.02. Application Of Trust Money.
All money deposited with the Indenture Trustee pursuant to Sections 3.03
and 4.01 shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent, as the Indenture Trustee may determine, to the
Persons entitled thereto, of the principal and interest for whose payment such
money has been deposited with the Indenture Trustee.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.01. Event Of Default.
"Event of Default", wherever used herein, means, with respect to Notes
issued hereunder, any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(1) if the Issuer shall default in the payment on any Payment
Date of any Required Payment Amount or fail to pay the Notes in full
on or before the Final Maturity Date (and in the case of any such
default, such default or failure shall continue for a period of 5
days unremedied);
(2) an Overcollateralization Deficit exists with respect to the
Notes;
(3) if the Issuer shall breach or default in the due observance
of any one or more of the covenants set forth in clauses (i) through
(viii) of Section 3.09;
(4) if the Issuer shall breach, or default in the due
observance or performance of, any other of its covenants in this
Indenture, and such Default shall continue for a period of 30 days
after there shall have been given, by registered or certified mail,
to the Issuer and the Note Insurer by the Indenture Trustee at the
direction of the Note Insurer, or to the Issuer and the Indenture
Trustee by the Holders of Notes representing at least 25% of the
Note Balance of the Outstanding Notes, with the prior written
consent of the Note Insurer, a written notice specifying such
Default and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder;
(5) if any representation or warranty of the Issuer made in
this Indenture or any certificate or other writing, delivered by the
Issuer pursuant hereto or in connection herewith shall prove to be
incorrect in any material respect as of the time when the same shall
have been made and, within 30 days after there shall have been
given, by registered or certified mail, written notice thereof to
the Issuer and the Note Insurer by the Indenture Trustee at the
direction of the Note Insurer, or to the Issuer and the Indenture
Trustee by the Holders of Notes representing at least 25% of the
Note Balance of the Outstanding Notes, with the prior written
consent of the Note Insurer, the circumstance or condition in
respect of which such representation or warranty was incorrect shall
not have been eliminated or otherwise cured; provided, however, that
in the event that there exists a remedy with respect to any such
breach that consists of a purchase obligation, repurchase obligation
or right to substitute under the Basic Documents, then such purchase
obligation, repurchase obligation or right to substitute shall be
the sole remedy with respect to such breach and shall not constitute
an Event of Default hereunder;
(6) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the
Issuer or of any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Issuer and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days;
(7) the commencement by the Issuer of a voluntary case under
the federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency or
similar law, or the consent by the Issuer to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Issuer or
of any substantial part of its property or the making by the Issuer
of an assignment for the benefit of creditors or the failure by the
Issuer generally to pay its debts as such debts become due or the
taking of corporate action by the Issuer in furtherance of any of
the foregoing; or
(8) the occurrence of an Event of Default under the FSA
Insurance Agreement.
Section 5.02. Acceleration Of Maturity; Rescission And Annulment.
If an Event of Default occurs and is continuing, then and in every such
case, but with the consent of the Note Insurer in the absence of a Note
Insurer Default, the Indenture Trustee may, and on request of the Note Insurer
or, with the consent of the Note Insurer, the Holders of Notes representing
not less than 50% of the Note Balance of the Outstanding Notes, shall, declare
all 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 such Notes, in an amount equal to the Note Balance of such
Notes, together with accrued and unpaid interest thereon to the date of such
acceleration, shall become immediately due and payable, all subject to the
prior written consent of the Note Insurer in the absence of a Note Insurer
Default.
At any time after such a declaration of acceleration of maturity of the
Notes has been made and before a judgment or decree for payment of the money
due has been obtained by the Indenture Trustee as hereinafter in this Article
provided the Note Insurer or the Holders of Notes representing more than 50%
of the Note Balance of the Outstanding Notes, with the prior written consent
of the Note Insurer, by written notice to the Issuer and the Indenture
Trustee, may rescind and annul such declaration and its consequences.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Section 5.03. Collection Of Indebtedness And Suits For Enforcement By
Indenture Trustee.
Subject to the provisions of Section 3.01 and the following sentence, if
an Event of Default occurs and is continuing, the Indenture Trustee may, with
the prior written consent of the Note Insurer and shall, if so directed by the
Note Insurer, proceed to protect and enforce its rights and the rights of the
Noteholders and the Note Insurer by any Proceedings the Indenture Trustee
deems appropriate to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or enforce any other proper
remedy. Any Proceedings brought by the Indenture Trustee on behalf of the
Noteholders and the Note Insurer or any Noteholder against the Issuer shall be
limited to the preservation, enforcement and foreclosure of the liens,
assignments, rights and security interests under the Indenture and no
attachment, execution or other unit or process shall be sought, issued or
levied upon any assets, properties or funds of the Issuer, other than the
Trust Estate relative to the Notes in respect of which such Event of Default
has occurred. If there is a foreclosure of any such liens, assignments, rights
and security interests under this Indenture, by private power of sale or
otherwise, no judgment for any deficiency upon the indebtedness represented by
the Notes may be sought or obtained by the Indenture Trustee or any Noteholder
against the Issuer. The Indenture Trustee shall be entitled to recover, as
provided in Section 5.05 and Section 5.07, the costs and expenses expended by
it pursuant to this Article V including reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its agents and counsel.
Section 5.04. Remedies.
If an Event of Default shall have occurred and be continuing and the
Notes have been declared due and payable and such declaration and its
consequences have not been rescinded and annulled, the Indenture Trustee, at
the direction of the Note Insurer (subject to Section 5.17, to the extent
applicable) may, for the benefit of the Noteholders and the Note Insurer, do
one or more of the following:
(a) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer moneys
adjudged due, subject in all cases to the provisions of Sections 3.01 and
5.03;
(b) in accordance with Section 5.17, sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or
private Sales called and conducted in any manner permitted by law;
(c) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(d) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and enforce
the rights and remedies of the Indenture Trustee or the Holders of the Notes
and the Note Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all Available
Funds pursuant to Section 5.07.
Section 5.05. Indenture Trustee May File Proofs Of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Notes
or the property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand on the Issuer for
the payment of any overdue principal or interest) shall, with the prior
written consent of the Note Insurer, be entitled and empowered, by
intervention in such Proceeding or otherwise to:
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel) and of the Noteholders and the Note
Insurer allowed in such Proceeding, and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such Proceeding is hereby authorized by each
Noteholder and the Note Insurer to make such payments to the Indenture
Trustee and, in the event that the Indenture Trustee shall consent to the
making of such payments directly to the Noteholders and the Note Insurer,
to pay to the Indenture Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting any of the Notes or the rights of any
Holder thereof, or the Note Insurer, or to authorize the Indenture Trustee to
vote in respect of the claim of any Noteholder or the Note Insurer in any such
Proceeding.
Section 5.06. Indenture Trustee May Enforce Claims Without Possession Of
Notes.
All rights of action and claims under this Indenture or any of the Notes
may be prosecuted and enforced by the Indenture Trustee without the possession
of any of the Notes or the production thereof in any Proceeding relating
thereto, and any such Proceeding instituted by the Indenture Trustee, at the
direction of the Note Insurer, shall be brought in its own name as trustee of
an express trust, and any recovery of judgment shall be for the ratable
benefit of the Holders of the Notes and the Note Insurer in respect of which
such judgment has been recovered after payment of amounts required to be paid
pursuant to clause (i) Section 5.07.
Section 5.07. Application Of Money Collected.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Indenture Trustee pursuant to this
Article or otherwise and any other monies that may then be held or thereafter
received by the Indenture Trustee as security for the Notes shall be applied
in the following order, at the date or dates fixed by the Indenture Trustee
and, in case of the payment of the entire amount due on account of principal
of, and interest on, the Notes, upon presentation and surrender thereof:
(i) first, to the Indenture Trustee, any unpaid Indenture Trustee
Fees then due and any other amounts payable and due to the Indenture
Trustee under this Indenture, including any costs or expenses incurred by
it in connection with the enforcement of the remedies provided for in
this Article V;
(ii) second, to the Master Servicer, any amounts required to pay the
Master Servicer for any unpaid Master Servicing Fees then due and to
reimburse the Master Servicer for related Monthly Advances previously
made by, and not previously reimbursed or retained by, the Master
Servicer (including Nonrecoverable Advances to the extent not previously
reimbursed) and, upon the final liquidation of the related Mortgage Loan
or the final liquidation of the Trust Estate, Servicing Advances
previously made by, and not previously reimbursed or retained by, the
Master Servicer;
(iii) third, to the payment of the Monthly Interest Amount then due
and unpaid upon the Outstanding Notes through the day preceding the date
on which such payment is made;
(iv) fourth, to the payment of the Note Balance of the Outstanding
Notes, up to the amount of their respective Note Balances, ratably,
without preference or priority of any kind;
(v) fifth, to the Note Insurer any amounts due and owing to the Note
Insurer under the FSA Insurance Agreement; and
(vi) sixth, the remainder to the Certificate Distribution Account
for payment to the Certificateholders.
Section 5.08. Limitation On Suits.
No Holder of a Note shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment
of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the
Indenture Trustee and the Note Insurer of a continuing Event of
Default;
(2) the Holders of Notes representing not less than 25% of the
Note Balance of the Outstanding Notes shall have made written
request to the Indenture Trustee to institute Proceedings in respect
of such Event of Default in its own name as Indenture Trustee
hereunder;
(3) such Holder or Holders have offered to the Indenture
Trustee indemnity in full against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
such Proceeding;
(5) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Holders of Notes representing more than 50% of the Note Balance of
the Outstanding Notes; and
(6) the consent of the Note Insurer shall have been obtained;
it being understood and intended that no one or more Holders of
Notes shall have any right in any manner whatever by virtue of, or
by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders of Notes or to obtain
or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the
Holders of Notes.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than 50% of the Note Balances of the Outstanding
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken notwithstanding any other provision herein to the
contrary.
Section 5.09. Unconditional Rights Of Noteholders To Receive Principal
And Interest.
Subject to the provisions in this Indenture (including Sections 3.01 and
5.03) limiting the right to recover amounts due on a Note to recovery from
amounts in the Trust Estate, the Holder of any Note shall have the right, to
the extent permitted by applicable law, which right is absolute and
unconditional, to receive payment of each installment of interest on such Note
on the respective Payment Date for such installments of interest, to receive
payment of each installment of principal of such Note when due (or, in the
case of any Note called for redemption, on the date fixed for such redemption)
and to institute suit for the enforcement of any such payment, and such right
shall not be impaired without the consent of such Holder.
Section 5.10. Restoration Of Rights And Remedies.
If the Indenture Trustee, the Note Insurer or any Noteholder has
instituted any Proceeding to enforce any right or remedy under this Indenture
and such Proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Indenture Trustee, the Note Insurer or to
such Noteholder, then and in every such case the Issuer, the Indenture
Trustee, the Note Insurer and the Noteholders shall, subject to any
determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of
the Indenture Trustee, the Note Insurer and the Noteholders shall continue as
though no such Proceeding had been instituted.
Section 5.11. Rights And Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee, the Note Insurer or to the Noteholders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
Section 5.12. Delay Or Omission Not Waiver.
No delay or omission of the Indenture Trustee, the Note Insurer or of any
Holder of any Note to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article or by law to the Indenture Trustee, the Note Insurer or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Note Insurer or by the Noteholders
with the prior consent of the Note Insurer, as the case may be.
Section 5.13. Control By Noteholders.
The Holders of Notes representing more than 50% of the Note Balance of
the Outstanding Notes on the applicable Record Date shall, with the consent of
the Note Insurer, have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Indenture Trustee or
exercising any trust or power conferred on the Indenture Trustee; provided
that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture;
(2) any direction to the Indenture Trustee to undertake a Sale
of the Trust Estate shall be by the Holders of Notes representing
the percentage of the Note Balance of the Outstanding Notes
specified in Section 5.17(b)(1), unless Section 5.17(b)(2) is
applicable; and
(3) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction; provided, however, that, subject to Section 6.01, the
Indenture Trustee need not take any action that it determines might
involve it in liability or be unjustly prejudicial to the
Noteholders not consenting.
Section 5.14. Waiver Of Past Defaults.
The Holders of Notes representing more than 50% of the Note Balance of
the Outstanding Notes on the applicable Record Date may on behalf of the
Holders of all the Notes, and with the consent of the Note Insurer, waive any
past Default hereunder and its consequences, except a Default:
(1) in the payment of principal or any installment of interest
on any Note; or
(2) in respect of a covenant or provision hereof that under
Section 9.02 cannot be modified or amended without the consent of
the Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 5.15. Undertaking For Costs.
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Indenture Trustee for any
action taken, suffered or omitted by it as Indenture Trustee, the filing by
any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made
by such party litigant; but the provisions of this Section shall not apply to
any suit instituted by the Indenture Trustee, to any suit instituted by any
Noteholder, or group of Noteholders, holding in the aggregate Notes
representing more than 10% of the Note Balance of the Outstanding Notes, or to
any suit instituted by any Noteholder for the enforcement of the payment of
any Required Payment Amount on any Note on or after the related Payment Date
or for the enforcement of the payment of principal of any Note on or after the
Final Maturity Date (or, in the case of any Note called for redemption, on or
after the applicable Redemption Date).
Section 5.16. Waiver Of Stay Or Extension Laws.
The Issuer covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension of law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
in, or the performance of, this Indenture; and the Issuer (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Indenture Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
Section 5.17. Sale Of Trust Estate.
(a) The power to effect any sale (a "Sale") of any portion of the
Trust Estate pursuant to Section 5.04 shall not be exhausted by any one or
more Sales as to any portion of the Trust Estate remaining unsold, but shall
continue unimpaired until the entire Trust Estate shall have been sold or all
amounts payable on the Notes and under this Indenture with respect thereto
shall have been paid. The Indenture Trustee may from time to time postpone any
public Sale by public announcement made at the time and place of such Sale.
(b) To the extent permitted by law, the Indenture Trustee shall not
in any private Sale sell or otherwise dispose of the Trust Estate, or any
portion thereof, unless:
(1) the Holders of Notes representing not less than 50% of the
Note Balance of the Notes then Outstanding consent to or direct the
Indenture Trustee to make such Sale; or
(2) the proceeds of such Sale would be not less than the entire
amount that would be payable to the Holders of the Notes, in full
payment thereof in accordance with Section 5.07, on the Payment Date
next succeeding the date of such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or disposition thereof for
purposes of this Section 5.17(b). In the absence of a Note Insurer Default, no
Sale hereunder shall be effective without the consent of the Note Insurer.
(c) Unless the Holders of all Outstanding Notes have otherwise
consented or directed the Indenture Trustee, at any public Sale of all or any
portion of the Trust Estate at which a minimum bid equal to or greater than
the amount described in paragraph (2) of subsection (b) of this Section 5.17
has not been established by the Indenture Trustee and no Person bids an amount
equal to or greater than such amount, the Indenture Trustee, acting in its
capacity as Indenture Trustee on behalf of the Noteholders, shall prevent such
sale and bid an amount (which shall include the Indenture Trustee's right, in
its capacity as Indenture Trustee, to credit bid) at least $1.00 more than the
highest other bid in order to preserve the Trust Estate on behalf of the
Noteholders.
(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 purchase the
property offered for Sale, and upon compliance with the terms of
sale may hold, retain and possess and dispose of such property,
without further accountability, and may, in paying the purchase
money therefor, deliver any Outstanding Notes or claims for interest
thereon in lieu of cash up to the amount that shall, upon
distribution of the net proceeds of such Sale, be payable thereon,
and such Notes, in case the amounts so payable thereon shall be less
than the amount due thereon, shall be returned to the Holders
thereof after being appropriately stamped to show such partial
payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any public Sale thereof, and, in
lieu of paying cash therefor, may make settlement for the purchase
price by crediting the gross Sale price against the sum of (A) the
amount that would be payable to the Holders of the Notes as a result
of such Sale in accordance with Section 5.07 on the Payment Date
next succeeding the date of such Sale and (B) the expenses of the
Sale and of any Proceedings in connection therewith which are
reimbursable to it, without being required to produce the 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 moneys.
Section 5.18. Action On Notes.
The Indenture Trustee's right to seek and recover judgment under this
Indenture shall not be affected by the seeking, obtaining or application of
any other relief under or with respect to this Indenture. Neither the lien of
this Indenture nor any rights or remedies of the Indenture Trustee, the Note
Insurer or the Holders of Notes shall be impaired by the recovery of any
judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate.
Section 5.19. No Recourse To Other Trust Estates Or Other Assets Of The
Issuer.
The Trust Estate Granted to the Indenture Trustee as security for the
Notes serves as security only for the Notes. Holders of the Notes shall have
no recourse against the trust estate granted as security for any other series
of Notes issued by the Issuer, and no judgment against the Issuer for any
amount due with respect to the Notes may be enforced against either the trust
estate securing any other series or any other assets of the Issuer, nor may
any prejudgment lien or other attachment be sought against any such other
trust estate or any other assets of the Issuer.
Section 5.20. Application Of The Trust Indenture Act.
Pursuant to Section 316(a) of the TIA, all provisions automatically
provided for in Section 316(a) are hereby expressly excluded.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties Of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Indenture Trustee need perform only those duties that
are specifically set forth in this Indenture and no others and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(2) In the absence of bad faith on its part, the Indenture
Trustee may request and conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture. The Indenture
Trustee shall, however, examine such certificates and opinions to
determine whether they conform on their face to the requirements of
this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of subsection (b)
of this Section 6.01;
(2) The Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(3) The Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Section 5.13, 5.14 or
5.17 or exercising any trust or power conferred upon the Indenture
Trustee under this Indenture.
(d) Except with respect to duties of the Indenture Trustee
prescribed by the TIA, as to which this Section 6.01(d) shall not apply, for
all purposes under this Indenture, the Indenture Trustee shall not be deemed
to have notice or knowledge of any Default or Event of Default described in
Section 5.01 other than Section 5.01(1) unless a Responsible Officer assigned
to and working in the Indenture Trustee's corporate trust department has
actual knowledge thereof or unless written notice of any event that is in fact
such an Event of Default or Default is received by the Indenture Trustee at
the Corporate Trust Office, and such notice references the Notes generally,
the Issuer, the Trust Estate or this Indenture.
(e) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to hereunder, under the Master
Servicing Agreement or otherwise.
(f) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to the provisions of this Section.
(g) Notwithstanding any extinguishment of all right, title and
interest of the Issuer in and to the Trust Estate following an Event of
Default and a consequent declaration of acceleration of the Maturity of the
Notes, whether such extinguishment occurs through a Sale of the Trust Estate
to another Person, the acquisition of the Trust Estate by the Indenture
Trustee or otherwise, the rights, powers and duties of the Indenture Trustee
with respect to the Trust Estate (or the proceeds thereof) and the Noteholders
and the Note Insurer and the rights of Noteholders and the Note Insurer shall
continue to be governed by the terms of this Indenture.
(h) The Indenture Trustee or any Custodian appointed pursuant to
Section 8.13 shall at all times retain possession of the Trustee Mortgage
Files in the State of Minnesota or the State of California, except for those
Trustee Mortgage Files or portions thereof released to the Master Servicer
pursuant to this Indenture or the Master Servicing Agreement.
Section 6.02. Notice Of Default.
Immediately after the occurrence of any Default known to the Indenture
Trustee, the Indenture Trustee shall transmit by mail to the Note Insurer and
the Underwriters notice of each such Default and, within 90 days after the
occurrence of any Default known to the Indenture Trustee, the Indenture
Trustee shall transmit by mail to all Holders of Notes notice of each such
Default, unless such Default shall have been cured or waived; provided,
however, that in no event shall the Indenture Trustee provide notice, or fail
to provide notice, of a Default known to the Indenture Trustee in a manner
contrary to the requirements of the Trust Indenture Act. Concurrently with the
mailing of any such notice to the Holders of the Notes, the Indenture Trustee
shall transmit by mail a copy of such notice to the Rating Agencies.
Section 6.03. Rights Of Indenture Trustee.
(a) Except as otherwise provided in Section 6.01, the Indenture
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper Person. The Indenture Trustee need not
investigate any fact or matter stated in any such document.
(b) Before the Indenture Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on any such Officer's Certificate or Opinion of Counsel.
(c) With the consent of the Note Insurer, which consent shall not be
unreasonably withheld, the Indenture Trustee may act through agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or
within its rights or powers.
Section 6.04. Not Responsible For Recitals Or Issuance Of Notes.
The recitals contained herein and in the Notes, except the certificates
of authentication on the Notes, shall be taken as the statements of the
Issuer, and the Indenture Trustee and the Authenticating Agent assume no
responsibility for their correctness. The Indenture Trustee makes no
representations with respect to the Trust Estate or as to the validity or
sufficiency of this Indenture or of the Notes. The Indenture Trustee shall not
be accountable for the use or application by the Issuer of the Notes or the
proceeds thereof or any money paid to the Issuer or upon Issuer Order pursuant
to the provisions hereof.
Section 6.05. May Hold Notes.
The Indenture Trustee, any Agent, or any other agent of the Issuer, in
its individual or any other capacity, may become the owner or pledgee of Notes
and, subject to Sections 6.07 and 6.13, may otherwise deal with the Issuer or
any Affiliate of the Issuer with the same rights it would have if it were not
Indenture Trustee, Agent or such other agent.
Section 6.06. Money Held In Trust.
Money held by the Indenture Trustee in trust hereunder need not be
segregated from other funds except to the extent required by this Indenture or
by law. The Indenture Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Issuer and
except to the extent of income or other gain on investments that are
obligations of the Indenture Trustee, in its commercial capacity, and income
or other gain actually received by the Indenture Trustee on investments, which
are obligations of others.
Section 6.07. Eligibility, Disqualification.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a Indenture Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). The Indenture Trustee shall always
have a combined capital and surplus as stated in Section 6.08. The Indenture
Trustee shall be subject to TIA Section 310(b).
Section 6.08. Indenture Trustee's Capital And Surplus.
The Indenture Trustee shall at all times have a combined capital and
surplus of at least $50,000,000 or shall be a member of a bank holding company
system, the aggregate combined capital and surplus of which is at least
$100,000,000 and shall at all times be rated "BBB" or better by Standard &
Poor's and "Baa2" by Moody's; provided, however, that the Indenture Trustee's
separate capital and surplus shall at all times be at least the amount
required by TIA Section 310(a)(2). If the Indenture Trustee publishes annual
reports of condition of the type described in TIA Section 310(a)(1), its
combined capital and surplus for purposes of this Section 6.08 shall be as set
forth in the latest such report. If at any time the Indenture Trustee shall
cease to be eligible in accordance with the provisions of this Section 6.08
and TIA Section 310(a)(2), it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
Section 6.09. Resignation And Removal; Appointment Of Successor.
(a) No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor
Indenture Trustee under Section 6.10.
(b) The Indenture Trustee may resign at any time by giving written
notice thereof to the Issuer, the Master Servicer, the Note Insurer and each
Rating Agency. If an instrument of acceptance by a successor Indenture Trustee
shall not have been delivered to the Indenture Trustee within 30 days after
the giving of such notice of resignation, the resigning Indenture Trustee may
petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.
(c) The Indenture Trustee may be removed at any time by the Note
Insurer or, with the consent of the Note Insurer, by Act of the Holders
representing more than 50% of the Note Balance of the Outstanding Notes, by
written notice delivered to the Indenture Trustee and to the Issuer.
(d) If at any time:
(1) the Indenture Trustee shall have a conflicting interest
prohibited by Section 6.07 and shall fail to resign or eliminate
such conflicting interest in accordance with Section 6.07 after
written request therefor by the Issuer or by any Noteholder; or
(2) the Indenture Trustee shall cease to be eligible under
Section 6.08 or shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Indenture
Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Indenture Trustee or of its
property or affairs for the purpose of rehabilitation, conservation
or liquidation;
then, in any such case, (i) the Issuer by an Issuer Order, with the consent of
the Note Insurer, may, and if so directed by the Note Insurer, shall remove
the Indenture Trustee, and the Issuer shall join with the Indenture Trustee in
the execution, delivery and performance of all instruments and agreements
necessary or proper to appoint a successor Indenture Trustee acceptable to the
Note Insurer and to vest in such successor Indenture Trustee any property,
title, right or power deemed necessary or desirable, subject to the other
provisions of this Indenture; provided, however, if the Issuer and the Note
Insurer do not join in such appointment within fifteen (15) days after the
receipt by it of a request to do so, or in case an Event of Default has
occurred and is continuing, the Indenture Trustee may petition a court of
competent jurisdiction to make such appointment, or (ii) subject to Section
5.15, and, in the case of a conflicting interest as described in clause (1)
above, unless the Indenture Trustee's duty to resign has been stayed as
provided in TIA Section 310(b), the Note Insurer or any Noteholder who has
been a bona fide Holder of a Note for at least six months may, on behalf of
himself and all others similarly situated, with the consent of the Note
Insurer, petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the
Indenture Trustee for any cause, the Note Insurer (and if the Note Insurer
fails to do so within 60 days, the Issuer shall be obligated to) appoint a
successor Indenture Trustee acceptable to the Note Insurer. If within one year
after such resignation, removal or incapability or the occurrence of such
vacancy a successor Indenture Trustee shall be appointed by the Note Insurer
or, with the consent of the Note Insurer, by Act of the Holders of Notes
representing more than 50% of the Note Balance of the Outstanding Notes
delivered to the Issuer and the retiring Indenture Trustee, the successor
Indenture Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Indenture Trustee and supersede the
successor Indenture Trustee appointed by the Issuer. If no successor Indenture
Trustee shall have been so appointed by the Issuer, the Note Insurer or
Noteholders and shall have accepted appointment in the manner hereinafter
provided, any Noteholder who has been a bona fide Holder of a Note for at
least six months may, on behalf of himself and all others similarly situated,
with the consent of the Note Insurer, petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
(f) The Issuer shall give notice of each resignation and each
removal of the Indenture Trustee and each appointment of a successor Indenture
Trustee to the Holders of Notes and the Note Insurer. Each notice shall
include the name of the successor Indenture Trustee and the address of its
Corporate Trust Office.
Section 6.10. Acceptance Of Appointment By Successor.
Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer, the Note Insurer and the retiring
Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become
effective and such successor Indenture Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Indenture Trustee. Notwithstanding the foregoing, on
request of the Issuer or the successor Indenture Trustee, such retiring
Indenture Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Indenture Trustee all the rights,
powers and trusts of the retiring Indenture Trustee, and shall duly assign,
transfer and deliver to such successor Indenture Trustee all property and
money held by such retiring Indenture Trustee hereunder. Upon request of any
such successor Indenture Trustee, the Issuer shall execute and deliver any and
all instruments for more fully and certainly vesting in and confirming to such
successor Indenture Trustee all such rights, powers and trusts.
No successor Indenture Trustee shall accept its appointment unless at the
time of such acceptance such successor Indenture Trustee shall be qualified
and eligible under this Article.
Section 6.11. Merger, Conversion, Consolidation Or Succession To Business
Of Indenture Trustee.
Any corporation into which the Indenture Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Indenture Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Indenture Trustee, shall be the successor
of the Indenture Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto. In case any Notes have been authenticated, but not delivered, by the
Indenture Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Indenture Trustee may adopt such
authentication and deliver the Notes so authenticated with the same effect as
if such successor Indenture Trustee had authenticated such Notes.
Section 6.12. Preferential Collection Of Claims Against Issuer.
The Indenture Trustee (and any co-trustee or separate trustee) shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in
TIA Section 31l(b), and an Indenture Trustee (and any co-trustee or separate
trustee) who has resigned or been removed shall be subject to TIA Section
311(a) to the extent indicated.
Section 6.13. Co-Indenture Trustees And Separate Indenture Trustees.
At any time or times, for the purpose of meeting the legal requirements
of the TIA or of any jurisdiction in which any of the Trust Estate may at the
time be located, the Indenture Trustee shall have power to appoint, and, upon
the written request of the Indenture Trustee, of the Note Insurer or of the
Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes with respect to which a co-trustee or separate trustee is
being appointed with the consent of the Note Insurer, the Issuer shall for
such purpose join with the Indenture Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint,
one or more Persons approved by the Indenture Trustee either to act as
co-trustee, jointly with the Indenture Trustee, of all or any part of the
Trust Estate, or to act as separate trustee of any such property, in either
case with such powers as may be provided in the instrument of appointment, and
to vest in such Person or Persons in the capacity aforesaid, any property,
title, right or power deemed necessary or desirable, subject to the other
provisions of this Section. If the Issuer does not join in such appointment
within 15 days after the receipt by it of a request to do so, or in case an
Event of Default has occurred and is continuing, the Indenture Trustee alone
shall have power to make such appointment. All fees and expenses of any
co-trustee or separate trustee shall be payable by the Issuer or, if an Event
of Default exists, from the Trust Estate with the same priority as the
expenses of the Indenture Trustee.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and
all such instruments shall, on request, be executed, acknowledged and
delivered by the Issuer. Every co-trustee or separate trustee shall, to the
extent permitted by law, but to such extent only, be appointed subject to the
following terms:
(1) The Notes shall be authenticated and delivered and all rights,
powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Indenture Trustee hereunder, shall be
exercised, solely by the Indenture Trustee.
(2) The rights, powers, duties and obligations hereby conferred or
imposed upon the Indenture Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee or by the Indenture Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to the
extent that under any law of any jurisdiction in which any particular act
is to be performed, the Indenture Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(3) The Indenture Trustee at any time, by an instrument in writing,
executed by it, with the concurrence of the Issuer evidenced by an Issuer
Order, may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case an Event of Default
has occurred and is continuing, the Indenture Trustee shall have power to
accept the resignation of, or remove, any such co-trustee or separate
trustee without the concurrence of the Issuer, and upon the written
request of the Indenture Trustee, the Issuer shall join with the
Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee
so resigned or removed may be appointed in the manner provided in this
Section.
(4) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Indenture Trustee, or any
other such trustee hereunder.
(5) Any Act of Noteholders delivered to the Indenture Trustee shall
be deemed to have been delivered to each such co-trustee and separate
trustee.
Section 6.14. Authenticating Agents.
The Issuer shall appoint an Authenticating Agent with power to act on its
behalf and subject to its direction in the authentication and delivery of the
Notes designated for such authentication by the Issuer and containing
provisions therein for such authentication (or with respect to which the
Issuer has made other arrangements, satisfactory to the Indenture Trustee and
such Authenticating Agent, for notation on the Notes of the authority of an
Authenticating Agent appointed after the initial authentication and delivery
of such Notes) in connection with transfers and exchanges under Section 2.06,
as fully to all intents and purposes as though the Authenticating Agent had
been expressly authorized by that Section to authenticate and deliver Notes.
For all purposes of this Indenture (other than in connection with the
authentication and delivery of Notes pursuant to Sections 2.05 and 2.11 in
connection with their initial issuance), the authentication and delivery of
Notes by the Authenticating Agent pursuant to this Section shall be deemed to
be the authentication and delivery of Notes "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.07 for the Indenture Trustee hereunder and has an
office for presentation of Notes in the United States of America. The
Indenture Trustee shall initially be the Authenticating Agent and shall be the
Note Registrar as provided in Section 2.06. The office from which the
Indenture Trustee shall perform its duties as Note Registrar and
Authenticating Agent shall be the Corporate Trust Office. Any Authenticating
Agent appointed pursuant to the terms of this Section 6.14 or pursuant to the
terms of any supplemental indenture shall deliver to the Indenture Trustee as
a condition precedent to the effectiveness of such appointment an instrument
accepting the trusts, duties and responsibilities of Authenticating Agent and
of Note Registrar or co-Note Registrar and indemnifying the Indenture Trustee
for and holding the Indenture Trustee harmless against, any loss, liability or
expense (including reasonable attorneys' fees) incurred without negligence or
bad faith on its part, arising out of or in connection with the acceptance,
administration of the trust or exercise of authority by such Authenticating
Agent, Note Registrar or co-Note Registrar.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust
business of any Authenticating Agent, shall be the successor of the
Authenticating Agent hereunder, if such successor corporation is otherwise
eligible under this Section, without the execution or filing of any further
act on the part of the parties hereto or the Authenticating Agent or such
successor corporation.
Any Authenticating Agent may at any time resign by giving written notice
of resignation to the Issuer. The Issuer may at any time terminate the agency
of any Authenticating Agent by giving written notice of termination to such
Authenticating Agent and the Issuer. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section, the Issuer
shall promptly appoint a successor Authenticating Agent, shall give written
notice of such appointment to the Indenture Trustee, and shall mail notice of
such appointment to all Holders of Notes.
The Indenture Trustee agrees, subject to Section 6.01(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its
services and the Indenture Trustee shall be entitled to be reimbursed for such
payments pursuant to Section 8.02(c). The provisions of Sections 2.09, 6.04
and 6.05 shall be applicable to any Authenticating Agent.
Section 6.15. [Reserved].
Section 6.16. Indenture Trustee Fees And Expenses.
(a) The Indenture Trustee shall be entitled to receive the Indenture
Trustee Fee on each Payment Date as provided herein.
(b) The Indenture Trustee also shall be entitled to (i) payment of
or reimbursement by the Issuer for expenses, disbursements and advances
incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Agreement, the Master Servicing Agreement, the Trust
Agreement and the Custodial Agreement (including, but not limited to, the
reasonable compensation and the expenses and disbursements of its counsel and
of all persons not regularly in its employ) and (ii) indemnification by the
Issuer against losses, liability and expenses, including reasonable attorney's
fees, incurred, arising out of or in connection with this Agreement, the
Master Servicing Agreement, the Notes, the Trust Agreement and the Custodial
Agreement.
(c) The Issuer's obligations to the Indenture Trustee pursuant to
this Section 6.16 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of a Default specified
in clauses (6) or (7) of Section 5.01 hereof, the expenses are intended to
constitute expenses of administration under Title 11 of the Bankruptcy Code or
any other applicable federal or state bankruptcy, insolvency or similar law.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Indenture Trustee Names And Addresses Of
Noteholders.
(a) The Issuer shall furnish or cause to be furnished to the
Indenture Trustee (i) semiannually, not less than 45 days nor more than 60
days after the Payment Date occurring closest to six months after the Closing
Date and each Payment Date occurring at six-month intervals thereafter, all
information in the possession or control of the Issuer, in such form as the
Indenture Trustee may reasonably require, as to names and addresses of the
Holders of Notes, and (ii) at such other times, as the Indenture Trustee may
request in writing, within 30 days after receipt by the Issuer of any such
request, a list of similar form and content as of a date not more than 10 days
prior to the time such list is furnished; provided, however, that so long as
the Indenture Trustee is the Note Registrar, no such list shall be required to
be furnished.
(b) in addition to furnishing to the Indenture Trustee the
Noteholder lists, if any, required under subsection (a), the Issuer shall also
furnish all Noteholder lists, if any, required under Section 3.03 at the times
required by Section 3.03.
Section 7.02. Preservation Of Information; Communications To Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list, if any, furnished to the Indenture Trustee
as provided in Section 7.01 and the names and addresses of the Holders of
Notes received by the Indenture Trustee in its capacity as Note Registrar. The
Indenture Trustee may destroy any list furnished to it as provided in Section
7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) or
this Indenture 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 Section 312(c).
Section 7.03. Reports by Indenture Trustee.
(a) Within 60 days after December 31 of each year (the "reporting
date"), commencing with the year after the issuance of the Notes, (i) the
Indenture Trustee shall, if required by TIA Section 313(a), mail to all
Holders a brief report dated as of such reporting date that complies with TIA
Section 313(a); (ii) the Indenture Trustee shall, to the extent not set forth
in the Payment Date Statement pursuant to Section 2.08(d), also mail to
Holders of Notes and the Note Insurer with respect to which it has made
advances, any reports with respect to such advances that are required by TIA
Section 313(b)(2); and, the Indenture Trustee shall also mail to Holders of
Notes and the Note Insurer any reports required by TIA Section 313(b)(1). For
purposes of the information required to be included in any such reports
pursuant to TIA Sections 313(a)(2), 313(b)(1) (if applicable), or 313(b)(2),
the principal amount of indenture securities outstanding on the date as of
which such information is provided shall be the Note Balance of the then
Outstanding Notes covered by the report.
(b) A copy of each report required under this Section 7.03 shall, at
the time of such transmission to Holders of Notes and the Note Insurer be
filed by the Indenture Trustee with the Commission and with each securities
exchange upon which the Notes are listed. The Issuer will notify the Indenture
Trustee when the Notes are listed on any securities exchange.
Section 7.04. Reports By Issuer.
The Issuer (a) shall deliver to the Indenture Trustee within 15 days
after the Issuer is required to file the same with the Commission copies of
the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may by rules
and regulations prescribe) that the Issuer is required to file with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, and (b) shall also comply with the other provisions of TIA
Section 314(a).
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
Section 8.01. Collection Of Moneys.
Except as otherwise expressly provided herein, the Indenture Trustee may
demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Indenture Trustee
pursuant to this Indenture. The Indenture Trustee shall hold all such money
and property received by it as part of the Trust Estate and shall apply it as
provided in this Indenture.
If the Indenture Trustee shall not have received the Remittance Amount by
close of business on any related Remittance Date, the Indenture Trustee shall,
unless the Issuer or the Master Servicer shall have made provisions
satisfactory to the Indenture Trustee for delivery to the Indenture Trustee of
an amount equal to such Remittance Amount, deliver a notice, with a copy to
the Note Insurer, to the Issuer and the Master Servicer of their failure to
remit such Remittance Amount and thereafter the Indenture Trustee shall act in
accordance with instructions of the Note Insurer.
Section 8.02. Note Payment Account; Supplemental Interest Payment
Account.
(a) The Issuer hereby directs the Indenture Trustee to establish for
the Notes, at the Corporate Trust Office, one or more separate trust accounts
that shall collectively be the "Note Payment Account" on or before the Closing
Date. The Indenture Trustee shall promptly deposit in the Note Payment Account
(i) any Remittance Amount received by it from the Master Servicer pursuant to
the Master Servicing Agreement, (ii) any other funds from any deposits to be
made by the Master Servicer pursuant to the Master Servicing Agreement, (iii)
any amount required to be deposited in the Note Payment Account pursuant to
Section 8.01, (iv) all amounts received pursuant to Section 8.03 (other than
any funds in the Policy Payments Account that are not required to be used to
make Scheduled Payments) (v) any amount required to be deposited pursuant to
Section 8.02(b) and (vi) all other amounts received for deposit in the Note
Payment Account, including the payment of any Purchase Price for a Mortgage
Loan received by the Indenture Trustee. All amounts that are deposited from
time to time in the Note Payment Account are subject to withdrawal by the
Indenture Trustee for the purposes set forth in subsections (c) and (d) of
this Section 8.02. All funds withdrawn from the Note Payment Account pursuant
to subsection (d) of this Section 8.02 for the purpose of making payments to
the Holders of Notes shall be applied in accordance with Section 3.03.
(b) The Cap Agreement provides for payments of Supplemental Interest
Payments payable to the Note Insurer to be paid to the Indenture Trustee. The
Indenture Trustee shall receive such payments as agent for the Note Insurer
and shall deposit them in a separate trust account entitled "Supplemental
Interest Payment Account for the Note Insurer and the Noteholders of the
American Residential Eagle Bond Trust 1999-1." Such amount shall be treated
for all purposes, including for the purposes of Section 8.04, as payments of
the Note Insurer pursuant to the FSA Policy. The Indenture Trustee shall, with
respect to each Payment Date on which a Supplemental Interest Payment is to be
made on the Notes, provide the Note Insurer by 12:00 noon, New York City time,
on the third Business Day prior to such Payment Date, a notice in the form set
forth as Exhibit A to the Endorsement to the FSA Policy setting forth the
amount of the Supplemental Interest Payment and the amount received or to be
received in respect of such payment under the Cap Agreement. If any
Supplemental Interest Payment is not paid at or before 1:00 p.m. New York City
time on the date such payment is due under the Cap Agreement, the Indenture
Trustee shall give notice of such non-payment to the Note Insurer and Bear
Stearns Financial Products, Inc. prior to 5:00 p.m. New York City time on such
date.
Funds in the Supplemental Interest Payment Account will remain
uninvested. Any funds remaining in the Supplemental Interest Payment Account,
after application thereof as provided in Section 8.02(d), shall be paid by the
Indenture Trustee as instructed by the Note Insurer.
(c) So long as no Default or Event of Default shall have occurred
and be continuing, amounts held in the Note Payment Account may be invested in
Permitted Investments, which Permitted Investments shall mature no later than
the Business Day preceding the immediately following Payment Date.
All income or other gains, if any, from investment of moneys deposited in
the Note Payment Account shall be for the benefit of the Indenture Trustee and
on each Payment Date, any such amounts may be released from the Note Payment
Account and paid to the Indenture Trustee as part of its compensation for
acting as Indenture Trustee. Any loss resulting from such investment of moneys
deposited in the Note Payment Account shall be reimbursed immediately as
incurred to the Note Payment Account by the Indenture Trustee. Subject to
Section 6.01 and the preceding sentence, the Indenture Trustee shall not in
any way be held liable by reason of any insufficiency in the Note Payment
Account.
(d) On each Payment Date, the Indenture Trustee shall withdraw
amounts on deposit in the Note Payment Account and pay on a pari passu basis
(i) to the Note Insurer, the Note Insurance Premium; (ii) to the Manager, the
Management Fee; (iii) to the Indenture Trustee, the Indenture Trustee Fee;
(iv) any gains or income from investments on the Note Payment Account to
itself; (v) to the Indenture Trustee, any amounts owed to the Indenture
Trustee pursuant to Section 6.16(b) hereof, but not to exceed $200,000 per
annum; (vi) to the Indenture Trustee, any amounts owed to the Indenture
Trustee pursuant to Section 7(b) of the Master Servicing Agreement not to
exceed $50,000 in the aggregate for such Payment Date and all preceding
Payment Dates; and (vii) provided notice is given to the Indenture Trustee no
later than the 4th Business Day prior to the Payment Date and to the extent
such amounts have not been withdrawn pursuant to the Master Servicing
Agreement, amounts required to pay the Master Servicer any unpaid Master
Servicing Fees then due and to reimburse the Master Servicer for Monthly
Advances and Servicing Advances previously made by, and not previously
reimbursed to or retained by, the Master Servicer, which are so reimbursable
to the Master Servicer pursuant to the Master Servicing Agreement (as reported
in writing by the Master Servicer to the Indenture Trustee). After payment of
such amounts, unless the Notes have been declared due and payable pursuant to
Section 5.02 and moneys collected by the Indenture Trustee are being applied
in accordance with Section 5.07, Available Funds on deposit in the Note
Payment Account on any Payment Date or Redemption Date shall be withdrawn from
the Note Payment Account, together with the amount of Supplemental Interest
Payments on deposit in the Supplemental Interest Payment Account or paid by
the Note Insurer in the amounts required, for application on such Payment Date
as follows:
first, to the Noteholders, an amount equal to (a) the Monthly
Interest Amount for such Payment Date, (b) the amount of the Supplemental
Interest Payment, if any, up to the amount of the Basis Risk Shortfall
with respect to such Payment Date and (c) any unpaid interest due
pursuant to this clause first with respect to previous Payment Dates;
second, to the Noteholders, the Monthly Principal Amount for such
Payment Date in reduction of the Note Balance until the Note Balance is
reduced to zero;
third, to the Note Insurer, any amount due to the Note Insurer
pursuant to the FSA Insurance Agreement (together with interest thereon
at the rate specified in the FSA Insurance Agreement);
fourth, to the Noteholders, in reduction of the Note Balance, the
amount, if any, equal to the lesser of (A) Excess Cash with respect to
such Payment Date, and (B) the lesser of (1) the amount necessary for the
Overcollateralization Amount to equal the Required Overcollateralization
Amount on such Payment Date (after giving effect to application of the
Monthly Principal Amount for such Payment Date) and (2) the amount
necessary to reduce the Note Balance to zero (the "Excess Cash Payment");
fifth, to the Noteholders, the amount of any LIBOR Carryover Amount;
and
sixth, to the Master Servicer, any amounts owed to the Master
Servicer pursuant to Section 6(e) of the Master Servicing Agreement; and
to the Indenture Trustee any amounts owed to it (a) pursuant to Section
7(b) of the Master Servicing Agreement and (b) pursuant to Section
6.16(b) hereof, but only to the extent such amounts are not paid pursuant
to Section 8.02(d)(v) and (vi) hereof, pari passu; and
seventh, to the Certificate Distribution Account for distribution to
the Investor Certificateholder.
Section 8.03. Claims Against The FSA Policy.
(a) If, on the third Business Day prior to the related Payment
Date there is not on deposit with the Indenture Trustee moneys in the
Note Payment Account sufficient to pay Scheduled Payments on the Notes
due on such Payment Date, the Indenture Trustee is authorized by the
Noteholders to, and shall give, notice to the Note Insurer by telephone
or telecopy of the amount of such deficiency by 12:00 noon, New York City
time, on such Business Day, and the allocation of such deficiency between
the amount required to pay interest on the Notes and the amount required
to pay principal of the Notes, confirmed in a Notice of Claim (in the
form set forth as Exhibit A to the Endorsement of the FSA Policy) to the
Note Insurer, by 12:00 noon, New York City time, on such third Business
Day.
(b) At the time of the execution and delivery of this
Indenture, and for the purposes of this Indenture, the Indenture Trustee
shall establish a separate special purpose trust account for the benefit
of Holders of the Notes referred to herein as the "Policy Payments
Account" and over which the Indenture Trustee shall have exclusive
control and sole right of withdrawal. The Indenture Trustee shall deposit
any amount paid under the FSA Policy in the Policy Payments Account and
distribute such amount only for purposes of making the Scheduled Payments
for which a claim was made. Such amounts shall be disbursed by the
Indenture Trustee to Holders in the same manner as principal and interest
payments are to be made with respect to the Notes under Section 8.02(d).
It shall not be necessary for such payments to be made by checks or wire
transfers separate from the check or wire transfer used to pay Scheduled
Payments with other funds available to make such payments. However, the
amount of any payment of principal of or interest on the Notes to be paid
from the Policy Payments Account shall be noted as provided in (d) below
in the Payment Date Statement to be furnished to Holders of the Notes.
Funds held in the Policy Payments Account shall not be invested by the
Indenture Trustee.
(c) Any funds received by the Indenture Trustee as a result of
any claim under the FSA Policy shall be applied by the Indenture Trustee,
subject to Section 6.06 hereof, together with the funds, if any, to be
withdrawn from the Note Payment Account and Supplemental Interest Payment
Account directly to the payment in full of the Scheduled Payments due on
the Notes (including Notes held for the Indenture Trustee's own account).
Funds received by the Indenture Trustee as a result of any claim under
the FSA Policy shall be deposited by the Indenture Trustee in the Policy
Payments Account and used solely for payment to the Holders of Notes and
may not be applied to satisfy any costs, expenses or liabilities of the
Indenture Trustee. Any funds remaining in the Policy Payments Account
following a Payment Date shall promptly be remitted to the Note Insurer
except for funds held for the payment of Notes pursuant to Section 3.03
hereof.
(d) The Indenture Trustee shall keep a complete and accurate
record of all funds deposited by the Note Insurer into the Policy
Payments Account and the allocation of such funds to payment of interest
on and principal paid in respect of any Note. The Note Insurer shall have
the right to inspect such records at reasonable times upon one Business
Day's prior notice to the Indenture Trustee.
(e) Subject to and conditioned upon payment of any interest or
principal with respect to the Notes by or on behalf of the Note Insurer,
the Indenture Trustee shall assign to the Note Insurer all rights to the
payment of interest or principal on the Notes which are then due for
payment to the extent of all payments made by the Note Insurer and the
Note Insurer may exercise any option, vote, right, power or the like with
respect to the Notes to the extent it has made a Scheduled Payment in
respect of principal pursuant to the FSA Policy. The Indenture Trustee
agrees that the Note Insurer shall be subrogated to all of the rights to
payment of the Holders of the Notes or in relation thereto to the extent
that any payment of principal or interest was made to such Holders with
Scheduled Payments made under the FSA Policy by the Note Insurer.
(f) Unless a Note Insurer Default exists and is continuing, the
Indenture Trustee shall cooperate in all respects with any reasonable request
by the Note Insurer for action to preserve or enforce the Note Insurer's
rights or interests hereunder without limiting the rights or affecting the
interests of the Noteholders as otherwise set forth herein.
(g) The Indenture Trustee shall surrender the FSA Policy to the Note
Insurer for cancellation upon the expiration of the term of the FSA Policy as
provided in the FSA Insurance Agreement.
Section 8.04. General Provisions Regarding The Note Payment Account, the
Supplemental Interest Payment Account And Mortgage Loans.
(a) The Note Payment Account and the Supplemental Interest Payment
Account shall relate solely to the Notes and to the Mortgage Loans, Permitted
Investments and other property securing the Notes. Funds and other property in
the Note Payment Account and the Supplemental Interest Payment Account shall
not be commingled with any other moneys or property of the Issuer or any
Affiliate thereof. Notwithstanding the foregoing, the Indenture Trustee may
hold any funds or other property received or held by it as part of the Note
Payment Account and the Supplemental Interest Payment Account in collective
accounts maintained by it in the normal course of its business and containing
funds or property held by it for other Persons (which may include the Issuer
or an Affiliate), provided that such accounts are under the sole control of
the Indenture Trustee and the Indenture Trustee maintains adequate records
indicating the ownership of all such funds or property and the portions
thereof held for credit to the Note Payment Account and the Supplemental
Interest Payment Account.
(b) If any amounts are needed for payment from the Note Payment
Account and sufficient uninvested funds are not available therein to make such
payment, the Indenture Trustee shall cause to be sold or otherwise converted
to cash a sufficient amount of the investments in such Note Payment Account.
(c) The Indenture Trustee shall, at all times while any Notes are
Outstanding, maintain in its possession, or in the possession of an agent
whose actions with respect to such items are under the sole control of the
Indenture Trustee, all certificates or other instruments, if any, evidencing
any investment of funds in the Note Payment Account. The Indenture Trustee
shall relinquish possession of such items, or direct its agent to do so, only
for purposes of collecting the final payment receivable on such investment or
certificate or, in connection with the sale of any investment held in the Note
Payment Account, against delivery of the amount receivable in connection with
any sale.
(d) The Indenture Trustee shall not invest any part of the Trust
Estate in Permitted Investments that constitute uncertificated securities (as
defined in Section 8-102 of the Uniform Commercial Code, as enacted in the
relevant jurisdiction) or in any other book-entry securities unless it has
received an Opinion of Counsel reasonably satisfactory in form and substance
to the Indenture Trustee setting forth, with respect to each type of security
for which authority to invest is being sought, the procedures that must be
followed to maintain the lien and security interest created by this Indenture
with respect to the Trust Estate.
Section 8.05. Releases Of Defective Mortgage Loans.
Upon notice or discovery of any breach of a representation or warranty of
the Seller set forth in Exhibit B to the Master Servicing Agreement, which
breach materially and adversely effects the value of the related Mortgage Loan
or the interests of the Indenture Trustee, the Noteholders or the Note Insurer
in such Mortgage Loan, the Indenture Trustee shall require the Initial Seller
to either (i) eliminate or otherwise cure the circumstance or condition in
respect of which such representation or warranty was incorrect as of the time
made, (ii) withdraw such Deleted Mortgage Loan from the lien of this Indenture
by depositing to the Collection Account an amount equal to the Purchase Price
for such Mortgage Loan or (iii) substitute a Replacement Mortgage Loan for
such Deleted Mortgage Loan and deposit any Substitution Amount required to be
paid in connection with such substitution pursuant to Section 2(c)of the
Master Servicing Agreement, all as provided in Section 2(c) of the Master
Servicing Agreement. In the event that the Indenture Trustee has actual
knowledge of the existence of a Defective Mortgage Loan, the Indenture Trustee
shall require the Initial Seller to either (i) cure the defect, (ii) withdraw
the Defective Mortgage Loan from the lien of this Indenture as provided in
clause (ii) of the preceding sentence or (iii) substitute a Replacement
Mortgage Loan as provided in clause (iii) of the preceding sentence, all as
provided in Sections 2(a) of the Master Servicing Agreement. Upon any purchase
of or substitution for a Defective Mortgage Loan or a Deleted Mortgage Loan by
the Initial Seller, or upon purchase of a defaulted Mortgage Loan pursuant to
Section 3(x) of the Master Servicing Agreement (and deposit of the Purchase
Price for such defaulted Mortgage Loan in the Collection Account), the
Indenture Trustee shall cause the Custodian to deliver the Trustee Mortgage
File relating to such Mortgage Loan to the Initial Seller or the purchaser of
such defaulted Mortgage Loan, as the case may be, and the Issuer and the
Indenture Trustee shall execute such instruments of transfer as are necessary
to convey title to such Mortgage Loan to the Initial Seller or such purchaser
free from the lien of this Indenture.
Section 8.06. Reports By Indenture Trustee To Noteholders; Access To
Certain Information.
On each Payment Date, the Indenture Trustee shall make available the
written report required by Section 2.08(d) to Noteholders of record as of the
related Record Date (including the Clearing Agency, if any) and to any other
interested party, via the Trustee's website, electronic bulletin board and its
fax-on-demand service. The Trustee's website will be located at
www.ctslink.com. The Trustee's electronic bulletin board may be accessed by
calling (3010 815-6620, and its fax-on-demand service may be accessed by
calling (301) 815-6610.
The Indenture Trustee shall make available at its Corporate Trust Office
upon receipt of reasonable advance written notice, during normal business
hours, for review by any Noteholder or any person identified to the Indenture
Trustee as a prospective Noteholder, originals or copies of the following
items: (a) the Indenture and any amendments thereto, (b) all Payment Date
Statements delivered to the Issuer since the Closing Date, (c) any Officers'
Certificates delivered to the Indenture Trustee since the Closing Date as
described in the Indenture and (d) any Accountants' reports delivered to the
Indenture Trustee since the Closing Date as required under the Master
Servicing Agreement. Copies of any and all of the foregoing items will be
available from the Indenture Trustee upon request; however, the Indenture
Trustee will be permitted to require payment of a sum sufficient to cover the
reasonable costs and expenses of providing such copies and shall not be
required to provide such copies without reasonable assurances that such sum
will be paid.
Section 8.07. Trust Estate Mortgage Files.
(a) The Custodian is permitted to release Trustee Mortgage Files or
portions thereof to the Master Servicer on the terms specified in the Master
Servicing Agreement.
(b) The Custodian is permitted to release, at such time as there are
no Notes outstanding, release all of the Trust Estate to the Issuer (other
than any cash held for the payment of the Notes pursuant to Section 3.03 or
4.02).
Section 8.08. Amendment To Master Servicing Agreement.
The Indenture Trustee may, without the consent of any Holder but with the
consent of the Note Insurer, enter into or consent to any amendment or
supplement to the Master Servicing Agreement for the purpose of increasing the
obligations or duties of any party other than the Indenture Trustee or the
Holders of the Notes. The Indenture Trustee may, in its discretion, decline to
enter into or consent to any such supplement or amendment: (i) unless the
Indenture Trustee receives an Opinion of Counsel that the position of the
Holders would not be materially adversely affected or written confirmation
from the Rating Agencies that the then-current implied ratings on the Notes
(without taking into account the FSA Policy) would not be adversely affected
by such supplement or amendment or (ii) if its own rights, duties or
immunities would be adversely affected.
Section 8.09. Delivery Of The Trustee Mortgage Files Pursuant To Master
Servicing Agreement.
As is appropriate for the servicing or foreclosure of any Mortgage Loan,
the Custodian is authorized to deliver to the Master Servicer the Trustee
Mortgage Files for such Mortgage Loan upon receipt by the Indenture Trustee
and the Custodian on or prior to the date such release is to be made of:
(a) such Officers' Certificates, if any, as are required by the
Master Servicing Agreement; and
(b) a "Request for Release" in the form prescribed by the Master
Servicing Agreement, executed by the Master Servicer, providing that the
Master Servicer will hold or retain the Trustee Mortgage Files in trust for
the benefit of the Indenture Trustee, the Note Insurer and the Holders of
Notes.
Section 8.10. [Reserved]
Section 8.11. Termination Of Master Servicer.
In the event of a Master Servicer Event of Default specified in Section 7
of the Master Servicing Agreement, the Indenture Trustee may, with the consent
of the Note Insurer, and shall, upon the direction of the Note Insurer (or as
otherwise provided in the Master Servicing Agreement), terminate the Master
Servicer as provided in Section 7 of the Master Servicing Agreement. If the
Indenture Trustee terminates the Master Servicer, the Indenture Trustee shall,
pursuant to Section 7 of the Master Servicing Agreement, assume the duties of
the Master Servicer or appoint a successor servicer acceptable to the Note
Insurer and meeting the requirements set forth in the Master Servicing
Agreement.
Section 8.12. Opinion Of Counsel.
The Indenture Trustee shall be entitled to receive at least five Business
Days' notice of any action to be taken pursuant to Sections 8.07(a) (other
than in connection with releases of Mortgage Loans that were the subject of a
prepayment in full) and 8.08, accompanied by copies of any instruments
involved, and the Indenture Trustee shall be entitled to receive an Opinion of
Counsel, in form and substance reasonably satisfactory to the Indenture
Trustee, stating the legal effect of any such action, outlining the steps
required to complete the same, and concluding that all conditions precedent to
the taking of such action have been complied with. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
Section 8.13. Appointment Of Custodians.
The Indenture Trustee may, at the written direction of the Issuer and at
no additional cost to the Issuer or to the Indenture Trustee, with the consent
of the Note Insurer, appoint one or more Custodians to hold all or a portion
of the Trustee Mortgage Files as agent for the Indenture Trustee. Each
Custodian shall (i) be a financial institution supervised and regulated by the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Office of Thrift Supervision, or the Federal Deposit Insurance
Corporation; (ii) have combined capital and surplus of at least $10,000,000;
(iii) be equipped with secure, fire resistant storage facilities, and have
adequate controls on access to assure the safety and security of the Trustee
Mortgage Files; (iv) utilize in its custodial function employees who are
knowledgeable in the handling of mortgage documents and of the functions of a
mortgage document custodian; and (v) satisfy any other reasonable requirements
that the Issuer may from time to time deem necessary to protect the interests
of Noteholders and the Note Insurer in the Trustee Mortgage Files. Each
Custodian shall be subject to the same obligations and standard of care as
would be imposed on the Indenture Trustee hereunder assuming the Indenture
Trustee retained the Trustee Mortgage Files directly. The appointment of one
or more Custodians shall not relieve the Indenture Trustee from any of its
obligations hereunder. Bankers Trust Company of California, N.A., has been
appointed as the initial Custodian under the Custodial Agreement.
Section 8.14. Rights Of The Note Insurer To Exercise Rights Of
Noteholders.
By accepting its Notes, each Noteholder agrees that unless a Note Insurer
Default exists, the Note Insurer shall have the right to exercise all rights
of the Noteholders under this Agreement and the Master Servicing Agreement
without any further consent of the Noteholders, including, without limitation:
(i) the right to require the Master Servicer to effect foreclosures
upon Mortgage Loans;
(ii) the right to require the Initial Seller to either repurchase or
substitute for Defective Mortgage Loans or Deleted Mortgage Loans
pursuant to Section 8.05;
(iii) the right to direct the actions of the Indenture Trustee
during the continuance of an Event of Default; and
(iv) the right to vote on proposed amendments to this Indenture.
In addition, each Noteholder agrees that, unless a Note Insurer Default
exists, the rights specifically set forth above may be exercised by the
Noteholders only with the prior written consent of the Note Insurer.
Except as otherwise provided in Section 8.03 and notwithstanding any
provision in this Indenture to the contrary, so long as a Note Insurer Default
has occurred and is continuing, the Note Insurer shall have no rights to
exercise any voting rights of the Noteholders hereunder, nor shall the
Indenture Trustee be required to obtain the consent of, or act at the
direction of, the Note Insurer.
Section 8.15. Trust Estate And Accounts Held For Benefit Of The Note
Insurer.
The Indenture Trustee shall hold the Trust Estate and shall cause the
Custodian to hold the Trustee Mortgage Files for the benefit of the
Noteholders and the Note Insurer and all references in this Agreement and in
the Notes to the benefit of Holders of the Notes shall be deemed to include
the Note Insurer.
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Noteholders
shall also be sent to the Note Insurer.
Section 8.16. Rights in Respect of Insolvency Proceedings.
(a) In the event that the Indenture Trustee has received a certified
copy of an order of the appropriate court that any Scheduled Payment of
principal of or interest on a Note has been voided in whole or in part as a
preference payment under applicable bankruptcy law, the Indenture Trustee
shall so notify the Note Insurer, shall comply with the provisions of the FSA
Policy to obtain payment by the Note Insurer of such voided Scheduled Payment,
and shall, at the time it provides notice to the Note Insurer, notify, by mail
to Holders of the Notes that, in the event that any Holder's Scheduled Payment
is so recovered, such Holder will be entitled to payment pursuant to the terms
of the FSA Policy, a copy of which shall be made available through the
Indenture Trustee, the Note Insurer or the Fiscal Agent, if any, and the
Indenture Trustee shall furnish to the Note Insurer or its Fiscal Agent, if
any, its records evidencing the payments of principal of and interest on the
Notes, if any, which have been made by the Indenture Trustee and subsequently
recovered from Holders, and the dates on which such payments were made.
(b) The Indenture Trustee shall promptly notify the Note Insurer of
either of the following as to which it has actual knowledge: (i) the
commencement of any Proceeding by or against the Note Insurer commenced under
the Bankruptcy Code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding") and
(ii) the making of any claim in connection with any Insolvency Proceeding
seeking the avoidance as a preferential transfer (a "Preference Claim") of any
payment of principal of, or interest on, the Notes. Each Holder, by its
purchase of a Note, and the Indenture Trustee hereby agrees that, so long as a
Note Insurer Default shall not have occurred and be continuing, Note Insurer
may at any time during the continuation of an Insolvency Proceeding direct all
matters relating to such Insolvency Proceeding, including, without limitation,
(i) all matters relating to any Preference Claim, (ii) the direction of any
appeal of any order relating to any Preference Claim at the expense of the
Note Insurer but subject to reimbursement as provided in the FSA Insurance
Agreement and (iii) the posting of any surety, supersedeas or performance bond
pending any such appeal. In addition, and without limitation of the foregoing,
the Note Insurer shall be subrogated to, and each Holder and the Indenture
Trustee hereby delegate and assign, to the fullest extent permitted by law,
the rights of the Indenture Trustee and each Holders in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any party
to an adversary proceeding action with respect to any court order issued in
connection with any such Insolvency Proceeding.
(c) The Indenture Trustee shall furnish to the Note Insurer or its
Fiscal Agent its records evidencing the Scheduled Payments of principal of and
interest on the Notes which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made.
Section 8.17. Effect of Payments by the Note Insurer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect
to the principal of or interest on the Notes which is made with moneys
received pursuant to the terms of the FSA Policy shall not be considered
payment by the Issuer of the Notes, shall not discharge the Issuer in respect
of its obligation to make such payment and shall not result in the payment of
or the provision for the payment of the principal of or interest on the Notes
within the meaning of Section 4.01 hereof. The Issuer and the Indenture
Trustee acknowledge that without the need for any further action on the part
of the Note Insurer, the Issuer, the Indenture Trustee or the Note Registrar
(i) to the extent the Note Insurer makes payments, directly or indirectly, on
account of principal of or interest on the Notes to the Holders of such Notes,
the Note Insurer will be fully subrogated to the rights of such Holders to
receive such principal and interest from the Issuer, and (ii) the Note Insurer
shall be paid such principal and interest in its capacity as a Holder of the
Notes but only from the sources and in the manner provided herein for the
payment of such principal and interest in each case only after as provided in
Section 8.02(d).
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent Of Noteholders.
With the consent of the Note Insurer and without the consent of the
Holders of any Notes, the Issuer and the Indenture Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto,
in form satisfactory to the Indenture Trustee, for any of the following
purposes:
(1) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(2) to add to the conditions, limitations and restrictions on the
authorized amount, terms and purposes of the issuance, authentication and
delivery of any Notes, as herein set forth, additional conditions,
limitations and restrictions thereafter to be observed;
(3) to evidence the succession of another Person to the Issuer to
the extent permitted herein, and the assumption by any such successor of
the covenants of the Issuer herein and in the Notes contained;
(4) to add to the covenants of the Issuer, for the benefit of the
Holders of all Notes and the Note Insurer or to surrender any right or
power herein conferred upon the Issuer;
(5) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision
herein, or to amend any other provisions with respect to matters or
questions arising under this Indenture, which shall not be inconsistent
with the provisions of this Indenture, provided that such action shall
not adversely affect in any material respect the interests of the Holders
of the Notes or the Holders of the Investor Certificate; and provided,
further, that the amendment shall not be deemed to adversely affect in
any material respect the interests of the Holders of the Notes and the
Note Insurer if the Person requesting the amendment obtains letters from
the Rating Agencies that the amendment would not result in the
downgrading or withdrawal of the implied ratings then assigned to the
Notes (without taking into account the FSA Policy); or
(6) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted, and to add to this Indenture such other provisions as may be
expressly required by the TIA.
Section 9.02. Supplemental Indentures With Consent Of Noteholders.
With the consent of the Note Insurer and with the consent of Holders of
Notes representing not less than a majority of the Note Balance of all
Outstanding Notes by Act of said Holders delivered to the Issuer and the
Indenture Trustee, the Issuer and the Indenture Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(1) change any Payment Date or the Final Maturity Date of the
Notes or reduce the principal amount thereof, the Note Interest Rate
thereon or the Redemption Price with respect thereto, change the
earliest date on which any Note may be redeemed at the option of the
Issuer, change any place of payment where, or the coin or currency
in which, any Note or any interest thereon is payable, or impair the
right to institute suit for the enforcement of the payment of any
installment of interest due on any Note on or after the Final
Maturity Date thereof or for the enforcement of the payment of the
entire remaining unpaid principal amount of any Note on or after the
Final Maturity Date (or, in the case of redemption, on or after the
applicable Redemption Date);
(2) reduce the percentage of the Note Balance of the
Outstanding Notes, the consent of the Holders of which is required
for any such supplemental indenture, or the consent of the Holders
of which is required for any waiver of compliance with provisions of
this Indenture or Defaults hereunder and their consequences provided
for in this Indenture;
(3) modify any of the provisions of this Section, Section 5.13,
Section 5.14 or Section 5.17(b), except to increase any percentage
specified therein or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of
the Holder of each Outstanding Note affected thereby;
(4) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(5) permit the creation of any lien other than the lien of this
Indenture with respect to any part of the Trust Estate (except for
Permitted Encumbrances) or terminate the lien of this Indenture on
any property at any time subject hereto or deprive the Holder of any
Note of the security afforded by the lien of this Indenture;
(6) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the Required Payment Amount
for any Payment Date (including the calculation of any of the
individual components of such Required Payment Amount) or to affect
rights of the Holders of the Notes to the benefits of any provisions
for the mandatory redemption of Notes contained herein; or
(7) incur any indebtedness, other than the Notes, that would
cause the Issuer or the Trust Estate to be treated as a "taxable
mortgage pool" within the meaning of Code Section 7701(i).
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee
shall mail to the Holders of the Notes to which such supplemental indenture
relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 9.03. Execution Of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Indenture Trustee shall be
entitled to receive, and (subject to Section 6.01) shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights, duties
or immunities under this Indenture or otherwise. The Issuer shall cause
executed copies of any Supplemental Indentures to be delivered to the Rating
Agencies and the Note Insurer.
Section 9.04. Effect Of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Notes to which such supplemental indenture relates that have
theretofore been or thereafter are authenticated and delivered hereunder shall
be bound thereby.
Section 9.05. Conformity With Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
Section 9.06. Reference In Notes To Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the Issuer shall so
determine, new Notes so modified as to conform, in the opinion of Indenture
Trustee and the Issuer, to any such supplemental indenture may be prepared and
executed by the Issuer and authenticated and delivered by the Indenture
Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments To Governing Documents.
The Indenture Trustee shall, with the consent of the Note Insurer,
subject to Sections 9.01 and 9.02 hereof, upon Issuer Request, consent to any
proposed amendment to the Issuer's governing documents, or an amendment to or
waiver of any provision of any other document relating to the Issuer's
governing documents, such consent to be given without the necessity of
obtaining the consent of the Holders of any Notes upon receipt by the
Indenture Trustee of:
(i) an Officers' Certificate, to which such proposed amendment or
waiver shall be attached, stating that such attached copy is a true copy
of the proposed amendment or waiver and that all conditions precedent to
such consent specified in this Section 9.07 have been satisfied; and
(ii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely
affect their implied ratings of the Notes (without taking into account
the FSA Policy).
Notwithstanding the foregoing, the Indenture Trustee may decline to
consent to a proposed waiver or amendment that adversely affects its own
rights, duties or immunities under this Indenture or otherwise or to any
proposed waiver or amendment of Section 3.02 of the Trust Agreement.
Nothing in this Section 9.07 shall be construed to require that any
Person obtain the consent of the Indenture Trustee to any amendment or waiver
or any provision of any document where the making of such amendment or the
giving of such waiver without obtaining the consent of the Indenture Trustee
is not prohibited by this Indenture or by the terms of the document that is
the subject of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
(a) All the Notes may be redeemed in whole, but not in part, on the
Redemption Date as provided in clause (i) of the definition thereof at the
Redemption Price at the option of the holders of a majority of the ownership
interest of the Issuer (the "Residual Majority"); provided, however, that
funds in an amount equal to the Redemption Price, plus any amounts owed to the
Note Insurer under the FSA Insurance Agreement any unreimbursed Nonrecoverable
Advances and any unreimbursed amounts due and owing to the Indenture Trustee
hereunder, must be deposited with the Indenture Trustee no later than 10:00
a.m. New York City time on the Redemption Date or the Issuer shall have
complied with the requirements for satisfaction and discharge of the Notes
specified in Section 4.01 (other than Section 4.01(2)). Notice of the election
to redeem the Notes shall be furnished to the Indenture Trustee not later than
thirty (30) days prior to the Payment Date selected for such redemption,
whereupon all such Notes shall be due and payable on such Payment Date upon
the furnishing of a notice pursuant to Section 10.02 to each Holder of such
Notes and the Note Insurer. Upon the redemption of the Notes, Mortgage Loans
in the Trust Estate shall be released and delivered to the owners of the Trust
Certificate.
(b) [Reserved]
(c) (i) Following the first Payment Date on which the Aggregate
Principal Balance of the Mortgage Loans as of the related Determination Date
is 10% or less of the Cut-off Date Aggregate Principal Balance of the Mortgage
Loans as of the Cut-off Date (unless the Notes shall have been redeemed
pursuant to this Section 10.01), the Indenture Trustee shall solicit bids for
the purchase of the Mortgage Loans and the Trust Estate. If the highest bid
received by the Indenture Trustee from a qualified bidder is not less than the
fair market value of the Mortgage Loans and would equal or exceed the amount
set forth in clause (ii) below, the Indenture Trustee shall notify the Seller
and the Master Servicer of the bid price.
(ii) The Seller shall have the right of first refusal to
purchase the Mortgage Loans at such bid price (or if the Seller does not
exercise such right, the Master Servicer may exercise such first refusal
rights to purchase the Mortgage Loans at the bid price). If the Seller
and the Master Servicer affirmatively waive in writing their respective
first refusal rights, then the Indenture Trustee shall sell and assign
such Mortgage Loans without recourse to the highest bidder and shall
redeem the Notes. The Indenture Trustee shall not consummate the sale
unless the bid price is at least equal to an amount, which, when added to
Available Funds for the related Payment Date, would equal the sum,
without duplication, of (i) the accrued interest then due on such Payment
Date, (ii) the aggregate Note Balance as of such Payment Date, (iii) the
aggregate of all amounts owed to the Note Insurer or that will be owed to
the Note Insurer as a result of such sale pursuant to the FSA Insurance
Agreement, (iv) any accrued and unpaid Master Servicing Fees and any
Servicing Advances and Monthly Advances (including Nonrecoverable
Advances) previously made by the Master Servicer and remaining
unreimbursed as of such Payment Date and (v) any accrued and unpaid fees
and other amounts owing to the Indenture Trustee or the Owner Trustee as
of such Payment Date. If such conditions are not met, the Indenture
Trustee shall not consummate such sale.
(iii) The Indenture Trustee shall not be required to consummate
a sale of the Mortgage Loans unless it receives an Opinion of Counsel
(with a copy to the Note Insurer) (which Opinion of Counsel shall not be
at the expense of the Indenture Trustee) that such sale will not give
rise to any adverse tax consequences to the Issuer or the Noteholders or
adversely affect the opinion that the Notes will evidence indebtedness of
the Issuer under the Code.
(iv) In the event that a sale is not consummated in accordance
with this Section 10.01(c), the Indenture Trustee shall solicit bids on a
quarterly basis for the purchase of such assets upon the terms described
in this Section.
(v) The proceeds of the sale of the Mortgage Loans shall be
used to redeem the Notes and to pay all amounts set forth in clause (ii)
above then due and owing, and any excess shall be deposited in the
Certificate Distribution Account for payment to the Certificateholders.
Section 10.02. Form Of Redemption Notice.
Notice of redemption shall be given by the Indenture Trustee in the name
of and at the expense of the Issuer by first class mail, postage prepaid,
mailed not less than ten days prior to the Redemption Date to each Holder of
Notes to be redeemed, such Holders being determined as of the Record Date for
such Payment Date, and to the Note Insurer.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price at which the Notes of such Series will be
redeemed,
(3) the fact of payment in full on such Notes, the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Issuer to be maintained as provided
in Section 3.02), and that no interest shall accrue on such Note for any
period after the date fixed for redemption.
Failure to give notice of redemption, or any defect therein, to any
Holder of any Note selected for redemption shall not impair or affect the
validity of the redemption of any other Note.
Section 10.03. Notes Payable On Optional Redemption.
Notice of redemption having been given as provided in Section 10.02, the
Notes to be redeemed shall, on the Redemption Date, become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of
the Redemption Price) no interest shall accrue on such Redemption Price for
any period after such Redemption Date; provided, however, that if such
Redemption Price is not paid on the Redemption Date, the Note Balance shall,
until paid, bear interest from the Redemption Date at the Note Interest Rate.
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates And Opinions.
(a) Upon any application or request by the Issuer to the Indenture
Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee and the Note Insurer an Officers'
Certificate stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with and an
Opinion of Counsel (with a copy to the Note Insurer), if requested by the
Indenture Trustee, stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or
opinion need be furnished.
(b) Every certificate, opinion or letter with respect to compliance
with a condition or covenant provided for in this Indenture, including one
furnished pursuant to specific requirements of this Indenture relating to a
particular application or request (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include and shall be deemed to include
(regardless of whether specifically stated therein) the following:
(1) a statement that each individual signing such certificate,
opinion or letter has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate, opinion or letter are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.02. Form Of Documents Delivered To Indenture Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of the Issuer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect
to the matters upon which his certificate or opinion is based are erroneous.
Any Opinion of Counsel may be based on the written opinion of other counsel,
in which event such Opinion of Counsel shall be accompanied by a copy of such
other counsel's opinion and shall include a statement to the effect that such
counsel believes that such counsel and the Indenture Trust may reasonably rely
upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application
or at the effective date of such certificate or report (as the case may be),
of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application
granted or to the sufficiency of such certificate or report. The foregoing
shall not, however, be construed to affect the Indenture Trustee's right to
rely upon the truth and accuracy of any statement or opinion contained in any
such document as provided in Section 6.01(b)(2).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request
or direction of the Issuer, then, notwithstanding that the satisfaction of
such condition is a condition precedent to the Issuer's right to make such
request or direction, the Indenture Trustee shall be protected in acting in
accordance with such request or direction if it does not have knowledge of the
occurrence and continuation of such Default or Event of Default as provided in
Section 6.01(d).
Section 11.03. Acts Of Noteholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Noteholders in person or by an
agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Indenture Trustee, and, where it is hereby
expressly required, to the 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.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Whenever such execution is by an officer of a corporation
or a member of a partnership on behalf of such corporation or partnership,
such certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Indenture Trustee or the Issuer in reliance thereon, whether
or not notation of such action is made upon such Notes.
Section 11.04. Notices, Etc. , To Indenture Trustee, The Note Insurer And
Issuer
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Noteholders or other documents provided or permitted by this Indenture
to be made upon, given or furnished to, or filed with:
(1) 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 and received by the Indenture Trustee at its
Corporate Trust Office and at 11000 Broken Land Parkway, Columbia,
Maryland 21044-3562 (in each case, Attention: Corporate Trust
Administration (AmREIT 1999-1)); or
(2) 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 it at American
Residential Eagle Bond Trust 1999-1, in care of Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration, or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer; or
(3) the Note Insurer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to Financial Security Assurance Inc., 350
Park Avenue, New York, New York 10022, Attention: Transaction Oversight,
Re: American Residential Eagle Bond Trust 1999-1; Confirmation: (212)
826-0100; Telecopy Nos: (212) 339-3518 or (212) 339-3529 (in each case in
which notice or other communication to the Note Insurer refers to an
Event of Default (as defined in the FSA Insurance Agreement), a claim on
the FSA Policy or with respect to which failure on the part of FSA to
respond shall be deemed to constitute consent or acceptance, then a copy
of such notice or other communication should also be sent to the
attention of the General Counsel and the Head of the Financial Guaranty
Group and shall be marked to indicate "URGENT MATERIAL ENCLOSED"); or
(4) the Depositor by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage paid, to Bear Stearns Asset Backed Securities, Inc.,
245 Park Avenue, New York, New York 10167, or at any other address
previously furnished in writing to the Indenture Trustee by the
Depositor; or
(5) the Seller or the Initial Seller by the Indenture Trustee or by
any Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage paid, to American Residential
Eagle, Inc., 445 Marine View Avenue, Suite 100, Del Mar, California
92014, Attention: Portfolio Manager, or at any other address previously
furnished in writing to the Indenture Trustee by the Seller or the
Servicer;
(6) the Master Servicer by the Indenture Trustee or the Note Insurer
for every purpose hereunder if in writing and mailed, first-class,
postage paid to Advanta Mortgage Corp. USA, 10790 Rancho Bernardo Road,
San Diego, California 92127; Attention: SVP Loan Servicing.
(7) the Underwriters by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to Bear Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167, Attn: Structured Finance Department
(American Residential Eagle Bond Trust 1999-1).
(8) Bear Stearns Financial Products, Inc. for every purpose
hereunder if in writing and valid, first class, postage prepaid to 245
Park Avenue, New York, New York 10167, Attention: DPC Manager - Suite
1700.
Notices required to be given to the Rating Agencies by the Issuer or the
Indenture Trustee shall be in writing, personally delivered or mailed
first-class postage pre-paid, to (i) in the case of Moody's, at the following
address: Moody's Investors Service, Inc., Residential Mortgage Monitoring
Department, 99 Church Street, New York, New York 10007 and (ii) in the case of
Standard & Poor's, at the following address: Standard & Poor's Ratings Group,
26 Broadway (15th Floor), New York, New York, 10004, Attention: Asset Bankers
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designed by written notice to the other parties.
Section 11.05. Notices And Reports To Noteholders; Waiver Of Notices.
Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder
as it appears on the Note Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice or
the mailing of such report. In any case where a notice or report to
Noteholders is mailed in the manner provided above, neither the failure to
mail such notice or report, nor any defect in any notice or report so mailed,
to any particular Noteholder shall affect the sufficiency of such notice or
report with respect to other Noteholders, and any notice or report that is
mailed in the manner herein provided shall be conclusively presumed to have
been duly given or provided.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to
mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
Section 11.06. Rules By Indenture Trustee.
The Indenture Trustee may make reasonable rules for any meeting of
Noteholders.
Section 11.07. Conflict With Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with another
provision hereof that is required to be included in this Indenture by any of
the provisions of the TIA, such required provision shall control.
Section 11.08. Effect Of Headings And Table Of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
Section 11.09. Successors And Assigns.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
Section 11.10. Separability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.11. Benefits Of Indenture.
Nothing in this Indenture or in the Notes, expressed or implied, shall
give to any Person, other than the parties hereto, the Note Insurer and their
successors hereunder, any separate trustee or Co-trustee appointed under
Section 6.14 and the Noteholders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 11.12. Legal Holidays.
In any case where the date of any Payment Date, Redemption Date or any
other date on which principal of or interest on any Note is proposed to be
paid shall not be a Business Day, then (notwithstanding any other provision of
the Notes or this Indenture) payment need not be made on such date, but may be
made on the next succeeding Business Day with the same force and effect as if
made on the nominal date of any such Payment Date, Redemption Date or other
date for the payment of principal of or interest on any Note and no interest
shall accrue for the period from and after any such nominal date, provided
such payment is made in full on such next succeeding Business Day.
Section 11.13. Governing Law.
IN VIEW OF THE FACT THAT NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY
STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH
CERTAINTY THAT THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY
OF COMMERCIAL AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF THE TYPE
CONTEMPLATED HEREIN, THIS INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
Section 11.14. Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 11.15. Recording Of Indenture.
This Indenture is subject to recording in any appropriate public
recording offices, such recording to be effected by the Issuer and at its
expense in compliance with any Opinion of Counsel delivered pursuant to
Section 2.11(c) or 3.06.
Section 11.16. Issuer Obligation.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
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 the Trust
Agreement.
Section 11.17. No Petition.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder and Beneficial Owner, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Issuer, or join in
any institution against 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. In addition, the Indenture Trustee will on behalf of the holders of
the Notes, (a) file a written objection to any motion or other proceeding
seeking the substantive consolidation of the Seller with, the Issuer, (b) file
an appropriate memorandum of points and authorities or other brief in support
of such objection, or (c) endeavor to establish at the hearing on such
objection that the substantive consolidation of such entity would be
materially prejudicial to the Noteholders.
This Section 11.17 will survive for one year and one day following the
termination of this Indenture.
Section 11.18. Inspection.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee and the Note Insurer, during the
Issuer's normal business hours, to examine all of books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent Accountants selected by the
Indenture Trustee or the Note Insurer, as the case may be, and to discuss its
affairs, finances and accounts with its officers, employees and Independent
Accountants (and by this provision the Issuer hereby authorizes its
Accountants to discuss with such representatives such affairs, finances and
accounts), all at such reasonable times and as often as may be reasonably
requested.
Section 11.19. Usury.
The amount of interest payable or paid on any Note under the terms of
this Indenture shall be limited to an amount that shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the United
States or the State of New York (whichever shall permit the higher rate), that
could lawfully be contracted for, charged or received (the "Highest Lawful
Rate"). In the event any payment of interest on any Note exceeds the Highest
Lawful Rate, the Issuer stipulates that such excess amount will be deemed to
have been paid as a result of an error on the part of both the Indenture
Trustee, acting on behalf of the Holder of such Note, and the Issuer, and the
Holder receiving such excess payment shall promptly, upon discovery of such
error or upon notice thereof from the Issuer or the Indenture Trustee, refund
the amount of such excess or, at the option of the Indenture Trustee, apply
the excess to the payment of principal of such Note, if any, remaining unpaid.
In addition, all sums paid or agreed to be paid to the Indenture Trustee for
the benefit of Holders of Notes for the use, forbearance or detention of money
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such Notes.
Section 11.20. Third Party Beneficiary.
The Note Insurer is intended as a third party beneficiary of this
Indenture shall be binding upon and inure to the benefit of the Note Insurer;
provided that, notwithstanding the foregoing, for so long as a Note Insurer
Default is continuing with respect to its obligations under the FSA Policy,
the Noteholders shall succeed to the Note Insurer's rights hereunder other
than the rights of the Note Insurer to receive payments hereunder. Without
limiting the generality of the foregoing, all covenants and agreements in this
Indenture that expressly confer rights upon the Note Insurer shall be for the
benefit of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it
were a party to this Indenture.
Section 11.21. Limitation of Liability of Wilmington Trust Company.
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of the Issuer in the
exercise of the powers and authority conferred and vested in it, (b) each of
the representations, undertakings and agreements herein made on the part of
the Issuer is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties
hereto and by any Person claiming by, through or under the parties hereto and
(d) under no circumstances shall Wilmington Trust Company be personally liable
for the payment of any indebtedness or expenses of the Issuer or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Issuer under this Agreement or any other related
document.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee and the have
caused this Indenture to be duly executed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
AMERICAN RESIDENTIAL EAGLE BOND
TRUST 1999-1
By: Wilmington Trust Company,
as Owner Trustee
By: /s/ Emmett Harmon
-------------------------------------
Authorized Signatory
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Indenture Trustee
By: /s/ Amy Wahl
------------------------------------
Name: Amy Wahl
Title: Assistant Vice President
[Signature Page to Indenture]
EXHIBIT A
SCHEDULE OF MORTGAGE LOANS
Refer to Tab 34
EXHIBIT A FORM OF NOTE
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
THE NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT
OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE FSA POLICY AS
PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE
PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
Date of Indenture: As of April 1, 1999 CUSIP No.: [[ ]]
First Payment Date: May 25, 1999 Note No.: 001
Aggregate Note Balance of all Notes: $[[ ]]
AMERICAN RESIDENTIAL EAGLE BOND TRUST 19991
MORTGAGE-BACKED LIBOR NOTES, CLASS A, SERIES 1999-1
American Residential Eagle Bond Trust 1999-1, a Delaware statutory
business trust organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to
pay to CEDE & CO., or registered assigns, the principal sum of $[[ ]] payable
on each Payment Date in an amount equal to the result obtained by multiplying
(i) a fraction the numerator of which is $[[ ]] and the denominator of which
is $[[ ]] (this Note's "Percentage Interest") by (ii) the aggregate amount, if
any, payable from the Note Payment Account in respect of principal on the
Notes pursuant to the Indenture dated as of April 1, 1999, between the Issuer
and Norwest Bank Minnesota, National Association, a national banking
association, as Indenture Trustee (the "Indenture Trustee"); provided,
however, that the entire unpaid principal amount of this Note shall be due and
payable on the earlier of (i) the Payment Date occurring in [[ ]] (the "Final
Maturity Date"), (ii) the Redemption Date, if any, pursuant to Article X of
the Indenture or (iii) the date on which an Event of Default shall have
occurred and be continuing, if the Notes have been declared to be immediately
due and payable in the manner provided in Section 5.02 of the Indenture.
Capitalized terms used but not defined herein are defined in Article I of the
Indenture.
Pursuant to the terms of the Indenture, payments will be made on the 25th
day of each month or, if such day is not a Business Day, on the Business Day
immediately following such 25th day (each a "Payment Date"), commencing on the
first Payment Date specified above, to the Person in whose name this Note is
registered at the close of business on the applicable Record Date, in an
amount equal to the product of (a) the Percentage Interest evidenced by this
Note and (b) the sum of the amounts to be paid on the Notes with respect to
such Payment Date, all as more specifically set forth in the Indenture.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) on the
Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments
will be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Notwithstanding the foregoing, in the case of Definitive
Notes, upon written request at least five days prior to the related Record
Date with appropriate instructions by the Holder of this Note (holding an
aggregate initial Note Balance of at least $1,000,000), any payment of
principal or interest, other than the final installment of principal or
interest, shall be made by wire transfer to an account in the United States
designated by such Holder reasonably satisfactory to the Indenture Trustee.
Any reduction in the principal amount of this Note (or any one or more
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Indenture Trustee,
in the name of and on behalf of the Issuer, will notify the Person who was the
Holder hereof as of the Record Date preceding such Payment Date by notice
mailed or transmitted by facsimile prior to such Payment Date, and the amount
then due and payable shall be payable only upon presentation and surrender of
this Note at the Indenture Trustee's principal Corporate Trust Office or at
the office of the Indenture Trustee's maintained for such purpose.
Payments of principal and interest on the Notes will be made on each
Payment Date to Noteholders of record as of the related Record Date. On each
Payment Date, Noteholders will be entitled to receive interest payments in an
aggregate amount equal to the Monthly Interest Amount for such Payment Date,
together with principal payments in an aggregate amount equal to the Monthly
Principal Amount plus, until the Overcollateralization Amount is equal to the
Required Overcollateralization Amount, Excess Cash, if any, for such Payment
Date. The "Note Balance" of a Note as of any date of determination is equal to
the initial principal balance thereof as of the Closing Date, reduced by the
aggregate of all amounts previously paid with respect to such Note on account
of principal.
The Issuer will pay Monthly Interest on this Note on every Payment Date
until the Principal Balance of this Note is paid in full at a per annum rate
equal to the least of (i) the applicable Formula Rate, (ii) the applicable CAP
Rate and (iii) the applicable Net Funds Cap, taking in to account whether such
Payment Date occurs on or prior to the Initial Redemption Date. The Holder of
this Note may also be entitled to receive certain additional payments of
interest on this Note up to the amount of any Basis Risk Shortfall for the
related Payment Date to the extent of any Supplemental Interest Payments made
under the FSA Policy (as defined below) on such Payment Date. To the extent
such Supplemental Interest Payment is less than the related Basis Risk
Shortfall, a Noteholder may be entitled to payment of LIBOR Carryover Amounts
on subsequent Payment Dates, but only to the extent that Available Funds
applied in the order of priorities set forth in the Indenture are sufficient
on subsequent Payment Dates to cover such Basis Risk Shortfall.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Issuer with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of
this Note.
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Mortgage-Backed LIBOR Notes, Class A, Series 1999-1, 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 Notes. To the extent that any provision of this Note contradicts or is
inconsistent with the provisions of the Indenture, the provisions of the
Indenture shall control and supersede such contradictory or inconsistent
provision herein. The Notes are subject to all terms of the Indenture.
The Notes are and will be equally and ratably secured by the Mortgage
Loans and the other collateral related thereto pledged as security therefor as
provided in the Indenture.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Maturity Date and the
Redemption Date, if any, pursuant to Article X of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which an Event of Default shall have
occurred and be continuing if the Indenture Trustee, at the direction or upon
the prior written consent of Financial Security Assurance Inc. (the "Note
Insurer") in the absence of a Note Insurer Default, or the Holders of the
Notes representing not less than 50% of the Note Balance of the Outstanding
Notes (with the prior written consent of the Note Insurer in the absence of a
Note Insurer Default), shall have declared the Notes to be immediately due and
payable in the manner provided in Section 5.02 of the Indenture. All principal
and interest payments on the Notes shall be made pro rata to the Noteholders
entitled thereto.
The Note Insurer, in consideration of the payment of the premium and
subject to the terms of the Financial Guaranty Insurance Policy (the "FSA
Policy") thereby has unconditionally and irrevocably guaranteed the payment of
the Scheduled Payments as described in the such Policy attached hereto.
Pursuant to the Indenture, unless a Note Insurer Default exists (i) the
Note Insurer shall be deemed to be the holder of the Notes for certain
purposes specified in the Indenture and will be entitled to exercise all
rights of the Noteholders thereunder, including the rights of Noteholders
relating to the occurrence of, and the remedies with respect to, an Event of
Default, without the consent of such Noteholders, and (ii) the Indenture
Trustee may take actions which would otherwise be at its option or within its
discretion, including actions relating to the occurrence of, and the remedies
with respect to, an Event of Default, only at the direction of the Note
Insurer. In addition, on each Payment Date, after the Noteholders have been
paid all amounts to which they are entitled, the Note Insurer will be entitled
to be reimbursed for any unreimbursed Scheduled Payments, unreimbursed Premium
Amounts (each with interest thereon at the "Late Payment Rate" specified in
the FSA Insurance Agreement) and any other amounts owed under the FSA Policy.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate and payments under the FSA Policy will be the sole source of
payments on the Notes, and each Holder hereof, by its acceptance of this Note,
agrees that (i) such Note will be limited in right of payment to amounts
available from the Trust Estate and the FSA Policy as provided in the
Indenture and (ii) such Holder shall have no recourse to the Issuer, the Owner
Trustee, the Indenture Trustee, the Depositor, the Initial Seller, the Seller,
the Master Servicer or any of their respective affiliates, or to the assets of
any of the foregoing entities, except the assets of the Issuer pledged to
secure the Notes pursuant to the Indenture.
As provided in the Indenture, the Notes may be redeemed in whole, but not
in part, by the Issuer at the direction of the Investor Certificateholder of
the Trust, on any Payment Date on and after the date on which the Aggregate
Principal Balance of the Mortgage Loans is 20% or less of the Aggregate
Principal Balance as of the Cut-off Date upon the payment of the redemption
price for the Notes specified in Section 10.01 of the Indenture. As provided
in the Indenture, on any Payment Date on and after the date on which the
Aggregate Principal Balance of the Mortgage Loans is equal to 10% or less of
the Aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date,
and quarterly thereafter, the Indenture Trustee is required to solicit
competitive bids for the purchase of the Mortgage Loans. In the event that
satisfactory bids are received as described in the Indenture (but subject to
the rights of first refusal of the Seller and Master Servicer to purchase the
Mortgage Loans at such bid price), the Notes will be redeemed.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Note Registrar duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for
any registration of transfer or exchange of this Note, but the transferor may
be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of
transfer or exchange.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on
the Notes or under the Indenture or any certificate or other writing delivered
in connection therewith, against (i) the Indenture Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the 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 Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees by accepting the benefits of the Indenture that such Noteholder or
Beneficial Owner will not at any time institute against the Issuer, or join in
any institution against 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 Notes, the Indenture, the Initial Mortgage Loan Purchase
Agreement, the Mortgage Loan Purchase Agreement, the Master Servicing
Agreement, the Management Agreement, the FSA Insurance Agreement and the
Indemnification Agreement (the "Basic Documents").
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and
each Beneficial Owner by acceptance of a beneficial interest in a Note),
agrees to treat the Notes for federal, state and local income, single business
and franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture)
is registered as the owner hereof for all purposes, whether or not this Note
be overdue, and none of the 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 rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Insurer and the Holders of
Notes representing a majority of the Note Balance of all Outstanding Notes.
The Indenture also contains provisions permitting the (i) Note Insurer or (ii)
if a Note Insurer Default exists, the Holders of Notes representing specified
percentages of the Note Balance of Outstanding 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 Note Insurer or by the Holder
of this Note (or any one or more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or
in lieu hereof whether or not notation of such consent or waiver is made upon
this Note. The Indenture also permits the amendment thereof, in certain
limited circumstances, or the waiver of certain terms and conditions set forth
in the Indenture, without the consent of Holders of the Notes issued
thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
Initially, the Notes will be represented by one Note registered in the
name of CEDE & Co. as nominees of the Clearing Agency. The Notes will be
delivered in denominations as provided in the Indenture and subject to certain
limitations therein set forth. The Notes are exchangeable for a like aggregate
initial Note Balance of Notes of different authorized denominations, as
requested by the Holder surrendering the same.
THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note
at the times, place and rate, and in the coin or currency herein prescribed.
Unless the certificate of authentication hereon has been executed by the
Authenticating Agent whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this Instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
DATE: April [[ ]], 1999
AMERICAN RESIDENTIAL EAGLE BOND
TRUST 1999-1
By: Wilmington Trust Company, not in its
individual capacity, but solely as Owner Trustee
under the Trust Agreement
By:_____________________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: April [[ ]], 1999
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
Authenticating Agent
By:_________________________________
Authorized Signatory
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
- ------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________________________________, attorney, to
transfer said Note on the books kept for registration thereof, with full power
of substitution in the premises.
Dated: ____________________*/
Signature Guaranteed: ___________________________*/
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership
or participation in STAMP or such other "signature guarantee program" as may
be determined by the Note Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
EXHIBIT B
FSA POLICY
EXHIBIT C
FORM OF NOTICE OF CLAIM
MANAGEMENT AGREEMENT
This Agreement (the "Agreement") is made as of April 1, 1999 by and
between American Residential Investment Trust, Inc., a Maryland corporation
("Manager"), and American Residential Eagle Bond Trust 1999-1, a Delaware
statutory business trust (the "Issuer"), pursuant to the Deposit Trust
Agreement, dated as of April 1, 1999 (the "Trust Agreement"), between Bear
Stearns Asset Backed Securities, Inc. (the "Company"), as depositor, and
Wilmington Trust Company, a Delaware banking corporation as Owner Trustee
("Owner Trustee").
WITNESSETH:
WHEREAS, the Issuer intends to issue its Mortgage-Backed LIBOR Notes,
Class A, Series 1999-1 (the "Notes"), collateralized by a pool of fixed and
adjustable rate mortgage loans owned by the Issuer ("Mortgage Loans"), as more
particularly set forth in the Indenture (the "Indenture"), dated as of April
1, 1999, between the Issuer and Norwest Bank Minnesota, N.A., a national
banking association, in its capacity as indenture trustee (the "Indenture
Trustee"); and
WHEREAS, the Issuer desires to retain Manager to provide certain
management services to the Issuer in connection with the Notes; and
WHEREAS, Manager is prepared to perform such services for the benefit of
the Issuer;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined in this Agreement
shall have the meanings set forth in the Indenture and in the Master Servicing
Agreement, dated as of April 1, 1999 (the "Master Servicing Agreement"), among
Advanta Mortgage Corp. USA, the Issuer and the Indenture Trustee.
2. Manager. Manager will serve as the manager of the Issuer.
3. Management Services. The Manager will:
(a) provide the following services to the Issuer without the Issuer's
further direction:
(i) cause the Notes executed by the Issuer to be delivered to the
Indenture Trustee for authentication;
(ii) cause definitive Notes to be prepared;
(iii) cause to be kept a Note Register and appoint successor Note
Registrars, if any;
(iv) in connection with the original issuance of the Notes, prepare
all Issuer Requests and Issuer Orders in connection with authentication and
delivery of the Notes; obtain Opinions of Counsel; prepare Officers'
Certificates and supply necessary supporting documents; supply insurance
policies, surety bonds, instructions, opinions and such other documents as may
be required by the terms of the Indenture or by the Indenture Trustee;
(v) appoint a Note Paying Agent, if different from the Indenture
Trustee, and direct the Indenture Trustee to deposit funds with such Note
Paying Agent, if required; cause the Note Paying Agent to execute and deliver
instruments to the Indenture Trustee, if required;
(vi) prepare for execution by the Issuer and file or record all
supplements, amendments, financing statements, continuation statements,
instruments of further assurance and other instruments necessary for the
protection of the Trust Estate;
(vii) supply Opinions of Counsel as to the Trust Estate;
(viii) monitor the Issuer's and other Persons' (including the Master
Servicer's) performance of obligations and notify the Issuer and the Indenture
Trustee of any event of default;
(ix) prepare and deliver on behalf of the Issuer annual statements as
to compliance with the Indenture and other documents to which the Issuer is a
party;
(x) affix the Indenture Trustee's name to each assignment of Mortgage
and, except to the extent otherwise provided in the Master Servicing
Agreement, record the Assignments of Mortgage and deliver the recorded
Assignments to the Custodian;
(xi) monitor the Issuer's obligations as to satisfaction and discharge
of the Indenture and report to the Issuer any failure in the satisfaction of
such obligations;
(xii) give notice to the Noteholders of the resignation of the
Indenture Trustee and the appointment of any successor Indenture Trustee;
(xiii) furnish the Indenture Trustee with names and addresses of the
Noteholders to the extent required;
(xiv) prepare for execution by the Issuer and file all documents
required to be filed on a periodic basis with the Securities and Exchange
Commission and file such documents with the Indenture Trustee and deliver
summaries of such documents to the Noteholders; monitor the Issuer's
compliance with provisions of TIA Section 314(a);
(xv) prepare and deliver to the Issuer for execution, as appropriate,
and then deliver to the Indenture Trustee all documents and opinions and take
all appropriate action with respect to the release of the Mortgage Loans;
(xvi) with the consent of the Issuer, appoint Independent accountants
and any successors and direct such Independent accountants or successors to
prepare and deliver reports or certificates to the extent required by the
Indenture;
(xvii) prepare for execution and deliver on behalf of the Issuer
certificates or Opinions of Counsel with respect to compliance with the
Indenture;
(xiii) record the Indenture, if required;
(xix) cause to be prepared for execution by the Issuer and delivered
or filed, all tax returns, financial statements and such annual or other
reports of the Issuer or the Owner Trustee, in its capacity as such, as may be
required pursuant to the Trust Agreement;
(xx) cause to be calculated the original issue discount with regard to
the Notes as requested from time to time;
(xxi) cause to be prepared for execution by the Issuer and filed,
recorded or delivered, such statements, instruments, notices, documents,
agreements and certificates or other papers required of the Issuer pursuant to
Section 5.01 of the Trust Agreement;
(xxii) deliver, on behalf of the Issuer, all documents and instruments
with respect to each Mortgage Loan as required by the Master Servicing
Agreement; and
(xxiii) deliver, on behalf of the Issuer, a notice of redemption to
the Indenture Trustee and any other notice of exercise of rights to remove
Mortgage Loans from the Indenture;
(b) provide the following services to the Issuer without the Issuer's
further direction:
(i) maintain (or cause to be maintained) the books of the Issuer on a
calendar year basis using the accrual method of accounting;
(ii) deliver (or cause to be delivered) to the Certificateholder as
may be required by the Code and applicable Treasury Regulations, such
information as may be required to enable the Certificateholder to prepare
federal and state income tax returns;
(iii) prepare and file or cause to be prepared and filed such tax
returns relating to the Issuer as may be required by the Code and applicable
Treasury Regulations (making such elections as may from time to time be
required or appropriate under any applicable state or federal statutes, rules
or regulations); and
(iv) collect or cause to be collected any withholding tax as described
in and in accordance with Section 5.01 of the Trust Agreement with respect to
income or distributions to the Certificateholder and prepare or cause to be
prepared the appropriate forms relating thereto;
(c) pursuant to the Indenture between American Residential Eagle Bond
Trust 1999-1, as Issuer, and Norwest Bank Minnesota, National Association, as
Indenture Trustee, dated as of April 1, 1999 (the "Indenture"), perform the
Issuer's obligations specified in sections 3.04(a), 3.05(a); 3.07(a), 3.07(c),
3.08, 6.09(f), 7.01(a), 7.04 and 11.01(a) of the Indenture for the Issuer
without the Issuer's further direction;
(d) pursuant to the Master Servicing Agreement, perform the Issuer's
obligations specified in Section 2 of the Master Servicing Agreement for the
Issuer without the Issuer's further direction; and amend from time to time the
Schedule of Mortgage Loans, as defined in the Master Servicing Agreement, to
reflect the addition of Replacement Mortgage Loans and the deletion of Deleted
Mortgage Loans, pursuant to the provisions of the Master Servicing Agreement
and the Indenture, for the Issuer without the Issuer's further direction;
(e) perform the Issuer's obligations under the Custodial Agreement,
including its obligation to pay the fees and expenses of the Custodian; and
(f) otherwise provide such consultation, services and assistance as
the Issuer may from time to time request in connection with the Owner
Trustee's obligations under the Trust Agreement and/or the Issuer's
obligations under the Indenture, the Trust Agreement, and the Master Servicing
Agreement, in respect of the Notes.
The Issuer shall cooperate with the Manager to facilitate the prompt
performance by the Manager of its obligations under this Paragraph 3. The
Manager may provide such services as required by this Paragraph 3 either
directly or may assign such duties to one or more submanagers pursuant to
submanagement agreements; provided, however, that any such submanager shall
have been approved by the Issuer; and provided further that notwithstanding
any such assignment the Manager shall remain liable for performing its duties
and obligations under this Agreement; and
(g) In performing its services hereunder, observe strictly the
following:
(i) the Issuer's operating expenses and liabilities will not be paid
by the Manager or any affiliate thereof (excluding the Issuer) (an "AmREIT
Person") except that certain organizational expenses of the Issuer and
expenses relating to creation and initial implementation of the Issuer have
been paid by the Manager;
(ii) the Manager will maintain for the Issuer records and books of
account separate from those of every AmREIT Person and telephone numbers,
mailing addresses, stationery and other business forms that are separate and
distinct from those of every AmREIT Person;
(iii) any financial statements of any AmREIT Person which are
consolidated to include the Issuer will contain detailed notes clearly stating
that (A) all of the Issuer's assets are owned by the Issuer, and (B) the
Issuer is a separate legal entity with its own separate creditors which will
be entitled to be satisfied out of the Issuer's assets prior to any value in
the Issuer becoming available to the Issuer's equity holders;
(iv) the Issuer's assets will be maintained in a manner that
facilitates their identification and segregation from those of any AmREIT
Person;
(v) the Manager will cause the Issuer to strictly observe formalities
in its dealings with each AmREIT Person (including, without limitation,
formalities in regard to the Issuer's status as a separate legal entity), and
funds or other assets of the Issuer will not be commingled with those of any
AmREIT Person. The Issuer will not be permitted to maintain joint bank
accounts or other depository accounts to which any AmREIT Person has
independent access;
(vi) the Manager will cause any transaction between the Issuer and an
AmREIT Person to be fair and equitable to the Issuer, to be the type of
transaction which would be entered into by a prudent Person to the position of
the Issuer with an AmREIT Person, and will be on terms which are at least as
favorable as may be obtained from a Person which is not an AmREIT Person;
(vii) any AmREIT Person that renders or otherwise furnishes services
to the Issuer will be compensated by the Issuer at market rates for such
services; and
(viii) the Manager will not permit the Issuer or any AmREIT Person to
be or to hold itself out to be responsible for the debts of the other.
4. Manager Compensation. The Manager shall be entitled to receive from
the Issuer a fee, payable monthly, at the rate and on the dates and in the
manner provided in the Indenture.
5. Limitation of Responsibility of the Manager.
(a) The Manager will have no responsibility under this Agreement other
than to render the services called for hereunder. The Manager, its affiliates,
shareholders, directors, officers and employees shall not be liable to the
Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders or others,
except by reason of acts constituting bad faith, willful misfeasance, gross
negligence or reckless disregard of their duties. The Issuer will reimburse,
indemnify and hold harmless the Manager and its affiliates, shareholders,
directors, officers and employees with respect to all expenses, losses,
damages, liabilities, demands, charges and claims of any nature in respect of
any acts or omissions performed or omitted by the Manager and in accordance
with the procedure set forth below.
(b) Any amount due the Manager or its affiliates, shareholders,
directors, officers and employees under Section 5(a) shall be paid by the
Issuer, solely out of the assets of the Trust Estate that are free of the lien
of the Indenture, promptly after each Payment Date, provided that all interest
and principal due on the Notes on such Payment Date and all amounts then owing
to the Indenture Trustee and the Owner Trustee have been paid in full. Any
amount that cannot be paid to the Manager or its affiliates, shareholders,
directors, officers and employees consistent with the foregoing proviso shall
be paid promptly after each succeeding Payment Date until paid in full, in
each case subject to the foregoing proviso.
6. Term. This Agreement shall continue in effect until the termination of
the Trust Agreement. If the date of such termination is not a Distribution
Date, the Manager shall be paid the amount due it pursuant to Section 5(a) as
of such termination promptly after such date of termination.
7. Termination.
(a) The Manager, at its election, may resign as Manager hereunder and
be discharged of its duties hereunder upon not less than 30 days' notice to
the Issuer, the Owner Trustee and the Indenture Trustee; provided, however,
that no such resignation and discharge shall become effective until a Person
selected by the Manager, who is acceptable to the Issuer in its discretion,
shall have assumed and agreed to perform the duties of the Manager hereunder
as evidenced by a written instrument to such effect delivered to the Issuer.
Upon delivery of such written instrument to the Issuer, the Issuer shall
promptly deliver to the successor Manager a written instrument acknowledging
and accepting the assignment of the resigning Manager's rights hereunder to
the successor Manager. Each such successor Manager shall be deemed to be the
Manager for all purposes of this Agreement.
(b) If any of the following events shall occur and be continuing:
(i) the Manager shall violate any provision of this Agreement and such
default is not cured within ten days after written notice thereof is given to
the Manager by the Issuer or the Indenture Trustee;
(ii) a court of competent jurisdiction shall enter a decree or order
for relief in respect of the Manager in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appoint a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Manager or for any substantial
part of its property, or order the winding-up or liquidation of its affairs;
or
(iii) the Manager shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case under
any such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Manager or for any substantial part of its property,
or shall make any general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due; then, in any such event
this Agreement may be terminated by the Issuer.
8. Indenture Trustee as Beneficiary. Each of the Owner Trustee, the Note
Insurer and the Indenture Trustee shall be an intended third-party beneficiary
of this Agreement and the Note Insurer or the Indenture Trustee shall be
entitled to enforce the rights of the Issuer hereunder for the benefit of the
Noteholders.
9. Assignment. The Manager may not assign this Agreement (other than (i)
the assignment of the duties under this Agreement to one or more submanagers
approved by the Issuer or (ii) to a corporation or other organization which is
a successor by merger, consolidation or purchase of substantially all of the
assets of the Manager) unless such assignment is consented to in writing by
both the Issuer and the Indenture Trustee. Such an assignment, if so consented
to, shall bind the assignee hereunder in the same manner as the Manager is
bound hereunder. This Agreement shall not be assignable by the Issuer without
the consent of the Manager, except for assignment to the Indenture Trustee
pursuant to the Indenture and in the case of assignment to a corporation or
other organization which is a successor by merger, consolidation or purchase
of substantially all of the assets to the Issuer, in which case such successor
organization shall be bound hereunder and by the terms of said assignment in
the same manner as the Issuer is bound hereunder.
10. Heading. The section headings hereof have been inserted for
convenience and reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
11. Amendments. This Agreement may not be amended, changed, modified or
terminated except in writing signed by Manager and the Issuer and unless
approved by the Indenture Trustee, such approval not to be unreasonably
withheld.
12. Governing Law. This Agreement shall be governed by and construed
under the substantive laws of the State of New York applicable to agreements
made and to be performed in the State of New York and the obligations, rights
and remedies of the parties hereto shall be determined in accordance with such
laws.
13. Notices. All notices, requests and other communications permitted or
required hereunder shall be in writing and shall be deemed to have been duly
given when received.
If to Manager to:
American Residential Investment Trust, Inc.
445 Marine View Avenue, Suite 230
Del Mar, CA 92014
Attention: Lisa Faulk and/or Rollie Lynn
If to the Issuer to:
American Residential Eagle Bond Trust 1999-1
c/o Wilmington Trust Company as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
14. Counterparts. This Agreement may be executed in one or more
counterparts, any of which shall constitute an original as against any party
whose signature appears on it, and all of which shall together constitute a
single instrument. This Agreement shall become binding when one or more
counterparts, individually or taken together, bear the signatures of all
parties.
15. Limitation of Liability of Wilmington Trust Company. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered in the name and on behalf of the Issuer by Wilmington
Trust Company, not individually or personally but solely as owner trustee of
American Residential Eagle Bond Trust 1999-1, in the exercise of the powers
and authority conferred and vested in it under the Trust Agreement, (b) each
of the representations, undertakings and agreements herein made on the part of
the Issuer is made and intended not as a personal representation, undertaking
and agreement by Wilmington Trust Company but is made solely in the name and
on behalf of the Issuer and intended for the purpose of binding only the
Issuer, (c) nothing herein contained shall be construed as creating any
liability on the part of Wilmington Trust Company, other than any liability in
connection herewith arising out of its gross negligence, bad faith or willful
misconduct, and (d) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the
Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Issuer under
this Agreement or the other Operative Documents or otherwise.
16. Nonpetition Covenants. Notwithstanding any prior termination of this
Agreement, the Manager shall not, prior to the date which is one year and one
day after the termination of this Agreement with respect to the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer (or any assignee)
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day first above written.
AMERICAN RESIDENTIAL
INVESTMENT TRUST, INC.
By: /s/ Jay M. Fuller
--------------------------------
Name: Jay M. Fuller
Title:
AMERICAN RESIDENTIAL EAGLE
BOND TRUST 1999-1
By: Wilmington Trust Company,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Emmett Harmon
-----------------------------
Name: Emmett Harmon
Title: Vice President
EXECUTION
===============================================================================
BEAR STEARNS ASSET BACKED SECURITIES, INC.,
as Depositor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
---------------------------------------------------------
DEPOSIT TRUST AGREEMENT
Dated as of April 1, 1999
---------------------------------------------------------
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
===============================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions........................................1
Section 1.02. Other Definitional Provisions......................5
ARTICLE II
ORGANIZATION
Section 2.01. Name...............................................6
Section 2.02. Office.............................................6
Section 2.03. Purposes and Powers................................6
Section 2.04. Appointment of Owner Trustee.......................7
Section 2.05. Initial Capital Contribution of Trust Estate.......7
Section 2.06. Declaration of Trust...............................8
Section 2.07. Title to Trust Property............................8
Section 2.08. Situs of Trust.....................................8
Section 2.09. Representations and Warranties of the Depositor....8
Section 2.10. Payment of Trust Fees..............................9
Section 2.11. Tax Treatment......................................9
Section 2.12. Investment Company................................10
ARTICLE III
THE INVESTOR CERTIFICATES
Section 3.01. Ownership.........................................11
Section 3.02. The Initial Investor Certificate..................11
Section 3.03. Authentication of Investor Certificate............11
Section 3.04. Registration of and Limitations on
Transfer and Exchange of Investor Certificate.....11
Section 3.05. Mutilated, Destroyed, Lost
or Stolen Investor Certificate....................14
Section 3.06. Persons Deemed Investor Certificateholder.........15
Section 3.07. Access to List of Investor Certificateholder's
Name and Address..................................15
Section 3.08. Maintenance of Office or Agency...................15
Section 3.09. Certificate Paying Agent..........................15
Section 3.10. Cooperation.......................................17
ARTICLE IV
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 4.01. General Authority.................................18
Section 4.02. General Duties....................................18
Section 4.03. Action upon Instruction...........................18
Section 4.04. No Duties Except as Specified under
Specified Documents or in Instructions............19
Section 4.05. Restrictions......................................19
Section 4.06. Prior Notice to Investor Certificateholder
with Respect to Certain Matters...................19
Section 4.07. Action by Investor Certificateholder
with Respect to Certain Matters...................20
Section 4.08. Action by Investor Certificateholder
with Respect to Bankruptcy........................20
Section 4.09. Restrictions on Investor
Certificateholder's Power.........................20
Section 4.10. Doing Business in Other Jurisdictions.............20
ARTICLE V
APPLICATION OF TRUST FUND
Section 5.01. Distributions.....................................22
Section 5.02. Method of Payment.................................22
Section 5.03. Statements to Investor Certificateholder..........22
Section 5.04. Tax Returns.......................................22
Section 5.05. Reports to Internal Revenue Service and Others....23
ARTICLE VI
CONCERNING THE OWNER TRUSTEE
Section 6.01. Acceptance of Trusts and Duties...................24
Section 6.02. Furnishing of Documents...........................25
Section 6.03. Representations and Warranties....................25
Section 6.04. Reliance; Advice of Counsel.......................26
Section 6.05. Not Acting in Individual Capacity.................26
Section 6.06. Owner Trustee Not Liable for
Investor Certificate or Related Documents.........27
Section 6.07. Owner Trustee May Own Investor
Certificate and Notes.............................27
ARTICLE VII
COMPENSATION OF OWNER TRUSTEE
Section 7.01. Owner Trustee's Fees and Expense..................28
Section 7.02. Indemnification...................................28
ARTICLE VIII
TERMINATION OF TRUST AGREEMENT
Section 8.01. Termination of Trust Agreement....................30
ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 9.01. Eligibility Requirements for Owner Trustee........32
Section 9.02. Replacement of Owner Trustee......................32
Section 9.03. Successor Owner Trustee...........................33
Section 9.04. Merger or Consolidation of Owner Trustee..........33
Section 9.05. Appointment of Co-Trustee or Separate Trustee.....33
ARTICLE X
MISCELLANEOUS
Section 10.01. Amendments........................................35
Section 10.02. No Legal Title to Trust Estate....................35
Section 10.03. Limitations on Rights of Others...................36
Section 10.04. Notices...........................................36
Section 10.05. Severability of Provisions........................36
Section 10.06. Counterparts......................................37
Section 10.07. Successors and Assigns............................37
Section 10.08. No Petition.......................................37
Section 10.09. No Recourse.......................................37
Section 10.10. Headings..........................................37
Section 10.11. Governing Law.....................................37
Section 10.12. Integration.......................................37
Section 10.13. Investor Certificate Nonassessable................37
Section 10.14. Third-Party Beneficiaries.........................37
EXHIBITS
Exhibit A Form of Investor Certificate...................................A-1
Exhibit B Certificate of Trust of American
Residential Eagle Bond Trust 1999-1............................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 Certificate of Non-Foreign Status..............................F-1
Exhibit G Form of ERISA Representation Letter............................G-1
Exhibit H Form of Representation Letter..................................H-1
This DEPOSIT TRUST AGREEMENT, dated as of April 1, 1999 (as amended from
time to time, the "Agreement"), is between Bear Stearns Asset Backed
Securities, Inc., a Delaware corporation, as depositor (the "Depositor"), and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Owner Trustee").
WITNESSETH:
WHEREAS, the Depositor and the Owner Trustee desire to form a Delaware
business trust for the purpose of, among other things, holding certain
mortgage loans and related assets;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Agreement, except as
otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the indenture dated as of April 1, 1999 (the
"Indenture"), between American Residential Eagle Bond Trust 1999-1, as issuer,
and Norwest Bank Minnesota, National Association, as indenture trustee. All
other capitalized terms used herein shall have the meanings specified herein.
All references herein to "this Agreement" shall be references to this
Agreement as defined in the preamble hereto. In addition, the following terms
shall have the meanings set forth below:
"AmREIT" means American Residential Investment Trust, Inc. and its
successors and assigns.
"Basic Documents" means the Underwriting Agreement, this Agreement, the
Indenture, the Management Agreement, the Initial Mortgage Loan Purchase
Agreement, the Mortgage Loan Purchase Agreement, the Master Servicing
Agreement, the Insurance Agreement, the Securities, the FSA Premium Letter,
the Custody Agreement, the Indemnification and Contribution Agreement and the
Indemnification Agreement.
"Business Day" means any day that is not (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions in the City of New York or the City
of Wilmington, Delaware or the States of Minnesota or Maryland, are authorized
or obligated by law or executive order to be closed.
"Business Trust Statute" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Section 3801 et seq., as the same may be amended from time to
time.
"Certificate of Trust" means the Certificate of Trust to be filed by the
Owner Trustee for the Trust pursuant to Section 3810 of the Business Trust
Statute in the form of Exhibit B hereto.
"Certificate Paying Agent" means any paying agent or co-paying agent
appointed pursuant to this Agreement, which initially shall be the Indenture
Trustee.
"Certificate Register" means the register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the
registration of the Investor Certificate and of transfers and exchanges of the
Investor Certificate.
"Certificate Registrar" means, initially, the Indenture Trustee, in its
capacity as Certificate Registrar, or any successor Certificate Registrar in
such capacity.
"Closing Date" means April 15, 1999.
"Code" means the Internal Revenue Code of 1986, as amended.
"Corporate Trust Office" means the principal corporate trust office of
the (i) Owner Trustee, which, on the date of this Agreement, is located at
Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-00001, Attention: Corporate Trust Administration, or (ii) Indenture
Trustee, which, on the date of this Agreement, is located at Sixth Avenue and
Marquette, Minneapolis, Minnesota 55479, Attention: Corporate Trust Services:
American Residential Eagle Bond Trust 1999-1, as applicable, or any other
office that the Owner Trustee or the Indenture Trustee, as applicable, advises
the Depositor is its principal corporate trust office.
"Depositor" means Bear Stearns Asset Backed Securities, Inc., a Delaware
corporation, and its successors and assigns.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiscal Year" means the period from each January 1 to and including the
following December 31.
"Indemnification Agreement" means the indemnification agreement in
connection with the insurance documents, dated as of April 1, 1999, among the
Note Insurer, the Initial Seller, the Seller, the Trust, the Depositor and the
Underwriter.
"Indemnification and Contribution Agreement" means the indemnification
and contribution agreement, dated as of April 1, 1999, among the Initial
Seller, the Seller, the Depositor and the Underwriter.
"Indenture" means the indenture, dated as of April 1, 1999, between the
Trust and the Indenture Trustee.
"Indenture Trustee" means Norwest Bank Minnesota, National Association,
as indenture trustee under the Indenture, and any successor Indenture Trustee.
"Initial Mortgage Loan Purchase Agreement" means the mortgage loan
purchase agreement, dated as of April 1, 1999, between the Initial Seller and
the Seller.
"Initial Seller" means AmREIT.
"Insurance Agreement" means the insurance and indemnity agreement, dated
as of April 1, 1999, among the Trust, the Depositor, the Initial Seller, the
Seller and the Note Insurer.
"Investor Certificateholder" means the Person in whose name the Investor
Certificate is registered in the Certificate Register except that, if the
Investor Certificate is registered in the name of the Issuer, the Owner
Trustee or the Indenture Trustee or any Affiliate of any of them it shall be
deemed not to be outstanding and the registered holder will not be considered
an Investor Certificateholder or a holder for purposes of giving any request,
demand, authorization, direction, notice, consent or waiver under the
Indenture or this Agreement; provided that, in determining whether the
Indenture Trustee or the Owner Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver,
only the Investor Certificate that the Indenture Trustee or the Owner Trustee
knows to be so owned shall be so disregarded. Owners of the Investor
Certificate that have been pledged in satisfaction of the Indenture Trustee or
the Owner Trustee, as the case may be, the pledgee's right so to act with
respect to the Investor Certificate and that the pledgee is not the Issuer,
any other obligor upon the Investor Certificate or any affiliate of any of the
foregoing Persons.
"Investor Certificate" means the equity certificate representing an
undivided beneficial interest in the Trust in substantially the form attached
hereto as Exhibit A.
"Issuer" means the Trust created pursuant to this Agreement.
"Management Agreement" means the management agreement, dated as of April
1, 1999, by and between the Trust and AmREIT, as such agreement may be amended
or supplemented.
"Manager" means AmREIT.
"Master Servicer" means Advanta Mortgage Corp. USA, a Delaware
corporation, and any successor Master Servicer.
"Master Servicing Agreement" means the master servicing agreement, dated
of April 1, 1999, by and among the Master Servicer, the Issuer and the
Indenture Trustee.
"Moody's" means Moody's Investors Service.
"Mortgage Loan Purchase Agreement" means the mortgage loan purchase
agreement, dated as of April 1, 1999, between the Seller, as seller, and the
Depositor, as purchaser.
"Mortgage Loans" means the fixed and adjustable rate, first lien
residential mortgage loans transferred to the Depositor pursuant to the
Mortgage Loan Purchase Agreement and transferred and assigned by the Depositor
to the Trust pursuant to this Agreement.
"Mortgage Loan Sale Agreements" means the Initial Mortgage Loan Purchase
Agreement and the Mortgage Loan Purchase Agreement.
"Noteholders" means the holders of the Notes.
"Note Insurer" means Financial Security Assurance Inc., a New York stock
insurance corporation.
"Notes" means the American Residential Eagle Bond Trust 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1, issued pursuant to the
Indenture.
"Percentage Interest" means, with respect to the Investor Certificate,
the percentage set forth on the face thereof.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Record Date" means, with respect to any Payment Date, the date on which
the Person(s) entitled to receive any payments on the Investor Certificate due
and payable on such Payment Date are determined; such date shall be the last
Business Day of the month preceding the month of such Payment Date.
"Rule 144A" means Rule 144A under the Securities Act.
"Secretary of State" means the Secretary of State of the State of
Delaware.
"Securities" means the Investor Certificate together with the Notes.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means American Residential Eagle, Inc., a Delaware corporation,
and its successors and assigns.
"Standard & Poor's" means Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, Inc.
"Trust" means the trust created pursuant to this Agreement.
"Trust Estate" means, collectively, the Mortgage Loans, all of the
Trust's rights under the Mortgage Loan Sale Agreements (including the Initial
Seller's and the Seller's repurchase or substitution obligations) and all
other assets pledged as collateral under the Indenture as security for the
payment of the Notes.
"Underwriter" means Bear Stearns & Co. Inc.
"Underwriting Agreement" means the underwriting agreement dated April 9,
1999, between the Depositor and the Underwriter.
Section 1.02. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the same meanings when
used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; "or" includes "and/or"; and the
term "including" and all variations thereof means "including without
limitation".
(d) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(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.
ARTICLE II
ORGANIZATION
Section 2.01. Name. The trust created hereby (the "Trust") shall be known
as "American Residential Eagle Bond Trust 1999-1", in which name the Owner
Trustee and its officers 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 of the Owner Trustee or at such
other address within the State of Delaware as the Owner Trustee may designate
by written notice to the Investor Certificateholder, the Note Insurer and the
Indenture Trustee.
Section 2.03. Purposes and Powers. The purpose of the Trust is to engage
in the following activities:
(a) to issue and administer the Notes pursuant to the Indenture and
the Investor Certificate pursuant to this Agreement ;
(b) to purchase the Mortgage Loans and to pay the organizational,
start-up and transactional expenses of the Trust;
(c) to assign, grant, transfer, pledge and convey the Mortgage Loans
pursuant to the Indenture and to hold, manage and distribute to the
Investor Certificateholder pursuant to Section 5.01 any portion of the
Mortgage Loans released from the Lien of, and remitted to the Trust
pursuant to, the Indenture;
(d) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(e) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(f) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Trust Estate and the making of distributions to the Investor
Certificateholder and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the other Basic Documents while any Note is outstanding without
the consent of the Note Insurer.
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 rights, powers and duties set forth herein and in the Business Trust
Statute.
The Owner Trustee is hereby authorized: (i) to execute the Basic
Documents to which the Trust is a party, (ii) to appoint a manager to perform
certain administrative and operational duties on behalf of the Trust as may be
required by the Basic Documents, all pursuant to a Management Agreement, and
(iii) to take all other actions required or permitted to be taken by the Trust
in accordance with this Agreement or the other Basic Documents.
Section 2.05. Initial Capital Contribution of Trust Estate. In
consideration of the delivery by the Owner Trustee, on behalf of the Trust, of
the Securities to the Depositor or its designee, upon the order of the
Depositor, the Depositor, as of the Closing Date and concurrently with the
execution and delivery hereof, does hereby sell, transfer, assign, set over
and otherwise convey to the Trust, without recourse, but subject to the other
terms and provisions of this Agreement, all of the right, title and interest
of the Depositor in and to the Trust Estate. The foregoing sale, transfer,
assignment, set over and conveyance does not, and is not intended to, result
in a creation or an assumption by the Trust of any obligation of the Depositor
or any other Person in connection with the Trust Estate or under any agreement
or instrument relating thereto, except as specifically set forth herein.
The Owner Trustee, on behalf of the Trust, acknowledges the conveyance to
the Trust by the Depositor, as of the Closing Date, of the Trust Estate,
including all right, title and interest of the Depositor in and to the Trust
Estate. Concurrently with such conveyance and in exchange therefor, the Trust
has pledged the Trust Estate to the Indenture Trustee and has executed the
Investor Certificate and the Notes and caused them to be duly authenticated
and delivered to or upon the order of the Depositor.
It is the express intent of the parties hereto that the conveyance of the
Trust Estate by the Depositor to the Trust be, and be construed as, an
absolute sale thereof. It is, further, not the intention of the parties that
such conveyances be deemed a pledge thereof. However, in the event that,
notwithstanding the intent of the parties, such assets are held to be the
property of the granting party, or if for any other reason this Agreement is
held or deemed to create a security interest in the Trust Estate, then (i)
this Agreement shall be deemed to be a security agreement within the meaning
of the Uniform Commercial Code of the State of New York and (ii) the
conveyances provided for in this Agreement shall be deemed to be an assignment
and a grant by the Depositor to the Trust of a security interest in all of the
assets transferred, whether now owned or hereafter acquired.
The Depositor and the Manager, on behalf of the Trust, shall, to the
extent consistent with this Agreement, take such actions as may be necessary
to ensure that, if this Agreement were deemed to create a security interest in
the Trust Estate, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement. The Depositor and
the Manager, on behalf of the Trust, shall arrange for filing any Uniform
Commercial Code continuation statements in connection with any security
interest granted or assigned hereunder.
Section 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it shall hold the Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Investor
Certificateholder, subject to the obligations of the Trust under the Basic
Documents. It is the intention of the parties hereto that the Trust constitute
a business trust under the Business Trust Statute and that this Agreement
constitute the governing instrument of such business trust. 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. No later than the Closing Date, the
Owner Trustee shall cause the filing of the Certificate of Trust with the
Secretary of State.
Section 2.07. Title to Trust Property. Legal title to the 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
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 or a separate
trustee, as the case may be.
Section 2.08. 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, 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 of the Owner Trustee
in Delaware.
Section 2.09. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(a) 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.
(b) 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
otherwise) of the Depositor and the ability of the Depositor to perform
under this Agreement.
(c) The Depositor has full power and authority to execute and
deliver this 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 Agreement have been duly authorized by the Depositor
by all necessary corporate action.
(d) Upon the conveyance by the Depositor of the Trust Estate and
receipt of the Trust Estate by the Owner Trustee on behalf of the Trust
under this Agreement, the Trust will own the Trust Estate free and clear
of any Lien (other than a Lien pursuant to the Indenture) and the Owner
Trustee will have the right on behalf of the Trust to grant and deliver
the Trust Estate to the Indenture Trustee in accordance with the
Indenture and Section 2.03 of this Agreement.
(e) This Agreement has been duly and validly authorized, executed
and delivered by, and constitutes a valid and binding agreement of, the
Depositor, enforceable against the Depositor in accordance with its
terms, subject, as to enforceability of remedies, to applicable
bankruptcy, insolvency, reorganization or other laws affecting creditors'
rights generally and to general principles of equity and equitable
remedies (regardless of whether the enforceability of such remedies is
considered in a proceeding at law or in equity).
(f) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any terms or 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 2.10. Payment of Trust Fees. The Owner Trustee shall pay or cause
to be paid out of the Trust Estate any fees and expenses of the Trust (other
than the Owner Trustee's fees and expenses pursuant to Section 7.01).
Section 2.11. Tax Treatment. It is the intention of the parties hereto
that, for federal and state income and state and local franchise tax purposes,
the Trust shall not be treated as (i) an association subject separately to
taxation as a corporation (other than as a "qualified REIT subsidiary" as
defined in Section 856(i) of the Code), (ii) a "publicly traded partnership"
as defined in Treasury Regulation Section 1.7704-1, or (iii) a "taxable
mortgage pool" as defined in Section 7701(i) of the Code. It is also the
intention of the parties hereto that (i) the Notes qualify under applicable
tax laws as indebtedness secured by the Trust Estate and (ii) the Trust formed
hereby be disregarded as an entity separate from the Depositor unless and
until the date when either (a) there is more than one Investor
Certificateholder or (b) the Notes are recharacterized as an equity interest
in the Trust for federal income tax purposes. In such event, the Trust is
intended to be classified as a partnership for federal income tax purposes.
The Depositor, the Owner Trustee and the Manager and any holder of the
Investor Certificate agree to report the transactions contemplated hereby in
accordance with the above stated intentions unless and until determined to the
contrary by an applicable taxing authority, and the provisions of this
Agreement shall be interpreted to further the above stated intentions.
Section 2.12. Investment Company. Neither the Depositor nor any holder of
the Investor Certificate shall take any action which would cause the Trust to
become an "investment company" which would be required to register under the
Investment Company Act of 1940, as amended.
ARTICLE III
THE INVESTOR CERTIFICATES
Section 3.01. Ownership. Upon the formation of the Trust and thereafter
except as otherwise permitted hereunder, the Depositor shall be the sole
Investor Certificateholder for all purposes of this Agreement.
Section 3.02. The Initial Investor Certificate. The Investor Certificate
shall be issued as a single certificate evidencing a Percentage Interest of
100%.
The Investor Certificate shall initially be registered in the name of the
Depositor. The Investor Certificate 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 3.03. An Investor
Certificate bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized to
sign on behalf of the Trust, shall be validly issued and entitled to the
benefit of this Agreement, notwithstanding that such individuals or any of
them shall have ceased to be so authorized prior to the authentication and
delivery of such Investor Certificate or did not hold such offices at the date
of authentication and delivery of such Investor Certificate. A Person or a
transferee shall become an Investor Certificateholder and shall be entitled to
the rights and subject to the obligations of an Investor Certificateholder
hereunder, upon such Person's or transferee's acceptance of an Investor
Certificate duly registered in such Person's or transferee's name, pursuant to
and upon satisfaction of the conditions set forth in Section 3.04.
Section 3.03. Authentication of Investor Certificate. Concurrently with
the acquisition of the Mortgage Loans by the Trust, the Owner Trustee shall
cause the Investor Certificate in an initial aggregate Percentage Interest of
100.00% 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 Seller. No Investor Certificate shall entitle its holder to any benefit
under this Agreement or be valid for any purpose unless there shall appear on
such Investor Certificate a certificate of authentication substantially in the
form set forth in Exhibit A, executed by the Owner Trustee, by manual
signature; and such authentication shall constitute conclusive evidence that
such Investor Certificate shall have been duly authenticated and delivered
hereunder. All Investor Certificates shall be dated the date of their
authentication.
Section 3.04. Registration of and Limitations on Transfer and Exchange of
Investor Certificate. The Certificate Registrar shall keep or cause to be
kept, at the office or agency maintained pursuant to Section 3.08, a
Certificate Register in which, subject to such reasonable regulations as it
may prescribe, the Certificate Registrar shall provide for the registration of
the Investor Certificate and transfers and exchanges of the Investor
Certificate 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.
Subject to satisfaction of the conditions set forth below, upon surrender
for registration of transfer of the Investor Certificate at the office or
agency maintained pursuant to Section 3.08, the Owner Trustee shall execute,
authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver) in the name of the designated transferee or
transferees, a new Investor Certificate of a like Percentage Interest, dated
the date of authentication by the Owner Trustee or any authenticating agent.
Each Investor 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 related
Investor Certificateholder or such Investor Certificateholder's attorney duly
authorized in writing. Each Investor 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 the Investor Certificate, 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 the Investor Certificate.
Except as described below, an Investor 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.
An Investor Certificate may be transferred to an Investor
Certificateholder unable to establish its non-foreign status as described in
the preceding paragraph only if such Investor Certificateholder provides an
Opinion of Counsel, which Opinion of Counsel shall not be an expense of the
Trust, the Owner Trustee, the Certificate Registrar or the Depositor,
satisfactory to the Owner Trustee and the Note Insurer, that such transfer (i)
will not affect the tax status of the Trust and (ii) will not adversely affect
the interests of any Investor Certificateholder or Noteholder or the Note
Insurer, including as a result of the imposition of any federal withholding
taxes on the Trust (except to the extent that such withholding taxes would be
payable solely from amounts otherwise distributable to the Investor
Certificate of the prospective transferee). If such transfer occurs and such
foreign Investor Certificateholder becomes subject to such federal withholding
taxes, any such taxes will be withheld by the Certificate Paying Agent at the
direction of the Manager as tax matters person, as defined in the Code. An
Investor Certificateholder unable to establish its non-foreign status shall
submit to the Certificate Paying Agent a copy of its Form W-8 and shall
resubmit such Form W-8 every three years.
No transfer, sale, pledge or other disposition of an Investor 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 the Securities
Act and such state laws. In the event of any such transfer, the Owner Trustee
or the Certificate Registrar shall prior to such transfer require the
transferee to execute (a) either (i) an investment letter in substantially the
form attached hereto as Exhibit C (or in such form and substance reasonably
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 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 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 the Securities Act and such state laws, or is being
made pursuant to the Securities Act and such state laws, which Opinion of
Counsel shall not be an expense of the Trust, the Owner Trustee, the
Certificate Registrar or the Depositor and (B) the transferee executes a
representation letter, substantially in the form of Exhibit D, and the
transferor executes a representation letter, substantially in the form of
Exhibit E, 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 Trust,
the Owner Trustee, the Certificate Registrar or the Depositor and (b) the
Certificate of Non-Foreign Status substantially the form of 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. If such Investor Certificateholder is unable to provide a
Certificate of Non-Foreign Status, such Investor Certificateholder must
provide an Opinion of Counsel as described in the preceding paragraph. The
Investor Certificateholder desiring to effect such transfer shall, and does
hereby agree to, indemnify the Trust, the Owner Trustee, the Certificate
Registrar 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 an Investor Certificate 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 (any of the foregoing,
a "Plan"), any Person acting, directly or indirectly, on behalf of any such
Plan or any Person acquiring such Investor Certificate with "plan assets"
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
and the Certificate Registrar are provided with an Opinion of Counsel that
establishes to the satisfaction of the Depositor, the Owner Trustee and the
Certificate Registrar that the purchase of the Investor Certificate 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, the
Certificate Paying Agent or the Indenture Trustee 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 or in any other
Basic Document, which Opinion of Counsel shall not be an expense of the
Depositor, the Owner Trustee or the Certificate Registrar. 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 Investor Certificate with
Plan Assets may provide a certification in the form of Exhibit G, upon which
the Depositor, the Owner Trustee, the Certificate Registrar, the Certificate
Paying Agent, and the Indenture Trustee may rely 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 Investor
Certificate by the Depositor to an Affiliate of the Depositor (in which case,
the Depositor or such Affiliate shall have deemed to have represented that
such Affiliate is not a Plan or a Person investing any Plan Assets), and the
Owner Trustee, the Certificate Registrar, the Certificate Paying Agent, and
the Indenture 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, sale, assignment, pledge or other disposition
of an Investor Certificate shall be permitted, and no such transfer shall be
registered by the Certificate Registrar or be effective hereunder, unless
evidenced by an Opinion of Counsel acceptable to the Note Insurer that
establishes that such transfer or the registration of such transfer would not
cause the Trust to be characterized as an association (or a publicly traded
partnership) taxable as a corporation by having more than 100 Investor
Certificateholders at any time during the taxable year of the Trust, a
corporation or a taxable mortgage pool for federal and relevant state income
tax purposes.
In addition, no transfer, sale, assignment, pledge or other disposition
of an Investor Certificate shall be made unless the proposed transferee (a)
executes a representation letter substantially in the form of Exhibit D, or
substantially in the form of Exhibit H, that (i) such transferee is acquiring
the Investor Certificate for its own behalf and is not acting as agent or
custodian for any other Person or entity in connection with such acquisition
and (ii) if such transferee is a partnership, grantor trust or S corporation
for federal income tax purposes, the related Investor Certificates represent
not more than 50% of the assets of the partnership, grantor trust or S
corporation, and (b) such transferee is either an Affiliate of the Seller or
otherwise acceptable to the Owner Trustee, the Certificate Paying Agent and
the Certificate Registrar.
Section 3.05. Mutilated, Destroyed, Lost or Stolen Investor Certificate.
If (i) any mutilated Investor 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 Investor
Certificate and (ii) 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 from harm, then in the absence of notice to
the Certificate Registrar or the Owner Trustee that such Investor Certificate
has been acquired by a bona fide purchaser, the Owner Trustee shall execute on
behalf of the Trust and the Owner Trustee or its authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Investor Certificate, a new Investor Certificate of
like tenor. In connection with the issuance of any new Investor Certificate
under this Section, the Owner Trustee or the Certificate Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Investor
Certificate issued pursuant to this Section shall constitute conclusive
evidence of ownership in the Trust, as if originally issued, whether or not
the lost, stolen or destroyed Investor Certificate shall be found at any time.
Section 3.06. Persons Deemed Investor Certificateholder. Prior to due
presentation of an Investor Certificate for registration of transfer, the
Owner Trustee, the Certificate Registrar or any Certificate Paying Agent may
treat the Person in the name of which the Investor Certificate is registered
in the Certificate Register as the owner of such Investor 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 the Certificate Paying Agent shall be bound by any notice to the
contrary.
Section 3.07. Access to List of Investor Certificateholder's Name and
Address. 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, in such form as the Depositor or the Owner Trustee, as the case
may be, may reasonably require, the name and address of the Investor
Certificateholder as of the most recent Record Date. The Investor
Certificateholder, by receiving and holding the Investor Certificate, shall be
deemed to have agreed not to hold any of the Trust, the Depositor, 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 3.08. Maintenance of Office or Agency. The Certificate Registrar,
on behalf of the Trust, shall maintain an office or offices or agency or
agencies where Investor 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 Investor Certificate may be served. The Certificate
Registrar initially designates the Corporate Trust Office of the Indenture
Trustee as its office for such purposes. The Certificate Registrar shall give
prompt written notice to the Depositor, the Owner Trustee and the Investor
Certificateholder of any change in the location of the Certificate Register or
any such office or agency.
Section 3.09. Certificate Paying Agent.
(a) The Certificate Paying Agent shall establish a segregated trust
account which shall be an Eligible Account entitled "Certificate Distribution
Account for the benefit of the Investor Certificateholders of American
Residential Eagle Bond Trust 1999-1" (the "Certificate Distribution Account")
and shall make distributions to the Investor Certificateholder from the
Certificate Distribution Account on behalf of the Trust in accordance with the
provisions of the Investor Certificate and Sections 5.01 and 5.02 from
payments remitted to the Certificate Paying Agent by the Indenture Trustee
pursuant to Section 8.02 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 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 Investor Certificate 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, or of the Indenture Trustee, in the making
of any payment required to be made with respect to the Investor
Certificate;
(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 the Investor Certificate, 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; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on the Investor Certificate of
any applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
(b) 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 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, that 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 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 shall also be the successor Paying Agent under the Indenture. The
Owner Trustee shall cause such successor Certificate Paying Agent or any
co-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 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 4.04, 6.01,
6.03, 6.04, 6.06, 6.07 and 7.01 shall apply to the Certificate Paying Agent,
to the extent applicable, as though it was named in each such Section in place
of the Owner Trustee. Any reference in this Agreement to the Certificate
Paying Agent shall include any co-paying agent, unless the context otherwise
requires.
(c) 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 received from the Indenture Trustee (if
applicable), 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 to the Investor Certificateholder from
moneys on deposit in the Certificate Distribution Account.
Section 3.10. Cooperation. The Trust shall cooperate in all respects with
any reasonable request by the Note Insurer for action to preserve or enforce
the Note Insurer's rights or interest under this Agreement or the Insurance
Agreement, consistent with this Agreement and without limiting the rights of
the Investor Certificateholder as otherwise expressly set forth in this
Agreement.
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 such Basic Documents 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 shall 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 Agreement and in the
interest of the Investor Certificateholder, subject to the Basic Documents and
in accordance with the provisions of this Agreement.
Section 4.03. Action upon Instruction.
(a) Subject to this Article and in accordance with the terms of the other
Basic Documents, the Investor Certificateholder 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 Investor Certificateholder
pursuant to this Article.
(b) Notwithstanding the foregoing, the Owner Trustee shall not be
required to take any action hereunder or under any other 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 other Basic
Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or
under any other Basic Document, or in the event that the Owner Trustee is
unsure as to the application of any provision of this Agreement or any other
Basic Document, or any such provision is ambiguous as to its application, or
is, or appears to be, in conflict with any other applicable provision, or in
the event that this Agreement permits any determination by the Owner Trustee
or is silent or is incomplete as to the course of action that the Owner
Trustee is required to take with respect to a particular set of facts, the
Owner Trustee shall promptly give notice (in such form as shall be appropriate
under the circumstances) to the Investor Certificateholder 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 the Investor Certificateholder or holders representing 100%
Percentage Interest, 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 such shorter period as
reasonably may be specified in such notice or may be necessary under the
circumstances) it may, but shall be under no duty to, take or refrain from
taking such action not inconsistent with this Agreement or the other Basic
Documents as it shall deem to be in the best interests of the Investor
Certificateholder; 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 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 in accordance with (i)
the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) the Basic Documents, and (iii) 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 Agreement or any other
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 filing with the Securities and Exchange Commission for the Trust or to
record this Agreement or any other 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 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 Trust Estate.
Section 4.05. Restrictions.
(a) The Owner Trustee shall not take any action that (i) is inconsistent
with the purposes of the Trust set forth in Section 2.03 or (ii) to the actual
knowledge of the Owner Trustee, would result in the Trust becoming taxable as
a corporation for federal income tax purposes. The Investor Certificateholder
shall not direct the Owner Trustee to take action that would violate the
provisions of this Section.
(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 (i) 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 Investor Certificateholder and (ii) such conveyance or
transfer shall not violate the provisions of Section 3.09 of the Indenture.
Section 4.06. Prior Notice to Investor Certificateholder 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 Investor Certificateholder
in writing of the proposed action and the Investor Certificateholder
representing 100% Percentage Interest shall not have notified the Owner
Trustee in writing prior to the 30th day after such notice is given that such
Investor Certificateholder has 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 Mortgage Loans) and the compromise of any action, claim or
lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of cash distributions due and
owing under the Mortgage Loans);
(b) the election by the Trust to file an amendment to the Certificate of
Trust (unless such amendment is required to be filed under the Business Trust
Statute);
(c) the amendment 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 Investor
Certificateholder; or
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of
a successor Certificate Registrar or Certificate Paying Agent, or the consent
to the assignment by the Note Registrar, the Paying Agent, the Indenture
Trustee, the Certificate Registrar or the Certificate Paying Agent of its
obligations under the Indenture or this Agreement, as applicable.
Section 4.07. Action by Investor Certificateholder with Respect to
Certain Matters. The Owner Trustee shall not have the power, except upon the
written direction of Investor Certificateholder evidencing 100% Percentage
Interest, to (i) remove the Master Servicer under the Master Servicing
Agreement pursuant to Sections 6(w) thereof or (ii) except as expressly
provided in the Basic Documents, sell the Mortgage Loans after the termination
of the Indenture.
Section 4.08. Action by Investor Certificateholder 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 the Investor Certificateholder and the delivery to the Owner
Trustee by the Investor Certificateholder of a certificate certifying that
such Investor Certificateholder reasonably believes that the Trust is
insolvent.
Section 4.09. Restrictions on Investor Certificateholder's Power. The
Investor Certificateholder 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 Agreement or any
other Basic Document 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. 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, (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 contemplated
hereby.
ARTICLE V
APPLICATION OF TRUST FUND
Section 5.01. Distributions.
(a) On each Payment Date, the Certificate Paying Agent shall distribute
to the Investor Certificateholder all funds, if any, on deposit in the
Certificate Distribution Account as a result of the application of Section
8.02(c) of the Indenture.
(b) In the event that any withholding tax is imposed on distributions (or
allocations of income) to an Investor Certificateholder, such tax shall reduce
the amount otherwise distributable to such Investor Certificateholder in
accordance with this Section. The Certificate Paying Agent is hereby
authorized and directed to retain or cause to be retained from amounts
otherwise distributable to the Investor Certificateholder sufficient funds for
the payment of any tax that is legally owed by the Trust; provided, that such
authorization shall not prevent the Owner Trustee from contesting any such tax
in appropriate Proceedings and withholding payment thereof, if permitted by
law, pending the outcome of such Proceedings. The amount of any withholding
tax imposed with respect to an Investor Certificateholder shall be treated as
cash distributed to such Investor 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. Investor
Certificateholder), the Certificate Paying Agent may in its sole discretion
withhold such amounts in accordance with this paragraph.
Section 5.02. Method of Payment. Subject to Section 8.01(b),
distributions required to be made to the Investor Certificateholder on any
Payment Date as provided in Section 5.01 shall be made to the Investor
Certificateholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Investor
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Investor 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 Investor
Certificateholder at the address thereof appearing in the Certificate
Register.
Section 5.03. Statements to Investor Certificateholder. On each Payment
Date, the Certificate Paying Agent shall make available to the Investor
Certificateholder the same report available to Noteholders under, and in the
manner provided in, Section 8.06 of the Indenture.
Section 5.04. Tax Returns. The Manager shall (a) maintain (or cause to be
maintained) the books of the Trust on a calendar year basis using the accrual
method of accounting, (b) deliver (or cause to be delivered) to the Investor
Certificateholder as may be required by the Code and applicable Treasury
Regulations, such information as may be required to enable the Investor
Certificateholder to prepare its federal and state income tax returns, (c)
prepare and file or cause to be prepared and filed such tax returns relating
to the Trust as may be required by the Code and applicable Treasury
Regulations (making such elections as may from time to time be required or
appropriate under any applicable state or federal statutes, rules or
regulations) and (d) collect or cause to be collected any withholding tax as
described in and in accordance with Section 5.01(b) of this Agreement with
respect to income or distributions to the Investor Certificateholder and
prepare or cause to be prepared the appropriate forms relating thereto. The
Owner Trustee shall sign all tax and information returns prepared or caused to
be prepared by the Manager pursuant to this Section 5.04 at the request of the
Manager, and in doing so shall rely entirely upon, and shall have no liability
for information or calculations provided by, the Master Servicer, the
Indenture Trustee or the Manager.
If the Trust is classified as a partnership for federal income tax
purposes, the Manager shall cause the Trust to (i) maintain capital accounts
and make partnership allocations in accordance with Section 704 of the Code
and (ii) file Form 8832 with the Internal Revenue Service and make an election
for the Trust be classified as a partnership for federal income tax purposes.
The Manager shall be designated as the "tax matters partner" of the Trust.
Section 5.05. Reports to Internal Revenue Service and Others. The Trust
will (i) cause to be prepared all periodic filings, (ii) make such elections
and file such tax returns relating to the Trust as the Depositor may direct in
a notice delivered to the Owner Trustee in accordance with Section 10.04, and
(iii) cause to be mailed to the Depositor any or all of such reports and tax
returns within 90 days of the end of the Fiscal Year; provided, however, that
the Trust shall be deemed to be in compliance with this provision by its
execution of the Management Agreement.
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 pursuant to the terms of this Agreement. The Owner
Trustee and the Certificate Paying Agent also agree to disburse all moneys
actually received by them constituting part of the Trust Estate pursuant to
the terms of this Agreement and the other Basic Documents. The Owner Trustee
shall not be answerable or accountable hereunder or under any other Basic
Document under any circumstance, except (i) for its own willful misconduct,
gross negligence, bad faith or grossly 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, without limitation
and subject to the exceptions set forth in the preceding sentence:
(a) no provision of this Agreement or any other 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 other 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 Basic Document, including the
principal of and interest on the Notes;
(c) the Owner Trustee shall not be responsible for the validity or
sufficiency of this Agreement, for the due execution hereof by the Depositor,
for the form, character, genuineness, sufficiency, value or validity of the
Trust Estate or for the validity or sufficiency of other Basic Documents, the
Notes or the Investor Certificate (other than its certificate of
authentication on the Investor Certificate), and the Owner Trustee shall not
assume or incur any liability, duty or obligation to any Noteholder or
Investor Certificateholder, other than as expressly provided for herein or in
the other Basic Documents;
(d) the execution, delivery, authentication and performance by the Owner
Trustee of this 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 Initial Seller, the Depositor, the Seller, the Indenture Trustee or the
Master Servicer under any Basic Document or otherwise, and the Owner Trustee
shall have no obligation or liability to perform the obligations of the Trust
under this Agreement or the other Basic Documents that are required to be
performed by the Indenture Trustee under the Indenture or the Initial Seller
or the Seller under the Mortgage Loan Sale Agreements or the Master Servicer
under the Master Servicing Agreement; and
(f) the Owner Trustee shall be under no obligation to exercise any right
or power vested in it or duty imposed upon it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or otherwise
or in relation to this Agreement or any other Basic Document, at the request,
order or direction of any Investor Certificateholder, unless such Investor
Certificateholder shall have offered the Owner Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in
any other Basic Document shall not be construed as a duty, and the Owner
Trustee shall not be answerable for other than its gross 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 Investor Certificateholder 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 Investor
Certificateholder and the Note Insurer, 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 Agreement;
(b) it has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf;
(c) neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor compliance
by it with any 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 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 otherwise)
or operations of the Owner Trustee or its properties or might have
consequences that would materially adversely affect its performance hereunder;
and
(f) no litigation is pending or, to the best of the Owner Trustee's
knowledge, threatened against the Owner Trustee that would prohibit its
entering into this Agreement or performing its obligations under this
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 Agreement or the other
Basic Documents, the Owner Trustee may (i) 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) 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 Agreement or any other Basic Document.
Section 6.05. Not Acting in Individual Capacity. Except as provided in
this Article, in accepting the trusts hereby created, Wilmington Trust Company
acts solely as Owner Trustee hereunder and not in its individual capacity; and
all Persons having any claim against the Owner Trustee by reason of the
transactions contemplated by this Agreement or any other Basic Document shall
look only to the Trust Estate for payment or satisfaction thereof.
Section 6.06. Owner Trustee Not Liable for Investor Certificate or
Related Documents. The recitals contained herein and in the Investor
Certificate (other than the signature of the Owner Trustee on the Investor
Certificate) 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 representation as to the validity or sufficiency of this
Agreement, any other Basic Document or the Investor Certificate (other than
the signature of the Owner Trustee on the Investor Certificate) or the Notes.
The Owner Trustee shall at no time have any responsibility or liability with
respect to the sufficiency of the Trust Estate or its ability to generate the
payments to be distributed to the Investor Certificateholder under this
Agreement or the Noteholders under the Indenture, including the compliance by
any Person with any warranty or representation made under any Basic Document
or in any related document, 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 Investor Certificate and Notes. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of the Investor Certificate or Notes and may deal with the Depositor,
the Seller, the Certificate Paying Agent, the Certificate Registrar, the
Paying Agent, the Master Servicer, the Note Insurer and the Indenture Trustee
in transactions with the same rights as it would have if it were not Owner
Trustee.
ARTICLE VII
COMPENSATION OF OWNER TRUSTEE
Section 7.01. Owner Trustee's Fees and Expense. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof (such fees not to be paid out of
the Trust Estate), and the Owner Trustee shall be reimbursed for its
reasonable expenses hereunder and under the other 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 other Basic Documents, which shall be payable
as separately agreed upon on or before the date hereof (but shall not be
payable out of the Trust Estate).
Section 7.02. Indemnification. The Investor Certificateholder shall
indemnify, defend and hold harmless the Owner Trustee, the Certificate Paying
Agent, and the Certificate Registrar and each of their successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and
against, any and all liabilities, obligations, losses, damages, taxes, claims,
actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever (collectively, "Expenses") that may at any time be imposed
on, incurred by, or asserted against the Owner Trustee, the Certificate Paying
Agent, the Certificate Registrar or any Indemnified Party in any way relating
to or arising out of this Agreement, the other Basic Documents, the Trust
Estate, the administration of the Trust Estate or the action or inaction of
the Owner Trustee, the Certificate Paying Agent, the Certificate Registrar or
any Indemnified Party hereunder; provided, that:
(a) the Investor Certificateholder shall not be liable for or required to
indemnify an Indemnified Party from and against Expenses arising or resulting
from the Indemnified Party's willful misconduct, gross negligence or bad
faith, or, with respect to the Owner Trustee, as a result of any inaccuracy of
a representation or warranty contained in Section 6.03 expressly made by the
Owner Trustee in its individual capacity;
(b) with respect to any such claim, the Indemnified Party shall have
given the Investor Certificateholder written notice thereof promptly after the
Indemnified Party shall have actual knowledge thereof, provided that the
failure to give such notice shall not relieve the Investor Certificateholder
from its liability under this Section 7.02;
(c) while maintaining control over its own defense, the Investor
Certificateholder shall consult with the Indemnified Party in preparing such
defense; and
(d) notwithstanding anything in this Agreement to the contrary, the
Investor Certificateholder shall not be liable for settlement of any claim by
an Indemnified Party entered into without its prior consent, which consent
shall not be unreasonably withheld.
The indemnities contained in this Section shall survive the resignation
or termination of the Owner Trustee, the Certificate Paying Agent or the
Certificate Registrar or the termination of this Agreement. In the event of
any Proceeding for which indemnity will be sought pursuant to this Section,
the Indemnified Party's choice of legal counsel, if other than the legal
counsel retained by the Indemnified Party in connection with the execution and
delivery of this Agreement, shall be subject to the approval of the Investor
Certificateholder, which approval shall not be unreasonably withheld. In
addition, upon written notice to the Indemnified Party and, with the consent
of such Indemnified Party, which consent shall not be unreasonably withheld,
the Investor Certificateholder has the right to assume the defense of any
Proceeding against such Indemnified Party; provided, however, that the
Investor Certificateholder shall not be entitled to control the defense of any
such claim if such claim involves a possible imposition of criminal liability
or penalty or a material civil penalty on such Indemnified Party, a conflict
of interest between such Indemnified Party and the Investor Certificateholder
or another indemnitee or the granting of material injunctive relief against
such indemnitee, and the Indemnified Party informs the Investor Certificates
that it desires to be represented by separate counsel, in which case the
reasonable fees and expenses of such separate counsel shall be borne by the
Investor Certificateholder.
ARTICLE VIII
TERMINATION OF TRUST AGREEMENT
Section 8.01. Termination of Trust Agreement.
(a) This Agreement (other than this Article) shall terminate and be of no
further force or effect and the Trust shall dissolve and wind up upon the
final distribution of all moneys or other property or proceeds of the Trust
Estate and the payment of all amounts due and owing hereunder to the Owner
Trustee, the Certificate Paying Agent, the Certificate Registrar, and the
Indenture Trustee in accordance with the terms of the Indenture and this
Agreement. The bankruptcy, liquidation, dissolution, death or incapacity of
any Investor Certificateholder shall not (i) operate to terminate this
Agreement or dissolve or terminate the Trust, (ii) entitle such Investor
Certificateholder's legal representatives or heirs to claim an accounting or
to pursue any Proceeding for a partition or winding up of all or any part of
the Trust or the Trust Estate, or (iii) otherwise affect the rights,
obligations and liabilities of the parties hereto. Notwithstanding any other
provision of this Agreement, in no event shall the Trust continue beyond the
expiration of 21 years from the death of the last survivor of the descendants
of Joseph P. Kennedy, the late Ambassador of the United States to the Court of
St. James's, living on the date hereof.
(b) Notice of any dissolution of the Trust, specifying the Payment Date
upon which the Investor Certificateholder shall surrender the Investor
Certificate to the Certificate Paying Agent for payment of the final
distribution and cancellation, shall be given by the Certificate Paying Agent
by letter to the Investor Certificateholder 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 Investor
Certificate shall be made upon presentation and surrender of the Investor
Certificate 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 Investor Certificate at the
office of the Certificate Paying 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 the Investor Certificateholder.
Upon presentation and surrender of the Investor Certificate, the Certificate
Paying Agent shall cause to be distributed to the Investor Certificateholder
the amounts distributable on such Payment Date pursuant to Section 5.01.
In the event that the Investor Certificateholder does not surrender the
Investor Certificate 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 Investor Certificateholder to
surrender the Investor Certificate 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 Investor Certificate was to have been made pursuant to Section
3.10, the Investor Certificate 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 Investor
Certificateholder concerning surrender of the Investor Certificate, and the
cost thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Certificate Distribution
Account after exhaustion of such remedies, and after payment of all amounts
due and owing to the Owner Trustee, the Certificate Paying Agent, the
Certificate Registrar, and the Indenture Trustee, shall be distributed by the
Certificate Paying Agent to the holder of the Investor Certificate.
(c) Upon the dissolution and the winding up of the Trust, the Owner
Trustee shall cause the Trust to be terminated by executing and filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810(c) of the Business Trust Statute.
ARTICLE IX
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 9.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times (i) be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute, (ii) be authorized to exercise
corporate trust powers, (iii) have a combined capital and surplus of at least
$50,000,000, (iv) be subject to supervision or examination by federal or state
authorities, (v) have (or have a parent that has) long-term debt obligations
rated at least A by Moody's or Standard & Poor's, and (vi) be otherwise
acceptable to the Note Insurer. If such corporation shall publish reports of
condition at least annually pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section, the combined capital and surplus of such corporation shall be deemed
to be its combined capital and surplus as set forth in its most recent report
of condition so published. In case at any time the Owner Trustee shall cease
to be eligible in accordance with the provisions of this Section, the Owner
Trustee shall resign immediately in the manner and with the effect specified
in Section 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 Indenture Trustee. Upon receiving such
notice of resignation, the Indenture Trustee shall promptly appoint a
successor Owner Trustee by written instrument in duplicate, one copy of which
shall be delivered to each of the resigning Owner Trustee and the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
shall have accepted such 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 (i) 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 of the Indenture Trustee, (ii) the Owner Trustee
shall be legally unable to act, (iii) the Owner Trustee shall be adjudged
bankrupt or insolvent, (iv) a receiver of the Owner Trustee or of its property
shall be appointed or (v) 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, in each case, the Indenture
Trustee may 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 by
written instrument in duplicate, one copy of which shall be delivered to each
of the outgoing Owner Trustee and the successor Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to this Section shall not become effective
until acceptance of appointment by such successor Owner Trustee pursuant to
Section 9.03.
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 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 rights, powers, duties and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall deliver to the successor
Owner Trustee all documents and monies held by it under this Agreement; and
such predecessor Owner Trustee shall execute and deliver such instruments and
do such other things as may reasonably be required for fully and certainly
vesting and confirming in the successor Owner Trustee all such rights, powers,
duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section, unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 9.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Indenture Trustee shall mail notice thereof to the Investor
Certificateholder, the Noteholders and the Note Insurer. 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 party 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 Note Insurer.
Section 9.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust 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 Trust Estate, and to
vest in such Person, in such capacity, such title to the Trust or any part
thereof and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Owner Trustee may consider
necessary or desirable. No co-trustee or separate trustee under this Agreement
shall be required to meet the terms of eligibility as a successor 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.
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 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 Agreement shall be personally liable by reason
of any act or omission of any other trustee under this 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 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
provisions of this Agreement, including every provision relating to the
conduct or affecting the liability of, or affording protection to, the Owner
Trustee. Each such instrument shall be filed with the Owner Trustee.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, then 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.
ARTICLE X
MISCELLANEOUS
Section 10.01. Amendments.
(a) This Agreement may be amended from time to time, with the consent of
the Note Insurer, by the parties hereto to cure any ambiguity, correct or
supplement any provision of this Agreement that may be inconsistent with any
other provision of this Agreement, add any provision that provides additional
rights to the Investor Certificateholder or ensure that the Trust is not
classified as an association (or a publicly traded partnership) taxable as a
corporation for federal income tax purposes; provided, that (i) such amendment
will not, in the good faith judgment of the parties thereto, materially and
adversely affect the interest of the Investor Certificateholder, (ii) an
Opinion of Counsel is delivered to the Owner Trustee to the effect that such
amendment will not materially and adversely affect the interest of the
Investor Certificateholder or (iii) the consent of the Investor
Certificateholder is obtained.
(b) 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 the Investor Certificateholder, the Indenture Trustee
and the Note Insurer. It shall not be necessary for the consent of the
Investor Certificateholder pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of the Investor Certificateholder provided
for in this Agreement or in any other Basic Document) and of evidencing the
authorization of the execution thereof by the Investor Certificateholder shall
be subject to such reasonable requirements as the Owner Trustee may prescribe
from time to time.
(c) In connection with the execution of any amendment to any agreement
(other than this Agreement) to which the Trust may be a party, 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.
Section 10.02. No Legal Title to Trust Estate. The Investor
Certificateholder shall not have legal title to any part of the Trust Estate.
The Investor Certificateholder shall be entitled to receive distributions with
respect to its undivided beneficial interest therein only in accordance with
Articles V and VIII. No transfer, by operation of law or otherwise, of any
right, title or interest of the Investor Certificateholder to and in their
ownership interest in the Trust Estate shall operate to terminate this
Agreement or the trusts hereunder, or entitle any transferee to an accounting
or to the transfer to it of legal title to any part of the Trust Estate. The
Owner Trustee may, but shall not be obligated, to execute any amendment which
adversely affects its rights, immunities and liabilities hereunder.
Section 10.03. Limitations on Rights of Others. Subject to Section 2.07,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Investor Certificateholder and, to the extent
expressly provided herein, the Indenture Trustee, the Note Insurer and the
Noteholders.
Section 10.04. Notices.
(a) Unless otherwise expressly specified or permitted by the terms
hereof, all notices shall be in writing, deemed to have been given upon
receipt and addressed to: if to (i) the Owner Trustee, its Corporate Trust
Office; (ii) the Depositor, to 245 Park Avenue, 4th Floor, New York, New York
10022, Attention: Structured Finance Department, RE: American Residential
Eagle Bond Trust 1999-1; (iii) the Note Insurer, to 350 Park Avenue, New York,
NY 10022, Attention: Transaction Oversight, Re: American Residential Eagle
Bond Trust 1999-1, Confirmation: (212) 826-0100, Telecopy Nos.: (212)
339-3518, (212) 339-3529; (iv) if to Moody's, to 99 Church Street, 4th Floor,
New York, New York 10001, Attention: Home Mortgage Loan Monitoring Group; (v)
Standard & Poor's, 26 Broadway, 15th Floor, New York, New York 10004,
Attention: Structured Finance Department MBS, (vi) the Indenture Trustee, the
Certificate Paying Agent or the Certificate Registrar, to the Corporate Trust
Office of the Indenture Trustee, with a copy to Norwest Bank Minnesota, N.A.,
Corporate Trust Administration, 11000 Broken Land Parkway, Columbia, Maryland
21044 (Attention: AmREIT Series 1999-1), or (vii) as to each of the foregoing
Persons, at such other address as shall be designated by such Person in a
written notice to each of the other foregoing Persons.
(b) Any notice required or permitted to be given to the Investor
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Investor Certificateholder as shown in the Certificate
Register. Any such notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or
not the Investor Certificateholder receives such notice.
(c) A copy of any notice delivered to the Owner Trustee or the Issuer
shall also be delivered to the Depositor and the Note Insurer.
Section 10.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement (including any
amendment hereto) shall be for any reason whatsoever held invalid or
unenforceable, then such covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions and
terms of this Agreement, as the same may be amended, and shall in no way
affect the validity or enforceability of the other covenants, agreements,
provisions or terms of this Agreement or any amendment hereto or the Investor
Certificate, or the rights of the Investor Certificateholder.
Section 10.06. Counterparts. This Agreement may be executed in any number
of counterparts, each of which so executed and delivered shall be deemed to be
an original, but all of which counterparts shall together constitute but one
and the same instrument.
Section 10.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
parties hereto, the Investor Certificateholder and its respective permitted
successors and assigns. Any request, notice, direction, consent, waiver or
other instrument or action by the Investor Certificateholder shall bind the
successors and assigns of such Investor Certificateholder.
Section 10.08. No Petition. The Owner Trustee, by entering into this
Agreement, and the Investor Certificateholder, by its acceptance of an
Investor Certificate, hereby covenants and agrees that they will not at any
time institute against the Depositor or the Trust, or join in the institution
against the Depositor or the Trust of, any Proceeding under or in relation to
any federal or state bankruptcy or similar law in connection with any
obligations with respect to the Investor Certificate, the Notes, this
Agreement or any other Basic Document.
Section 10.09. No Recourse. The Investor Certificateholder, by its
acceptance of an Investor Certificate, acknowledges that such Investor
Certificate represents a beneficial interest in the Trust only, and does not
represent an interest in or obligation of the Depositor, the Seller, the Owner
Trustee, the Indenture Trustee, the Certificate Paying Agent, the Certificate
Registrar, the Master Servicer, the Note Insurer or any Affiliate thereof, and
no recourse may be had against such Persons or their assets except as may be
expressly set forth or contemplated in the Investor Certificate, this
Agreement or the other 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 term or provision hereof.
Section 10.11. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.12. Integration. This 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. Investor Certificate Nonassessable. The interests
represented by the Investor Certificate shall be nonassessable for any loss of
the Trust or for any reason whatsoever.
Section 10.14. Third-Party Beneficiaries. The Note Insurer shall be a
third-party beneficiary to this Agreement.
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.
BEAR STEARNS ASSET BACKED
SECURITIES, INC., as Depositor
By: /s/ Jonathan Lieberman
----------------------------
Name: Jonathan Lieberman
Title: Managing Director
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
By: /s/ Emmett Harmon
--------------------------------
Name: Emmett Harmon
Title: Vice President
Acknowledged and Agreed:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Indenture Trustee, Certificate
Registrar and Certificate
Paying Agent
By: /s/ Amy Wahl
--------------------------------
Name: Amy Wahl
Title: Assistant Vice President
EXHIBIT A
FORM OF INVESTOR CERTIFICATE
THIS INVESTOR CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
NOTES AS DESCRIBED IN THE TRUST AGREEMENT.
THIS INVESTOR CERTIFICATE IS NOT TRANSFERABLE EXCEPT UPON SATISFACTION OF
THE CONDITIONS IN SECTION 3.04 OF THE TRUST AGREEMENT. THIS INVESTOR
CERTIFICATE IS ISSUED IN THE PERCENTAGE INTEREST SET FORTH BELOW.
THIS INVESTOR CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT
IS REGISTERED PURSUANT TO THE SECURITIES ACT AND SUCH STATE LAWS, OR IS SOLD
OR TRANSFERRED IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND SUCH STATE LAWS AND IS TRANSFERRED IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 3.04 OF THE TRUST AGREEMENT.
NO TRANSFER OF THIS INVESTOR CERTIFICATE SHALL BE MADE UNLESS THE
CERTIFICATE REGISTRAR SHALL HAVE RECEIVED EITHER (I) A REPRESENTATION LETTER
FROM THE TRANSFEREE OF THIS INVESTOR 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, AS AMENDED (THE "CODE"),
ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY SUCH PLAN OR ANY
PERSON USING "PLAN ASSETS" WITHIN THE MEANING OF THE DEPARTMENT OF LABOR
REGULATION AT 29 C.F.R. ss. 2510.3-101 TO ACQUIRE THIS INVESTOR CERTIFICATE
(COLLECTIVELY A "PLAN INVESTOR"), OR (II) IF THIS INVESTOR 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 TRUST AGREEMENT IN
LIEU OF SUCH OPINION OF COUNSEL, TO THE EFFECT THAT THE PURCHASE OR HOLDING OF
THIS INVESTOR 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 DEPOSITOR, THE ISSUER, THE OWNER TRUSTEE,
THE INDENTURE TRUSTEE, THE CERTIFICATE PAYING AGENT OR THE CERTIFICATE
REGISTRAR TO ANY OBLIGATION OR LIABILITY IN ADDITION TO THAT UNDERTAKEN IN THE
TRUST AGREEMENT OR THE OTHER BASIC DOCUMENTS.
THE TRANSFEREE OF THIS INVESTOR CERTIFICATE SHALL BE SUBJECT TO FEDERAL
WITHHOLDING TAX UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A
CERTIFICATE OF NON-FOREIGN STATUS CERTIFYING AS TO THE TRANSFEREE'S STATUS AS
A UNITED STATES PERSON, CORPORATION OR PARTNERSHIP UNDER UNITED STATES LAW.
THIS INVESTOR CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION
OF THE SELLER, THE DEPOSITOR, THE ISSUER, THE MASTER SERVICER, THE OWNER
TRUSTEE, THE INDENTURE TRUSTEE, THE NOTE INSURER OR ANY OF THEIR RESPECTIVE
AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN THE TRUST AGREEMENT OR THE OTHER
BASIC DOCUMENTS.
No. C-___ Percentage Interest: 100%
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1, INVESTOR CERTIFICATE
evidencing a fractional undivided interest in American Residential Eagle Bond
Trust 1999-1 (the "Issuer"), the property of which consists primarily of the
Mortgage Loans.
This Investor Certificate is payable solely from the Trust Estate, and
does not represent an obligation of or interest in the Depositor, the Initial
Seller, the Seller, the Issuer, the Owner Trustee, the Indenture Trustee, the
Master Servicer, the Note Insurer or any of their respective Affiliates. This
Investor Certificate is not guaranteed or insured by any governmental agency
or instrumentality or by the Depositor, the Initial Seller, the Seller, the
Issuer, the Owner Trustee, the Indenture Trustee, the Master Servicer, the
Note Insurer or any of their respective Affiliates. None of the Depositor, the
Initial Seller, the Seller, the Issuer, the Owner Trustee, the Indenture
Trustee, the Master Servicer, the Note Insurer or any of their respective
Affiliates will have any obligation with respect to any Investor Certificate
or other obligation secured by or payable from payments on the Investor
Certificate.
This certifies that _________________________, a _________________
corporation, is the registered owner of the Percentage Interest evidenced by
this Investor Certificate (as set forth on the face hereof) in certain
distributions with respect to the Trust Estate, which consists primarily of
the Mortgage Loans. The Trust is governed by a trust agreement dated as of
April 1, 1999 (the "Trust Agreement"), between the Depositor and Wilmington
Trust Company, as owner trustee (the "Owner Trustee"), a summary of certain of
the pertinent provisions of which is set forth below. Capitalized terms used
herein that are not otherwise defined shall have the meanings ascribed thereto
in the indenture dated as of April 1, 1999 (the "Indenture"), between the
Trust and the Indenture Trustee. This Investor Certificate is issued under and
is subject to the terms, provisions and conditions of the Trust Agreement, to
which the holder of this Investor Certificate by virtue of the acceptance
hereof assents, and by which such Investor Certificateholder is bound.
Pursuant to the terms of the Trust Agreement, a distribution will be made
on the 25th day of each month or, if such day is not a Business Day, the
immediately succeeding Business Day (each, a "Payment Date"), commencing in
May 1999, to the Person in the name of which this Investor Certificate is
registered at the close of business on the last day (or if such day is not a
Business Day, the immediately preceding Business Day) of the month immediately
preceding the month of such distribution (each, a "Record Date"), in an amount
equal to the pro rata portion evidenced by this Investor Certificate (based on
the Percentage Interest stated on the face hereon) of the amount, if any,
required to be distributed to the Investor Certificateholder on such Payment
Date. Distributions on this Investor Certificate will be made as provided in
the Trust Agreement by the Certificate Paying Agent by wire transfer or check
mailed to the Investor Certificateholder of record in the Certificate Register
without the presentation or surrender of this Investor Certificate or the
making of any notation hereon.
Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Investor 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 Investor
Certificate at the office or agency maintained by the Certificate Registrar
for such purpose.
No transfer of this Investor Certificate may be made unless such transfer
is exempt from the registration requirements of the Securities Act and any
applicable state securities laws, or is made in accordance with the Securities
Act and such state laws. In the event such a transfer is to be made, (i) the
Certificate Registrar or the Issuer may require an Opinion of Counsel
acceptable to and in form and substance satisfactory to the Certificate
Registrar and the Issuer that such transfer is exempt from (describing the
applicable exemption and the basis therefor) or is being made pursuant to the
registration requirements of the Securities Act and any applicable state
securities laws, (ii) the transferee shall execute an investment letter in the
form described in the Trust 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 Trust Agreement (or if a
Certificate of Non-Foreign Status is not provided, an Opinion of Counsel as
described in the Trust Agreement), which investment letter and certificate or
Opinion of Counsel shall not be an expense of the Depositor, the Trust, the
Owner Trustee or the Certificate Registrar. The Holder hereof desiring to
effect such transfer shall, and does hereby agree to, indemnify the Depositor,
the Trust, the Owner Trustee and the Certificate Registrar against any
liability that may result if such transfer is not so exempt or is not made in
accordance with such federal and state laws. In connection with any such
transfer, the Certificate Registrar (unless otherwise directed by the Issuer)
will also require either (i) a representation letter, in the form as described
by the Trust Agreement, stating that the related 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
(any of the foregoing, a "Plan"), any Person acting, directly or indirectly,
on behalf of any such Plan or any person using the "plan assets" within the
meaning of the Department of Labor regulations at 29 C.F.R. ss. 2510.3-101, to
effect such acquisition (each, 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 Depositor, the Owner Trustee and the Certificate
Registrar, or a certification in the form of Exhibit G to the Trust Agreement,
to the effect that the purchase or holding of the related Investor Certificate
is permissible under applicable law, will not constitute or result in a
prohibited transaction under Section 406 of ERISA or Section 497-5 of the Code
(or comparable provisions of any subsequent enactments) and will not subject
the Depositor, the Issuer, the Owner Trustee, the Certificate Registrar, the
Certificate Paying Agent or the Indenture Trustee to any obligation or
liability in addition to those undertaken in the Trust Agreement or the other
Basic Documents.
The Investor Certificateholder, by its acceptance of the Investor
Certificate, agrees that it will look solely to funds on deposit in the
Certificate Distribution Account that have been released from the Lien of the
Indenture for payment hereunder, and that the Owner Trustee in its individual
capacity is not personally liable to the Investor Certificateholder for any
amount payable under the Investor Certificate or the Trust Agreement or,
except as expressly provided in the Trust Agreement, subject to any liability
under the Trust Agreement.
The Holder of this Investor Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Investor Certificate are
subordinated to the rights of the Noteholders as described in the Indenture.
The Investor Certificateholder, by its acceptance of the Investor
Certificate, covenants and agrees that such Investor Certificateholder will
not at any time institute against the Depositor or the Issuer, or join in any
institution against the Depositor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation Proceedings, or other
Proceedings under any federal or state bankruptcy or similar law in connection
with any obligations relating to the Investor Certificate, the Notes, the
Trust Agreement or any other Basic Document.
The Trust Agreement permits the amendment thereof from time to time, with
the consent of the Note Insurer, by the parties thereto (i) to cure any
ambiguity, correct or supplement any provision of the Trust Agreement that may
be inconsistent with any other provision of the Trust Agreement, add any
provision that provides additional rights to the Investor Certificateholder or
ensure that the Trust is not classified as an association (or a publicly
traded partnership) taxable as a corporation for federal income tax purposes;
provided, that (i) such amendment will not, in the good faith judgment of the
parties thereto, materially and adversely affect the interest of the Investor
Certificateholder, (ii) an Opinion of Counsel is delivered to the Owner
Trustee to the effect that such amendment or supplement will not materially
and adversely affect the interest of the Investor Certificateholder or (iii)
the consent of the Investor Certificateholder is obtained.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Investor Certificate is registerable
in the Certificate Register upon surrender of this Investor Certificate for
registration of transfer at the offices or agencies of the Certificate
Registrar maintained for such purpose, accompanied by a written instrument of
transfer in form satisfactory to the Certificate Registrar duly executed by
the Holder hereof or such Investor Certificateholder's attorney duly
authorized in writing, and thereupon a new Investor Certificate evidencing a
like aggregate Percentage Interest will be issued to the designated
transferee. The initial Certificate Registrar appointed under the Trust
Agreement is the Indenture Trustee.
This Investor Certificate is issuable only as a single certificate
evidencing a 100% Percentage Interest.
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 foregoing may treat the Person in
the name of which this Investor 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.
This Investor Certificate shall be governed by and construed in
accordance with the laws of the State of Delaware.
The Trust Agreement (other than Articles VII and VIII thereof) shall
terminate and be of no further force or effect and the Trust shall dissolve
upon the final distribution of all moneys or other property or proceeds of the
Trust Estate in accordance with the terms of the Indenture and the Trust
Agreement. The bankruptcy, liquidation, dissolution, death or incapacity of
any Investor Certificateholder shall not (i) operate to terminate the Trust
Agreement or the Trust, (ii) entitle such Investor Certificateholder's legal
representatives or heirs to claim an accounting or to pursue any Proceeding
for a partition or winding up of all or any part of the Trust or the Trust
Estate or (iii) otherwise affect the rights, obligations and liabilities of
the parties thereto. Notwithstanding any other provision of the Trust
Agreement, in no event will the Trust continue beyond the expiration of 21
years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the Court of St. James's,
living on the date of the Trust 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 Investor Certificate shall not be entitled to any
benefit under the Trust Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Investor Certificate to be duly
executed.
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee
Dated: ______________________ By:______________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Investor Certificates referred to in the within-mentioned
Trust 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
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 Investor Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
to transfer such Investor 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 Investor 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.
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 __________.
By:_______________________________
Signature of assignee or agent
(for authorization of wire
transfer only)
EXHIBIT B
CERTIFICATE OF TRUST OF
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
THIS Certificate of Trust of American Residential Eagle Bond Trust 1999-1
(the "Trust") is being duly executed and filed by Wilmington Trust Company, a
Delaware banking corporation, as trustee, to form a business trust under the
Delaware Business Trust Act (12 Del. C. ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is American
Residential Eagle Bond Trust 1999-1.
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware is Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
3. Effective Date. This Certificate of Trust will be effective April
15, 1999.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the Trust,
has executed this Certificate of Trust as of the date first-above written.
WILMINGTON TRUST COMPANY, as trustee
By:_________________________________
Name:
Title:
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 "Securities Act"), or that would render the
disposition of the Rule 144A Securities a violation of Section 5 of the
Securities 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
Securities Act.
2. The Buyer warrants and represents to, and covenants with, the Owner
Trustee and the Depositor, in each case as defined in the trust agreement
dated as of April 1, 1999 (the "Trust Agreement"), between Bear Stearns Asset
Backed Securities, Inc., as Depositor, and Wilmington Trust Company, as Owner
Trustee, as follows:
(a) The Buyer understands that the Rule 144A Securities have not
been registered under the Securities 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 Owner
Trustee or the Master Servicer.
(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 Securities Act or that would render the disposition of the Rule 144A
Securities a violation of Section 5 of the Securities 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 Securities 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 which 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 Securities
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, as amended (the
"Code"), a Person acting, directly or indirectly, on behalf of any
such plan or any Person acquiring such Investor Certificate with
"plan assets" 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 Paying Agent, the Indenture Trustee and the
Certificate Registrar with either: (A) an opinion of counsel,
satisfactory to the Depositor, the Owner Trustee, the Certificate
Paying Agent, the Indenture Trustee and the Certificate Registrar, to
the effect that the purchase and holding of an Investor 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 Paying Agent, the
Indenture Trustee or the Certificate Registrar 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 Paying Agent, the Indenture Trustee or
the Certificate Registrar; or (B) 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.
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:_____________________________
ANNEX 1 TO EXHIBIT C
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144
[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, as amended ("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 (i) 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
(ii) 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.
____ Savings and Loan. The Buyer (i) is a savings and loan association,
building and loan association, cooperative bank, homestead
association or similar institution that 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 (ii) 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, as amended.
____ Insurance Company. The Buyer is an insurance company the primary and
predominant business activity of which is the writing of insurance or
the reinsuring of risks underwritten by insurance companies and that
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 such 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, as
amended.
____ Investment Adviser. The Buyer is an investment adviser registered
under the Investment Advisers Act of 1940, as amended.
____ 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, as amended.
____ Business Development Company. The Buyer is a business development
company as defined in Section 202(a)(22) of the Investment Advisers
Act of 1940, as amended.
____ Trust Fund. The Buyer is a trust fund the trustee of which is a bank
or trust company and the participants of which are exclusively (a)
plans established and maintained by a state, its political
subdivisions, or any agency or instrumentality of such 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, as amended, 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 or (vii) currency, interest rate and commodity
swaps.
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,
as amended.
5. The Buyer, acknowledges that it is familiar with Rule 144A and
understands that the Seller 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:_______________________________
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, as amended ("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, as
amended, 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 that 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 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:
Date:_______________________________
IF AN ADVISER:
____________________________________
Print Name of Buyer
By:_________________________________
Name:
Title:
Date:_______________________________
EXHIBIT D
FORM OF INVESTOR REPRESENTATION LETTER
___________, ____
Bear Stearns Asset Backed Securities, Inc.
245 Park Avenue, 4th Floor
New York, NY 10167
Norwest Bank Minnesota, National Association
as Certificate Registrar
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Administration
Re: American Residential Eagle Bond
Trust 1999-1, Investor Certificates
Ladies and Gentlemen:
____________ (the "Purchaser") intends to purchase from ___________ (the
"Seller") $____________ of American Residential Eagle Bond Trust 1999-1, an
Investor Certificate (the "Investor Certificate"), issued pursuant to the
trust agreement dated as of April 1, 1999 (the "Trust Agreement"), between
Bear Stearns Asset Backed Securities, Inc., as depositor (the "Depositor") and
Wilmington Trust Company, as owner trustee (the "Owner Trustee"), as
acknowledged and agreed by Norwest Bank Minnesota, National Association, 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 Issuer and the
Certificate Registrar and, with respect to paragraph 6 below, the Indenture
Trustee and the Certificate Paying Agent that:
1. The Purchaser understands that (a) the Investor Certificate has 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 Issuer is not
required to so register or qualify the Investor Certificate, (c) the Investor
Certificate 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 Investor Certificate and
(e) the Investor Certificate will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Investor Certificate 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 Investor Certificate, such that it is capable of evaluating the merits and
risks of investment in the Investor Certificate, (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 Trust Agreement and (b) such other information
concerning the Investor Certificate, the Mortgage Loans and the Issuer as has
been requested by the Purchaser from the Issuer or the Seller and is relevant
to the Purchaser's decision to purchase the Investor Certificate. The
Purchaser has had any questions arising from such review answered by the
Issuer or the Seller to the satisfaction of the Purchaser. If the Purchaser
did not purchase the Investor Certificate in connection with the initial
distribution of the Investor Certificate, the Purchaser acknowledges that the
Issuer did not participate in or facilitate in any way the purchase of the
Investor Certificate by the Purchaser from the Seller, and the Purchaser
agrees that it will look solely to the Seller and not to the Issuer with
respect to any damage, liability, claim or expense arising out of, resulting
from or in connection with its purchase of Investor Certificate.
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 the Investor Certificate, any interest in the Investor 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 the Investor
Certificate, any interest in the Investor Certificate or any other similar
security from any person in any manner, (c) otherwise approach or negotiate
with respect to the Investor Certificate, any interest in the Investor
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 the Investor Certificate under the Act,
that would render the disposition of the Investor Certificate a violation of
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Purchaser will not sell or
otherwise transfer the Investor Certificate, 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, as
amended (the "Code"), a Person acting, directly or indirectly,
on behalf of any such plan or any Person acquiring Investor
Certificates with "plan assets" 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 Indenture Trustee, the Certificate Paying Agent,
and the Certificate Registrar with either: (i) an opinion of
counsel, satisfactory to the Depositor, the Owner Trustee, the
Indenture Trustee, the Certificate Paying Agent and the
Certificate Registrar, to the effect that the purchase and
holding of the Investor 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 Indenture Trustee, the
Certificate Paying Agent or the Certificate Registrar 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 Indenture
Trustee, the Certificate Paying Agent or the Certificate
Registrar, or
(ii) in lieu of such opinion of counsel, a certification in the
form of Exhibit G to the Trust Agreement; and
(iii) 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.
7. The Purchaser is not a non-United States person.
Very truly yours,
By:_________________________________
Name:
Title:
EXHIBIT E
FORM OF TRANSFEROR REPRESENTATION LETTER
_________, ____
Bear Stearns Asset Backed Securities, Inc.
245 Park Avenue, 4th Floor
New York, NY 10167
Norwest Bank Minnesota, National Association
as Certificate Registrar
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Administration
Re: American Residential Eagle Bond
Trust 1999-1, Investor Certificates
Ladies and Gentlemen:
___________ (the "Purchaser") intends to purchase from __________ (the
"Seller") a ____% Percentage Interest of American Residential Eagle Bond Trust
1999-1, Investor Certificate (the "Investor Certificate"), issued pursuant to
the trust agreement dated as of April 1, 1999 (the "Trust Agreement"), between
Bear Stearns Asset Backed Securities, Inc., as depositor (the "Depositor"),
and Wilmington Trust Company, as owner trustee (the "Owner Trustee"), as
acknowledged and agreed by Norwest Bank Minnesota, National Association, as
Certificate Registrar. All terms used herein and not otherwise defined shall
have the meanings set forth in the indenture dated as of April 1, 1999 (the
"Indenture"), between the Issuer and the Indenture Trustee. The Seller hereby
certifies, represents and warrants to, and covenants with, the Issuer and the
Certificate Registrar that:
Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred the Investor Certificate,
any interest in the Investor 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 the Investor Certificate, any
interest in the Investor Certificate or any other similar security from any
person in any manner, (c) has otherwise approached or negotiated with respect
to the Investor Certificate, any interest in the Investor 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 Investor Certificates under the Securities
Act of 1933, as amended (the "Act"), that would render the disposition of the
Investor Certificate 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 the Investor Certificate. The Seller has not and will
not sell or otherwise transfer the Investor Certificate, except in compliance
with the provisions of the Trust Agreement.
Very truly yours,
By:_________________________________
(Seller)
By:__________________________________
Name:
Title:
EXHIBIT F
CERTIFICATE OF NON-FOREIGN STATUS
This Certificate of Non-Foreign Status (the "Certificate") is delivered
pursuant to Section 3.05 of the trust agreement dated as of April 1, 1999 (the
"Trust Agreement"), between Bear Stearns Asset Backed Securities, Inc., as
Depositor, and Wilmington Trust Company, 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 American Residential Eagle Bond Trust 1999-1, Investor
Certificate (the "Investor Certificate"). Capitalized terms used herein but
not otherwise defined shall have the meanings ascribed thereto in Appendix A
to the Indenture dated as of April 1, 1999 (the "Indenture"), between the
Issuer and the Indenture Trustee.
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 this 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 Investor Certificates 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
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 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 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 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.
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.
EXHIBIT G
FORM OF ERISA REPRESENTATION LETTER
_________, _____
Bear Stearns Asset Backed Securities, Inc.
245 Park Avenue, 4th Floor
New York, NY 10167
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Norwest Bank Minnesota, National Association
as Certificate Registrar, Indenture Trustee
and Certificate Paying Agent
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0070
Re: Bear Stearns Asset Backed Securities, Inc.
American Residential Eagle Bond Trust 1999-1, Investor Certificates
Dear Sirs:
____________ (the "Transferee") intends to acquire from __________ (the
"Transferor") a ____% Percentage Interest of American Residential Eagle Bond
Trust 1999-1, Investor Certificate (the "Investor Certificate"), issued
pursuant to a trust agreement dated as of April 1, 1999 (the "Trust
Agreement"), between Bear Stearns Asset Backed Securities, Inc., as depositor
(the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner
Trustee"). Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in Appendix A to the indenture dated as of April
1, 1999 (the "Indenture"), between the Issuer and the Indenture Trustee.
The Transferee hereby certifies, represents and warrants to, and
covenants with, the Depositor, the Owner Trustee, the Indenture Trustee, the
Certificate Paying Agent and the Certificate Registrar that either:
(a) The Investor Certificate (i) is 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, as amended (the "Code")
(any of the foregoing, a "Plan"), (ii) are not being acquired with "plan
assets" 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
(b) The purchase of the Investor Certificate 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
Owner 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 Investor Certificates (each being referred to as a
"Source") and one of the following statements:
(i) the Transferee is an insurance company and (A) the Source is
assets of its "general account," (B) the conditions set forth in PTCE
95-60 issued by the DOL have been satisfied and the purchase and holding
of the Investor Certificate by or on behalf of the Transferee are exempt
under PTCE 95-60 and (B) 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 the Investor Certificate; or
(i) the Transferee is an insurance company and (A) the Source is
assets of its "general account," (B) 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
(C) 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 Investor Certificate after the date that 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 the Investor Certificate,
if the assets of the general account constitute "plan assets" within the
meaning of the Department of Labor regulation promulgated at 29 C.F.R.ss.
2510.3-101, it will dispose of the Investor Certificate prior to the date
that is 18 months after the 401(c) Regulations become final.
(c) 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:
EXHIBIT H
FORM OF REPRESENTATION LETTER
___________, ___
Bear Stearns Asset Backed Securities, Inc.
245 Park Avenue, 4th Floor
New York, NY 10167
Wilmington Trust Company,
as Owner Trustee
1100 North Market
Wilmington, Delaware 19890
Norwest Bank Minnesota, National Association
as Certificate Registrar
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0070
Re: Bear Stearns Asset Backed Securities, Inc.
American Residential Eagle Bond Trust 1999-1, Investor Certificates
Dear Sirs:
__________ (the "Transferee") intends to acquire from ________ (the
"Transferor") a ____% Percentage Interest of American Residential Eagle Bond
Trust 1999-1, Investor Certificate (the "Investor Certificate"), issued
pursuant to a trust agreement dated as of April 1, 1999 (the "Trust
Agreement"), between Bear Stearns Asset Backed Securities, Inc., as depositor
(the "Depositor"), and Wilmington Trust Company, as owner trustee (the "Owner
Trustee"). Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in Appendix A to the indenture dated as of April
1, 1999 (the "Indenture"), between the Issuer and the Indenture Trustee.
The Transferee hereby certifies, represents and warrants to, and
covenants with, the Depositor, the Owner Trustee and the Certificate Registrar
that:
(a) the Transferee is acquiring the Investor Certificate for its own
behalf and is not acting as agent or custodian for any other person or entity
in connection with such acquisition; and
(b) the Transferee is not a partnership, grantor trust or S corporation
for federal income tax purposes, or, if the Transferee is a partnership,
grantor trust or S corporation for federal income tax purposes, the Investor
Certificates are not more than 50% of the assets of the partnership, grantor
trust or S corporation.
Very truly yours,
By:
Name:
Title:
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.,
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1,
AMERICAN RESIDENTIAL EAGLE, INC.,
and
BEAR STEARNS ASSET BACKED SECURITIES, INC.
Dated as of April 1, 1999
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
$229,000,000
TABLE OF CONTENTS
Page
ARTICLE I
Section 1.01 Definitions ........................................ 1
Section 1.02 Limited Recourse ................................... 1
ARTICLE II
Section 2.01 Representations and Warranties of the Depositor ... 3
Section 2.02 Representations and Warranties of the Seller ....... 6
Section 2.03 Representations and Warranties of the Issuer ....... 10
Section 2.04 Representations and Warranties of the Company ...... 13
Section 2.05 Affirmative Covenants of the Depositor ............. 17
Section 2.06 Affirmative Covenants of the Seller ................ 20
Section 2.07 Affirmative Covenants of the Issuer ................ 24
Section 2.08 Affirmative Covenants of the Company ............... 27
Section 2.09 Negative Covenants of the Depositor ................ 31
Section 2.10 Negative Covenants of the Seller ................... 33
Section 2.11 Negative Covenants of the Issuer ................... 34
Section 2.12 Negative Covenants of the Company .................. 35
ARTICLE III
Section 3.01 Issuance of the Policy ............................ 37
Section 3.02 Payment of Fees and Premium ........................ 37
Section 3.03 Reimbursement and Additional Payment Obligation .... 37
Section 3.04 Indemnification .................................... 39
Section 3.05 Subrogation ........................................ 43
ARTICLE IV
Section 4.01 Effective Date; Term of Agreement .................. 44
Section 4.02 Obligations Absolute ............................... 44
Section 4.03 Assignments; Reinsurance; Third-Party Rights ....... 45
Section 4.04 Liability of FSA ................................... 46
ARTICLE V
Section 5.01 Events of Default .................................. 47
Section 5.02 Remedies; Waivers .................................. 48
ARTICLE VI
Section 6.01 Amendments, Etc .................................... 50
Section 6.02 Notices ............................................ 50
Section 6.03 Payment Procedure .................................. 51
Section 6.04 Severability ....................................... 51
Section 6.05 Governing Law ...................................... 51
Section 6.06 Consent to Jurisdiction ............................ 52
Section 6.07 Consent of FSA ..................................... 53
Section 6.08 Counterparts ....................................... 53
Section 6.09 Trial by Jury Waived ............................... 53
Section 6.10 Limited Liability .................................. 53
Section 6.11 Entire Agreement ................................... 53
Appendix I--Definitions
Appendix II--Opinions of Counsel
Annex I--Form of Policy
Appendix A--Conditions Precedent to Issuance of the Policy
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT dated as of April 1, 1999, between
FINANCIAL SECURITY ASSURANCE INC. ("FSA"), AMERICAN RESIDENTIAL EAGLE BOND
TRUST 1999-1 (the "Issuer), AMERICAN RESIDENTIAL INVESTMENT TRUST, INC. (the
"Company"), AMERICAN RESIDENTIAL EAGLE, INC. (the "Seller") and BEAR STEARNS
ASSET BACKED SECURITIES, INC. (the "Depositor").
INTRODUCTORY STATEMENTS
Pursuant to an Indenture, dated as of April 1, 1999 (the "Indenture"),
among the Issuer, as issuer, and Norwest Bank Minnesota, National Association,
as indenture trustee, $229,000,000 American Residential Eagle Bond Trust
1999-1, Mortgage-Backed LIBOR Notes, Class A, Series 1999-1 (the
"Obligations"), are being issued.
The Issuer, the Company, the Seller and the Depositor have requested that
FSA issue a financial guaranty insurance policy guarantying certain
distributions of the principal of and interest on the Obligations (including
any such distributions subsequently avoided as a preference under applicable
bankruptcy law) upon the terms and subject to the conditions provided herein.
The parties hereto desire to specify the conditions precedent to the
issuance of the Policy by FSA, the payment of premium in respect of the
Policy, the indemnity and reimbursement to be provided to FSA in respect of
amounts paid by FSA under the Policy or otherwise and certain other matters.
In consideration of the promises and of the agreements herein contained,
FSA, the Issuer, the Company, the Seller and the Depositor hereby agree as
follows:
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section 1.01 Definitions. Capitalized terms used herein shall have the
meanings provided in Appendix I hereto unless the context otherwise requires.
Section 1.02 Limited Recourse. Notwithstanding any provision of this
Agreement to the contrary, the payment obligations set forth herein (other
than those set forth in Sections 3.02, 3.03(b), 3.03(c), 3.03(d) and 3.04)
shall be non-recourse obligations with respect to the Issuer, the Company, the
Seller and the Depositor and shall be payable only from monies available for
such payment in accordance with the provisions of the Indenture (except to the
extent that any such payment obligation arises from a failure to perform or
default of the Issuer, the Company, the Seller or the Depositor or any
affiliate thereof under any Transaction Document or by reason of negligence,
willful misconduct or bad faith on the part of any of the Issuer, the Company,
the Seller or the Depositor in the performance of its duties and obligations
thereunder or reckless disregard by any of the Issuer, the Company, the Seller
or the Depositor of its duties and obligations thereder). The payment
obligations of each of the Company, the Seller and the Issuer shall be joint
and several and the payment obligations of the Depositor shall be several and
not joint.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01 Representations and Warranties of the Depositor. The
Depositor represents, warrants and covenants, as of the date hereof and as of
the Date of Issuance, as follows:
(a) Due Organization and Qualification. The Depositor is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Depositor is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the conduct
of its business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Transaction
Documents to which it is a party, in each jurisdiction in which the failure to
be so qualified or to obtain such approvals would render any Mortgage Loan
unenforceable in any respect or would otherwise have a material adverse effect
upon the Transaction.
(b) Power and Authority. The Depositor has all necessary corporate power
and authority to conduct its business as currently conducted and as described
in the Offering Document, to execute, deliver and perform its obligations
under the Transaction Documents to which it is a party and to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Transaction Documents to which it is a party by the Depositor have been duly
authorized by all necessary corporate action and do not require any additional
approvals or consents or other action by or any notice to or filing with any
Person, including, without limitation, any governmental entity or the
Depositor's stockholders.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents to which it is a party by the Depositor, the
consummation of the transactions contemplated thereby nor the satisfaction of
the terms and conditions of the Transaction Documents,
(i) conflicts with or results in any breach or violation of any
provision of the certificate of incorporation or bylaws of the
Depositor or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to the Depositor or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Depositor,
(ii) constitutes a default by the Depositor under or a breach of any
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Depositor is a party or by
which it or any of its properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in respect
of any of the Depositor's assets except as otherwise expressly
contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation by
or before any court, governmental or administrative agency or arbitrator
against or affecting all or any of the Mortgage Loans, or the Depositor, or
any properties or rights of the Depositor, pending or, to the Depositor's
knowledge after reasonable inquiry, threat ened, which, in any case, if
decided adversely to the Depositor, would result in a Material Adverse Change
with respect to the Depositor or any Mortgage Loan.
(f) Valid and Binding Obligations. The Transaction Documents to which it
is a party, when executed and delivered by the Depositor, will constitute the
legal, valid and binding obligations of the Depositor, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and general equitable principles.
The Obligations, when executed, authenticated and delivered in accordance with
the Indenture, will be validly issued and outstanding and entitled to the
benefits of the Indenture.
(g) Financial Statements. The Financial Statements of the Depositor,
copies of which have been furnished to FSA, (i) are, as of the dates and for
the periods referred to therein, complete and correct in all material
respects, (ii) present fairly the financial condition and results of
operations of the Depositor as of the dates and for the periods indicated and
(iii) have been prepared in accordance with generally accepted accounting
principles consistently applied, except as noted therein (subject as to
interim statements to normal yearend adjustments). Since the date of the most
recent Financial Statements, there has been no Material Adverse Change in such
financial condition or results of opera tions. Except as disclosed in the
Financial Statements, the Depositor is not subject to any contingent
liabilities or commitments that, individually or in the aggregate, have a
material possibility of causing a Material Adverse Change in respect of the
Depositor.
(h) ERISA. The Depositor is in compliance in all material respects with
ERISA and has not incurred and does not reasonably expect to incur any
liabilities to the PBGC under ERISA in connection with any Plan or
Multiemployer Plan or to contribute now or in the future in respect of any
Plan or Multiemployer Plan.
(i) Accuracy of Information. None of the Provided Documents contain any
statement of a material fact with respect to the Depositor or the Transaction
that was untrue or misleading in any material respect when made. Since the
furnishing of the Provided Documents, there has been no change, nor any
development or event involving a prospective change known to the Depositor,
that would render any of the Provided Documents untrue or misleading in any
material respect. There is no fact known to the Depositor which has a material
possibility of causing a Material Adverse Change with respect to the Depositor
or any Mortgage Loan.
(j) Compliance With Securities Laws. The offer and sale of the
Obligations comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws. Without
limitation of the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading (except with respect to the FSA Information as to which no
representation is made). The Issuer is not required to be registered as an
"investment company" under the Investment Company Act. The Indenture meets the
requirements of the Trust Indenture Act.
(k) Transaction Documents. Each of the representations and warranties of
the Depositor contained in the Transaction Documents is true and correct in
all material respects and the Depositor hereby makes each such representation
and warranty to, and for the benefit of, FSA as if the same were set forth in
full herein.
(l) No Consents. No consent, license, approval or authorization from,
or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any consent,
approval, waiver or notification of any creditor, lessor or other
nongovernmental person, is required to be obtained by the Depositor in
connection with the execution, delivery and performance by the Depositor of
this Agreement or of any other Transaction Document to which it is a party,
except (in each case) such as have been obtained and are in full force and
effect.
(m) Compliance With Law, Etc. No practice, procedure or policy employed
or proposed to be employed by the Depositor in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable
to the Depositor which, if enforced, would result in a Material Adverse Change
with respect to the Depositor or any Mortgage Loan.
(n) Good Title; Absence of Liens; Security Interest. Immediately prior to
the transfer to the Issuer, the Depositor is the owner of, and has good and
marketable title to, the Mortgage Loans free and clear of all Liens and
Restrictions on Transferability, and has full right, corporate power and
lawful authority to assign, transfer and pledge the Mortgage Loans. In the
event that, in contravention of the intention of the parties, the transfer of
the Mortgage Loans by the Depositor to the Issuer is characterized as other
than a sale, such transfer shall be characterized as a secured financing, and
the Issuer shall have a valid and perfected first priority security interest
in the Mortgage Loans free and clear of all Liens and Restrictions on
Transferability.
(o) Taxes. The Depositor has filed all federal and state tax returns
which are required to be filed and paid all taxes, including any assessments
received by it, to the extent that such taxes have become due. Any taxes, fees
and other governmental charges payable by the Depositor in connection with the
Transaction, the execution and delivery of the Transaction Documents and the
issuance of the Obligations have been paid or shall have been paid at or prior
to the Date of Issuance.
(p) Perfection of Liens and Security Interest. On the Closing Date, the
Indenture Trustee, on behalf of FSA and the Obligationholders, will have a
valid and perfected first priority security interest in the Collateral,
including but not limited to all funds and Permitted Investments in the Trust
Accounts, free and clear of all Liens and Restrictions on Transferability,
other than the Lien of the Indenture and the Restrictions on Transferability
contained in the Transaction Documents.
(q) Solvency; Fraudulent Conveyance. The Depositor is solvent and will
not be rendered insolvent by the transactions contemplated by the Transaction
Documents and, after giving effect to such transactions, the Depositor will
not be left with an unrea sonably small amount of capital with which to engage
in its business. The Depositor does not intend to incur, or believe that it
has incurred, debts beyond its ability to pay such debts as they mature. The
Depositor does not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the
Depositor or any of its assets. The amount of consideration being received by
the Depositor upon the sale of the Mortgage Loans to the Issuer constitutes
reasonably equivalent value and fair consideration for the interest in the
Mortgage Loans being transferred. The Depositor is not transferring the
Mortgage Loans to the Issuer, as provided in the Transaction Documents, with
any intent to hinder, delay or defraud any of the Depositor's creditors.
(r) Non-Petition. The Depositor has obtained covenants from each party to
any transaction involving the issuance of debt by the Depositor, entered into
prior to the date hereof, that such party shall not institute against the
Depositor, or join in any institution against the Depositor of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
until at least one year and one day after the payment of all obligations of
the Depositor under such transaction.
(s) Non-Recourse. Any outstanding debt of the Depositor is non-recourse
to the Depositor.
(t) No Violation. With respect to any transaction entered into by the
Depositor prior to the date hereof, except as contemplated by the Transaction
Documents, the Depositor has not taken any action, or omitted to take any
action, and no circumstance exists, that would constitute a violation of any
of the negative covenants of the Depositor set forth in Section 2.09 hereof if
such negative covenants were in existence on the date of such transaction.
Section 2.02 Representations and Warranties of the Seller. The Seller
represents, warrants and covenants, as of the date hereof and as of the Date
of Issuance, as follows:
(a) Due Organization and Qualification. The Seller is a corporation, duly
organized, validly existing and in good standing under the laws of the State
of Delaware. The Seller is duly qualified to do business, is in good standing
and has obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its business as
currently conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents to which it is
a party, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render any Mortgage Loan unenforceable in any
respect or would otherwise have a material adverse effect upon the
Transaction.
(b) Power and Authority. The Seller has all necessary corporate power and
authority to conduct its business as currently conducted and as described in
the Offering Document, to execute, deliver and perform its obligations under
the Transaction Documents to which it is a party and to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Trans action Documents to which it is a party by the Seller have been duly
authorized by all necessary corporate action and do not require any additional
approvals or consents or other action by or any notice to or filing with any
Person, including, without limitation, any governmental entity or the Seller's
stockholders.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents to which it is a party by the Seller, the consummation
of the transactions contemplated thereby nor the satisfaction of the terms and
conditions of the Transaction Documents,
(i) conflicts with or results in any breach or violation of any
provision of the Certificate of Incorporation or Bylaws of the
Seller or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to the Seller or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Seller,
(ii) constitutes a default by the Seller under or a breach of any
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Seller is a party or by which
it or any of its properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in respect
of any of the Seller's assets except as otherwise expressly
contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation by
or before any court, governmental or administrative agency or arbitrator
against or affecting all or any of the Mortgage Loans, or the Seller, or any
properties or rights of the Seller, pending or, to the Seller's knowledge
after reasonable inquiry, threatened, which, in any case, if decided adversely
to the Seller, would result in a Material Adverse Change with respect to the
Seller or any Mortgage Loan.
(f) Valid and Binding Obligations. The Transaction Documents to which it
is a party, when executed and delivered by the Seller, will constitute the
legal, valid and binding obligations of the Seller, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles. The
Obligations, when executed, authenticated and delivered in accordance with the
Indenture, will be validly issued and outstanding and entitled to the benefits
of the Indenture.
(g) Financial Statements. The Financial Statements of the Seller, copies
of which have been furnished to FSA, (i) are, as of the dates and for the
periods referred to therein, complete and correct in all material respects,
(ii) present fairly the financial condition and results of operations of the
Seller as of the dates and for the periods indicated and (iii) have been
prepared in accordance with generally accepted accounting principles
consistently applied, except as noted therein (subject as to interim
statements to normal yearend adjustments). Since the date of the most recent
Financial Statements, there has been no Material Adverse Change in such
financial condition or results of operations. Except as disclosed in the
Financial Statements, the Seller is not subject to any contingent liabilities
or commitments that, individually or in the aggregate, have a material
possibility of causing a Material Adverse Change in respect of the Seller.
(h) ERISA. The Seller is in compliance in all material respects with
ERISA and has not incurred and does not reasonably expect to incur any
liabilities to the PBGC under ERISA in connection with any Plan or
Multiemployer Plan or to contribute now or in the future in respect of any
Plan or Multiemployer Plan.
(i) Accuracy of Information. None of the Provided Documents contain any
statement of a material fact with respect to the Seller, the Issuer, the
Company, or the Transaction that was untrue or misleading in any material
respect when made. Since the furnishing of the Provided Documents, there has
been no change, nor any development or event involving a prospective change
known to the Seller, that would render any of the Provided Documents untrue or
misleading in any material respect. There is no fact known to the Seller which
has a material possibility of causing a Material Adverse Change with respect
to the Seller or any Mortgage Loan.
(j) Compliance With Securities Laws. The offer and sale of the
Obligations comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws. Without
limitation of the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading (except with respect to the FSA Information as to which no
representation is made). The Issuer is not required to be registered as an
"investment company" under the Investment Company Act. The Indenture meets the
requirements of the Trust Indenture Act.
(k) Transaction Documents. Each of the representations and warranties of
the Seller contained in the Transaction Documents is true and correct in all
material respects and the Seller hereby makes each such representation and
warranty to, and for the benefit of, FSA as if the same were set forth in full
herein.
(l) No Consents. No consent, license, approval or authorization from, or
registration, filing or declaration with, any regulatory body, administrative
agency, or other governmental instrumentality, nor any consent, approval,
waiver or notification of any creditor, lessor or other nongovernmental
person, is required to be obtained by the Seller in connection with the
execution, delivery and performance by the Seller of this Agreement or of any
other Transaction Document to which it is a party, except (in each case) such
as have been obtained and are in full force and effect.
(m) Compliance With Law, Etc. No practice, procedure or policy employed
or proposed to be employed by the Seller in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable
to the Seller which, if enforced, would result in a Material Adverse Change
with respect to the Seller, the Issuer, the Company, or any Mortgage Loan.
(n) Good Title; Absence of Liens; Security Interest. Immediately prior to
the transfer to the Depositor, the Seller is the owner of, and has good and
marketable title to, the Mortgage Loans free and clear of all Liens and
Restrictions on Transferability, and has full right, corporate power and
lawful authority to assign, transfer and pledge the Mortgage Loans. In the
event that, in contravention of the intention of the parties, the transfer of
the Mortgage Loans by the Seller to the Depositor is characterized as other
than a sale, such transfer shall be characterized as a secured financing, and
the Depositor shall have a valid and perfected first priority security
interest in the Mortgage Loans free and clear of all Liens and Restrictions on
Transferability.
(o) Taxes. The Seller has filed all federal and state tax returns which
are required to be filed and paid all taxes, including any assessments
received by it, to the extent that such taxes have become due. Any taxes, fees
and other governmental charges payable by the Seller in connection with the
Transaction, the execution and delivery of the Transaction Documents and the
issuance of the Obligations have been paid or shall have been paid at or prior
to the Date of Issuance.
(p) Perfection of Liens and Security Interest. On the Closing Date, the
Indenture Trustee, on behalf of FSA and the Obligationholders, will have a
valid and perfected first priority security interest in the Trust Estate,
including but not limited to all funds and Permitted Investments in the Trust
Accounts, free and clear of all Liens and Restrictions on Transferability,
other than the Lien of the Indenture and the Restrictions on Transferability
contained in the Transaction Documents.
(q) Solvency; Fraudulent Conveyance. The Seller is solvent and will not
be rendered insolvent by the transactions contemplated by the Transaction
Documents and, after giving effect to such transactions, the Seller will not
be left with an unreasonably small amount of capital with which to engage in
its business. The Seller does not intend to incur, or believe that it has
incurred, debts beyond its ability to pay such debts as they mature. The
Seller does not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the Seller
or any of its assets. The amount of consideration being received by the Seller
upon the sale of the Mortgage Loans to the Depositor constitutes reasonably
equivalent value and fair consideration for the interest in the Mortgage Loans
being transferred. The Seller is not transferring the Mortgage Loans to the
Depositor, as provided in the Transaction Documents, with any intent to
hinder, delay or defraud any of the Seller's creditors.
(r) Non-Petition. The Seller has obtained covenants from each party to
any transaction involving the issuance of debt by the Seller, entered into
prior to the date hereof, that such party shall not institute against the
Seller, or join in any institution against the Seller of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings until at
least one year and one day after the payment of all obligations of the Seller
under such transaction.
(s) Non-Recourse. Any outstanding debt of the Seller is non-recourse to
the Seller.
(t) No Violation. With respect to any transaction entered into by the
Seller prior to the date hereof, except as contemplated by the Transaction
Documents, the Seller has not taken any action, or omitted to take any action,
and no circumstance exists, that would constitute a violation of any of the
negative covenants of the Seller set forth in Section 2.10 hereof if such
negative covenants were in existence on the date of such transaction.
Section 2.03 Representations and Warranties of the Issuer. The Issuer
represents, warrants and covenants, as of the date hereof and the Date of
Issuance, as follows:
(a) Due Organization and Qualification. The Issuer is a Delaware business
trust, duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Issuer is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the conduct
of its business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Transaction
Documents, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render any Mortgage Loan unenforceable in any
respect or would otherwise have a material adverse effect upon the
Transaction.
(b) Power and Authority. The Issuer has all necessary power and authority
to conduct its business as currently conducted and as described in the
Offering Document, to execute, deliver and perform its obligations under the
Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Trans action Documents by the Issuer have been duly authorized by all
necessary action and do not require any additional approvals or consents or
other action by or any notice to or filing with any Person, including, without
limitation, any governmental entity or any holder of an interest in the
Issuer.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents by the Issuer, the consummation of the transactions
contemplated thereby nor the satisfaction of the terms and conditions of the
Transaction Documents,
(i) conflicts with or results in any breach or violation of any
provision of the Owner Trust Agreement of the Issuer or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
the Issuer or any of its properties, including regulations issued by
an administrative agency or other governmental authority having
supervisory powers over the Issuer,
(ii) constitutes a default by the Issuer under or a breach of any
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Issuer is a party or by which
it or any of its properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in respect
of any of the Issuer's assets except as otherwise expressly
contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation by
or before any court, governmental or administrative agency or arbitrator
against or affecting all or any of the Mortgage Loans, or the Issuer, or any
properties or rights of the Issuer, pending or, to the Issuer's knowledge
after reasonable inquiry, threatened, which, in any case, if decided adversely
to the Issuer, would result in a Material Adverse Change with respect to the
Issuer or any Mortgage Loan.
(f) Valid and Binding Obligations. The Transaction Documents to which it
is a party, when executed and delivered by the Issuer, will constitute the
legal, valid and binding obligations of the Issuer, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles. The
Obligations, when executed, authenticated and delivered in accordance with the
Indenture, will be validly issued and outstanding and entitled to the benefits
of the Indenture.
(g) ERISA. The Issuer is in compliance in all material respects with
ERISA and has not incurred and does not reasonably expect to incur any
liabilities to the PBGC under ERISA in connection with any Plan or
Multiemployer Plan or to contribute now or in the future in respect of any
Plan or Multiemployer Plan.
(h) Accuracy of Information. None of the Provided Documents contain any
statement of a material fact with respect to the Issuer, the Company, the
Seller or the Transaction that was untrue or misleading in any material
respect when made. Since the furnishing of the Provided Documents, there has
been no change, nor any development or event involving a prospective change
known to the Issuer, that would render any of the Provided Documents untrue or
misleading in any material respect. There is no fact known to the Issuer which
has a material possibility of causing a Material Adverse Change with respect
to the Issuer or any Mortgage Loan.
(i) Compliance With Securities Laws. The offer and sale of the
Obligations comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws. Without
limitation of the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading (except with respect to the FSA Information as to which no
representation is made). The Issuer is not required to be registered as an
"investment company" under the Investment Company Act. The Indenture meets the
requirements of the Trust Indenture Act.
(j) Transaction Documents. Each of the representations and warranties of
the Issuer contained in the Transaction Documents to which it is a party is
true and correct in all material respects and the Issuer hereby makes each
such representation and warranty to, and for the benefit of, FSA as if the
same were set forth in full herein.
(k) No Consents. No consent, license, approval or authorization from, or
registration, filing or declaration with, any regulatory body, administrative
agency, or other governmental instrumentality, nor any consent, approval,
waiver or notification of any creditor, lessor or other nongovernmental
person, is required to be obtained by the Issuer in connection with the
execution, delivery and performance by the Issuer of this Agreement or of any
other Transaction Document to which it is a party, except (in each case) such
as have been obtained and are in full force and effect.
(l) Compliance With Law, Etc. No practice, procedure or policy employed
or proposed to be employed by the Issuer in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable
to the Issuer which, if enforced, would result in a Material Adverse Change
with respect to the Issuer, the Seller, the Company or any Mortgage Loan.
(m) Good Title; Absence of Liens; Security Interest. Upon the execution
of the Transaction Documents, the Issuer is the owner of, and has good and
marketable title to, the Mortgage Loans free and clear of all Liens and
Restrictions on Transferability, and has full right, corporate power and
lawful authority to assign, transfer and pledge the Mortgage Loans to the
Indenture Trustee, and the Indenture Trustee shall, for the benefit of the
Obligationholders and FSA, have a valid and perfected first priority security
interest in the Mortgage Loans free and clear of all Liens and Restrictions on
Transferability.
(n) Taxes. Any taxes, fees and other governmental charges payable by the
Issuer in connection with the Transaction, the execution and delivery of the
Transaction Documents and the issuance of the Obligations have been paid or
shall have been paid at or prior to the Date of Issuance.
(o) Perfection of Liens and Security Interest. On the Closing Date, the
Indenture Trustee, on behalf of FSA and the Obligationholders, will have a
valid and perfected first priority security interest in the Trust Estate,
including but not limited to all funds and Permitted Investments in the Trust
Accounts, free and clear of all Liens and Restrictions on Transferability,
other than the Lien of the Indenture and the Restrictions on Transferability
contained in the Transaction Documents.
(p) Solvency; Fraudulent Conveyance. The Issuer is solvent and will not
be rendered insolvent by the transactions contemplated by the Transaction
Documents and, after giving effect to such transactions, the Issuer will not
be left with an unreasonably small amount of capital with which to engage in
its business. The Issuer does not intend to incur, or believe that it has
incurred, debts beyond its ability to pay such debts as they mature. The
Issuer does not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the Issuer
or any of its assets. The amount of consideration being received by the Issuer
upon the sale of the Obligations constitutes reasonably equivalent value and
fair consideration for the interest in the Mortgage Loans evidenced by the
Obligations. The Issuer is not selling the Obligations, as provided in the
Transaction Documents, with any intent to hinder, delay or defraud any of the
Issuer's creditors.
Section 2.04 Representations and Warranties of the Company. The Company
represents, warrants and covenants, as of the date hereof and the Date of
Issuance, as follows:
(a) Due Organization and Qualification. The Company is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Maryland. The Company is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the conduct
of its business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Transaction
Documents, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render any Mortgage Loan unenforceable in any
respect or would otherwise have a material adverse effect upon the
Transaction.
(b) Power and Authority. The Company has all necessary power and
authority to conduct its business as currently conducted and as described in
the Offering Document, to execute, deliver and perform its obligations under
the Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Trans action Documents by the Company have been duly authorized by all
necessary action and do not require any additional approvals or consents or
other action by or any notice to or filing with any Person, including, without
limitation, any governmental entity or any holder of an interest in the
Company.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents by the Company, the consummation of the transactions
contemplated thereby nor the satisfaction of the terms and conditions of the
Transaction Documents,
(i) conflicts with or results in any breach or violation of any
provision of the certificate of incorporation or bylaws of the
Company or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to the Company or any of its properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Company,
(ii) constitutes a default by the Company under or a breach of any
provision of any loan agreement, mortgage, indenture or other
agreement or instru ment to which the Company is a party or by which
it or any of its properties is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in respect
of any of the Company's assets except as otherwise expressly
contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation by
or before any court, governmental or administrative agency or arbitrator
against or affecting all or any of the Mortgage Loans, or the Company, or any
properties or rights of the Company, pending or, to the Company's knowledge
after reasonable inquiry, threatened, which, in any case, if decided adversely
to the Company, would result in a Material Adverse Change with respect to the
Company or any Mortgage Loan.
(f) Valid and Binding Obligations. The Transaction Documents to which it
is a party, when executed and delivered by the Company, will constitute the
legal, valid and binding obligations of the Company, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles. The
Obligations, when executed, authenticated and delivered in accordance with the
Indenture, will be validly issued and outstanding and entitled to the benefits
of the Indenture.
(g) ERISA. No Accued Funding Deficiency, whether or not waived, has
occurred with respect to any Plan. No Plan has been terminated, and no
Commonly Controlled Entity has withdrawn from any Multiemployer Plan which
could result in any liability under ERISA of a Commonly Controlled Entity. No
Reportable Event or other event or condition has occurred which could result
in the termination of any Plan by the PBGC. No Plan has an Underfunding
greater than $100,000. The aggregate amount of Underfunding for all
Underfunded Plans does not exceed $100,000. The liability to which the
Commonly Controlled Entities would become subject under ERISA if they were to
withdraw completely from all Multiemployer Plans as of the most recent
valuation date is not in excess of $100,000. The Multiemployer Plans are
neither in Reorganization (as defined in Section 4241 of ERISA) nor Insolvent
(as defined in Section 4245 of ERISA). The Company is in compliance in all
material respects with ERISA and has not incurred and does not reasonably
expect to incur any liabilities to the PBGC (other than premiums due to the
PBGC) in connection with any Plan or Multiployer Plan.
(h) Accuracy of Information. None of the Provided Documents contain any
statement of a material fact with respect to the Company, the Seller, the
Depositor, the Issuer or the Transaction that was untrue or misleading in any
material respect when made. Since the furnishing of the Provided Documents,
there has been no change, nor any development or event involving a prospective
change known to the Company, that would render any of the Provided Documents
untrue or misleading in any material respect. There is no fact known to the
Company which has a material possibility of causing a Material Adverse Change
with respect to the Company or any Mortgage Loan.
(i) Compliance With Securities Laws. The offer and sale of the
Obligations comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws. Without
limitation of the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading (except with respect to the FSA Information as to which no
representation is made). The Issuer is not required to be registered as an
"investment company" under the Investment Company Act. The Indenture meets the
requirements of the Trust Indenture Act.
(j) Transaction Documents. Each of the representations and warranties of
the Company contained in the Transaction Documents to which it is a party is
true and correct in all material respects and the Company hereby makes each
such representation and warranty to, and for the benefit of, FSA as if the
same were set forth in full herein.
(k) No Consents. No consent, license, approval or authorization from, or
registration, filing or declaration with, any regulatory body, administrative
agency, or other governmental instrumentality, nor any consent, approval,
waiver or notification of any creditor, lessor or other nongovernmental
person, is required to be obtained by the Company in connection with the
execution, delivery and performance by the Company of this Agreement or of any
other Transaction Document to which it is a party, except (in each case) such
as have been obtained and are in full force and effect.
(l) Compliance With Law, Etc. No practice, procedure or policy employed
or proposed to be employed by the Company in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree applicable
to the Company which, if enforced, would result in a Material Adverse Change
with respect to the Company, the Seller, the Depositor, the Issuer or any
Mortgage Loan.
(m) Good Title; Absence of Liens; Security Interest. Immediately prior to
the transfer to the Seller, the Company is the owner of, and has good and
marketable title to, the Mortgage Loans free and clear of all Liens and
Restrictions on Transferability, and has full right, corporate power and
lawful authority to assign, transfer and pledge the Mortgage Loans. In the
event that, in contravention of the intention of the parties, the transfer of
the Mortgage Loans by the Company to the Seller is characterized as other than
a sale, such transfer shall be characterized as a secured financing, and the
Seller shall have a valid and perfected first priority security interest in
the Mortgage Loans free and clear of all Liens and Restrictions on
Transferability.
(n) Taxes. Any taxes, fees and other governmental charges payable by the
Company in connection with the Transaction, the execution and delivery of the
Transaction Documents and the issuance of the Obligations have been paid or
shall have been paid at or prior to the Date of Issuance.
(o) Perfection of Liens and Security Interest. On the Closing Date, the
Indenture Trustee, on behalf of FSA and the Obligationholders, will have a
valid and perfected first priority security interest in the Collateral,
including but not limited to all funds and Permitted Investments in the Trust
Accounts, free and clear of all Liens and Restrictions on Transferability,
other than the Lien of the Indenture and the Restrictions on Transferability
contained in the Transaction Documents.
(p) Solvency; Fraudulent Conveyance. The Company is solvent and will not
be rendered insolvent by the transactions contemplated by the Transaction
Documents and, after giving effect to such transactions, the Company will not
be left with an unreasonably small amount of capital with which to engage in
its business. The Company does not intend to incur, or believe that it has
incurred, debts beyond its ability to pay such debts as they mature. The
Company does not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the Company
or any of its assets. The amount of consideration being received by the
Company upon the sale of the Mortgage Loans constitutes reasonably equivalent
value and fair consideration. The Company is not selling the Mortgage Loans,
as provided in the Transaction Documents, with any intent to hinder, delay or
defraud any of the Company's creditors.
Section 2.05 Affirmative Covenants of the Depositor. The Depositor hereby
agrees that during the Term of the Agreement, unless FSA shall otherwise
expressly consent in writing:
(a) Corporate Existence. The Depositor shall maintain its corporate
existence and shall at all times continue to be duly organized under the laws
of the State of Delaware and duly qualified and duly authorized (as described
in Sections 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its certificate of incorporation and bylaws.
(b) Compliance With Agreements and Applicable Laws. The Depositor shall
perform each of its obligations under the Transaction Documents to which it is
a party and shall comply with all material requirements of, and the
Obligations shall be offered and sold in accor dance with, any law, rule or
regulation applicable to it or thereto, or that are required in connection
with its performance under any of the Transaction Documents to which the
Depositor is a party.
(c) Accountants' Reports; Other Information. The Depositor shall keep or
cause to be kept in reasonable detail books and records of account of its
assets and business. The Depositor shall furnish or caused to be furnished to
FSA:
(i) Accountants' Reports. If a Trigger Event has occurred, copies of any
reports submitted to the Depositor by its independent accountants in
connection with any examination of the financial statements of the
Depositor, promptly upon receipt thereof.
(ii) Other Information. Promptly upon receipt thereof, copies of all
reports, statements, certifications, schedules, or other similar
items delivered to or by the Depositor pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
FSA may reasonably request; provided, however, that the Depositor
shall not be required to deliver any such items if provision by some
other party to FSA is required under the Transaction Documents
unless such other party wrongfully fails to deliver such item. The
Depositor shall, upon the request of FSA, permit FSA or its
authorized agents (A) to inspect the books and records of the
Depositor as they may relate to the Obligations, the Mortgage Loans,
the obligations of the Depositor under the Transaction Documents,
the Transaction and the Depositor's business; (B) to discuss the
affairs, finances and accounts of the Depositor with the Depositor,
no more frequently than annually unless a Trigger Event has
occurred; and (C) upon the occurrence of a Trigger Event, to discuss
the affairs, finances and accounts of the Depositor with its
independent accountants, provided that a representative of the
Depositor, as applicable, shall have the right to be present during
such discussions. Such inspections and discussions shall be
conducted during normal business hours and shall not unreasonably
disrupt the business of the Depositor. The books and records of the
Depositor will be maintained at the respective addresses designated
herein for receipt of notices, unless it shall otherwise advise the
parties hereto in writing.
(iii) The Depositor shall provide or cause to be provided to FSA an
executed original copy of each document executed in connection with
the transaction within 30 days after the date of closing.
(d) Notice of Material Events. The Depositor shall promptly inform FSA in
writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation (A) against
the Depositor pertaining to the Mortgage Loans in general, (B) with
respect to a material portion of the Mortgage Loans or (C) in which
a request has been made for certification as a class action (or
equivalent relief) that would involve a material portion of the
Mortgage Loans;
(ii) any change in the location of the Depositor's principal office or
any change in the location of the Depositor's books and records;
(iii) the occurrence of any Trigger Event, Default or Event of Default;
or
(iv) any other event, circumstance or condition that has resulted, or has
a material possibility of resulting, in a Material Adverse Change in
respect of the Depositor.
(e) Further Assurances. The Depositor shall, upon the request of FSA,
from time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request, such
amendments hereto and such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, in the
Mortgage Loans, free and clear of all Liens and Restrictions on
Transferability except the Lien in favor of the Indenture Trustee, for the
benefit of the Obligationholders and FSA, and the Restrictions on
Transferability imposed by the Indenture. In addition, the Depositor agrees to
cooperate with S&P and Moody's in connection with any review of the
Transaction which may be undertaken by S&P and Moody's after the date hereof.
(f) Retirement of Obligations. The Depositor shall cause the Indenture
Trustee, upon retirement of the Obligations pursuant to the Indenture or
otherwise, to furnish to FSA a notice of such retirement, and, upon retirement
of the Obligations and the expiration of the term of Policy, to surrender the
Policy to FSA for cancellation.
(g) Third-Party Beneficiary. The Depositor agrees that FSA shall have all
rights of a third-party beneficiary in respect of the Transaction Documents to
which the Depositor is a party and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the benefit
of FSA.
(h) Year 2000 Program. The Depositor has taken all steps reasonably
necessary and appropriate to prevent any material problems in its computer and
information systems arising from or in connection with the information
processing challenges associated with the Year 2000, and will provide to FSA
such information and reports as FSA may reasonably request from time to time
with respect to such steps as have or will be taken with respect thereto.
(i) Special Purpose Entity.
(i) The Depositor shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to mislead
others as to the identity of the entity with which those others are
concerned. It particularly will use its best efforts to avoid the
appearance of conducting business on behalf of The Bear Stearns
Companies Inc. or any affiliate thereof and to avoid the appearance
that the assets of The Bear Stearns Companies Inc. are available to
pay the creditors of The Bear Stearns Companies Inc. or any
affiliate thereof. Without limiting the generality of the foregoing,
all oral and written communications of the Depositor including,
without limitation, letters, invoices, purchase orders, contracts,
statements and loan applications of the Depositor, will be made
solely in the name of the Depositor.
(ii) The Depositor shall maintain corporate records and books of account
separate from those of The Bear Stearns Companies Inc. and the other
affiliates thereof.
(iii) The organizational expenses, operating expenses and liabilities of
the Depositor shall be paid from the Depositor's own funds.
(iv) The annual financial statements of the Depositor shall disclose the
effects of its transactions in accordance with generally accepted
accounting principles and shall disclose that the assets of the
Depositor are not available to pay creditors of The Bear Stearns
Companies Inc. or any affiliate thereof.
(v) The resolutions, agreements and other instruments of the Depositor
underlying the transactions described in this Agreement and in the
other Transaction Documents shall be continuously maintained by the
Depositor as official records of the Depositor separately identified
and held apart from the records of The Bear Stearns Companies Inc.
and each other affiliate thereof.
(vi) The Depositor shall maintain an arm's-length relationship with The
Bear Stearns Companies Inc. and the affiliates thereof and will not
hold itself out as being liable for the debts of The Bear Stearns
Companies Inc. or any of its respective affiliates.
(vii) The Depositor shall keep its assets and liabilities wholly separate
from those of all other entities, including, but not limited to, The
Bear Stearns Companies Inc. and its affiliates.
(viii) The Depositor shall obtain proper authorization from its board of
directors and/or shareholders of all corporate action requiring such
authorization. Meetings of the board of directors of the Depositor
shall be held not less frequently than two times per annum and
copies of the minutes of each such board meeting shall be delivered
to FSA within two weeks of such meeting.
(ix) At least one director of the Depositor will not be a director,
officer, employee or holder of 10% or more of the equity securities
of The Bear Stearns Companies Inc.
(x) The Depositor's funds and assets will not be commingled with those
of The Bear Stearns Companies Inc.
(xi) The books and records of the Depositor will be maintained at the
address designated herein for receipt of notices, unless it shall
otherwise advise the parties hereto in writing.
(j) Non-Petition. The Depositor shall cause all parties to any
transaction involving the issuance of debt by the Depositor to covenant not to
institute against the Depositor, or join in any institution against the
Depositor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings until at least one year and one day after the later to
occur of (i) the Expiration Date or (ii) the payment of all obligations of the
Depositor under such transaction.
Section 2.06 Affirmative Covenants of the Seller. The Seller hereby
agrees that during the Term of the Agreement, unless FSA shall otherwise
expressly consent in writing:
(a) Corporate Existence. The Seller shall maintain its corporate
existence and shall at all times continue to be duly organized under the laws
of the State of Delaware and duly qualified and duly authorized (as described
in Sections 2.02(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its certificate of incorporation and bylaws.
(b) Compliance With Agreements and Applicable Laws. The Seller shall
perform each of its obligations under the Transaction Documents to which it is
a party and shall comply with all material requirements of, and the
Obligations shall be offered and sold in accordance with, any law, rule or
regulation applicable to it or thereto, or that are required in connection
with its performance under any of the Transaction Documents.
(c) Accountants' Reports; Other Information. The Seller shall keep or
cause to be kept in reasonable detail books and records of account of its
assets and business. The Seller shall furnish or caused to be furnished to
FSA:
(i) Accountants' Reports. If a Trigger Event has occurred, copies of any
reports submitted to the Seller by its independent accountants in
connection with any examination of the financial statements of the
Seller, promptly upon receipt thereof.
(ii) Other Information. Promptly upon receipt thereof, copies of all
reports, statements, certifications, schedules, or other similar
items delivered to or by the Seller pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
FSA may reasonably request; provided, however, that the Seller shall
not be required to deliver any such items if provision by some other
party to FSA is required under the Transaction Documents unless such
other party wrongfully fails to deliver such item. The Seller shall,
upon the request of FSA, permit FSA or its authorized agents (A) to
inspect the books and records of the Seller as they may relate to
the Obligations, the Mortgage Loans, the obligations of the Seller
under the Transaction Documents, the Transaction and the Seller's
business; (B) to discuss the affairs, finances and accounts of the
Seller with the Seller, no more frequently than annually unless a
Trigger Event has occurred; and (C) upon the occurrence of a Trigger
Event, to discuss the affairs, finances and accounts of the Seller
with its independent accountants, provided that or representative of
the Seller, as applicable, shall have the right to be present during
such discussions. Such inspections and discussions shall be
conducted during normal business hours and shall not unreasonably
disrupt the business of the Seller. The books and records of the
Seller will be maintained at the respective addresses designated
herein for receipt of notices, unless it shall otherwise advise the
parties hereto in writing.
(iii) The Seller shall provide or cause to be provided to FSA an executed
original copy of each document executed in connection with the
transaction within 30 days after the date of closing.
(d) Notice of Material Events. The Seller shall promptly inform FSA in
writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation (A) against
the Seller pertaining to the Mortgage Loans in general, (B) with
respect to a material portion of the Mortgage Loans or (C) in which
a request has been made for certification as a class action (or
equivalent relief) that would involve a material portion of the
Mortgage Loans;
(ii) any change in the location of the Seller's principal office or any
change in the location of the Seller's books and records;
(iii) the occurrence of any Trigger Event, Default or Event of Default;
or
(iv) any other event, circumstance or condition that has resulted, or has
a material possibility of resulting, in a Material Adverse Change in
respect of the Seller.
(e) Further Assurances. The Seller shall, upon the request of FSA, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request, such
amendments hereto and such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, in the
Mortgage Loans, free and clear of all Liens and Restrictions on
Transferability except the Lien in favor of the Indenture Trustee, for the
benefit of the Obligationholders and FSA, and the Restrictions on
Transferability imposed by the Indenture. In addition, the Seller agrees to
cooperate with S&P and Moody's in connection with any review of the
Transaction which may be undertaken by S&P and Moody's after the date hereof.
(f) Retirement of Obligations. The Seller shall cause the Indenture
Trustee, upon retirement of the Obligations pursuant to the Indenture or
otherwise, to furnish to FSA a notice of such retirement, and, upon retirement
of the Obligations and the expiration of the term of Policy, to surrender the
Policy to FSA for cancellation.
(g) Third-Party Beneficiary. The Seller agrees that FSA shall have all
rights of a third-party beneficiary in respect of the Transaction Documents to
which the Seller is a party and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the benefit
of FSA.
(h) Year 2000 Program. The Seller has taken all steps reasonably
necessary and appropriate to prevent any material problems in its computer and
information systems arising from or in connection with the information
processing challenges associated with the Year 2000, and will provide to FSA
such information and reports as FSA may reasonably request from time to time
with respect to such steps as have or will be taken with respect thereto.
(i) Special Purpose Entity.
(i) The Seller shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which
those others are concerned. It particularly will use its best
efforts to avoid the appearance of conducting business on
behalf of the Company or any affiliate thereof and to avoid the
appearance that the assets of the Seller are available to pay
the creditors of the Company or any affiliate thereof. Without
limiting the generality of the foregoing, all oral and written
communications of the Seller including, without limitation,
letters, invoices, purchase orders, contracts, statements and
loan applications of the Seller, will be made solely in the
name of the Seller.
(ii) The Seller shall maintain corporate records and books of
account separate from those of the Company and the other
affiliates thereof.
(iii) The organizational expenses, operating expenses and
liabilities of the Seller shall be paid from the Seller's own
funds.
(iv) The annual financial statements of the Seller shall disclose
the effects of its transactions in accordance with generally
accepted accounting principles and shall disclose that the
assets of the Seller are not available to pay creditors of the
Company or any affiliate thereof.
(v) The resolutions, agreements and other instruments of the Seller
underlying the transactions described in this Agreement and in
the other Transaction Documents shall be continuously
maintained by the Seller as official records of the Seller
separately identified and held apart from the records of the
Company and each other affiliate thereof.
(vi) The Seller shall maintain an arm's-length relationship with the
Company and the affiliates thereof and will not hold itself out
as being liable for the debts of the Company or any of its
respective affiliates.
(vii) The Seller shall keep its assets and liabilities wholly
separate from those of all other entities, including, but not
limited to, the Company and its affiliates.
(viii) The Seller shall obtain proper authorization from its board
of directors and/or shareholders of all corporate action
requiring such authorization. Meetings of the board of
directors (or actions by written consent in lieu of meeting) of
the Seller shall be held not less frequently than two times per
annum and copies of the minutes of each such board meeting
shall be delivered to FSA within two weeks of such meeting.
(ix) At least one director of the Seller will not be a director,
officer, employee or holder of 5% or more of the equity
securities of the Company.
(x) The Seller's funds and assets will not be commingled with those
of the Company.
(xi) The books and records of the Seller will be maintained at the
address designated herein for receipt of notices, unless it
shall otherwise advise the parties hereto in writing.
(j) Non-Petition. The Seller shall cause all parties to any transaction
involving the issuance of debt by the Seller to covenant not to institute
against the Seller, or join in any institution against the Seller of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
until at least one year and one day after the later to occur of (i) the
Expiration Date or (ii) the payment of all obligations of the Seller under
such transaction.
Section 2.07 Affirmative Covenants of the Issuer. The Issuer hereby
agrees that during the Term of this Agreement, unless FSA shall otherwise
expressly consent in writing:
(a) Existence. The Issuer shall maintain its existence and shall at all
times continue to be duly organized under the laws of the State of Delaware
and duly qualified and duly authorized (as described in Sections 2.03(a), (b)
and (c) hereof) and shall conduct its business in accordance with the terms of
its Owner Trust Agreement.
(b) Compliance With Agreements and Applicable Laws. The Issuer shall
perform its respective obligations under the Transaction Documents and shall
comply with all material requirements of, and the Obligations shall be offered
and sold in accordance with, any law, rule or regulation applicable to it or
thereto, or that are required in connection with its performance under any of
the Transaction Documents.
(c) Accountant's Reports; Other Information. The Issuer shall keep or
cause to be kept in reasonable detail books and records of account of its
assets and business. The Issuer shall furnish or caused to be furnished to
FSA:
(i) Accountants' Reports. If a Trigger Event has occurred, copies
of any reports submitted to the Issuer by its independent
accountants in connection with any examination of the financial
statements of the Issuer, promptly upon receipt thereof.
(ii) Other Information. Promptly upon receipt thereof, copies of all
reports, statements, certifications, schedules, or other
similar items delivered to or by the Issuer pursuant to the
terms of the Transaction Documents and promptly upon request,
such other data as FSA may reasonably request; provided,
however, that the Issuer shall not be required to deliver any
such items if provision by some other party to FSA is required
under the Transaction Documents unless such other party
wrongfully fails to deliver such item. The Issuer shall, upon
the request of FSA, permit FSA or its authorized agents (A) to
inspect the books and records of the Issuer as they may relate
to the Obligations, the Mortgage Loans, the obligations of the
Issuer under the Transaction Documents, the Transaction and the
Issuer's business; (B) to discuss the affairs, finances and
accountants of the Issuer with the Issuer, no more frequently
than annually unless a Trigger Event has occurred; and (C) upon
the occurrence of a Trigger Event, to discuss the affairs,
finances and accounts of the Issuer with its independent
accountants, provided that or representative of the Issuer, as
applicable, shall have the right to be present during such
discussions. Such inspections and discussions shall be
conducted during normal business hours and shall not
unreasonably disrupt the business of the Issuer. The books and
records of the Issuer will be maintained at the respective
addresses designated herein for receipt of notices, unless it
shall otherwise advise the parties hereto in writing.
(iii) The Issuer shall provide or cause to be provided to FSA an
executed original copy of each document executed in connection
with the transaction within 30 days after the date of closing.
(d) Notice of Material Events. The Issuer shall promptly inform FSA in
writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
(A) against the Issuer pertaining to the Mortgage Loans in
general, (B) with respect to a material portion of the Mortgage
Loans or (C) in which a request has been made for certification
as a class action (or equivalent relief) that would involve a
material portion of the Mortgage Loans;
(ii) any change in the location of the Issuer's principal office or
any change in the location of the Issuer's books and records;
(iii) the occurrence of any Trigger Event, Default or Event of
Default; or
(iv) any other event, circumstance or condition that has resulted,
or has a material possibility of resulting, in a Material
Adverse Change in respect of the Issuer.
(e) Further Assurances. The Issuer shall, upon the request of FSA, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request, such
amendments hereto and such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, in the
Mortgage Loans, free and clear of all Liens and Restrictions on
Transferability except the Lien in favor of the Indenture Trustee, for the
benefit of the Obligationholders and FSA, and the Restrictions on
Transferability imposed by the Indenture. In addition, the Issuer agrees to
cooperate with S&P and Moody's in connection with any review of the
Transaction which may be undertaken by S&P and Moody's after the date hereof.
(f) Retirement of Obligations. The Issuer shall cause the Indenture
Trustee, upon retirement of the Obligations pursuant to the Indenture or
otherwise, to furnish to FSA a notice of such retirement, and, upon retirement
of the Obligations and the expiration of the term of the Policy, to surrender
the Policy to FSA for cancellation.
(g) Third-Party Beneficiary. The Issuer agrees that FSA shall have all
rights of a third-party beneficiary in respect of the Transaction Documents to
which the Issuer is a party and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the benefit
of FSA.
(h) Special Purpose Entity.
(i) The Issuer shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which
those others are concerned. It particularly will use its best
efforts to avoid the appearance of conducting business on
behalf of the Company or any affiliate thereof and to avoid the
appearance that the assets of the Issuer are available to pay
the creditors of the Company or any affiliate thereof. Without
limiting the generality of the foregoing, all oral and written
communications of the Issuer including, without limitation,
letters, invoices, purchase orders, contracts, statements and
loan applications of the Issuer, will be made solely in the
name of the Issuer.
(ii) The Issuer shall maintain records and books of account separate
from those of the Company and the other affiliates thereof.
(iii) The organizational expenses, operating expenses and
liabilities of the Issuer shall be paid from the Issuer's own
funds.
(iv) The annual financial statements of the Issuer shall disclose
the effects of its transactions in accordance with generally
accepted accounting principles and shall disclose that the
assets of the Issuer are not available to pay creditors of the
Company or any affiliate thereof.
(v) The resolutions, agreements and other instruments of the Issuer
underlying the transactions described in this Agreement and in
the other Transaction Documents shall be continuously
maintained by the Issuer as official records of the Issuer
separately identified and held apart from the records of the
Company and each other affiliate thereof.
(vi) The Issuer shall maintain an arm's-length relationship with the
Company and the affiliates thereof and will not hold itself out
as being liable for the debts of the Company or any of its
respective affiliates.
(vii) The Issuer shall keep its assets and liabilities wholly
separate from those of all other entities, including, but not
limited to, the Company and its affiliates.
(viii) The Issuer shall obtain proper authorization from its
beneficial owners of all action requiring such authorization.
(ix) The Issuer's funds and assets will not be commingled with those
of the Company.
(x) The books and records of the Issuer will be maintained at the
address designated herein for receipt of notices, unless it
shall otherwise advise the parties hereto in writing.
(i) Non-Petition. The Issuer shall cause all parties to any transaction
involving the issuance of debt by the Issuer to covenant not to institute
against the Issuer, or join in any institution against the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
until at least one year and one day after the later to occur of (i) the
Expiration Date or (ii) the payment of all obligations of the Issuer under
such transaction.
Section 2.08 Affirmative Covenants of the Company. The Company hereby
agrees that during the Term of this Agreement, unless FSA shall otherwise
expressly consent in writing:
(a) Existence. The Company shall maintain its existence and shall at all
times continue to be duly organized under the laws of the State of Maryland
and duly qualified and duly authorized (as described in Sections 2.04(a), (b)
and (c) hereof) and shall conduct its business in accordance with the terms of
its certificate of incorporation and bylaws.
(b) Compliance With Agreements and Applicable Laws. The Company shall
perform its respective obligations under the Transaction Documents and shall
comply with all material requirements of, and the Obligations shall be offered
and sold in accordance with, any law, rule or regulation applicable to it or
thereto, or that are required in connection with its performance under any of
the Transaction Documents.
(c) Financial Statements; Accountants' Reports; Other Information.
The Company shall keep or cause to be kept in reasonable detail books and
records of account of the Company's assets and business, and shall clearly
reflect therein the transfer of the Mortgage Loans as a sale of the Company's
interest in the Mortgage Loans; provided, that for tax purposes the Company
will treat the Obligations as newly originated debt obligations. The Company
shall furnish or caused to be furnished to FSA:
(i) Annual Financial Statements. As soon as available, and in any
event within 90 days after the close of each fiscal year of the
Company, the audited balance sheets of the Company as of the
end of such fiscal year and the audited statements of income,
changes in shareholders' equity and cash flows of the Company
for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding
date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles,
consistently applied, and accompanied by the certificate of the
Company's independent accountants (who shall be a nationally
recognized firm or otherwise acceptable to FSA) and by the
certificate specified in Section 2.08(d) hereof.
(ii) Quarterly Financial Statements. As soon as available, and in
any event within 45 days after the close of each of the first
three quarters of each fiscal year of the Company, the
unaudited balance sheets of the Company as of the end of such
quarter and the unaudited statements of income, changes in
shareholders' equity and cash flows of the Company for the
portion of the fiscal year then ended, all in reasonable detail
and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting
principles, consistently applied (subject to normal year-end
adjustments), and accompanied by the certificate specified in
Section 2.08(d) hereof if such certificate is required to be
provided pursuant to such Section.
(iii) Accountants' Reports. If a Trigger Event has occurred, copies
of any reports submitted to the Company by its independent
accountants in connection with any examination of the financial
statements of the Company, promptly upon receipt thereof.
(iv) Other Information. Promptly upon receipt thereof, copies of all
reports, statements, certifications, schedules, or other
similar items delivered to or by the Company pursuant to the
terms of the Transaction Documents and, promptly upon request,
such other data as FSA may reasonably request; provided,
however, that the Company shall not be required to deliver any
such items if provision by some other party to FSA is required
under the Transaction Documents unless such other party
wrongfully fails to deliver such item. The Company shall, upon
the request of FSA, permit FSA or its authorized agents (A) to
inspect the books and records of the Company as they may relate
to the Obligations, the Mortgage Loans, the obligations of the
Company under the Transaction Documents, the Transaction and,
but only following the occurrence of a Trigger Event, the
Company's business; (B) to discuss the affairs, finances and
accounts of the Company with the Chief Operating Officer and
the Chief Financial Officer of the Company, no more frequently
than annually unless a Trigger Event has occurred; and (C) upon
the occurrence of a Trigger Event, to discuss the affairs,
finances and accounts of the Company with the Company's
independent accountants, provided that an officer of the
Company shall have the right to be present during such
discussions. Such inspections and discussions shall be
conducted during normal business hours and shall not
unreasonably disrupt the business of the Company. In addition,
the Company shall promptly (but in no case more than 30 days
following issuance or receipt by the Commonly Controlled
Entity) provide to FSA a copy of all correspondence between a
Commonly Controlled Entity and the PBGC, IRS, Department of
Labor or the administrators of a Multiemployer Plan relating to
any Reportable Event or the underfunded status, termination or
possible termination of a Plan or a Multiemployer Plan. The
books and records of the Company will be maintained at the
address of the Company designated herein for receipt of
notices, unless the Company shall otherwise advise the parties
hereto in writing.
(v) The Company shall provide or cause to be provided to FSA an
executed original copy of each document executed in connection
with the transaction within 30 days after the date of closing.
All financial statements specified in clauses (i) and (ii) above shall be
furnished in consolidated form for the Company and all Subsidiaries in
the event the Company shall consolidate its financial statements with its
Subsidiaries.
(d) Compliance Certificate. The Company shall deliver to FSA concurrently
with the delivery of the financial statements required pursuant to Section
2.08(c)(i) hereof (and concurrently with the delivery of the financial
statements required pursuant to Section 2.08(c)(ii) hereof, if a Trigger Event
has occurred), a certificate signed by the Chief Financial Officer of the
Company stating that:
(i) a review of the Company's and the Issuer's performance under
the Transaction Documents during such period has been made
under such officer's supervision;
(ii) to the best of such individual's knowledge following reasonable
inquiry, no Trigger Event, Default or Event of Default has
occurred, or if a Trigger Event, Default or Event of Default
has occurred, specifying the nature thereof and, if the Company
has a right to cure any such Default or Event of Default
pursuant to Section 5.01, stating in reasonable detail the
steps, if any, being taken by the Company to cure such Default
or Event of Default or to otherwise comply with the terms of
the agreement to which such Default or Event of Default
relates; and
(iii) the attached financial reports submitted in accordance with
Section 2.08(c)(i) or (ii) hereof, as applicable, are complete
and correct in all material respects and present fairly the
financial condition and results of operations of the Company as
of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied
(subject as to interim statements to normal year-end
adjustments).
(e) Notice of Material Events. The Company shall promptly inform FSA in
writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
(A) against the Company pertaining to the Mortgage Loans in
general, (B) with respect to a material portion of the Mortgage
Loans or (C) in which a request has been made for certification
as a class action (or equivalent relief) that would involve a
material portion of the Mortgage Loans;
(ii) any change in the location of the Company's principal office or
any change in the location of the Company's books and records;
(iii) the occurrence of any Trigger Event, Default or Event of
Default; or
(iv) any other event, circumstance or condition that has resulted,
or has a material possibility of resulting, in a Material
Adverse Change in respect of the Company.
(f) Further Assurances. The Company shall, upon the request of FSA, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request, such
amendments hereto and such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, in the
Mortgage Loans, free and clear of all Liens and Restrictions on
Transferability except the Lien in favor of the Indenture Trustee, for the
benefit of the Obligationholders and FSA, and the Restrictions on
Transferability imposed by the Indenture. In addition, the Company agrees to
cooperate with S&P and Moody's in connection with any review of the
Transaction which may be undertaken by S&P and Moody's after the date hereof.
(g) Retirement of Obligations. The Company shall cause the Indenture
Trustee, upon retirement of the Obligations pursuant to the Indenture or
otherwise, to furnish to FSA a notice of such retirement, and, upon retirement
of the Obligations and the expiration of the term of the Policy, to surrender
the Policy to FSA for cancellation
(h) Third-Party Beneficiary. The Company agrees that FSA shall have all
rights of a third-party beneficiary in respect of the Transaction Documents to
which the Company is a party and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the benefit
of FSA.
(i) Year 2000 Program. The Company has taken all steps reasonably
necessary and appropriate to prevent any material problems in its computer and
information systems arising from or in connection with the information
processing challenges associated with the Year 2000, and will provide to FSA
such information and reports as FSA may reasonably request from time to time
with respect to such steps as have or will be taken with respect thereto.
Section 2.09 Negative Covenants of the Depositor. The Depositor hereby
agrees that during the Term of the Agreement, unless FSA shall otherwise
expressly consent in writing:
(a) Restrictions on Liens. The Depositor shall not (i) create, incur or
suffer to exist, or agree to create, incur or suffer to exist, or consent to
cause or permit in the future (upon the happening of a contingency or
otherwise) the creation, incurrence or existence of any Lien or Restriction on
Transferability on the Mortgage Loans except for the Lien in favor of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, and the
Restrictions on Transferability imposed by the Indenture or (ii) sign or file
under the Uniform Commercial Code of any jurisdiction any financing statement
which names the Depositor as a debtor, or sign any security agreement
authorizing any secured party thereunder to file such financing statement,
with respect to the Mortgage Loans, except in each case any such instrument
solely securing the rights and preserving the Lien of the Indenture Trustee,
for the benefit of the Obligationholders and FSA.
(b) Impairment of Rights. The Depositor shall not take any action, or
fail to take any action, if such action or failure to take action may (i)
interfere with the enforcement of any rights under the Transaction Documents
that are material to the rights, benefits or obligations of the Indenture
Trustee, the Obligationholders or FSA, (ii) result in a Material Adverse
Change in respect of any Mortgage Loan or (iii) impair the ability of the
Depositor to perform its obligations under the Transaction Documents to which
it is a party, including any consolidation, merger with any Person or any
transfer of all or any material amount of the Depositor's assets to any other
Person if such consolidation, merger or transfer would materially impair the
net worth of the Depositor or any successor Person obligated, after such
event, to perform the Depositor's obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. The Depositor shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
provisions of any of the Transaction Documents or its certificate of
incorporation or by-laws.
(d) Successors. So long as no Insurer Default has occurred and is
continuing, the Depositor shall not terminate or designate, or consent to the
termination or designation of, the servicer, the master servicer, any
subservicer, any custodian, or the Indenture Trustee or any successor thereto
without the prior approval of FSA.
(e) Other Activities. The Depositor shall not create, incur, assume or
suffer to exist any indebtedness or sell, transfer, exchange or otherwise
dispose of any of its assets, or engage in any business or activity, except as
provided in or contemplated by the Transaction Documents or its certificate of
incorporation or by-laws; provided, that in no event shall any such
indebtedness be recourse to the Depositor.
(f) Subsidiaries. The Depositor shall not form, or cause to be formed,
any Subsidiaries.
(g) No Mergers. The Depositor shall not consolidate with or merge into
any Person or transfer all or any material amount of its assets to any Person
except as provided in or contemplated by the Transaction Documents.
(h) Insolvency. The Depositor shall not commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to the bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, corporation or other relief with respect to it or
(B) seeking appointment of a receiver, insolvency trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
make a general assignment for the benefit of its creditors. The Depositor
shall not take any action in furtherance of, or indicating the consent to,
approval of , or acquiescence in any of the acts set forth above. The
Depositor shall not admit in writing its inability to pay its debts.
Section 2.10 Negative Covenants of the Seller. The Seller hereby agrees
that during the Term of the Agreement, unless FSA shall otherwise expressly
consent in writing:
(a) Restrictions on Liens. The Seller shall not (i) create, incur or
suffer to exist, or agree to create, incur or suffer to exist, or consent to
cause or permit in the future (upon the happening of a contingency or
otherwise) the creation, incurrence or existence of any Lien or Restriction on
Transferability on the Mortgage Loans except for the Lien in favor of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, and the
Restrictions on Transferability imposed by the Indenture or (ii) sign or file
under the Uniform Commercial Code of any jurisdiction any financing statement
which names the Seller as a debtor, or sign any security agreement authorizing
any secured party thereunder to file such financing statement, with respect to
the Mortgage Loans, except in each case any such instrument solely securing
the rights and preserving the Lien of the Indenture Trustee, for the benefit
of the Obligationholders and FSA.
(b) Impairment of Rights. The Seller shall not take any action, or fail
to take any action, if such action or failure to take action may (i) interfere
with the enforcement of any rights under the Transaction Documents that are
material to the rights, benefits or obligations of the Indenture Trustee, the
Obligationholders or FSA, (ii) result in a Material Adverse Change in respect
of any Mortgage Loan or (iii) impair the ability of the Seller to perform its
obligations under the Transaction Documents to which it is a party, including
any consolidation, merger with any Person or any transfer of all or any
material amount of the Seller's assets to any other Person if such
consolidation, merger or transfer would materially impair the net worth of the
Seller or any successor Person obligated, after such event, to perform the
Seller's obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. The Seller shall not waive, modify or amend,
or consent to any waiver, modification or amendment of, any of the provisions
of any of the Transaction Documents or its certificate of incorporation and
by-laws.
(d) Successors. So long as no Insurer Default has occurred and is
continuing, the Seller shall not terminate or designate, or consent to the
termination or designation of, the servicer, the master servicer, any
subservicer, any custodian, or the Indenture Trustee or any successor thereto
without the prior approval of FSA.
(e) Other Activities. The Seller shall not create, incur, assume or
suffer to exist any indebtedness or sell, transfer, exchange or otherwise
dispose of any of its assets, or engage in any business or activity, except as
provided in or contemplated by the Transaction Documents and its certificate
of incorporation and by-laws; provided, that in no event shall any such
indebtedness be recourse to the Seller.
(f) Subsidiaries. The Seller shall not form, or cause to be formed, any
Subsidiaries. No Mergers. The Seller shall not consolidate with or merge into
any Person or transfer all or any material amount of its assets to any Person
except as provided in or contemplated by the Transaction Documents.
(g) Insolvency. The Seller shall not commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to the bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, corporation or other relief with respect to it or
(B) seeking appointment of a receiver, insolvency trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
make a general assignment for the benefit of its creditors. The Seller shall
not take any action in furtherance of, or indicating the consent to, approval
of , or acquiescence in any of the acts set forth above. The Seller shall not
admit in writing its inability to pay its debts.
Section 2.11 Negative Covenants of the Issuer. The Issuer hereby agrees
that during the Term of the Agreement, unless FSA shall otherwise expressly
consent in writing:
(a) Restrictions on Liens. The Issuer shall not (i) create, incur or
suffer to exist, or agree to create, incur or suffer to exist, or consent to
cause or permit in the future (upon the happening of a contingency or
otherwise) the creation, incurrence or existence of any Lien or Restriction on
Transferability on the Mortgage Loans except for the Lien in favor of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, and the
Restrictions on Transferability imposed by the Indenture or (ii) sign or file
under the Uniform Commercial Code of any jurisdiction any financing statement
which names the Issuer as a debtor, or sign any security agreement authorizing
any secured party thereunder to file such financing statement, with respect to
the Mortgage Loans, except in each case any such instrument solely securing
the rights and preserving the Lien of the Indenture Trustee, for the benefit
of the Obligationholders and FSA.
(b) Impairment of Rights. The Issuer shall not take any action, or fail
to take any action, if such action or failure to take action may (i) interfere
with the enforcement of any rights under the Transaction Documents that are
material to the rights, benefits or obligations of the Indenture Trustee, the
Obligationholders or FSA, (ii) result in a Material Adverse Change in respect
of any Mortgage Loan or (iii) impair the ability of the Issuer to perform its
obligations under the Transaction Documents to which it is a party, including
any consolidation, merger with any Person or any transfer of all or any
material amount of the Issuer's assets to any other Person if such
consolidation, merger or transfer would materially impair the net worth of the
Issuer or any successor Person obligated, after such event, to perform the
Issuer's obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. The Issuer shall not waive, modify or amend,
or consent to any waiver, modification or amendment of, any of the provisions
of any of the Transaction Documents.
(d) Successors. So long as no Insurer Default has occurred and is
continuing, the Issuer shall not terminate or designate, or consent to the
termination or designation of, the servicer, the master servicer, any
subservicer, any custodian, or the Indenture Trustee or any successor thereto
without the prior approval of FSA.
(e) Other Activities. The Issuer shall not create, incur, assume or
suffer to exist any indebtedness or sell, transfer, exchange or otherwise
dispose of any of its assets, or engage in any business or activity, except as
provided in or contemplated by the Transaction Documents and the Owner Trust
Agreement; provided, that in no event shall any such indebtedness be recourse
to the Issuer.
(f) Subsidiaries. The Issuer shall not form, or cause to be formed, any
Subsidiaries.
(g) No Mergers. The Issuer shall not consolidate with or merge into any
Person or transfer all or any material amount of its assets to any Person
except as provided in or contemplated by the Transaction Documents.
(h) Insolvency. The Issuer shall not commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to the bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, corporation or other relief with respect to it or
(B) seeking appointment of a receiver, insolvency trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
make a general assignment for the benefit of its creditors. The Issuer shall
not take any action in furtherance of, or indicating the consent to, approval
of , or acquiescence in any of the acts set forth above. The Issuer shall not
admit in writing its inability to pay its debts.
Section 2.12 Negative Covenants of the Company. The Company hereby agrees
that during the Term of the Agreement, unless FSA shall otherwise expressly
consent in writing: Restrictions on Liens. The Company shall not (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a contingency
or otherwise) the creation, incurrence or existence of any Lien or Restriction
on Transferability on the Mortgage Loans except for the Lien in favor of the
Indenture Trustee, for the benefit of the Obligationholders and FSA, and the
Restrictions on Transferability imposed by the Indenture or (ii) sign or file
under the Uniform Commercial Code of any jurisdiction any financing statement
which names the Company as a debtor, or sign any security agreement
authorizing any secured party thereunder to file such financing statement,
with respect to the Mortgage Loans, except in each case any such instrument
solely securing the rights and preserving the Lien of the Indenture Trustee,
for the benefit of the Obligationholders and FSA. Impairment of Rights. The
Company shall not take any action, or fail to take any action, if such action
or failure to take action may (i) interfere with the enforcement of any rights
under the Transaction Documents that are material to the rights, benefits or
obligations of the Indenture Trustee, the Obligationholders or FSA, (ii)
result in a Material Adverse Change in respect of any Mortgage Loan or (iii)
impair the ability of the Company to perform its obligations under the
Transaction Documents to which it is a party, including any consolidation,
merger with any Person or any transfer of all or any material amount of the
Company's assets to any other Person if such consolidation, merger or transfer
would materially impair the net worth of the Company or any successor Person
obligated, after such event, to perform the Company's obligations under the
Transaction Documents.
(c) Waiver, Amendments, Etc. The Company shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
provisions of any of the Transaction Documents.
(d) Successors. So long as no Insurer Default has occurred and is
continuing, the Company shall not terminate or designate, or consent to the
termination or designation of, the servicer, the master servicer, any
subservicer, any custodian, or the Indenture Trustee or any successor thereto
without the prior approval of FSA.
(e) Insolvency. The Company shall not commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to the bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, corporation or other relief with respect to it or
(B) seeking appointment of a receiver, insolvency trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or
make a general assignment for the benefit of its creditors. The Company shall
not take any action in furtherance of, or indicating the consent to, approval
of , or acquiescence in any of the acts set forth above. The Company shall not
admit in writing its inability to pay its debts.
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01 Issuance of the Policy. FSA agrees to issue the Policy
subject to satisfac tion of the conditions precedent set forth in Appendix A
hereto.
Section 3.02 Payment of Fees and Premium.
(a) Legal Fees. On the Date of Issuance, the Company shall pay or cause
to be paid legal fees and disbursements incurred by FSA in connection with the
issuance of the Policy, unless otherwise agreed between the Company and FSA.
(b) Rating Agency Fees. The initial fees of S&P and Moody's with respect
to the Obligations and the transactions contemplated hereby shall be paid by
the Company in full on the Date of Issuance, or otherwise provided for to the
satisfaction of FSA. All periodic and subsequent fees of S&P and Moody's with
respect to, and directly allocable to, the Obligations shall be for the
account of, and shall be billed to, the Company. The fees for any other rating
agency shall be paid by the party requesting such other agency's rating,
unless such other agency is a substitute for S&P or Moody's in the event that
S&P or Moody's is no longer rating the Obligations, in which case the cost for
such agency shall be paid by the Company.
(c) Auditors' Fees. In the event that FSA's auditors are required to
provide information or any consent in connection with the Offering Document
prepared prior to the Date of Issuance, fees therefor not exceeding $4,000
shall be paid by the Company. The Company shall pay on demand any additional
fees of FSA's auditors payable in respect of any Offering Document that are
incurred after the Date of Issuance. It is understood that FSA's auditors
shall not incur any additional fees in respect of future Offering Documents
except at the request of or with the consent of the Company.
(d) Premium. In consideration of the issuance by FSA of the Policy, FSA
shall be entitled to receive the Premium as and when due in accordance with
the terms of the Premium Letter (i) in the case of Premium due on or before
the Date of Issuance, directly from the Company and (ii) in the case of
Premium due after the Date of Issuance, as provided in the Indenture. The
Premium paid hereunder or under the Indenture shall be nonrefundable without
regard to whether FSA makes any payment under the Policy or any other
circumstances relating to the Obligations or provision being made for payment
of the Obligations prior to maturity. The Company shall make all payments of
Premium by wire transfer to an account designated from time to time by FSA by
written notice to the Company.
Section 3.03 Reimbursement and Additional Payment Obligation. The
Depositor, the Seller, the Company and the Issuer agree to pay to FSA the
following amounts, as and when incurred:
(a) a sum equal to the total of all amounts paid by FSA under the Policy;
(b) any and all out-of-pocket charges, fees, costs and expenses which FSA
may reasonably pay or incur, including, but not limited to, attorneys' and
accountants' fees and expenses, in connection with (i) in the event of
payments under the Policy, any accounts established to facilitate payments
under the Policy, to the extent FSA has not been immeately reimbursed on the
date that any amount is paid by FSA under the Policy, or other administrative
expenses relating to such payments under the Policy, (ii) the enforcement,
defense or preservation of any rights in respect of any of the Transaction
Documents, including defending, monitoring or participating in any litigation
or proceeding (including any insolvency or bankruptcy proceeding in respect of
any Transaction participant or any affiliate thereof) relating to any of the
Transaction Documents, any party to any of the Transaction Documents or the
Transaction, (iii) any amendment, waiver or other action with respect to, or
related to, any Transaction Document whether or not executed or completed,
(iv) any review or investigation made by FSA in those circumstances where its
approval or consent is sought under any of the Transaction Documents;
(c) interest on any and all amounts described in Section 3.03(a) or
Section 3.02(d) from the date due to FSA pursuant to the provisions hereof
until payment thereof in full, payable to FSA at the Late Payment Rate per
annum; and
(d) any payments made by FSA on behalf of, or advanced to, the Depositor,
the Seller, the Company or the Issuer, including, without limitation, any
amounts payable by the Depositor, the Seller, the Company or the Issuer
pursuant to the Obligations (other than any payments of interest or principal
on the Notes but without the limiting amounts specified in clause (a) of this
Section 3.03) or any other Transaction Documents; and any payments made by FSA
as, or in lieu of, any servicing, management, trustee, custodial or
administrative fees payable, in the sole discretion of FSA to third parties in
connection with the Transaction.
All such amounts are to be immediately due and payable without demand, in
full without any requirement on the part of FSA to seek reimbursement from any
other sources of indemnity therefor or to allocate expenses to other
transactions benefitting therefrom.
Notwithstanding any provision of this Section to the contrary, the
payment obligations set forth in this Section shall be non-recourse
obligations with respect to the Depositor, the Seller, the Company and the
Issuer (other than those set forth in subsections (b), (c) and (d) above) and
shall be payable only from monies available for such payment in accordance
with the provisions of the Indenture (except to the extent that any such
payment obligation arises from a failure to perform or default of the
Depositor, the Seller, the Company, the Issuer or any affiliate thereof under
any Transaction Document or by reason of negligence, willful misconduct or bad
faith on the part of any of the Depositor, the Seller, the Company or the
Issuer in the performance of its duties and obligations thereunder or reckless
disregard by any of the Depositor, the Seller, the Company or the Issuer of
its duties and obligations thereunder)
Section 3.04 Indemnification
(a) Indemnification by the Depositor. In addition to any and all rights
of reimbursement, indemnification, subrogation and any other rights pursuant
hereto or under law or in equity, the Depositor agrees to pay, and to protect,
indemnify and save harmless, FSA and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls FSA within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including, without limitation, fees and expenses of attorneys, consultants
and auditors and reasonable costs of investigations) of any nature arising out
of or relating to the transactions contemplated by the Transaction Documents
by reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer,
employee or agent of the Depositor, or any affiliate thereof;
(ii) the breach by the Depositor or any affiliate thereof of any
representation, warranty or covenant under any of the
Transaction Documents or the occurrence, in respect of the
Depositor or any affiliate thereof, under any of the
Transaction Documents of any "event of default" or any event
which, with the giving of notice or the lapse of time or both,
would constitute any "event of default";
(iii) any untrue statement or alleged untrue statement of a material
fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, except insofar as such claims arise out of or
are based upon any untrue statement or omission in information
included in an Offering Document and furnished by FSA in
writing expressly for use therein (all such information so
furnished being referred to herein as "FSA Information"), it
being understood that, in respect of the initial Offering
Document, the FSA Information is limited to the information
included under the caption "The Note Insurer"(except with
respect to the undertakings of the Seller and the Depositor
therein) and the financial statements of FSA incorporated by
reference;
(iv) any statement, omission or action by the Depositor in
connection with the offering, issuance, sale, remarketing or
delivery of the Obligations; or
(v) the violation by the Depositor of any Federal, state or foreign
law, rule or regulation or any judgment, order or decree
applicable to it.
(b) Indemnification by the Seller. In addition to any and all rights of
reimbursement, indemnification, subrogation and any other rights pursuant
hereto or under law or in equity, the Seller agrees to pay, and to protect,
indemnify and save harmless, FSA and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls FSA within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damag es, costs or expenses
(including, without limitation, fees and expenses of attorneys, consultants
and auditors and reasonable costs of investigations) of any nature arising out
of or relating to the transactions contemplated by the Transaction Documents
by reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer,
employee or agent of the Seller, the Issuer, the Company, or
any affiliate thereof;
(ii) the breach by the Seller, the Issuer, the Company, or any
affiliate thereof of any representation, warranty or covenant
under any of the Transaction Documents or the occurrence, in
respect of the Seller, the Issuer, the Company, or any
affiliate thereof, under any of the Transaction Documents of
any "event of default" or any event which, with the giving of
notice or the lapse of time or both, would constitute any
"event of default";
(iii) any untrue statement or alleged untrue statement of a material
fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, except insofar as such claims arise out of or
are based upon any untrue statement or omission in the FSA
Information;
(iv) any statement, omission or action by the Seller, the Company or
the Issuer in connection with the offering, issuance, sale,
remarketing or delivery of the Obligations; or
(v) the violation by the Seller, the Company or the Issuer of any
Federal, state or foreign law, rule or regulation or any
judgment, order or decree applicable to it.
(c) Indemnification by the Company. In addition to any and all rights of
reimbursement, indemnification, subrogation and any other rights pursuant
hereto or under law or in equity, the Company agrees to pay, and to protect,
indemnify and save harmless, FSA and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls FSA within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including, without limitation, fees and expenses of attorneys, consultants
and auditors and reasonable costs of investigations) of any nature arising out
of or relating to the transactions contemplated by the Transaction Documents
by reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer,
employee or agent of the Company, the Depositor, the Seller or
the Issuer, or any affiliate thereof;
(ii) the breach by the Company, the Depositor, the Seller, the
Issuer, or any affiliate thereof of any representation,
warranty or covenant under any of the Transaction Documents or
the occurrence, in respect of the Company, the Depositor, the
Seller, the Issuer, or any affiliate thereof, under any of the
Transaction Documents of any "event of default" or any event
which, with the giving of notice or the lapse of time or both,
would constitute any "event of default";
(iii) any untrue statement or alleged untrue statement of a material
fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, except insofar as such claims arise out of or
are based upon any untrue statement or omission in the FSA
Information;
(iv) any statement, omission or action by the Company, the
Depositor, the Seller or the Issuer in connection with the
offering, issuance, sale, remarketing or delivery of the
Obligations; or
(v) the violation by either of the Company, the Depositor, the
Seller or the Issuer of any Federal, state or foreign law, rule
or regulation or any judgment, order or decree applicable to
it.
(d) Indemnification by the Issuer. In addition to any and all rights of
reimbursement, indemnification, subrogation and any other rights pursuant
hereto or under law or in equity, the Issuer agrees to pay, and to protect,
indemnify and save harmless, FSA and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls FSA within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damag es, costs or expenses
(including, without limitation, fees and expenses of attorneys, consultants
and auditors and reasonable costs of investigations) of any nature arising out
of or relating to the transactions contemplated by the Transaction Documents
by reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer,
employee or agent of the Company, Seller, the Issuer or any
affiliate thereof;
(ii) the breach by the Company, Seller, the Issuer or any affiliate
thereof of any representation, warranty or covenant under any
of the Transaction Documents or the occurrence, in respect of
the Issuer, the Company, the Seller or any affiliate thereof,
under any of the Transaction Documents of any "event of
default" or any event which, with the giving of notice or the
lapse of time or both, would constitute any "event of default";
(iii) any untrue statement or alleged untrue statement of a material
fact contained in any Offering Document or any omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, except insofar as such claims arise out of or
are based upon any untrue statement or omission in the FSA
Information;
(iv) any statement, omission or action by the Company, the Seller or
the Issuer in connection with the offering, issuance, sale,
remarketing or delivery of the Obligations; or
(v) the violation by either of the Company, the Seller or the
Issuer of any Federal, state or foreign law, rule or regulation
or any judgment, order or decree applicable to it.
(e) Conduct of Actions or Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted
against FSA, any officer, director, shareholder, employee or agent of FSA or
any Person controlling FSA (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") in respect of which indemnity may be
sought from the Depositor, the Seller, the Company or the Issuer (the
"Indemnifying Party") hereunder, FSA shall promptly notify the Indemnifying
Party in writing, and the Indem nifying Party shall assume the defense
thereof, including the employment of counsel satisfactory to FSA and the
payment of all expenses. An Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
at the expense of the Indemnified Party; provided, however, that the fees and
expenses of such separate counsel shall be at the expense of the Indemnifying
Party if (i) the Indemnifying Party has agreed to pay such fees and expenses,
(ii) the Indemnifying Party shall have failed to assume the defense of such
action or proceeding and employ counsel satisfactory to FSA in any such action
or proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have been advised by
counsel that (A) there may be one or more legal defenses available to it which
are different from or additional to those available to the Indemnifying Party
and (B) the representation of the Indemnifying Party and the Indemnified Party
by the same counsel would be inappropriate or contrary to prudent practice (in
which case, if the Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party,
it being understood, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Parties, which firm shall be
designated in writing by FSA). The Indemnifying Party shall not be liable for
any settlement of any such action or proceeding effected without its written
consent to the extent that any such settlement shall be prejudicial to the
Indemnifying Party, but, if settled with its written consent, or if there be a
final judgment for the plaintiff in any such action or proceeding with respect
to which the Indemnifying Party shall have received notice in accordance with
this subsection (d), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by reason
of such settlement or judgment.
(f) Contribution. To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of this
Section), the Indemnifying Party shall contribute to the losses incurred by
the Indemnified Party on the basis of the relative fault of the Indemnifying
Party, on the one hand, and the Indemnified Party, on the other hand.
Section 3.05 Subrogation. Subject only to the priority of payment
provisions of the Indenture, the Depositor, the Seller, the Company and the
Issuer acknowledge that, to the extent of any payment made by FSA pursuant to
the Policy, FSA is to be fully subrogated to the extent of such payment and
any additional interest due on any late payment, to the rights of the
Obligationholders to any moneys paid or payable in respect of the Obligations
under the Transaction Documents or otherwise. The Depositor, the Seller, the
Company and the Issuer agree to such subrogation and, further, agree to
execute such instruments and to take such actions as, in the sole judgment of
FSA, are necessary to evidence such subrogation and to perfect the rights of
FSAto receive any moneys paid or payable in respect of the Obligations under
the Transaction Documents or otherwise.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01 Effective Date; Term of Agreement. This Agreement shall take
effect on the Date of Issuance and shall remain in effect until the later of
(a) such time as FSA is no longer subject to a claim under the Policy and the
Policy shall have been surrendered to FSA for cancellation and (b) all amounts
payable to FSA and the Obligationholders under the Transaction Documents and
under the Obligations have been paid in full; provided, however, that the
provisions of Sections 3.02, 3.03 and 3.04 hereof shall survive any
termination of this Agreement.
Section 4.02 Obligations Absolute.
(a) The payment obligations of the Depositor, the Seller, the Company and
the Issuer hereunder shall be absolute and unconditional, and shall be paid
strictly in accordance with this Agreement under all circumstances
irrespective of (i) any lack of validity or enforceability of, or any
amendment or other modifications of, or waiver with respect to, any of the
Transaction Documents, the Obligations or the Policy; (ii) any exchange or
release of any other obligations hereunder; (iii) the existence of any claim,
setoff, defense, reduction, abatement or other right which the Depositor, the
Seller, the Company or the Issuer may have at any time against FSA or any
other Person; (iv) any document presented in connection with the Policy
proving to be forged, fraudulent, invalid or insufficient in any respect,
including any failure to strictly comply with the terms of the Policy, or any
statement therein being untrue or inaccurate in any respect; (v) any failure
of the Depositor, the Seller, the Company or the Issuer to receive the
proceeds from the sale of the Obligations; (vi) any breach by the Depositor,
the Seller, the Company or the Issuer of any representation, warranty or
covenant contained in any of the Transaction Documents; or (vii) any other
circumstances, other than payment in full, which might otherwise constitute a
defense available to, or discharge of, the Depositor, the Seller, the Company
or the Issuer in respect of any Transaction Document.
(b) The Depositor, the Seller, the Company and the Issuer and any and all
others who are now or may become liable for all or part of the obligations of
the Depositor, the Seller, the Company or the Issuer under this Agreement
agree to be bound by this Agreement and (i) to the extent permitted by law,
waive and renounce any and all redemption and exemption rights and the benefit
of all valuation and appraisement privileges against the indebtedness, if any,
and obligations evidenced by any Transaction Document or by any extension or
renewal thereof; (ii) waive presentment and demand for payment, notices of
nonpayment and of dishonor, protest of dishonor and notice of protest; (iii)
waive all notices in connection with the delivery and acceptance hereof and
all other notices in connection with the performance, default or enforcement
of any payment hereunder except as required by the Transaction Documents; (iv)
waive all rights of abatement, diminution, postponement or deduction, or to
any defense other than payment, or to any right of setoff or recoupment
arising out of any breach under any of the Transaction Documents, by any party
thereto or any beneficiary thereof, or out of any obligation at any time owing
to the Depositor, the Seller, the Company or the Issuer; (v) agree that any
consent, waiver or forbearance hereunder with respect to an event shall
operate only for such event and not for any subsequent event; (vi) consent to
any and all extensions of time that may be granted by FSA with respect to any
payment hereunder or other provisions hereof and to the release of any
security at any time given for any payment hereunder, or any part thereof,
with or without substitution, and to the release of any Person or entity
liable for any such payment; and (vii) consent to the addition of any and all
other makers, endorsers, guarantors and other obligors for any payment
hereunder, and to the acceptance of any and all other security for any payment
hereunder, and agree that the addition of any such obligors or security shall
not affect the liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting the Depositor, the
Seller, the Company or the Issuer from pursuing any rights or remedies they
may have against any Person other than FSA in a separate legal proceeding.
Section 4.03 Assignments; Reinsurance; Third-Party Rights
(a) This Agreement shall be a continuing obligation of the parties hereto
and shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither of the Depositor,
the Seller, the Company nor the Issuer may assign its rights under this
Agreement, or delegate any of its duties hereunder, without the prior written
consent of FSA. Any assignment made in violation of this Agreement shall be
null and void.
(b) FSA shall have the right to give participations in its rights under
this Agreement and to enter into contracts of reinsurance with respect to the
Policy upon such terms and conditions as FSA may in its discretion determine;
provided, however, that no such participation or reinsurance agreement or
arrangement shall relieve FSA of any of its obligations hereunder or under the
Policy.
(c) In addition, FSA shall be entitled to assign or pledge to any bank or
other lender providing liquidity or credit with respect to the Transaction or
the obligations of FSA in connec tion therewith any rights of FSA under the
Transaction Documents or with respect to any real or personal property or
other interests pledged to FSA, or in which FSA has a security interest, in
connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any Person, including, particularly, any
Obligationholder, other than FSA, against the Depositor, the Seller, the
Company or the Issuer, and all the terms, covenants, conditions, promises and
agreements contained herein shall be for the sole and exclusive benefit of the
parties hereto and their successors and permitted assigns. Neither the
Indenture Trustee or any Obligationholder shall have any right to payment from
any premiums paid or payable hereunder or from any other amounts paid by the
Depositor, the Seller, the Company or the Issuer pursuant to Section 3.02,
3.03 or 3.04 hereof.
Section 4.04 Liability of FSA. Neither FSA nor any of its officers, direc
tors or employees shall be liable or responsible for: (a) the use which may be
made of the Policy by the Indenture Trustee or for any acts or omissions of
the Indenture Trustee in connection therewith or (b) the validity,
sufficiency, accuracy or genuineness of documents delivered to FSA (or its
Fiscal Agent) in connection with any claim under the Policy, or of any
signatures thereon, even if such documents or signatures should in fact prove
to be in any or all respects invalid, insufficient, fraudulent or forged
(unless FSA had actual knowledge thereof). In furtherance and not in
limitation of the foregoing, FSA (or its Fiscal Agent) may accept documents
that appear on their face to be in order, without responsibility for further
investigation.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01 Events of Default. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) any representation or warranty made by the Depositor, the Seller, the
Company or the Issuer under any of the Transaction Documents, or in any
certificate or report furnished under any of the Transaction Documents, shall
prove to be untrue or incorrect in any material respect; provided, however,
that if the Depositor, the Seller, the Company or the Issuer effectively cures
any such defect in any representation or warranty under any Transaction
Document, or certificate or report furnished under any Transaction Document,
within the time period specified in the relevant Transaction Document as the
cure period therefor, such defect shall not in and of itself constitute an
Event of Default hereunder;
(b) (i) the Depositor, the Seller, the Company or the Issuer shall fail
to pay when due any amount payable by the Depositor, the Seller, the Company
or the Issuer, as applicable, under any of the Transaction Documents unless
such amounts are paid in full within any applicable cure period explicitly
provided for under the relevant Transaction Document; (ii) the Depositor, the
Seller, the Company or the Issuer shall have asserted that any of the
Transaction Documents to which it is a party is not valid and binding on the
parties thereto; or (iii) any court, governmental authority or agency having
jurisdiction over any of the parties to any of the Transaction Documents or
any property thereof shall find or rule that any material provision of any of
the Transaction Documents is not valid and binding on the parties thereto;
(c) the Depositor, the Seller, the Company or the Issuer shall fail to
perform or observe any other covenant or agreement contained in any of the
Transaction Documents (except for the obligations described under clause (b)
above) and such failure shall continue for a period of 30 days after written
notice given to the Depositor, the Seller, the Company or the Issuer, as
applicable; provided, however, that, if such failure shall be of a nature that
it cannot be cured within 30 days, such failure shall not constitute an Event
of Default hereunder if within such 30 day period the Depositor, the Seller,
the Company or the Issuer, as applicable, shall have given notice to FSA of
corrective action it proposes to take, which corrective action is agreed in
writing by FSA to be satisfactory and the Depositor, the Seller, the Company
or the Issuer, as applicable, shall thereafter pursue such corrective action
diligently until such default is cured;
(d) the Seller, the Company or the Issuer shall fail to pay its debts
generally as they come due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors, or shall institute any proceeding seeking to adjudicate the Seller,
the Company or the Issuer insolvent or seeking a liquidation, or shall take
advantage of any insolvency act, or shall commence a case or other proceeding
naming the Seller, the Company or the Issuer as debtor under the United States
Bankruptcy Code or similar law, domestic or foreign, or a case or other
proceeding shall be commenced against the Seller, the Company or the Issuer
under the United States Bankruptcy Code or similar law, domestic or foreign,
or any proceeding shall be instituted against the Seller, the Company or the
Issuer seeking liquidation of the Seller's, the Company's or the Issuer's
assets and the Seller, the Company or the Issuer, as applicable, shall fail to
take appropriate action resulting in the withdrawal or dismissal of such
proceeding within 30 days or there shall be appointed or the Seller, the
Company or the Issuer shall consent to, or acquiesce in, the appointment of a
receiver, liquidator, conservator, trustee or similar official in respect of
the Seller, the Company or the Issuer or the whole or any substantial part of
the properties or assets of any of the Seller, the Company or the Issuer shall
take any corporate action in furtherance of any of the foregoing;
(e) the occurrence of an "event of default" under any of the Transaction
Documents;
(f) the occurrence of an "event of default" under any other insurance and
indemnity agreement to which FSA and any of the Seller, the Company or the
Issuer are parties; and any demand for payment shall be made under the Policy
other than a payment solely for a Supplemental Interest Payment which is paid
out of the Supplemental Interest Payment Account on the same Payment Date that
such claim relates to.
Section 5.02 Remedies; Waivers
(a) Upon the occurrence of an Event of Default, FSA may exercise any one
or more of the rights and remedies set forth below:
(i) declare all or a portion of the Premium Supplement that has
accrued or will accrue to be payable, and the same thereupon be
immediately due and payable to the extent then accrued and
shall thereupon become immediately due and payable upon accrual
to the extent accruing thereafter, whether or not FSA shall
have declared an "Event of Default" or shall have exercised, or
be entitled to exercise, any other rights or remedies
hereunder;
(ii) exercise any rights and remedies available under the
Transaction Documents in its own capacity or in its capacity as
the Person entitled to exercise the rights of the
Obligationholders in respect of the Obligations; or
(iii) take whatever action at law or in equity may appear necessary
or desirable in its judgment to enforce performance of any
obligation of the Depositor, the Seller, the Company or the
Issuer under the Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred upon
or reserved is intended to be exclusive of any other available remedy, but
each remedy shall be cumulative and shall be in addition to other remedies
given under the Transaction Documents or existing at law or in equity. No
delay or failure to exercise any right or power accruing under any Transaction
Document upon the occurrence of any Event of Default or otherwise shall impair
any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle FSA to exercise any remedy reserved to
FSA in this Article, it shall not be necessary to give any notice, other than
such notice as may be expressly required in this Article.
(c) If any proceeding has been commenced to enforce any right or remedy
under this Agreement and such proceeding has been discontinued or abandoned
for any reason, or has been determined adversely to FSA, then and in every
such case the parties hereto shall, subject to any determination in such
proceeding, be restored to their respective former positions hereunder, and,
thereafter, all rights and remedies of FSA shall continue as though no such
proceed ing had been instituted.
(d) FSA shall have the right, to be exercised in its complete discretion,
to waive any covenant, Default or Event of Default by a writing setting forth
the terms, condi tions and extent of such waiver signed by FSA and delivered
to the Depositor, the Seller, the Company or the Issuer. Any such waiver may
only be effected in writing duly executed by FSA, and no other course of
conduct shall constitute a waiver of any provision hereof. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend only to
the specific event or occurrence so waived and not to any other similar event
or occurrence.
ARTICLE
MISCELLANEOUS
Section 6.01 Amendments, Etc. This Agreement may be amended, modified or
terminated only by written instrument or written instruments signed by the
parties hereto. No act or course of dealing shall be deemed to constitute an
amendment, modification or termination hereof.
Section 6.02 Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered or
telecopied to the recipient as follows:
(a) To FSA: Financial Security Assurance Inc. 350 Park Avenue New
York, NY 10022 Attention: Transaction Oversight Re: American
Residential Eagle Bond Trust 1999-1 Confirmation: (212)
826-0100 Telecopy Nos.: (212) 339-3518, (212) 339-3529 (in each
case in which notice or other communication to FSA refers to an
Event of Default, a claim on the Policy or with respect to
which failure on the part of FSA to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or
other communication should also be sent to the attention of
each of the General Counsel and the Head--Financial Guaranty
Group and shall be marked to indicate "URGENT MATERIAL
ENCLOSED.")
(b) To the Depositor: Bear Stearns Asset Backed Securities, Inc.
245 Park Avenue, 4th Floor
New York, New York 10167
Attention: Asset Backed Securities Group
(American Residential Eagle Bond Trust 1999-1)
Telecopy: (212) 272-2703
(c) To the Seller: American Residential Eagle, Inc.
455 Marine View Avenue, Suite 230
Del Mar, California 92014
Attention: Lisa Faulk and/or Rollie Lynn
Confirmation: (619) 350-5000
Telecopy: (619) 350-6484
(d) To the Issuer: American Residential Eagle Bond Trust 1999-1
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North, 1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Confirmation: (302) 651-1000
Telecopy: (302) 651-8882
(e) To the Company: American Residential Investment Trust Inc.
455 Marine View Avenue, Suite 230
Del Mar, California 92014
Attention: Lisa Faulk and/or Rollie Lynn
Confirmation: (619) 350-5000
Telecopy: (619) 350-6484
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03 Payment Procedure. In the event of any payment by FSA for
which it is entitled to be reimbursed or indemnified as provided above, the
Depositor, the Seller, the Company and the Issuer agree to accept the voucher
or other evidence of payment as prima facie evidence of the propriety thereof
and the liability therefor to FSA. All payments to be made to FSA under this
Agreement shall be made to FSA in lawful currency of the United States of
America in immediately available funds to the account number provided in the
Premium Letter before 1:00 p.m. (New York, New York time) on the date when due
or as FSA shall otherwise direct by written notice to the Depositor, the
Seller, the Company or the Issuer. In the event that the date of any payment
to FSA or the expiration of any time period hereunder occurs on a day which is
not a Business Day, then such payment or expiration of time period shall be
made or occur on the next succeeding Business Day with the same force and
effect as if such payment was made or time period expired on the scheduled
date of payment or expiration date. Payments to be made to FSA under this
Agreement shall bear interest at the Late Payment Rate from the date due to
the date paid.
Section 6.04 Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate
or render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect
in any way the ability of such party to pursue any other remedy available to
it.
Section 6.05 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 6.06 Consent to Jurisdiction
(a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY
COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING
BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE TRANSACTION
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT
A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF
THE SUIT, AC TION OR PROCEEDING IS IMPROPER OR THAT THE TRANSACTION DOCUMENTS
OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties hereto shall
not seek and hereby waive the right to any review of the judgment of any such
court by any court of any other nation or jurisdiction which may be called
upon to grant an enforcement of such judgment. Each of the Depositor, the
Seller, the Company and the Issuer hereby irrevocably appoints and designates
CT Corporation System, whose address is 1633 Broadway, New York, New York
10019, as its true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Each of the Depositor, the Seller, the
Company and the Issuer agrees that service of such process upon such Person
shall constitute personal service of such process upon it.
(c) Nothing contained in the Agreement shall limit or affect FSA's right
to serve process in any other manner permitted by law or to start legal
proceedings relating to any of the Transaction Documents against the
Depositor, the Seller, the Company or the Issuer or their property in the
courts of any jurisdiction.
Section 6.07 Consent of FSA. In the event that FSA's consent is required
under any of the Transaction Documents, the determination whether to grant or
withhold such consent shall be made by FSA in its sole discretion without any
implied duty towards any other Person, except as otherwise expressly provided
therein.
Section 6.08 Counterparts. This Agreement may be executed in counterparts
by the parties hereto, and all such counterparts shall constitute one and the
same instrument.
Section 6.09 Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN
CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO
ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER
THINGS, THIS WAIVER.
Section 6.10 Limited Liability
(a) No recourse under any Transaction Document shall be had against, and
no personal liability shall attach to, any officer, employee, director,
affiliate or shareholder of any party hereto, as such, by the enforcement of
any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise in respect of any of the Transaction Documents, the
Obligations or the Policy, it being expressly agreed and understood that each
Transaction Document is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity, or
by statute or constitution, of every such officer, employee, director,
affiliate or shareholder for breaches by any party hereto of any obligations
under any Transaction Document is hereby expressly waived as a condition of
and in consideration for the execution and delivery of this Agreement.
(b) It is expressly understood and agreed by the parties hereto that (i)
this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of the Issuer in the
exercise of the powers and authority conferred and vested in it, (ii) each of
the representations, undertakings and agreements herein made on the part of
the Issuer is made and is intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and
intended for the purpose for binding only the Issuer, (iii) nothing herein
contained shall be construed as creating any liability on the part of
Wilmington Trust company, individually or personally, to perform any covenant
either express or implied herein and all such liability, if any, being
expressly waived by the parties hereto and by any Person claiming by, through
or under the parties hereto and (iv) under no circumstances shall Wilmington
Trust Company be personally liable for the payment of any indebtedness or
expenses of the Issuer or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Agreement or any other related document.
Section 6.11 Entire Agreement. This Agreement, the Premium Letter, the
Indemnification Agreement and the Policy set forth the entire agreement
between the parties with respect to the subject matter thereof, and this
Agreement supersedes and replaces any agreement or understanding that may have
existed between the parties prior to the date hereof in respect of such
subject matter.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By ______________________________
Authorized Officer
AMERICAN RESIDENTIAL INVESTMENT TRUST INC.
By ______________________________
Name ______________________________
Title ______________________________
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
By: Wilmington Trust Company, solely in its
capacity as Owner Trustee
By ______________________________
Name ______________________________
Title ______________________________
AMERICAN RESIDENTIAL EAGLE, INC.
By ______________________________
Name ______________________________
Title ______________________________
BEAR STEARNS ASSET BACKED SECURITIES, INC.
By ______________________________
Name ______________________________
Title ______________________________
APPENDIX I
DEFINITIONS
"Accumulated Funding Deficiency" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"Business Day" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in the City of New York, New York or any of
the states of Delaware, Maryland or California are authorized or obligated by
law or executive order to be closed.
"Code" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Collateral" has the meaning provided in the Indenture.
"Commission" means the Securities and Exchange Commission.
"Commonly Controlled Entity" means the Depositor, the Seller, the Company
or the Issuer, as applicable, and each entity, whether or not incorporated,
which is affiliated with the Depositor, the Seller, the Company or the Issuer,
as applicable, pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Custodial Agreement" means the Custodial Agreement, dated as of April 1,
1999, among the Company, the Seller, the Depositor, the Custodian, and the
Indenture Trustee.
"Custodian" means Bankers Trust Company of California, N.A., and any
Successor thereto under the Custodial Agreement.
"Date of Issuance" means the date on which the Policy is issued as
specified therein.
"Default" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Default" means any event of default specified in Section 5.01
of the Insurance Agreement.
"Expiration Date" means the final date of the Term of the Policy, as
specified in the Policy.
"Financial Statements" means with respect to the Company the balance
sheets as of December 31, 1998 and the statements of income, retained earnings
and cash flows for the 12 month period then ended.
"Fiscal Agent" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"FSA" means Financial Security Assurance Inc., a New York stock insurance
company, its successors and assigns.
"FSA Information" has the meaning assigned to that term in Section
3.04(a)(iii).
"Indemnification Agreement" means the Indemnification Agreement, dated as
of April 9, 1999, among FSA, the Depositor, the Seller, the Company, the
Issuer and the Underwriter, as the same may be amended from time to time.
"Indenture" means the Indenture, dated as of April 1, 1999, between the
Issuer and the Indenture Trustee on behalf of FSA and the Obligationholders,
pursuant to which the Obligations are to be issued, as the same may be amended
from time to time.
"Indenture Trustee" means Norwest Bank Minnesota, National Association,
as indenture trustee under the Indenture, and any successor thereto as
indenture trustee under the Indenture.
"Initial Mortgage Loan Purchase Agreement" means the Initial Mortgage
Purchase Loan Agreement, dated as of April 1, 1999, between the Company and
the Seller.
"Insurance Agreement" means this Insurance and Indemnity Agreement, dated
as of April 1, 1999, among FSA, the Company, the Seller, the Issuer and the
Depositor, as the same may be amended from time to time.
"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"Issuer" means the American Residential Eagle Bond Trust 1999-1 created
under the Owner Trust Agreement.
"Late Payment Rate" means the lesser of (a) the greater of (i) the per
annum rate of interest, publicly announced from time to time by Chase
Manhattan Bank at its principal office in the City of New York, as its prime
or base lending rate (any change in such rate of interest to be effective on
the date such change is announced by Chase Manhattan Bank) plus 3%, and (ii)
the then applicable highest rate of interest on the Obligations and (b) the
maximum rate permissible under applicable usury or similar laws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the
actual number of days elapsed over a year of 360 days.
"Lien" means, as applied to the property or assets (or the income or
profits therefrom) of any Person, in each case whether the same is consensual
or nonconsensual or arises by con tract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security
interest or encumbrance of any kind or (b) any arrangement, express or
implied, under which such property or assets are transferred, sequestered or
otherwise identified for the purpose of subjecting or making available the
same for the payment of debt or performance of any other obligation in
priority to the payment of the general, unsecured creditors of such Person.
"Management Agreement" means the Management Agreement, dated as of April
1, 1999, among the Issuer, the Owner Trustee, the Indenture Trustee and the
Company.
"Material Adverse Change" means, (a) in respect of any Person, a material
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or (ii) the ability of such Person to perform its
obligations under any of the Transaction Documents to which it is a party and
(b) in respect of any Mortgage Loan, a material adverse change in (i) the
value or marketability of such Mortgage Loan or (ii) the probability that
amounts now or hereafter due in respect of such Mortgage Loan will be
collected on a timely basis.
"Master Servicer" means, Advanta Mortgage Corp. USA as Master Servicer
under the Master Servicing Agreement, and any successor thereto.
"Master Servicing Agreement" means the Master Servicing Agreement, dated
as of April 1, 1999, among the Issuer, the Indenture Trustee and the Master
Servicer.
"Moody's" means Moody's Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recog nized rating agency designated
by FSA.
"Mortgage Documents" means the Mortgage Notes, Mortgages, assignments of
Mortgages and other related documents required to be delivered to the
Custodian to the Indenture Trustee pursuant to Section 2 of the Master
Servicing Agreement.
"Mortgage Loan" has the meaning provided in the Master Servicing
Agreement.
"Mortgage Loan Purchase Agreement" means the Mortgage Loan Purchase
Agreement, dated as of April 1, 1999, between the Seller and the Depositor.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Notice of Claim" means a Notice of Claim and Certificate in the form
attached as Exhibit A to Endorsement No. 1 to the Policy.
"Obligationholders" means registered holders of the Obligations.
"Obligations" means the American Residential Eagle Bond Trust 1999-1,
$229,000,000 Mortgage-Backed LIBOR Notes, Class A, Series 1999-1.
"Offering Document" means the Prospectus Supplement, dated April 9, 1999,
and the Prospectus, dated June 4, 1998, of the Issuer in respect of the
Obligations and any amendment or supplement thereto and any other offering
document in respect of the Obligations that makes reference to the Policy.
"Owner Trust Agreement" means the Deposit Trust Agreement, dated as of
April 1, 1999, between the Depositor and the Owner Trustee, as the same may be
amended from time to time.
"Owner Trustee" means Wilmington Trust Company, a Delaware banking
corporation, as Owner Trustee under the Owner Trust Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency, corporation or instrumentality of the United States to which the
duties and powers of the Pension Benefit Guaranty Corporation are transferred.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, partnership
or other organization or entity (whether governmental or private).
"Plan" means any pension plan (other than a Multiemployer Plan) covered
by Title IV of ERISA, which is maintained by a Commonly Controlled Entity or
in respect of which a Commonly Controlled Entity has liability.
"Policy" means the financial guaranty insurance policy, including any
endorsements thereto, issued by FSA with respect to the Obligations.
"Premium" means the premium payable in accordance with Section 3.02 of
the Insurance Agreement and the Premium Supplement, if any.
"Premium Letter" means the side letter between FSA, the Company, the
Seller, the Issuer and the Depositor, dated April 15, 1999, in respect of the
premium payable in consideration of the issuance of the Policy.
"Premium Supplement" means a non-refundable premium in addition to the
premium payable in accordance with Section 3.02 of the Insurance Agreement, in
an amount equal to .23% per annum of the principal amount of the Obligations
outstanding on the Premium Supplement Commencement Date, which will accrue
from the Premium Supplement Commencement Date until the Premium Supplement
Termination Date, and which is payable on each Payment Date following the
Premium Supplement Collection Date until the Premium Supplement Termination
Date, if any.
"Premium Supplement Collection Date" means the date on which all or a
portion of the Premium Supplement that has accrued or will accrue shall have
been declared payable in accordance with Section 5.02(a)(i) of the Insurance
Agreement.
"Premium Supplement Commencement Date" means the date of occurrence of
the Event of Default in respect of which the Premium Supplement shall have
begun to accrue, regardless of whether the Event of Default has been declared.
"Premium Supplement Termination Date" means the date on which all Events
of Default under the Insurance Agreement shall have been remedied or shall
have been waived by FSA.
"Provided Documents" means the Transaction Documents and any documents,
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to FSA by or on
behalf of the Depositor, the Seller, the Company or the Issuer with respect to
the Depositor, the Seller, the Company or the Issuer, their Subsidiaries or
the Transaction.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder.
"Restrictions on Transferability" means, as applied to the property or
assets (or the income or profits therefrom) of any Person, in each case
whether the same is consensual or non consensual or arises by contract,
operation of law, legal process or otherwise, any material condition to, or
restriction on, the ability of such Person or any transferee therefrom to
sell, assign, transfer or otherwise liquidate such property or assets in a
commercially reasonable time and manner or which would otherwise materially
deprive such Person or any transferee therefrom of the benefits of ownership
of such property or assets.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Services, A Division of The
McGraw-Hill Companies, Inc., and any successor thereto, and, if such
corporation shall for any reason no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
nationally recognized rating agency designated by FSA.
"Subsidiary" means, with respect to any Person, any corporation of which
a majority of the outstanding shares of capital stock having ordinary voting
power for the election of directors is at the time owned by such Person
directly or through one or more Subsidiaries.
"Term of the Agreement" shall be determined as provided in Section 4.01
of the Insurance Agreement.
"Term of the Policy" has the meaning provided in the Policy.
"Transaction" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"Transaction Documents" means the Insurance Agreement, the
Indemnification Agreement, the Indenture, the Master Servicing Agreement, the
Mortgage Loan Purchase Agreement, the Initial Mortgage Loan Purchase
Agreement, the Owner Trust Agreement, the Management Agreement, the Custodial
Agreement, the Underwriting Agreement and the Premium Letter.
"Trigger Event" means the occurrence of any one of the following: (a) an
Event of Default under the Insurance Agreement has occurred and is continuing,
(b) any legal proceeding or binding arbitration is instituted with respect to
the Transaction or (c) any governmental or administrative investigation,
action or pro ceeding is instituted that would, if adversely decided, result
in a Material Adverse Change in respect of the Depositor, the Seller, the
Company or the Issuer or of a material portion of the Mortgage Loans.
"Trust Accounts" has the meaning provided in the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder,
as amended from time to time.
"Underfunded Plan" means any Plan that has an Underfunding.
"Underfunding" means, with respect to any Plan, the excess, if any, of
(a) the present value of all benefits under the Plan (based on the assumptions
used to fund the Plan pursuant to Section 412 of the Code) as of the most
recent valuation date over (b) the fair market value of the assets of such
Plan as of such valuation date.
"Underwriter" means Bear, Stearns & Co. Inc.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
April 9, 1999, between the Depositor and the Underwriter with respect to the
offer and sale of the Obligations, as the same may be amended from time to
time.
APPENDIX II
OPINIONS OF COUNSEL
There shall be delivered to FSA, Moody's and S&P opinions of counsel as
follows:
(i) opinions to the effect that the Obligations have been duly issued,
and the Transaction Documents have been duly executed and delivered, and each
constitutes legal, valid and binding obligations, enforceable in accordance
with their respective terms;
(ii) opinions as to compliance with applicable securities laws,
including, but not limited to, opinions to the effect that:
(A) to the best of counsel's knowledge, no filing or
registration with or notice to or consent, approval, authorization
or order of any court or governmental authority or agency is
required for the consummation of the Transaction, except such as may
be required and have been obtained under the Securities Act and
state securities or "blue sky" laws;
(B) the Issuer is not required to be registered under the
Investment Company Act; and
(C) the Indenture meets the requirements of the Trust Indenture
Act;
(iii) an opinion to the effect that (A) the Issuer is the owner of the
Mortgage Loans, holding good and marketable title thereto; (B) the Mortgage
Loans would not be included as part of the estate of the Company or the
Depositor in the event of any receivership or insolvency proceedings in
respect thereof; (C) the transfer of the Mortgage Loans by the Company to the
Seller and by the Depositor to the Issuer would be characterized by a court of
competent jurisdiction as a sale of such Mortgage Loans and not as a borrowing
by the Company or the Depositor or a relationship of joint ownership,
partnership, joint venture or similar arrangement; (D) the transfer of the
Mortgage Loans by the Seller to the Depositor, in the event that such transfer
is not characterized as a sale of such Mortgage Loans, would be characterized
by a court of competent jurisdiction as a secured financing of such Mortgage
Loans creating a perfected first priority security interest in the Trust
Estate in favor of the Depositor; and (E) the Transaction Documents create for
the benefit of the Indenture Trustee, as secured party on behalf of the
Obligationholders and FSA, a valid, perfected, first priority security
interest in the Collateral and the proceeds thereof; and
(iv) an opinion to the effect that (A) the Obligations constitute debt of
the Issuer for federal income tax purposes and, in the states of California,
for state and local tax purposes and the Issuer will not be classified as a
publicly traded partnership, a taxable mortgage pool or an association taxable
as a corporation; and (B) no portion of the Collateral will constitute a
taxable mortgage pool.
APPENDIX A
TO INSURANCE AND INDEMNITY AGREEMENT
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) Payment of Initial Premium and Expenses; Premium Letter. FSA shall
have been paid, by or on behalf of the Company, a nonrefundable Premium and
shall have been reimbursed, by or on behalf of the Company, for other fees and
expenses identified in Section 3.02 below as payable at closing and FSA shall
have received a fully executed copy of the Premium Letter.
(b) Transaction Documents. FSA shall have received a copy of each of the
Transaction Documents, in form and substance satisfactory to FSA, duly
authorized, executed and delivered by each party thereto. Without limiting the
foregoing, the provisions of the [Indenture] relating to the payment to FSA of
Premium due on the Policy and the reimbursement to FSA of amounts paid under
the Policy shall be in form and substance acceptable to FSA in its sole
discretion.
(c) Certified Documents and Resolutions. FSA shall have received a copy
of (i) the certificate of incorporation and bylaws of the Depositor, the
Seller and the Company and (ii) the resolutions of the Company's, the Seller's
and the Depositor's Boards of Directors authorizing the issuance of the
Obligations and the sale of the Mortgage Loans and the execution, delivery and
performance by the Depositor , the Seller and the Company of the Transaction
Documents and the transactions contemplated thereby, certified by the
Secretary or an Assistant Secretary of the Depositor, the Seller and the
Company (which certificates shall state that such certificate of
incorporation, bylaws and resolutions are in full force and effect without
modification on the Date of Issuance).
(d) Incumbency Certificate. FSA shall have received certificates of the
Secretary or an Assistant Secretary of the Depositor, the Seller, the Company
and the Owner Trustee certifying the name and signatures of the officers of
the Depositor, the Seller, the Company and the Owner Trustee authorized to
execute and deliver the Transaction Documents and that shareholder consent to
the execution and delivery of such documents is not necessary.
(e) Representations and Warranties; Certificate. The representations and
warranties of the Depositor, the Seller, the Company and the Issuer in the
Insurance Agreement shall be true and correct as of the Date of Issuance as if
made on the Date of Issuance and FSA shall have received certificates of
appropriate officers of the Depositor, the Seller, the Company and the Issuer
to that effect.
(f) Opinions of Counsel. FSA shall have received opinions of counsel
addressed to FSA, Moody's and S&P in respect of the Depositor, the Seller, the
Company and the Issuer, the other parties to the Transaction Documents and the
Transaction in form and substance satisfactory to FSA, addressing such matters
as FSA may reasonably request, including without limitation, the items set
forth in Appendix II hereto, and the counsel providing each such opinion shall
have been instructed by its client to deliver such opinion to the addressees
thereof.
(g) Approvals, Etc. FSA shall have received true and correct copies of
all approvals, licenses and consents, if any, including, without limitation,
the approval of the shareholders of the Depositor, the Seller and the Company
and the beneficial owners of the Issuer, required in connection with the
Transaction.
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consum mation of the
Transaction.
(i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions contemplated
by any of the Transaction Documents illegal or otherwise prevent the
consummation thereof.
(j) Satisfaction of Conditions of Underwriting Agreement. All conditions
set forth in the Underwriting Agreement to the Underwriter's obligation to
purchase the Obligations shall have been satisfied.
(k) Issuance of Ratings. FSA shall have received confirmation that the
risk secured by the Policy constitutes an investment grade risk by S&P and an
insurable risk by Moody's and that the Obligations, when issued, will be rated
"AAA" by S&P, and "Aaa" by Moody's.
(l) Delivery of Mortgage Documents. FSA shall have received evidence
satisfactory to it that: (i) delivery has been made to the Indenture Trustee
or to a Custodian of the Mortgage Loan Files required to be so delivered
pursuant to Section 2 of the Master Servicing Agreement; and (ii) each
Mortgage Note is endorsed as provided in Section 2 of the Master Servicing
Agreement.
(m) No Default. No Default or Event of Default shall have occurred.
(n) Additional Items. FSA shall have received such other documents,
instruments, approvals or opinions requested by FSA as may be reasonably
necessary to effect the Transaction, including but not limited to evidence
satisfactory to FSA that all conditions precedent, if any, in the Transaction
Documents have been satisfied.
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.,
AMERICAN RESIDENTIAL EAGLE, INC.,
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1,
BEAR STEARNS ASSET BACKED SECURITIES, INC.,
and
BEAR, STEARNS & CO. INC.
Dated as of April 9, 1999
American Residential Eagle Bond Trust 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
$229,000,000
TABLE OF CONTENTS
Page
Section 1. Definitions........................................................1
Section 2. Representations, Warranties and Agreements of Financial Security...3
Section 3. Representations, Warranties and Agreements of the Underwriter......5
Section 4. Indemnification....................................................6
Section 5. Indemnification Procedures.........................................7
Section 6. Contribution.......................................................8
Section 7. Miscellaneous......................................................9
EXHIBIT
Exhibit A Opinion of General Counsel
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of April 9, 1999, among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), AMERICAN RESIDENTIAL EAGLE
BOND TRUST 1999-1 (the "Issuer"), AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
(the "Company"), AMERICAN RESIDENTIAL EAGLE, INC. (the "Seller"), BEAR STEARNS
ASSET BACKED SECURITIES, INC. (the "Depositor") and BEAR, STEARNS & CO. INC.
(the "Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended from time to
time.
"Company Party" means any of the Company, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of
the foregoing.
"Depositor Party" means any of the Depositor, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of
the foregoing.
"Financial Security Agreements" means this Agreement and the Insurance
Agreement.
"Financial Security Information" has the meaning provided in Section 2(g)
hereof.
"Financial Security Party" means any of Financial Security, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated
as of April 1, 1999, by and among Financial Security, the Issuer, the
Depositor, the Seller, and the Company.
"Issuer Party" means any of the Issuer, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of
the foregoing.
"Losses" means (a) any actual out-of-pocket damages incurred by the party
entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other expenses
incurred in connection with investigating or defending any claim, action or
other proceeding which entitle such party to be indemnified hereunder (subject
to the limitations set forth in Section 5 hereof), to the extent not paid,
satisfied or reimbursed from funds provided by any other Person other than an
affiliate of such party (provided that the foregoing shall not create or imply
any obligation to pursue recourse against any such other Person), plus (c)
interest on the amount paid by the party entitled to indemnification or
contribution from the date of such payment to the date of payment by the party
who is obligated to indemnify or contribute hereunder at the statutory rate
applicable to judgments for breach of contract.
"Master Servicing Agreement" means the Master Servicing Agreement, dated
as of April 1, 1999, among Advanta Mortgage Corp. USA, as Master Servicer, the
Issuer, and the Indenture Trustee.
"Prospectus" means the Prospectus dated June 4, 1998 and the Prospectus
Supplement dated April 9, 1999 relating to the Securities.
"Offering Document" means the Prospectus and any amendments or
supplements thereto and any other material or documents delivered by the
Underwriter to any Person in connection with the offer or sale of the
Securities.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization or other organization or entity (whether
governmental or private).
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Seller Party" means any of the Seller, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of
the foregoing.
"Securities" means the American Residential Eagle Bond Trust 1999-1,
$229,000,000 Mortgage-Backed LIBOR Notes, Class A, Series 1999-1, issued
pursuant to the Indenture, dated as of April 1, 1999, between the Issuer and
Norwest Bank Minnesota, National Association as Indenture Trustee (the
"Indenture Trustee")
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
April 9, 1999, between the Depositor and the Underwriter in respect of the
Securities.
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Organization, Etc. Financial Security is a monoline insurance company
duly organized, validly existing and authorized to transact financial guaranty
insurance business under the laws of the State of New York.
(b) Authorization, Etc. The Policy and the Financial Security Agreements
have been duly authorized, executed and delivered by Financial Security.
(c) Validity, Etc. The Policy and the Financial Security Agreements
constitute valid and binding obligations of Financial Security, enforceable
against Financial Security in accordance with their terms, subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles
of equity and subject, in the case of this Agreement, to principles of public
policy limiting the right to enforce the indemnification provisions contained
herein.
(d) Exemption From Registration. The Policy is exempt from registration
under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by Financial Security
of the Policy or the Financial Security Agreements, nor the performance by
Financial Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the bylaws of Financial
Security or result in a breach of, or constitute a default under, any material
agreement or other instrument to which Financial Security is a party or by
which any of its property is bound nor violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement, insofar as they
relate to indemnification for liabilities arising under the Securities Act,
are against public policy as expressed in the Securities Act and are therefore
unenforceable).
(f) Financial Information. The consolidated balance sheets of Financial
Security as of December 31, 1998 and the related consolidated statements of
income, changes in shareholder's equity and cash flows for the fiscal year
then ended furnished by Financial Security for incorporation in the
Prospectus, fairly present in all material respects the financial condition of
Financial Security as of such dates and for such periods in accordance with
generally accepted accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments) and since the date of the
most current interim consolidated balance sheet referred to above there has
been no change in the financial condition of Financial Security which would
materially and adversely affect its ability to perform its obligations under
the Policy.
(g) Financial Security Information. The information in the Prospectus
Supplement set forth under the caption "The Note Insurer" (as revised from
time to time in accordance with the provisions hereof (except with respect to
undertakings by the Depositor or the Seller), the "Financial Security
Information") is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with respect to a
registrant in connection with the offer and sale of securities of such
registrant registered under the Securities Act. Within such limited scope of
disclosure, however, as of the date of the Prospectus Supplement and as of the
date hereof, the Financial Security Information does not contain any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
(h) Additional Information. Financial Security will furnish to the
Underwriter, the Depositor, the Company or the Issuer, upon request of the
Underwriter, the Depositor, the Company or the Issuer, as the case may be,
copies of Financial Security's most recent financial statements (annual or
interim, as the case may be) which fairly present in all material respects the
financial condition of Financial Security as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied except as noted therein (subject, as to interim
statements, to normal year-end adjustments); provided, however, that, if the
Underwriter, the Depositor, the Company or the Issuer shall require a manually
signed report or consent of Financial Security's auditors in connection with
such financial statements, such report or consent shall be at the expense of
the Underwriter, the Depositor, the Company or the Issuer, as the case may be.
In addition, if the delivery of a Prospectus relating to the Securities is
required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the
Securities, the Company, the Depositor or the Underwriter will notify
Financial Security of such requirement to deliver a Prospectus and Financial
Security will promptly provide the Underwriter, the Depositor and the Company
with any revisions to the Financial Security Information that are in the
judgment of Financial Security necessary to prepare an amended Prospectus or a
supplement to the Prospectus which will correct such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to the Issuer,
the Depositor, the Seller, the Underwriter, the Company and the Rating
Agencies on the closing date for the sale of the Securities an opinion of its
Associate General Counsel, to the effect set forth in Exhibit A attached
hereto, dated such closing date and addressed to the Issuer, the Depositor,
the Seller, the Underwriter, the Company and the Rating Agencies.
(j) Consents and Reports of Independent Accountants. Financial Security
will furnish to the Underwriter, the Company, the Depositor and the Issuer,
upon request, as comfort from its independent accountants in respect of its
financial condition, (i) at the expense of the Person specified in the
Insurance Agreement, a copy of the Prospectus, including either a manually
signed consent or a manually signed report of Financial Security's independent
accountants and (ii) the quarterly review letter by Financial Security's
independent accountants in respect of the most recent interim financial
statements of Financial Security.
Nothing in this Agreement shall be construed as a representation or
warranty by Financial Security concerning the rating of its claims-paying
ability by Standard & Poor's Ratings Service, a Division of The McGraw Hill
Companies, Inc., or Moody's Investors Service, Inc. or any other rating agency
(collectively, the "Rating Agencies"). The Rating Agencies, in assigning such
ratings, take into account facts and assumptions not described in the
Prospectus and the facts and assumptions which are considered by the Rating
Agencies, and the ratings issued thereby, are subject to change over time.
Section 3. Representations, Warranties and Agreements of the Underwriter.
The Underwriter represents, warrants and agrees, with respect to itself, as of
the date hereof and as of the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all material
respects with all legal requirements in connection with offers and sales of
the Securities and make such offers and sales in the manner provided in the
Prospectus.
(b) Offering Document. The Underwriter will not use, or distribute to
other broker-dealers for use, any Offering Document in connection with the
offer and sale of the Securities unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Prospectus. Each
Offering Document will include the following statement: "The Policy is not
covered by the property/casualty insurance security fund specified in Article
76 of the New York Insurance Law". Each Offering Document including financial
information with respect to Financial Security prepared in accordance with
generally accepted accounting principles will include the following statement
immediately preceding such financial information: "The New York State
Insurance Department recognizes only statutory accounting practices for
determining and reporting the financial condition and results of operations of
an insurance company, for determining its solvency under New York Insurance
Law, and for determining whether its financial condition warrants the payment
of a dividend to its stockholders. No consideration is given by the New York
State Insurance Department to financial statements prepared in accordance with
generally accepted accounting principals in making such determinations."
(c) Underwriter Information. The following information constitutes the
only information furnished by the Underwriter (the "Underwriter Information"):
(i) the statements set forth in the second to the last paragraph on the front
cover page of the Prospectus Supplement; (ii) the statements set forth under
the heading "Underwriting"; and (iii) the statements (other than those based
on the "Seller Provided Information" (as such term is defined in the
Underwriting Agreement)) set forth in materials delivered by the Underwriter
to the Depositor within the meaning of the no-action letter dated May 20, 1994
issued by the Division of Corporation Finance of the Securities Exchange
Commission (the "Commission") to Kidder, Peabody Acceptance Corporation I,
Kidder, Peabody & Co. Incorporated and Kidder Structured Asset Corporation and
the no-action letter dated May 27, 1994 issued by the Division of Corporation
Finance of the Commission to the Public Securities Association and filed by
the Sponsor with the Commission in the Current Report or Reports on Form 8-K
(the "Form 8-K"). Within such limited scope of disclosure, however, as of the
date of the Prospectus and as of the date hereof, the Underwriter Information
does not contain any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
Section 4. Indemnification. (a) Financial Security agrees, upon the terms
and subject to the conditions provided herein, to indemnify, defend and hold
harmless each Issuer Party, each Depositor Party, each Seller Party, each
Company Party and each Underwriter Party against (i) any and all Losses
incurred by them with respect to the offer and sale of the Securities and
resulting from Financial Security's breach of any of its representations,
warranties or agreements set forth in Section 2 hereof and (ii) any and all
Losses to which any Issuer Party, Depositor Party, Seller Party, Company Party
or Underwriter Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was
made in the Financial Security Information included therein in accordance with
the provisions hereof.
(b) The Underwriter agrees upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each Financial
Security Party against (i) any and all Losses incurred by them with respect to
the offer and sale of the Securities and resulting from the Underwriter's
breach of any of its representations, warranties or agreements set forth in
Section 3 hereof and (ii) any and all Losses to which any Financial Security
Party may become subject, under the Securities Act or otherwise, insofar as
such Losses arise out of or result from an untrue statement of a material fact
contained in any Offering Document or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in the Underwriter Information included
therein.
(c) Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution or in Section 7(e), the indemnification
provided herein by an Indemnifying Party shall be the exclusive remedy of any
and all Indemnified Parties for the breach of a representation, warranty or
agreement hereunder by an Indemnifying Party; provided, however, that each
Indemnified Party shall be entitled to pursue any other remedy at law or in
equity for any such breach so long as the damages sought to be recovered shall
not exceed the Losses incurred thereby resulting from such breach. In the
event that any action or regulatory proceeding shall be commenced or claim
asserted which may entitle an Indemnified Party to be indemnified under this
Agreement, such party shall give the Indemnifying Party written or telegraphic
notice of such action or claim reasonably promptly after receipt of written
notice thereof. The Indemnifying Party shall be entitled to participate in
and, upon notice to the Indemnified Party, assume the defense of any such
action or claim in reasonable cooperation with, and with the reasonable
cooperation of, the Indemnified Party. The Indemnified Party will have the
right to employ its own counsel in any such action in addition to the counsel
of the Indemnifying Party, but the fees and expenses of such counsel will be
at the expense of such Indemnified Party, unless (a) the employment of counsel
by the Indemnified Party at its expense has been authorized in writing by the
Indemnifying Party, (b) the Indemnifying Party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, or (c) the named parties
to any such action or proceeding (including any impleaded parties) include
both the Indemnifying Party and one or more Indemnified Parties, and the
Indemnified Parties shall have been advised by counsel that there may be one
or more legal defenses available to them which are different from or
additional to those available to the Indemnifying Party (it being understood,
however, that the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all
Issuer Parties, Depositor Parties, Seller Parties and Company Parties, one
such firm for all Underwriter Parties and one such firm for all Financial
Security Parties, as the case may be, which firm shall be designated in
writing by the Company in respect of the Company Parties, Seller Parties,
Depositor Parties and Issuer Parties, by the Underwriter in respect of the
Underwriter Parties and by Financial Security in respect of the Financial
Security Parties), in each of which cases the fees and expenses of counsel
will be at the expense of the Indemnifying Party and all such fees and
expenses will be reimbursed promptly as they are incurred. The Indemnifying
Party shall not be liable for any settlement of any such claim or action
unless the Indemnifying Party shall have consented thereto or be in default in
its obligations hereunder. Any failure by an Indemnified Party to comply with
the provisions of this Section shall relieve the Indemnifying Party of
liability only if such failure is prejudicial to the position of the
Indemnifying Party and then only to the extent of such prejudice.
Section 6. Contribution. (a) To provide for just and equitable
contribution if the indemnification provided by any Indemnifying Party is
determined to be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
Losses arising from any breach of any of its representations, warranties or
agreements contained in this Agreement on the basis of the relative fault of
each of the parties as set forth in Section 6(b) below; provided, however,
that an Indemnifying Party shall in no event be required to contribute to all
Indemnified Parties an aggregate amount in excess of the Losses incurred by
such Indemnified Parties resulting from the breach of representations,
warranties or agreements contained in this Agreement.
(b) The relative fault of each Indemnifying Party, on the one hand, and
of each Indemnified Party, on the other, shall be determined by reference to,
among other things, whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this Agreement relates
to information supplied by, or action within the control of, the Indemnifying
Party or the Indemnified Party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such breach.
(c) The parties agree that Financial Security shall be solely responsible
for the Financial Security Information, the Underwriter shall be solely
responsible for the Underwriter Information and that, as and to the extent
provided in the Insurance Agreement, the balance of the Offering Document
shall be the responsibility of the Company, the Seller, the Depositor and the
Issuer.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount greater than the
total discount received by it from the Depositor in respect of the Securities
underwritten by the Underwriter.
(e) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) Upon the incurrence of any Losses entitled to contribution hereunder,
the contributor shall reimburse the party entitled to contribution promptly
upon establishment by the party entitled to contribution to the contributor of
the Losses incurred.
(g) The provisions relating to contribution set forth in this Section 6
do not limit the rights of any party to indemnification under Section 4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under this
Agreement shall be delivered to the address set forth below or to such other
address as shall be designated by the recipient in a written notice to the
other party or parties hereto.
If to Financial Security: Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Transaction Oversight
Re: American Residential Eagle Bond Trust 1999-1
If to the Issuer: American Residential Eagle Bond Trust 1999-1
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North, 1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
If to the Company: American Residential Investment Trust, Inc.
455 Marine View Avenue, Suite 230
Del Mar, California 92014
Attention: Lisa Faulk and/or Rollie Lynn
If to the Seller: American Residential Eagle, Inc.
455 Marine View Avenue, Suite 230
Del Mar, California 92014
Attention: Lisa Faulk and/or Rollie Lynn
If to the Depositor: Bear Stearns Asset Backed Securities, Inc.
245 Park Avenue, 4th Floor
New York, New York 10167
Attention: Asset Backed Securities Group/American
Residential Eagle Bond Trust 1999-1
If to the Underwriter: Bear Stearns & Co. Inc.
245 Park Avenue, 4th Floor
New York, New York 10167
Attention: Chief Counsel/American
Residential Eagle Bond Trust 1999-1
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflicts of law principles thereof.
(c) Assignments. This Agreement may not be assigned by any party without
the express written consent of each other party. Any assignment made in
violation of this Agreement shall be null and void.
(d) Amendments. Amendments to this Agreement shall be in writing signed
by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements contained in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Indemnifying Party, (ii)
the issuance of the Securities or (iii) any termination of this Agreement or
the Policy. The indemnification provided in this Agreement will be in addition
to any liability which the parties may otherwise have and shall in no way
limit any obligations of the Company, the Seller, the Depositor, the Issuer or
the Underwriter under the Underwriting Agreement or the Insurance Agreement,
as applicable.
(f) Counterparts. This Agreement may be executed in counterparts by the
parties hereto, and all such counterparts shall constitute one and the same
instrument.
(g) Limitation of Liability of Wilmington Trust Company. It is expressly
understood and agreed by the parties hereto that (i) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee of the Issuer in the exercise of the
powers and authority conferred and vested in it, (ii) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and is intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (iii) nothing herein contained shall be
construed as creating any liability on the part of Wilmington Trust company,
individually or personally, to perform any covenant either express or implied
herein and all such liability, if any, being expressly waived by the parties
hereto and by any Person claiming by, through or under the parties hereto and
(iv) under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Issuer or be
liable for the breach or failure of any obligation, representation, warranty
or covenant made or undertaken by the Issuer under this Agreement or any other
related document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By
Name:
Title:
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
By: Wilmington Trust Company, solely in its capacity
as Owner Trustee
By /s/ Emmett Harmon
---------------------------------------------
Name: Emmett Harmon
Title: Vice President
AMERICAN RESIDENTIAL INVESTMENT TRUST, INC.
By /s/ Jay M. Fuller
-------------------------------------------------
Name: Jay M. Fuller
Title:
AMERICAN RESIDENTIAL EAGLE, INC.
By: Jay M. Fuller
-------------------------------------------------
Name: Jay M. Fuller
Title:
BEAR STEARNS ASSET BACKED SECURITIES, INC.
By /s/ Jonathan Lieberman
--------------------------------------------------
Name: Jonathan Lieberman
Title: Managing Director
BEAR, STEARNS & CO. INC.
By: /s/ Jonathan Lieberman
--------------------------------------------------
Name: Jonathan Lieberman
Title: Managing Director
EXHIBIT A
OPINION OF GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a monoline insurance company duly organized,
validly existing and authorized to transact financial guaranty insurance
business under the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized, executed and
delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding obligations
of Financial Security, enforceable against Financial Security in accordance
with their terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in the
event of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case of the
Indemnification Agreement, to principles of public policy limiting the right
to enforce the indemnification provisions contained therein insofar as they
relate to indemnification for liabilities arising under applicable securities
laws.
4. The Policy is exempt from registration under the Securities Act of
1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the Policy
or the Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of the certificate of
incorporation or the by-laws of Financial Security or, to the best of my
knowledge, result in a breach of, or constitute a default under, any agreement
or other instrument to which Financial Security is a party or by which it or
any of its property is bound or, to the best of my knowledge, violate any
judgment, order or decree applicable to Financial Security of any governmental
or regulatory body, administrative agency, court or arbitrator having
jurisdiction over Financial Security (except that in the published opinion of
the Securities and Exchange Commission the indemnification provisions of the
Indemnification Agreement, insofar as they relate to indemnification for
liabilities arising under the Act, are against public policy as expressed in
the Act and are therefore unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "The Note Insurer" in the Prospectus
Supplement dated April 9, 1999 to the Prospectus dated June 4, 1998 (the
"Offering Document") of the Issuer with respect to the Securities. The
information provided in the Offering Document with respect to Financial
Security is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant under the
Act in connection with a public offering and sale of securities of such
registrant. Within such limited scope of disclosure, however, there has not
come to my attention any information which would cause me to believe that the
description of Financial Security referred to above, as of the date of the
Prospectus Supplement or as of the date of this opinion, contained or contains
any untrue statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that I
express no opinion with respect to any financial statements or other financial
information contained or referred to therein).
EXECUTION
MASTER SERVICING AGREEMENT
Dated as of April 1, 1999
among
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1, Issuer,
and
ADVANTA MORTGAGE CORP. USA, Master Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Trustee
Relating to the Mortgage Loans
Pledged as Collateral for the Issuer's
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
in the Aggregate Initial
Principal Amount of $229,000,000
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT
Section 1. Defined Terms.................................................
Section 2. Mortgage Documents............................................
(a) Trustee to Retain Possession of Documents through
Custodians. .............................................
(b) Trustee and Custodians to Cooperate; Release of Trustee
Mortgage Files...........................................
(c) Representations and Warranties of the Master Servicer,
AmREIT and the Issuer....................................
Section 3. General Duties of the Master Servicer.........................
(a) Master Servicer to Service Mortgage Loans................
(b) Servicing Agreements Between the Master Servicer
and Subservicers.........................................
(c) Master Servicer Authorization............................
(d) Access to Certain Documentation..........................
(e) Rights of the Issuer and the Trustee in Respect of the
Master Servicer..........................................
(f) Trustee to Act as Master Servicer........................
(g) Collection of Mortgage Loan Payments; Collection
Account; Note Payment Account............................
(h) Master Servicer Monthly Data.............................
(i) Payment of Taxes, Insurance and Other Charges............
(j) Maintenance of Casualty Insurance........................
(k) Reserved.................................................
(l) Fidelity Bond; Errors and Omissions Policy...............
(m) Collection of Taxes, Assessments and Other Items;
Servicing Account........................................
(n) Periodic Filings with the Securities and Exchange
Commission; Additional Information.......................
(o) Enforcement of Due-on-Sale Clauses; Assumption
Agreements ..............................................
(p) Realization Upon Defaulted Mortgage Loans................
(q) Trustee to Cooperate; Release of Mortgage Files..........
(r) Reports to the Master Servicer; Collection Account
Statement. ..............................................
(s) Annual Statement as to Compliance........................
(t) Annual Independent Public Accountants' Servicing Report..
(u) Liquidation Report.......................................
(v) Adjustment of Servicing Compensation in Respect of
Prepaid Mortgage Loans...................................
(w) Maintenance of Corporate Existence and Licenses..........
(x) Optional Purchase of Defaulted Mortgage Loans............
(y) No Solicitation..........................................
Section 4. Monthly Advances..............................................
Section 5. Master Servicing Compensation and Expenses....................
Section 6. Master Servicer...............................................
(a) Liabilities of the Master Servicer.......................
(b) Merger or Consolidation of the Master Servicer...........
(c) Resignation of Master Servicer; Termination
Without Cause ...........................................
(d) Assignment or Delegation of Duties by the
Master Servicer .........................................
(e) Limitation on Liability of the Master
Servicer and Others .....................................
Section 7. Master Servicing Default; Termination and Liabilities.........
(a) Master Servicing Default.................................
(b) Trustee to Act; Appointment of Successor.................
(c) Waivers by FSA...........................................
(d) Notification to Noteholders..............................
(e) Term of Service Appointment..............................
Section 8. Miscellaneous.................................................
(a) Term of Master Servicing Agreement.......................
(b) Assignment...............................................
(c) Notices..................................................
(d) Governing Law............................................
(e) Amendments...............................................
(f) Severability.............................................
(g) No Joint Venture.........................................
(h) Execution in Counterparts................................
(i) Limitation of Liability of Wilmington Trust Company......
(j) Noncompetition Covenants.................................
(k) Third-Party Beneficiary..................................
(l) Trust Estate and Accounts Held for Benefit of FSA........
SCHEDULE I - Schedule of Mortgage Loans
SCHEDULE II - Representations and Warranties of the Master Servicer
SCHEDULE III - Representations and Warranties as to the Mortgage Loans
SCHEDULE IV - Representations and Warranties of the Issuer
SCHEDULE V - Purchase and Sale Agreements
SCHEDULE VI - List of Insurance Policies and Related Premiums and
Mortgage Loans
MASTER SERVICING AGREEMENT
THIS MASTER SERVICING AGREEMENT is made and entered into as of April 1,
1999, by and among American Residential Eagle Bond Trust 1999-1, a statutory
business trust formed under the laws of the State of Delaware (the "Issuer"),
Advanta Mortgage Corp. USA, a Delaware corporation (the "Master Servicer"),
and Norwest Bank Minnesota, National Association ("Norwest"), a national
banking association (the "Trustee ") (in its capacity as indenture trustee
under the Indenture referred to below, the "Trustee").
PRELIMINARY STATEMENT
The Issuer was formed for the purpose of issuing notes secured by
mortgage collateral. The Issuer has entered into a trust indenture, dated as
of April 1, 1999 (the "Indenture"), between the Issuer and the Trustee,
pursuant to which the Issuer intends to issue its Mortgage-Backed LIBOR Notes,
Class A, Series 1999-1, in the aggregate initial principal amount of
$229,000,000 (the "Notes"). Pursuant to the Indenture, as security for the
indebtedness represented by such Notes, the Issuer is and will be pledging to
the Trustee, or granting the Trustee a security interest in, among other
things, certain Mortgage Loans, its rights under this Agreement, the Initial
Mortgage Loan Purchase Agreement, the Mortgage Loan Purchase Agreement, the
Purchase and Sale Agreements, the Collection Account, the Note Payment Account
and certain Insurance Policies (as each such term is defined herein).
The parties desire to enter into this Agreement to provide, among other
things, for the master servicing of the Mortgage Loans by the Master Servicer.
The Master Servicer also agrees to perform the servicing functions set forth
herein as to the Mortgage Loans designated in Schedule I hereto. The Master
Servicer may enter into as herein provided one or more Subservicing Agreements
to perform the servicing functions set forth herein. The Master Servicer
acknowledges that, in order further to secure the Notes, the Issuer is and
will be granting to the Trustee a security interest in, among other things,
its rights under this Agreement, and the Master Servicer agrees that all
covenants and agreements made by the Master Servicer herein with respect to
the Mortgage Loans shall also be for the benefit and security of the Trustee
and Holders of the Notes and FSA.
The Issuer will enter into a Management Agreement, dated as of the date
hereof, with American Residential Investment Trust, Inc. (in such capacity,
the "Manager"), pursuant to which the Manager will conduct certain operations
of the Issuer. Actions by or required of the Issuer hereunder may be performed
on its behalf by the Manager or any sub-manager appointed to act for the
Issuer.
1. Defined Terms.
Except as otherwise specified or as the context may otherwise require,
the following terms have the respective meanings set forth below for all
purposes of this Agreement, and the definitions of such terms 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. Capitalized terms
that are used but not defined in this Agreement and which are defined in the
Indenture have the meanings assigned to them therein.
"Accepted Servicing Practices" means servicing practices which in general
conform to the mortgage servicing practices of prudent mortgage lending
institutions which service for their own account mortgage loans of the same
type as the Mortgage Loans in the jurisdictions in which the related Mortgaged
Properties are located.
"Adjusted Net Mortgage Rate" means, as to each Mortgage Loan and at any
time, the per annum rate equal to the Mortgage Rate less the Master Servicing
Fee Rate.
"Adjustable Rate Mortgage Loan" means any Mortgage Loan which provides
for adjustment of the Mortgage Rate payable in respect thereto in accordance
with the Index and other factors set forth in such Note.
"Adjustment Date" means, as to any Adjustable Rate Mortgage Loan, a date
on which the related Mortgage Rate adjusts pursuant to the terms thereof.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agreement" means this Master Servicing Agreement, as the same may be
amended or supplemented from time to time.
"Amount Held for Future Distribution" means, as to any Payment Date, the
aggregate amount held in the Collection Account which is not required to be
distributed with respect to the related Payment Date.
"AmREIT" means American Residential Investment Trust, Inc., a Maryland
corporation, and its successors and assigns.
"Annual Loss Percentage" has the meaning set forth in the Indenture.
"Appraised Value" means (i) with respect to a Mortgage Loan other than a
Refinancing Mortgage Loan, the lesser of (a) the value of the Mortgaged
Property based upon the appraisal made at the time of the origination of such
Mortgage Loan and (b) the sales price of the Mortgaged Property at the time of
the origination of such Mortgage Loan; or (ii) with respect to a Refinancing
Mortgage Loan, the value of the Mortgaged Property based upon the appraisal
made at the time of the origination of such Refinancing Mortgage Loan.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978,
as amended from time to time.
"BSABS" means Bear Stearns Asset-Backed Securities, Inc., a Delaware
corporation, and its successors and assigns.
"Business Day" means any day other than (i) a Saturday or a Sunday, or
(ii) a day on which banking institutions in the States of Maryland or
Minnesota or The City of New York or the city in which the Corporate Trust
Office (as defined in the Indenture) is located are authorized or obligated by
law or executive order to be closed.
"Certificate Paying Agent" means the Person acting in such capacity
pursuant to the Deposit Trust Agreement which shall initially be the Trustee.
"Certificateholder" means the holder of the Investor Certificate.
"Class A Notes" means the Notes issued under the Indenture.
"Closing Date" means April 15, 1999.
"Code" means the Internal Revenue Code of 1986, including any successor
or amendatory provisions.
"Collection Account" means, with respect to the Notes, the separate
Eligible Account created and maintained by the Master Servicer pursuant to
Section 3(g) with a depository institution in the name of the Trustee on
behalf of the Noteholders and FSA and designated "Collection Account -Norwest
Bank Minnesota, National Association, in trust for the registered holders of
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1 and FSA."
"Collection Period" means, with respect to any Payment Date, the calendar
month preceding the month in which such Payment Date occurs.
"Compensating Interest" means that which is defined in Section 3(v)
hereof.
"Curtailment" means, with respect to a Mortgage Loan, any payments or
collection of principal received during a Due Period that is in excess of the
amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
"Custodial Agreement" means the agreement between the Trustee, the Issuer
and the Custodian.
"Custodian" means Bankers Trust Company of California, N.A., as custodian
under the Custodial Agreement, or any successor custodian thereunder.
"Cut-off Date" means, with respect to the Mortgage Loans, April 1, 1999.
"Cut-off Date Principal Balance" means, as to any Mortgage Loan, the
Stated Principal Balance thereof as of the close of business on the Cut-off
Date.
"Debt Service Reduction" means, with respect to any Mortgage Loan, a
reduction in the Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of
principal.
"Deficient Valuation" means, with respect to any Mortgage Loan, a
valuation by a court of competent jurisdiction of the Mortgaged Property in an
amount less than the then outstanding indebtedness under the Mortgage Loan, or
any reduction in the amount of principal to be paid in connection with any
Monthly Payment that results in a permanent forgiveness of principal, which
valuation or reduction results from an order of such court which is final and
non-appealable in a proceeding under the Bankruptcy Code.
"Deleted Mortgage Loan" has the meaning ascribed thereto in Section
2(c)(iv) hereof.
"Delinquent" means, as to any Mortgage Loan, if any payment due thereon
is not made by the close of business on the day such payment by the related
Mortgagor is scheduled to be due. A Mortgage Loan is "30 days Delinquent" if
such payment has not been received by the close of business on the
corresponding day of the month immediately succeeding the month in which such
payment was due, or, if there is no such corresponding day (e.g., as when a
30-day month follows a 31-day month in which a payment was due on the 31st day
of such month) then on the last day of such immediately succeeding month.
Similarly for "60 days Delinquent," "90 days Delinquent" and so on.
"Deposit Trust Agreement" means the Deposit Trust Agreement, dated as of
April 1, 1999, between BSABS and the Owner Trustee, as such Deposit Trust
Agreement may be amended or supplemented from time to time.
"Due Date" means, with respect to each Payment Date, the date on which
the monthly payment of principal and interest on such Mortgage Loan became due
during the related Due Period.
"Due Period" means, with respect to each Payment Date, the period
beginning on the opening of business on the second day of the calendar month
preceding the calendar month in which such Payment Date occurs, and ending at
the close of business on the first day of the calendar month in which such
Payment Date occurs.
"Eligible Account" means any of (i) a segregated account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of
a depository institution or trust company that is the principal subsidiary of
a holding company, the debt obligations of such holding company, but only if
Moody's is not a Rating Agency) have the highest short-term ratings of each
Rating Agency at the time any amounts are held on deposit therein and the long
term debt obligations of which shall be rated AA or higher by S&P and Aa or
higher by Moody's, or (ii) a segregated trust account or accounts maintained
with the trust department of a federal or state chartered depository
institution or trust company, acting in its fiduciary capacity acceptable to
each Rating Agency and FSA, having capital and surplus not less than
$100,000,000 or (iii) any other account acceptable to each Rating Agency and
FSA. Eligible Accounts may bear interest, and may include, if otherwise
qualified under this definition, accounts maintained with the Master Servicer
or the Trustee.
"Expense Fee Rate" means the sum of (i) the Master Servicing Fee Rate,
and (ii) the Mortgage Insurance Premium Rate.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC" means Freddie Mac, formerly known as the Federal Home Loan
Mortgage Corporation, a corporate instrumentality of the United States created
and existing under Title III of the Emergency Home Finance Act of 1970, as
amended, or any successor thereto.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
"FNMA" means Fannie Mae, formerly known as the Federal National Mortgage
Association, a federally chartered and privately owned corporation organized
and existing under the Federal National Mortgage Association Charter Act, or
any successor thereto.
"FSA" means Financial Security Assurance Inc. or any successor thereto.
"FSA Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of April 1, 1999, between the Issuer, FSA, AmREIT, the Seller and
BSABS.
"FSA Policy" means the irrevocable financial guaranty insurance policy
(Policy No. 50799-N) issued by FSA with respect to the Notes.
"Indenture" means the Indenture, dated as of the date hereof, between the
Issuer and the Trustee, as such Indenture may be amended or supplemented from
time to time in accordance with its terms.
"Independent Accountants" shall have the meaning ascribed to such term
under the Indenture.
"Index" means, as to each Adjustable Rate Mortgage Loan, the index from
time to time in effect for the adjustment of the Mortgage Rate set forth as
such on the related Mortgage Note.
"Initial Mortgage Loan Purchase Agreement" means the mortgage loan
purchase agreement dated as of April 1, 1999 between AmREIT and the Seller.
"Insurance Policy" means, with respect to any Mortgage Loan, any primary
mortgage guaranty insurance policy or other insurance policy with respect to
the Mortgage Loans, including all riders and endorsements thereto in effect,
including any replacement policy or policies for any Insurance Policies (but
shall not include the FSA Policy).
"Insurance Proceeds" means proceeds paid by an insurer pursuant to any
Insurance Policy, other than any amount included in such Insurance Proceeds in
respect of Insured Expenses.
"Insured Expenses" means amounts applied out of payments made by an
insurer under an Insurance Policy to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the Servicing
Provisions.
"Interest Remittance Amount" means, with respect to any Remittance Date,
the sum of (i) the interest component of the Monthly Payments due on the
related Due Date collected or advanced, adjusted to the Net Mortgage Rate,
plus (ii) the interest collected on Principal Prepayments occurring during the
related Collection Period, adjusted to the Net Mortgage Rate, plus, (iii) any
Compensating Interest in respect of the related Collection Period, plus (iv)
interest components of late Monthly Payments collected during the related
Collection Period and not previously advanced, adjusted to the Net Mortgage
Rate, plus (v) any other collections in respect of interest received during
the related Collection Period and not included under (i) through (iv) above,
adjusted to the Net Mortgage Rate.
"Investor Certificate" shall have the meaning ascribed thereto in the
Deposit Trust Agreement.
"LIBOR" means, for each Adjustable Rate Mortgage, the six-month London
Interbank Rate determined as provided in the related Mortgage Note.
"Liquidated Mortgage Loan" means with respect to any Payment Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in
the calendar month preceding the month of such Payment Date and as to which
the Master Servicer has certified (in accordance with this Agreement) that it
has received all amounts it expects to receive in connection with the
liquidation of such Mortgage Loan including the final disposition of an REO
Property.
"Liquidation Expenses" means expenses incurred by the Master Servicer or
any Subservicer in connection with the liquidation of any defaulted Mortgage
Loan or property acquired in respect thereof (including, without limitation,
legal fees and expenses, committee or referee fees, and, if applicable,
brokerage commissions and conveyance taxes), any unreimbursed amount expended
by the Master Servicer pursuant to the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration
or preservation of the related Mortgaged Property. Liquidation Expenses shall
not include any previously incurred expenses in respect of an REO Mortgage
Loan which have been netted against related proceeds.
"Liquidation Proceeds" means amounts, including Insurance Proceeds,
received in connection with the partial or complete liquidation of defaulted
Mortgage Loans, whether through trustee's sale, foreclosure sale or otherwise
or amounts received in connection with any condemnation or partial release of
a Mortgaged Property and any other proceeds received in connection with an REO
Property, less the sum of related unreimbursed Master Servicing Fees,
Servicing Advances and Monthly Advances and net of any other unreimbursed
expenses incurred in connection with liquidation or foreclosure.
"Liquidation Report" means a report prepared by the Master Servicer in
the ordinary course with respect to Liquidated Mortgage Loans.
"Loan-to-Value Ratio" means, with respect to any Mortgage Loan and as to
any date of determination, the fraction (expressed as a percentage) the
numerator of which is the principal balance of the related Mortgage Loan at
such date of determination and the denominator of which is the Appraised Value
of the related Mortgaged Property.
"Management Agreement" means the Management Agreement dated as of April
1, 1999 between the Issuer and AmREIT, as Manager.
"Management Fee" means the compensation payable to AmREIT under the
Management Agreement which shall equal $1,000 per month.
"Margin" means as to each Adjustable Rate Mortgage Loan, the percentage
amount set forth on the related Mortgage Note which is to be added to the
Index in calculating the Mortgage Rate thereon.
"Master Servicer" means Advanta Mortgage Corp. USA, a Delaware
corporation, and its successors and assigns, in its capacity as master
servicer hereunder.
"Master Servicing Default" means a master servicing default as described
under Section 7(a) of this Agreement.
"Master Servicing Fee" means as to any Payment Date, an amount per
Mortgage Loan equal to the product of the Master Servicing Fee Rate and the
Stated Principal Balance of such Mortgage Loan for such Payment Date.
"Master Servicing Fee Rate" means, with respect to each Mortgage Loan,
the percentage per annum equal to 0.50%.
"Maximum Rate" means as to any Adjustable Rate Mortgage Loan, the maximum
rate set forth on the related Mortgage Note at which interest can accrue on
such Mortgage Loan.
"Minimum Rate" means as to any Adjustable Rate Mortgage Loan, the minimum
rate set forth on the related Mortgage Note at which interest can accrue on
such Mortgage Loan.
"Monthly Advance" means any advance of a payment of interest (but not
principal) due on a Mortgage Loan (adjusted to the Net Mortgage Rate) required
to be made by the Master Servicer with respect to any Payment Date pursuant to
Section 4.
"Monthly Payment" As to any Mortgage Loan (including any REO Mortgage
Loan) and any Due Date, the scheduled payment of principal and interest due
thereon for such Due Date (before adjustment for any Curtailments applied on
or before such Due Date in the related Due Period and any Relief Act
Reductions and Deficient Valuations occurring prior to such Due Date but
before any adjustment to such amortization schedule by reason of any
bankruptcy, other than Deficient Valuations, or similar proceeding or any
moratorium or similar waiver or grace period).
"Moody's" means Moody's Investors Service, Inc., or any successor
thereto. If Moody's is designated as a Rating Agency in the Indenture, for
purposes of Section 9(c) the address for notices to Moody's shall be Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: Residential Pass-Through Monitoring, or such other address as
Moody's may hereafter furnish to the Issuer and the Master Servicer.
"Mortgage" means the mortgage, deed of trust or other instrument creating
a first lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.
"Mortgage Documents" mean the mortgage documents pertaining to a
particular Mortgage Loan and delivered to the Custodian pursuant to this
Agreement and the Custodial Agreement.
"Mortgage Impairment Insurance Policy" means that which is defined in
Section 3(k).
"Mortgage Insurance Premium Rate" means the applicable premium rate for
each covered Mortgage Loan expressed as a percentage in Schedule VI.
"Mortgage Insurer" means each insurer under an Insurance Policy listed in
Schedule VI.
"Mortgage Loan" means such of the mortgage loans granted by the Issuer to
the Trustee under the Indenture as security for the Notes, as from time to
time are held as part of the Trust Estate (including any REO Property), the
Mortgage Loans so held being identified in the Schedule of Mortgage Loans,
notwithstanding foreclosure or other acquisition of title of the related
Mortgaged Property.
"Mortgage Loan Purchase Agreement" means the mortgage loan purchase
agreement between the Depositor and the Seller.
"Mortgage Note" means the original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Rate" means the annual rate of interest borne by a Mortgage
Note from time to time.
"Mortgaged Property" means the underlying real property securing a
Mortgage Loan.
"Mortgagor" means the obligor(s) on a Mortgage Note.
"Net Mortgage Rate" means, as to any Mortgage Loan and Payment Date, the
related Mortgage Rate as of the Due Date in the month preceding the month of
such Payment Date reduced by the related Expense Fee Rate.
"Net REO Proceeds" means, as to any REO Mortgage Loan, proceeds received
in respect thereof net of any related expenses of the Master Servicer.
"Nonrecoverable Advance" means any portion of a Monthly Advance or a
Servicing Advance previously made or proposed to be made by the Master
Servicer that, in the good faith judgment of the Master Servicer, will not be
ultimately recoverable from the related Mortgagor, related Liquidation
Proceeds or otherwise.
"Note Insurer Default" has the meaning set forth in the Indenture.
"Note Payment Account" means the Eligible Account or Accounts created and
maintained with the Trustee pursuant to Section 8.02 of the Indenture, to
which shall be remitted from time to time certain of the funds the Master
Servicer has collected and deposited in the Collection Account with respect to
the Mortgage Loans, as required hereunder.
"Noteholder" or "Holder" means the Person in whose name a Note is
registered in the Note Register (as defined in the Indenture).
"Notes" mean the Issuer's Mortgage-Backed LIBOR Notes, Class A, Series
1999-1.
"Officer's Certificate" means a certificate (i) signed by the Chairman of
the Board, the Vice Chairman of the Board, the President, a Managing Director,
a Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Master Servicer, or (ii) if provided for in this Agreement,
signed by a Servicing Officer, as the case may be, and delivered to the
Trustee and FSA as required by this Agreement.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Master Servicer or the Issuer, as applicable, including,
in-house counsel, reasonably acceptable to the Trustee and FSA.
"Original Mortgage Loan" means the Mortgage Loan refinanced in connection
with the origination of a Refinancing Mortgage Loan.
"Original Note Balance" means $229,000,000.
"Original Pool Principal Balance" means the Pool Principal Balance as of
the Cut-off Date which is equal to $236,285,896.00.
"OTS" means the Office of Thrift Supervision.
"Outstanding" shall have the meaning ascribed thereto in the Indenture.
"Outstanding Mortgage Loan" means, as of any Due Date, a Mortgage Loan
with a Stated Principal Balance greater than zero which was not the subject of
a Principal Prepayment in Full prior to such Due Date and which did not become
a Liquidated Mortgage Loan prior to such Due Date.
"Owner Trustee" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Owner Trustee under
the Deposit Trust Agreement, until a successor Person shall have become the
Owner Trustee pursuant to the applicable provisions of the Deposit Trust
Agreement, and thereafter "Owner Trustee" shall mean such successor Person.
"Payment Date" means, with respect to the Notes and the Investor
Certificate, the 25th day of each calendar month after the initial issuance of
the Notes and the Investor Certificate or, if such 25th day is not a Business
Day, the next succeeding Business Day, commencing in May 1999.
"Periodic Rate Cap" means, as to any Adjustable Rate Mortgage Loan and
any Adjustment Date, the maximum allowable percent increase to the related
Mortgage Rate on any such Adjustment Date, as specified in the related
Mortgage Note.
"Permitted Investments" means, at the time, any one or more of the
following obligations and securities.
(i) obligations of the United States or any agency thereof, provided
such obligations are backed by the full faith and credit of the United
States;
(ii) general obligations of or obligations guaranteed by any state
of the United States or the District of Columbia receiving the highest
long-term debt rating of each Rating Agency;
(iii) commercial paper which is then receiving the highest
commercial paper rating of each Rating Agency;
(iv) certificates of deposit, demand or time deposits, or bankers'
acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof
and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or long-term
unsecured debt obligations of such depository institution or trust
company (or in the case of the principal depository institution in a
holding company system, the commercial paper or long-term unsecured debt
obligations of such holding company, but only if Moody's is a Rating
Agency) are then rated one of the two highest long-term and the highest
short-term ratings of each Rating Agency for such securities;
(v) demand or time deposits or certificates of deposit issued by any
bank or trust company or savings institution to the extent such deposits
are fully insured by the FDIC;
(vi) repurchase obligations with respect to any security described
in clauses (i) above, in either case entered into with a depository
institution or trust company (acting as principal) described in clause
(iv) above;
(vii) securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of the face amount
thereof) bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States or any state thereof
which have the highest rating of each Rating Agency (except if the Rating
Agency is Moody's, such rating shall be the highest commercial paper
rating of Moody's for any such securities);
(viii) interests in any money market fund which invests only in
other Permitted Investments which at the date of acquisition of the
interests in such fund and throughout the time such interests are held in
such fund has the highest applicable rating by each applicable Rating
Agency;
(ix) short term investment funds which invest only in other
Permitted Investments sponsored by any trust company or national banking
association incorporated under the laws of the United States or any state
thereof which are rated by each applicable Rating Agency in their
respective highest applicable rating category;
(x) such other investments having a specified stated maturity and
bearing interest or sold at a discount acceptable to FSA and to each
applicable Rating Agency as will not result in a change in the rating
(without regard to the existence of the FSA Policy) then assigned to the
Notes by each Rating Agency, as evidenced by a signed writing delivered
by each Rating Agency; and
(xi) any mutual fund, money market funds, common trust fund or other
pooled investment vehicle, the assets of which are limited to instruments
that otherwise would constitute Permitted Investments hereunder,
including any fund managed by the Trustee, the Master Servicer or any
affiliate of the Trustee or the Master Servicer or any fund to which the
Trustee, the Master Servicer or any affiliate of the Trustee or the
Master Servicer acts as an advisor, provided that such fund has the
highest applicable rating by each Rating Agency,
provided, that no such instrument shall be a Permitted Investment if (i)
such instrument evidences the right to receive interest only payments with
respect to the obligations underlying such instrument or (ii) such instrument
would require the Issuer to register as an investment company under the
Investment Company Act of 1940, as amended.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.
"Pool Principal Balance" means, with respect to any Payment Date, the
aggregate of the Stated Principal Balances of the Mortgage Loans which were
Outstanding Mortgage Loans on the Due Date in the month preceding the month of
such Payment Date.
"Prepayment Interest Shortfall" means, as to any Payment Date, Mortgage
Loan and Principal Prepayment, the amount, if any, by which one month's
interest at the related Net Mortgage Rate (giving effect to any Relief Act
Reduction) on such Principal Prepayment exceeds the amount of interest paid in
connection with such Principal Prepayment.
"Principal Prepayment" means any payment of principal by a Mortgagor on a
Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment, including
both Curtailments and Principal Prepayments in Full.
"Principal Prepayment in Full" means any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.
"Principal Remittance Amount" means, with respect to any Remittance Date,
the sum of (i) the principal component of the Monthly Payments due on the
related Due Date and actually collected, plus (ii) Principal Prepayments
occurring during the related Collection Period, plus (iii) any principal
components of late Monthly Payments collected during the related Collection
Period, plus (iv) any other collections in respect of principal received
during the related Collection Period and not included under (i) through (iii)
above.
"Prospectus Supplement" means the Prospectus Supplement dated April 9,
1999 relating to the Notes.
"PUD" means Planned Unit Development.
"Purchase Price" means, with respect to the purchase of any Mortgage Loan
from the Issuer an amount equal to the sum of (i) 100% of the unpaid principal
balance of the Mortgage Loan on the date of such purchase, and (ii) accrued
interest thereon at the applicable Mortgage Rate from the date through which
interest was last paid by the Mortgagor to the Due Date in the month in which
the Purchase Price is to be distributed to Noteholders plus the amount of any
unreimbursed Servicing Advances with respect to such purchased Mortgage Loan.
"Purchase and Sale Agreements" means the agreements, listed in Schedule
V, pursuant to which AmREIT acquired the Mortgage Loans.
"Qualified Insurer" means a mortgage guaranty insurance company duly
qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connection
with the insurance policy issued by such insurer, duly authorized and licensed
in such states to transact a mortgage guaranty insurance business in such
states and to write the insurance provided by the insurance policy issued by
it, approved as a FNMA- or FHLMC-approved mortgage insurer or having a claims
paying ability rating of at least "AA" or equivalent rating by a nationally
recognized statistical rating organization. Any replacement insurer with
respect to a Mortgage Loan must have at least as high a claims paying ability
rating as the insurer it replaces had on the Closing Date.
"Rating Agency" shall mean each of the Rating Agencies specified in the
Indenture. If any such organization or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by the Issuer and
acceptable to FSA, notice of which designation shall be given to the Trustee.
References herein to a given rating or rating category of a Rating Agency
shall mean such rating category without giving effect to any modifiers.
"Realized Loss" means, with respect to each Liquidated Mortgage Loan, an
amount (not less than zero or more than the Stated Principal Balance of the
Liquidated Mortgage Loan) as of the date of such liquidation, equal to (i) the
Stated Principal Balance of the Liquidated Mortgage Loan as of the date of
such liquidation, plus (ii) interest at the Adjusted Net Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and not
reimbursed) to Noteholders up to the Due Date in the month in which
Liquidation Proceeds are required to be distributed on the Stated Principal
Balance of such Liquidated Mortgage Loan from time to time, minus (iii) the
Liquidation Proceeds, if any, received during the month in which such
liquidation occurred, to the extent applied as recoveries of interest at the
Adjusted Net Mortgage Rate and to principal of the Liquidated Mortgage Loan.
With respect to each Mortgage Loan which has become the subject of a Deficient
Valuation, if the principal amount due under the related Mortgage Note has
been reduced, the difference between the principal balance of the Mortgage
Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation.
With respect to each Mortgage Loan which has become the subject of a Debt
Service Reduction and any Payment Date, the amount, if any, by which the
principal portion of the related Monthly Payment has been reduced.
"Refinancing Mortgage Loan" means any Mortgage Loan originated in
connection with the refinancing of an existing mortgage loan.
"Released Mortgage Property Proceeds" means, as to any Mortgage Loan,
proceeds received by the Master Servicer in connection with (a) a taking of an
entire Mortgaged Property by exercise of the power of eminent domain or
condemnation or (b) any release of part of the Mortgaged Property from the
lien of the related Mortgage, whether by partial condemnation, sale or
otherwise; which are not released to the Mortgagor in accordance with
applicable law, Accepted Servicing Practices and this Agreement.
"Relief Act" means the Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.
"Relief Act Reductions" means, with respect to any Payment Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which (i) interest
collectible on such Mortgage Loan for the most recently ended calendar month
is less than (ii) interest accrued thereon for such month pursuant to the
Mortgage Note.
"Remittance Amount" means, with respect to any Remittance Date, an amount
equal to (i) the Principal Remittance Amount, plus (ii) the Interest
Remittance Amount, minus (iii) any amounts withdrawn by the Master Servicer
pursuant to Section 3(g) out of funds which would otherwise be payable under
clause (i) or (ii).
"Remittance Date" means, with respect to any Payment Date, the 18th of
the month in which such Payment Date occurs, or if such 18th day is not a
Business Day, the Business Day preceding such 18th day.
"Remittance Date Statement" has the meaning set forth in Section 3(h).
"REO Acquisition" means the acquisition of any REO Property pursuant to
Section 3(p).
"REO Disposition" means the final sale by the Master Servicer of an REO
Property.
"REO Mortgage Loan" means any Mortgage Loan which is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related
Mortgage Note is discharged and the related Mortgaged Property is held as part
of the Trust Estate.
"REO Property" means a Mortgaged Property acquired by the Trust Estate
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.
"Replacement Mortgage Loan" means a Mortgage Loan substituted for a
Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form attached to the
Custodial Agreement, (i) have a principal balance, after deduction of the
principal portion of the Monthly Payment due in the month of substitution, not
in excess of, and not more than 20% less than, the Stated Principal Balance of
the Deleted Mortgage Loan; (ii) be accruing interest at a rate no lower than
and not more than 1.0% per annum higher than, that of the Deleted Mortgage
Loan and, if an Adjustable Rate Mortgage Loan, be bearing interest based on an
Index that is LIBOR; (iii) have a Loan-to-Value Ratio no higher than that of
the Deleted Mortgage Loan; (iv) have a Mortgage Rate not lower than, and not
more than 1.0% per annum higher than that of the Deleted Mortgage Loan; (v)
have a remaining term to maturity no greater than (and not more than 36 months
less than) that of the Deleted Mortgage Loan; (vi) comply with each
representation and warranty set forth in Schedule III hereto; and (vii) be
otherwise acceptable to FSA.
"Request for Release" means the Request for Release submitted by the
Master Servicer or AmREIT to the Custodian, substantially in one of the forms
attached to the Custodial Agreement, as appropriate.
"Required Insurance Policy" means with respect to any Mortgage Loan, any
insurance policy that is required to be maintained from time to time under the
Servicing Provisions.
"Responsible Officer" means, when used with respect to the Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, any trust officer or any other officer
of the Trustee customarily performing functions similar to those performed by
any of the above designated officers and to whom, with respect to a particular
matter, such matter is referred because of such officer's knowledge of and
familiarity with the particular subject. When used with respect to AmREIT or
the Master Servicer, the President or any Vice President, Assistant Vice
President, or any Secretary or Assistant Secretary.
"Rolling Delinquency Percentage" has the meaning set forth in the
Indenture.
"SAIF" means the Savings Association Insurance Fund, or any successor
thereto.
"S&P" means Standard & Poor's Ratings Services, a division of McGraw-Hill
Inc. If S&P is designated as a Rating Agency in the Indenture, for purposes of
Section 9(c) the address for notices to S&P shall be Standard & Poor's Ratings
Group, 26 Broadway, 15th Floor, New York, New York 10004, Attention: Mortgage
Surveillance Monitoring, or such other address as S&P may hereafter furnish to
the Issuer and the Master Servicer.
"Schedule of Mortgage Loans" means the schedule attached hereto as
Schedule I listing the Mortgage Loans to be master serviced by the Master
Servicer pursuant to this Agreement (as from time to time amended by the
Issuer to reflect the addition of Replacement Mortgage Loans and the deletion
of Deleted Mortgage Loans pursuant to the provisions of this Agreement and
Section 8.05 of the Indenture) pledged to the Trustee as part of the Trust
Estate and from time to time subject to this Agreement and the Indenture,
setting forth the following information with respect to each Mortgage Loan:
(i) the loan number;
(ii) the Mortgagor's name and the street address of the Mortgaged
Property, including the zip code;
(iii) the maturity date;
(iv) the original principal balance;
(v) the Original Pool Principal Balance;
(vi) the first payment date of the Mortgage Loan;
(vii) the Monthly Payment in effect as of the Cut-off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) a code indicating whether the residential dwelling at the time
of origination was represented to be owner-occupied;
(x) a code indicating whether the residential dwelling is either (a)
a detached single family dwelling, (b) attached single family dwelling,
(c) a dwelling in a PUD, (d) a condominium unit, or (e) a two- to
four-unit residential property;
(xi) the Mortgage Rate in effect as of the Cut-off Date;
(xii) the Master Servicing Fee Rate;
(xiii) the Maximum Rate and the Minimum Rate, if any;
(xiv) the Periodic Rate Cap, if any;
(xv) the Adjustment Date, if any;
(xvi) the Margin, if any;
(xvii) the purpose for the Mortgage Loan; and
(xviii) the type of documentation program pursuant to which the
Mortgage Loan was originated.
Such schedule shall also set forth (a) the total of the amounts described
under (iv) and (vii) above and (b) the weighted average, weighted on the basis
of the Original Pool Principal Balance, of the amounts described under (xi)
and (xii) above.
"Seller" means American Residential Eagle, Inc., a Delaware corporation,
which, as of the Closing Date, owns all of the outstanding beneficial
interests in the Issuer, and its successors and assigns.
"Servicing Account" means the separate Eligible Account or Accounts
created and maintained pursuant to this Agreement.
"Servicing Advances" means any customary, reasonable and necessary
"out-of-pocket" costs and expenses, incurred by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, (i)
expenditures in connection with a foreclosed Mortgage Loan prior to the
liquidation thereof, including expenditures for real estate property taxes,
hazard insurance premiums and property restoration or preservation
("Preservation Expenses"); (ii) the cost of any enforcement or judicial
proceedings, including (a) foreclosures, and (b) other legal actions and costs
associated therewith that potentially affect the existence, validity,
priority, enforceability or collectability of the Mortgage Loans, including
collection agency fees and costs of pursuing or obtaining personal judgments,
garnishments, levies, attachment and similar actions; (iii) the cost of the
conservation, management, liquidation, sale or other disposition of any
Mortgaged Property acquired in satisfaction of the related Mortgage Loan,
including reasonable fees paid to any independent contractor in connection
therewith; and (iv) advances to keep liens current, unless with respect to any
of the foregoing the Master Servicer has determined that such advance would
not be recoverable.
"Servicing Officer" means any officer of the Master Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loan
whose name and facsimile signature appear on a list of servicing officers
furnished to the Trustee, the Custodian and FSA by the Master Servicer on the
Closing Date pursuant to this Agreement, as such list may from time to time be
amended.
"Servicing Provisions" means the provisions for servicing and/or
administering the Mortgage Loans set forth in Article III.
"Stated Maturity" shall have the meaning ascribed thereto in the
Indenture.
"Stated Principal Balance" means, as to any Mortgage Loan and Payment
Date, the principal balance of such Mortgage Loan as of the Due Date preceding
the date of determination as specified for such Due Date in the amortization
schedule (before any adjustment to such amortization schedule by reason of any
bankruptcy (other than Deficient Valuations) or similar proceeding or any
moratorium or similar waiver or grace period) after giving effect to Principal
Prepayments in Full or Curtailments received and applied prior to such Due
Date, Deficient Valuations incurred prior to such Due Date, to any
Curtailments applied by the Master Servicer in reduction of the unpaid
principal balance of such Mortgage Loan as of such Due Date and to the payment
of principal due on such Due Date and irrespective of any delinquency in
payment by the related Mortgagor. The Stated Principal Balance of a Mortgage
Loan which becomes a Liquidated Mortgage Loan prior to such Due Date shall be
zero.
"Statistical Cut-off Date" means March 1, 1999.
"Substitution Amount" has the meaning ascribed to such term pursuant to
Section 2(c)(iv).
"Subservicer" shall mean any Person with whom the Master Servicer has
entered into a Subservicing Agreement and who satisfies the requirements set
forth in Section 3(b) hereof in respect of the qualification of a Subservicer.
"Subservicing Agreement" shall mean any agreement between the Master
Servicer and any Subservicer relating to subservicing and/or administration of
certain Mortgage Loans as provided in Section 3(b), a copy of which shall be
delivered, along with any modifications thereto, to the Issuer, the Trustee
and FSA.
"Trust Estate" shall have the meaning ascribed to such term in the
Indenture.
"Trust Receipt" means, as applicable, either the Initial Trust Receipt in
the form of Exhibit One-A to the Custodial Agreement or the Final Trust
Receipt in the form of Exhibit One-B to the Custodial Agreement.
"Trustee Mortgage File" means, with respect to each Mortgage Loan, the
Mortgage Documents.
"Weighted Average Net Mortgage Rate" means, as to any Payment Date, the
weighted average of the Net Mortgage Rates weighted on the basis of the Stated
Principal Balances of the Mortgage Loans as of the Due Date in the preceding
calendar month.
2. Mortgage Documents.
(a) Trustee to Retain Possession of Documents through Custodian.
(i) Concurrently with the execution and delivery hereof, the Issuer
has pledged, transferred and assigned to the Trustee for the benefit of
the Noteholders and FSA, as collateral for the payment of principal and
interest on the Notes, all right, title and interest of the Issuer in and
to the Trust Estate for the Notes, including the Mortgage Loans. Prior to
or contemporaneous with the execution of this Agreement, or within the
applicable time periods specified below, the Issuer shall have delivered
or caused to be delivered to the Custodian, with respect to each Mortgage
Loan, all originals of the Mortgage Documents and any other instruments
relating thereto comprising the Trustee Mortgage File.
In the event that in connection with any Mortgage Loan the Issuer
cannot deliver (A) the original recorded Mortgage, (B) all interim
recorded assignments of Mortgage or (C) the lender's title policy
(together with all riders thereto) satisfying the requirements set forth
in the Custodial Agreement, concurrently with the execution and delivery
hereof, the Issuer shall promptly deliver to the Custodian, in accordance
with the terms and conditions of the Custodial Agreement, (x) in the case
of (A) or (B) above, such original Mortgage or such interim assignment of
Mortgage, as the case may be, with evidence of recording indicated
thereon upon receipt thereof from the public recording office, or a copy
thereof, certified, if appropriate, by the relevant recording office, but
in no event shall any such delivery of the original Mortgage Loan and
each such interim assignment of Mortgage or a copy thereof, certified, if
appropriate, by the relevant recording office, be made later than 90 days
following the Closing Date, or, (y) in the case of (C) above, such title
policy, no later than 90 days following the Closing Date; provided,
however, that in the event the Issuer is unable to deliver by such date
each Mortgage and each such interim assignment of Mortgage by reason of
the fact that any such documents have not been returned by the
appropriate recording office, or, in the case of each such interim
assignment of Mortgage, because the related Mortgage has not been
returned by the appropriate recording office, the Issuer shall deliver
such documents to the Custodian as promptly as possible upon receipt
thereof and, in any event, within 180 days following the Closing Date.
The Issuer shall forward or cause to be forwarded to the Custodian (I)
from time to time additional original documents evidencing an assumption
or modification of a Mortgage Loan and (II) any other documents required
to be delivered by the Issuer to the Custodian. In the event that the
original Mortgage is not delivered and in connection with the payment in
full of the related Mortgage Loan the public recording office requires
the presentation of a "lost instruments affidavit and indemnity" or any
equivalent document, because only a copy of the Mortgage can be delivered
with the instrument of satisfaction or reconveyance, the Issuer shall
execute and deliver or cause to be executed and delivered such a document
to the public recording office. In the case where a public recording
office retains the original recorded Mortgage or in the case where a
Mortgage is lost after recordation in a public recording office, the
Issuer shall deliver to the Custodian a copy of such Mortgage certified
by such public recording office to be a true and complete copy of the
original recorded Mortgage.
As promptly as practicable subsequent to the Issuer's pledge,
transfer and assignment, and in any event within thirty (30) days
thereafter, the Issuer shall (X) affix the Trustee's name to each
assignment of Mortgage, as the assignee thereof, (Y) cause such
assignment to be in proper form for recording in the appropriate public
office for real property records within thirty (30) days after receipt
thereof and (Z) cause to be delivered for recording in the appropriate
public office for real property records the assignments of the Mortgages
to the Trustee, except that, with respect to any assignment of a Mortgage
as to which the Issuer has not received the information required to
prepare such assignment in recordable form, the Issuer's obligation to do
so and to deliver the same for such recording shall be as soon as
practicable after receipt of such information and in any event within
thirty (30) days after the receipt thereof, and the Issuer need not cause
to be recorded any assignment which relates to a Mortgage Loan the
Mortgaged Property relating to which is located in any jurisdiction under
the laws of which, as evidenced by an Opinion of Counsel from local
counsel, delivered by the Issuer (at the Issuer's expense) to the Trustee
and FSA in accordance with Section 1.01 of the Indenture, the recordation
of such assignment is not necessary to protect the Trustee's and the
Noteholders' and FSA's interest in the related Mortgage Loan; provided,
however, notwithstanding the delivery of any legal opinions, each
assignment of Mortgage shall be recorded by the Issuer at its expense
upon the earliest to occur of (I) the direction by FSA, (II) a Default
under the Indenture, or (III) any bankruptcy, insolvency or foreclosure
with respect to the related Mortgagor.
In the case of Mortgage Loans that have been prepaid in full as of
the Closing Date, the Issuer, in lieu of delivering the above documents
to the related Custodian, will deposit in the Collection Account the
portion of such payment that is required to be deposited in the
Collection Account pursuant to Section 3(g).
Until the Notes have been paid in full and the Issuer has otherwise
fulfilled its obligations under the Indenture, the Custodian shall retain
possession and custody of each Trustee Mortgage File in accordance with
and subject to the terms and conditions set forth in the Custodial
Agreement, the Indenture and this Agreement.
(ii) On the Closing Date, the Trustee shall receive a Trust Receipt
from the Custodian, whereby the Custodian acknowledges receipt of the
documents identified in the Trust Receipt and declares that it holds and
will hold such documents and the other documents delivered to it
constituting the Trustee Mortgage Files in trust for the exclusive use
and benefit of the Trustee, as the holder of the Trust Receipt acting on
behalf of all present and future Noteholders and FSA. The Custodian
acknowledges in the Custodial Agreement that it will maintain possession
of the Mortgage Notes in the State provided in the Custodial Agreement,
unless otherwise permitted by the Trustee, the Rating Agencies and FSA.
The Custodian has agreed, pursuant to the Custodial Agreement, to
execute and deliver on the Closing Date to the Trustee a Trust Receipt
constituting an initial such receipt in the form attached to the
Custodial Agreement. Based on its review and examination required by and
in accordance with the Custodial Agreement, and only as to the documents
identified in such initial certification, the Custodian acknowledges that
such documents appear regular on their face and relate to the specified
Mortgage Loan; provided that the Custodian shall be under no obligation
to ascertain that, except as therein provided, any information set forth
in said Trust Receipt is accurate. Neither the Trustee nor the Custodian
shall be under any duty or obligation to inspect, review or examine said
documents, instruments, certificates or other papers to determine that
the same are genuine, enforceable or appropriate for the represented
purpose or that they have actually been recorded in the real estate
records or that they are other than what they purport to be on their
face.
Not later than 180 days after the Closing Date, the Custodian shall
deliver to the Trustee the Trust Receipt in final form, with any
applicable exceptions noted thereon.
If, in the course of its review, the Custodian finds any document
constituting a part of a Trustee Mortgage File which does not meet the
requirements of the Custodial Agreement, the Custodian shall list such as
an exception in the Trust Receipt; provided, however, that the Custodian
shall not make any determination as to whether (A) any endorsement is
sufficient to transfer all right, title and interest of the party so
endorsing, as noteholder or assignee thereof, in and to that Mortgage
Note or (B) that any assignment of Mortgage is in recordable form or is
sufficient to effect the assignment of and transfer to the assignee
thereof under the mortgage to which the assignment of Mortgage relates.
Subject to the time extensions for certain documents set forth in Section
2(a)(ii) above, AmREIT shall promptly correct or cure such defect within
90 days from the date it was so notified of such defect and, if AmREIT
does not correct or cure such defect within such period, AmREIT shall
either (I) substitute for the related Mortgage Loan a Replacement
Mortgage Loan, which substitution shall be accomplished in the manner and
subject to the conditions set forth in Section 2(c)(iv), or (II) purchase
such Mortgage Loan from the Issuer within 90 days from the date AmREIT
was notified of such defect in writing at the Purchase Price of such
Mortgage Loan. Any such substitution pursuant to clause (I) above shall
not be effected prior to the delivery to the Custodian of a Request for
Release. The Purchase Price for any such Mortgage Loan purchased pursuant
to clause (II) shall be deposited by AmREIT in the Collection Account on
or prior to the applicable Remittance Date in the month following the
month of purchase and, upon the making of such deposit and the delivery
of related Request for Release, the Custodian shall release the related
Trustee Mortgage File to AmREIT. The Issuer and the Trustee (or the
Master Servicer as its agent) shall execute and deliver at AmREIT's
request such instruments of transfer or assignment prepared by AmREIT, in
each case without recourse, as shall be necessary to vest in AmREIT, or a
designee, the Issuer's and the Trustee's interest in any Mortgage Loan
released pursuant hereto.
The Custodian shall retain possession and custody of each Trustee
Mortgage File in accordance with and subject to the terms and conditions
set forth in the Custodial Agreement. The Issuer or the Trustee shall
promptly deliver to the Custodian, upon the execution or receipt thereof,
the originals of such other documents or instruments constituting the
Trustee Mortgage File as come into the possession of the respective
Issuer or Trustee from time to time.
It is understood and agreed that the obligation of AmREIT to
substitute for or to purchase any Mortgage Loan which does not meet the
requirements set forth in the Custodial Agreement shall constitute the
sole remedy respecting such defect available to the Trustee and any
Noteholder against AmREIT.
(b) Security Interest of Trustee; Master Servicer Authorization.
(i) The Master Servicer hereby acknowledges that concurrently with
the execution of this Agreement, the Trustee has acquired and holds a
security interest in the Trustee Mortgage Files and in all Mortgage Loans
represented by such Trustee Mortgage Files and in all funds now or
hereafter held by, or under the control of, the Master Servicer that are
collected by the Master Servicer in connection with the Mortgage Loans,
whether as Monthly Payments, as Principal Prepayments, or as Liquidation
Proceeds or Insurance Proceeds or otherwise, and in all proceeds of the
foregoing and proceeds of proceeds (but excluding any Master Servicing
Fees and any other amounts or reimbursements to which the Master Servicer
is entitled to deduct under this Agreement). The Master Servicer agrees
that so long as the Mortgage Loans are assigned to the Trustee, all
Trustee Mortgage Files (and any documents or instruments constituting a
part of such files), and such funds (except as above provided) which come
into the possession or custody of, or which are subject to the control
of, the Master Servicer shall be held by the Master Servicer for and on
behalf of the Trustee as the Trustee's agent and bailee for purposes of
perfecting the Trustee's security interest therein, as provided by
Section 9-305 of the Uniform Commercial Code of the State in which such
property is located. The Master Servicer hereby accepts such agency and
acknowledges that the Trustee, as secured party, will be deemed to have
possession at all times of all Trustee Mortgage Files and any other
documents or instruments constituting a part of such files, such funds
and other items for purposes of Section 9-305 of the Uniform Commercial
Code of the State in which such property may be held by the Master
Servicer.
(ii) Subject to clause (i) above, the Master Servicer also agrees
that it shall not create, incur or subject any Trustee Mortgage File or
other documents relating to a Mortgage Loans which are in the possession
of the Master Servicer with respect to each Mortgage Loan or any funds
that are deposited in the Note Payment Account and the Collection
Account, or any funds that otherwise are or may become due or payable to
the Trustee for the benefit of the Noteholders, to any claim, lien,
security interest, judgment, levy, writ of attachment or other
encumbrance (other than the claims of the Noteholders), or assert by
legal action or otherwise any claim or right of set-off against any such
Trustee Mortgage File or any funds collected or held by, or under the
control of, the Master Servicer from time to time in respect of a
Mortgage Loan.
(iii) Without limiting the generality of the foregoing, the Master
Servicer (1) is hereby authorized and empowered by the Issuer and the
Trustee, to execute and deliver, on behalf of itself, the Issuer, the
Noteholders, FSA and the Trustee or any of them, any and all instruments
of satisfaction or cancellation, or of partial or full release or
discharge and all other comparable instruments, with respect to the
Mortgage Loans and with respect to the related Mortgaged Properties and
(2) subject to Section 3(p), to institute foreclosure proceedings or
obtain deeds in lieu of foreclosure so as to convert ownership of
Mortgaged Properties into the name of the Issuer pursuant to Section 3(p)
of this Agreement. The Master Servicer may sue to enforce or collect on
any of the Mortgage Loans or any insurance policy covering a Mortgage
Loan, in its own name if possible, or on behalf of the Issuer or the
Trustee. If the Master Servicer commences a legal proceeding to enforce a
Mortgage Loan or any such insurance policy, the Issuer and the Trustee
shall thereupon be deemed to have automatically assigned the Mortgage
Loan or the rights under such insurance policy to the Master Servicer for
purposes of collection only. If, however, in any suit or legal proceeding
for enforcement, it is held that the Master Servicer may not enforce or
collect on a Mortgage Loan or any insurance policy covering a Mortgage
Loan on the ground that it is not a real party in interest or a holder
entitled to enforce such Mortgage Loan or such insurance policy, as the
case may be, then the Issuer and the Trustee shall, upon the written
request of a Servicing Officer, execute and return to the Master Servicer
such powers of attorney and other documents as are necessary or
appropriate to enable the Master Servicer to enforce such Mortgage Loan
or insurance policy, as the case may be, and which are prepared by the
Master Servicer and submitted to the Issuer or the Trustee for execution.
(c) Representations and Warranties of the Master Servicer, AmREIT and the
Issuer.
(i) Advanta Mortgage Corp. USA in its capacity as Master Servicer,
hereby makes the representations and warranties set forth in Schedule II
hereto, and by this reference incorporated herein, to the Issuer, FSA and
the Trustee, as of the Closing Date, or if so specified therein, as of
the Cut-off Date.
(ii) AmREIT has made in the Mortgage Loan Purchase Agreement the
representations and warranties as set forth in Schedule III hereto, as of
the Closing Date, or if so specified therein, as of the Cut-off Date, and
such representations and warranties, and the obligations associated
therewith, have been assigned to the Issuer, FSA and the Trustee;
(iii) The Issuer hereby makes the representations and warranties set
forth in Schedule IV hereto, and by this reference incorporated herein,
to the Trustee and the Master Servicer, as of the Closing Date.
(iv) Upon discovery by any of the parties hereto or FSA, of a breach
of a representation or warranty described in Section 2(c)(ii) (without
regard to any limitation regarding the knowledge of AmREIT contained
therein) that materially and adversely affects the value of any Mortgage
Loan or the interests of the Noteholders or FSA in any Mortgage Loan, the
party discovering such breach shall give prompt written notice thereof to
the other parties and FSA. AmREIT confirms its covenant in the Initial
Mortgage Loan Purchase Agreement to comply with the following: within 90
days of the earlier of its discovery or its receipt of written notice
from any party of a breach of any representation or warranty (without
regard to any limitation regarding the knowledge of AmREIT contained
therein) made pursuant to Section 2(c)(ii) which materially and adversely
affects the value of any Mortgage Loan or the interests of the
Noteholders or FSA, in any Mortgage Loan, AmREIT shall cure such breach
in all material respects, and if such breach is not so cured, shall, (A)
remove such Mortgage Loan (a "Deleted Mortgage Loan") from the Trust
Estate and substitute in its place a Replacement Mortgage Loan, in the
manner and subject to the conditions set forth in this Section 2(c); or
(B) purchase the affected Mortgage Loan or Mortgage Loans from the Issuer
(with the Trustee releasing its lien thereon) at the Purchase Price in
the manner set forth below; provided, however, that any such substitution
pursuant to (A) above shall not be effected prior to the delivery to the
Custodian of a Request for Release for the Deleted Mortgage Loan Trustee
Mortgage File, and the delivery to the Custodian of the Trustee Mortgage
File for any such Replacement Mortgage Loan. AmREIT shall promptly
reimburse the Trustee or FSA for any expenses reasonably incurred by the
Trustee or FSA in respect of enforcing the remedies for such breach.
With respect to the representations and warranties described in this
Section 2(c) which are made to the best of AmREIT's knowledge, if it is
discovered by either the Issuer or the Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of any Mortgage Loan, or the interests of
the Noteholders or FSA therein, notwithstanding AmREIT's lack of
knowledge with respect to the substance of such representation or
warranty, such inaccuracy shall be deemed a breach of the applicable
representation or warranty.
With respect to any Replacement Mortgage Loan or Loans, AmREIT shall
deliver to the Custodian for the benefit of the Noteholders and FSA the
Mortgage Note, the Mortgage, the related assignment of the Mortgage, and
such other documents and agreements as are required by the Custodial
Agreement, with the Mortgage Note endorsed and the Mortgage assigned as
required by the Custodial Agreement. No substitution is permitted to be
made in any calendar month after the Remittance Date for such month.
Monthly Payments due with respect to Replacement Mortgage Loans in the
month of substitution shall not be part of the Trust Estate and will be
retained by AmREIT on the next succeeding Payment Date. For the month of
substitution, the Remittance Amount will include the Monthly Payment due
on any Deleted Mortgage Loans for such month and thereafter AmREIT shall
be entitled to retain all amounts received in respect of such Deleted
Mortgage Loans.
The Issuer shall amend the Schedule of Mortgage Loans for the
benefit of the Noteholders and FSA to reflect the removal of such Deleted
Mortgage Loans and the substitution of the Replacement Mortgage Loans and
the Issuer shall deliver the amended Schedule of Mortgage Loans to the
Trustee and FSA. Upon such substitution, the Replacement Mortgage Loans
shall be subject to the terms of this Agreement in all respects, and
AmREIT shall be deemed to have made with respect to such Replacement
Mortgage Loans, as of the date of substitution, the representations and
warranties made pursuant to Section 2(c)(ii) with respect to such
Mortgage Loans. Upon any such substitution and the deposit to the
Collection Account of the amount required to be deposited therein in
connection with such substitution as described in the following
paragraph, the Custodian shall release the Trustee Mortgage File held for
the benefit of the Noteholders and FSA relating to such Deleted Mortgage
Loans to AmREIT. The Issuer and the Trustee (or the Master Servicer as
its agent) shall execute and deliver at AmREIT's direction such
instruments of transfer or assignment prepared by AmREIT, in each case
without recourse, as shall be necessary to vest title in AmREIT, or its
designee, the Issuer's and the Trustee's interest in any Deleted Mortgage
Loan substituted for pursuant to this Section 2(c).
For any month in which AmREIT substitutes one or more Replacement
Mortgage Loans for one or more Deleted Mortgage Loans, AmREIT will
determine the amount (if any) by which the aggregate principal balance of
all such Replacement Mortgage Loans as of the date of substitution is
less than the aggregate Stated Principal Balance of all such Deleted
Mortgage Loans (after application of the scheduled principal portion of
the monthly payments due in the month of substitution). The amount of
such shortage (the "Substitution Amount") shall be deposited into the
Collection Account by AmREIT on or before the Remittance Date for the
Payment Date in the month succeeding the calendar month during which the
related Mortgage Loan became replaced hereunder.
In the event that AmREIT shall have purchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Collection Account
pursuant to Section 3(g) and in compliance with the provisions of Section
8.05 of the Indenture on or before the Remittance Date for the Payment
Date in the month following the month during which AmREIT became
obligated hereunder to purchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price and receipt of a Request for Release,
the Custodian shall release the related Trustee Mortgage File held for
the benefit of the Noteholders to AmREIT. The Issuer and the Trustee (or
the Master Servicer as its agent) shall execute and deliver at AmREIT's
direction such instruments of transfer or assignment, prepared by AmREIT,
in each case without recourse, as shall be necessary to vest title in
AmREIT, or its designee, the Issuer's and the Trustee's interest in any
Deleted Mortgage Loan substituted for pursuant to this Section 2(c). It
is understood and agreed that the obligation under this Agreement of
AmREIT to cure, purchase or replace any Mortgage Loan as to which a
breach has occurred and is continuing shall constitute the sole remedy
against AmREIT respecting such breach available to Noteholders or the
Trustee on their behalf.
The representations and warranties made pursuant to this Section 2(c)
shall survive delivery of the respective Trustee Mortgage Files to the
Custodian for the Trustee for the benefit of the Noteholders and FSA.
3. General Duties of the Master Servicer.
(a) Master Servicer to Service Mortgage Loans.
(i) The Master Servicer agrees to perform all servicing duties under
this Agreement subject to the terms hereof.
(ii) The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Issuer, the Trustee and FSA and shall have full
power and authority, acting alone or through one or more Subservicers, to
do any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting
the generality of the foregoing, the Master Servicer, in its own name or
the name of a Subservicer, may, and is hereby authorized and empowered by
the Trustee to, execute and deliver, on behalf of itself and the Trustee
or either of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, the insurance
policies and accounts related thereto and the properties subject to the
Mortgages. Upon the execution and delivery of this Agreement, and from
time to time as may be required thereafter, the Trustee shall, upon
written request, execute for the Master Servicer or its Subservicers any
powers of attorney furnished to the Trustee by the Master Servicer and
such other documents furnished to the Trustee by the Master Servicer as
may be necessary or appropriate to enable the Master Servicer to carry
out its servicing and administrative duties hereunder.
In servicing and administering the Mortgage Loans, the Master
Servicer shall employ procedures consistent with Accepted Servicing
Practices and in a manner consistent with recovery under any Insurance
Policy required to be maintained by the Master Servicer pursuant to this
Agreement.
The Master Servicer shall make appropriate interest rate and payment
adjustments on each Adjustment Date in compliance with applicable
regulatory adjustable mortgage loan requirements and the Mortgage Notes
that evidence Adjustable Rate Mortgage Loans. The Master Servicer shall
execute and deliver all appropriate notices required by the applicable
adjustable mortgage loan laws and regulations and the Mortgage Loan
Documents regarding such interest rate adjustments and payment
adjustments.
Costs incurred by the Master Servicer in effectuating the timely
payment of taxes and assessments on the property securing a Mortgage Note
and foreclosure costs may be added by the Master Servicer to the amount
owing under such Mortgage Note where the terms of such Mortgage Note so
permit; provided, however, that the addition of any such cost shall not
be taken into account for purposes of calculating the principal amount of
the Mortgage Note and Mortgage Loan, the Monthly Payments on the Mortgage
Note and Mortgage Loan or remittances to be made to the Collection
Account. Such costs shall be recoverable by the Master Servicer pursuant
to Section 3(g).
(iii) Subject to Section 3(p), the Master Servicer is hereby
authorized and empowered to execute and deliver on behalf of the Trustee,
all instruments of satisfaction or cancellation, or of partial or full
release, discharge and all other comparable instruments, with respect to
the Mortgage Loans and with respect to the Mortgaged Properties. If
reasonably required by the Master Servicer, the Trustee shall execute any
powers of attorney furnished to the Trustee by the Master Servicer and
other documents necessary or appropriate to enable the Master Servicer to
carry out its servicing and administrative duties under this Agreement.
(iv) If the Mortgage relating to a Mortgage Loan did not have a lien
senior 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.
(v) The Master Servicer agrees to monitor the premiums due on the
Insurance Policies listed in Schedule VI providing private mortgage
insurance coverage of the Mortgage Loans identified in such Schedule. The
Master Servicer further agrees to pay such premiums when due (A) by
deducting from the Collection Account an amount from collections of
interest on each covered Mortgage Loan or (B) by advancing from the
Amount Held for Future Distributions or its own funds (which advances
shall be treated as if it were deemed part of the Monthly Advance on any
Delinquent Mortgage Loan and subject to recovery as herein provided),
equal to the per annum percentage set forth on Schedule VI.
(vi) The Master Servicer agrees to collect all prepayment penalties
or charges that may become due on the Mortgage Loans being serviced by it
and to deposit such collections into the Collection Account. The Master
Servicer agrees to withdraw from the Collection Account and distribute to
the Issuer (or its designee) on each Remittance Date the amount of
prepayment penalties and charges collected during the related Due Period.
(vii) The Master Servicer shall deliver a list of Servicing Officers
to the Master Servicer, the Trustee and FSA by the Closing Date.
(b) Subservicing Agreements Between the Master Servicer and
Subservicers.
(i) The Master Servicer may, subject to the prior written approval
of the Issuer and FSA, enter into Subservicing Agreements with
Subservicers for the servicing and administration of the Mortgage Loans
and for the performance of any and all other activities of the Master
Servicer hereunder; provided, however, that the Issuer and FSA hereby
approve Advanta Bank Corp., a Utah industrial loan corporation and
affiliate of the Master Servicer as a Subservicer. Each Subservicer shall
be either (i) a depository institution the accounts of which are insured
by the FDIC or (ii) another entity that engages in the business of
originating, acquiring or servicing loans, and in either case shall be
authorized to transact business in the state or states where the related
Mortgaged Properties it is to service are situated. In addition, each
Subservicer will obtain and preserve its qualifications to do business as
a foreign corporation in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform or cause to be
performed its duties under the related Subservicing Agreement. Each
Subservicing Agreement shall provide that the Subservicer's rights shall
terminate at the option of the successor Master Servicer and without any
termination fee, expense, penalty or other cost upon the termination,
resignation or other removal of the related Master Servicer under this
Agreement.
(ii) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements
between a Master Servicer and a Subservicer or reference to actions taken
through a Subservicer or otherwise, the Master Servicer shall remain
obligated and primarily liable to the Trustee and FSA for the servicing
and administering of the Mortgage Loans in accordance with the provisions
of this Agreement without diminution of such obligation or liability by
virtue of such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and under the
same terms and conditions as if the Master Servicer alone were servicing
and administering the Mortgage Loans. For purposes of this Agreement, the
Master Servicer shall be deemed to have received payments on Mortgage
Loans when its Subservicer has received such payments.
(c) Master Servicer Authorization.
The Issuer as owner of the Mortgage Loans and the Trustee as lienholder
with respect thereto, hereby authorize and appoint the Master Servicer as
their agent to exercise all rights of the party entitled to exercise ownership
rights with respect to the Mortgage Loans in accordance with the terms of this
Agreement.
(d) Access to Certain Documentation.
The Master Servicer shall afford the Issuer, FSA and the Trustee
reasonable access to all records and documentation regarding the Mortgage
Loans within the Master Servicer's possession and all accounts, insurance
information and other matters relating to this Agreement maintained by the
Master Servicer, such access being afforded without charge, but only upon
reasonable request and during normal business hours at the office designated
by the Master Servicer. The Master Servicer shall also provide to the OTS and
the FDIC and to comparable regulatory authorities supervising Holders of Notes
and the examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans within
the possession of the Master Servicer (or reasonably accessible to it pursuant
to the Servicing Agreements) and required by applicable regulations of the OTS
and the FDIC. Such access shall be afforded without charge, but only upon
reasonable and prior written request and during normal business hours at the
offices designated by the Master Servicer. Nothing in this Section 3(d) shall
limit the obligation of the Master Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors and the failure
of the Master Servicer to provide access as provided in this Section 3(d) as a
result of such obligation shall not constitute a breach of this Section 3(d).
(e) Rights of the Issuer and the Trustee in Respect of the Master
Servicer.
The Issuer may, but is not obligated to, enforce the obligations of the
Master Servicer hereunder and may, but is not obligated to, perform, or cause
a designee to perform, any defaulted obligation of the Master Servicer
hereunder and in connection with any such defaulted obligation to exercise the
related rights of the Master Servicer hereunder; provided that the Master
Servicer shall not be relieved of any of its obligations hereunder by virtue
of such performance by the Issuer or its designee. Neither the Trustee nor the
Issuer shall have any responsibility or liability for any action or failure to
act by the Master Servicer nor shall the Trustee or the Issuer be obligated to
supervise the performance of the Master Servicer hereunder or otherwise. The
Trustee shall not be liable for any acts or omissions of the Master Servicer
or any Subservicer. In particular, the Trustee shall not be liable for any
servicing errors or interruption resulting from any failure of the Master
Servicer or any Subservicer to maintain computer and other information systems
that are year-2000 compliant.
(f) Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of a Master Servicing
Default), unless a successor Master Servicer acceptable to FSA (after
consultation with the Trustee) has been appointed pursuant to Section 6(c) or
Section 7, the Trustee or its successor shall thereupon succeed to all of the
rights and assume all of the obligations of the Master Servicer hereunder
arising thereafter, except that the Trustee shall not be (i) liable for any
acts or omissions of the predecessor Master Servicer as such hereunder, (ii)
obligated to make Servicing Advances or Monthly Advances if it is prohibited
from doing so by applicable law, or (iii) deemed to have made any
representations and warranties of the Master Servicer hereunder. Any such
assumption shall be subject to Section 7(b).
(g) Collection of Mortgage Loan Payments; Collection Account; Note
Payment Account.
(i) The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans,
and shall, to the extent such procedures shall be consistent with this
Agreement and any applicable Insurance Policy, follow such collection
procedures as shall constitute Accepted Servicing Practices. Consistent
with the foregoing, the Master Servicer may in its discretion waive any
assumption fee, late payment charge or other charge (but not prepayment
penalties or charges) in connection with a Mortgage Loan, provided,
however, that the Master Servicer shall not waive any prepayment
penalties or charges without the prior consent of the Issuer and provided
further that if the Issuer has not consented or objected within two (2)
Business Days after notice of the proposed waiver, the Issuer shall be
deemed to have consented thereto. Further, consistent with the
above-described standard, the Master Servicer may in its discretion
arrange a schedule, running for no more than 180 days after the Due Date
for payment of any installment on any Mortgage Note, for the liquidation
of Delinquent items. Any provision of this agreement to the contrary
notwithstanding, the Master Servicer shall not agree to the modification
or waiver of any provision of a Mortgage Loan (other than prepayment
penalties or charges as permitted above) (A) at a time when such Mortgage
Loan is not in default or such default is not reasonably foreseeable or
(B) if the aggregate Stated Principal Balance of all Mortgage Loans as to
which any such modification or waiver has been agreed to would exceed
four percent (4.0%) of the Original Pool Principal Balance, without the
prior consent of FSA as to this clause (B), provided that if FSA has not
consented or objected within five (5) Business Days after notice of the
proposed waiver or modification, FSA shall be deemed to have consented
thereto.
(ii) The Master Servicer shall establish and maintain in the name of
the Trustee a Collection Account, in trust for the benefit of the Trustee
and FSA. The Collection Account shall be established and maintained as an
Eligible Account. The Master Servicer shall deposit in its Collection
Account on the Closing Date and thereafter, within two Business Days of
receipt (except as otherwise permitted herein), the following payments
and collections received or made by it:
(A) all payments received before or after the Cut-off Date on
account of principal on the Mortgage Loans (other than payments of
principal due prior to the Cut-off Date);
(B) all payments received before or after the Cut-off Date on
account of interest on the Mortgage Loans (other than payments of
interest that accrued on each Mortgage Loan up to and including
March 1, 1999);
(C) all Liquidation Proceeds;
(D) all Insurance Proceeds;
(E) all Released Mortgaged Property Proceeds;
(F) any amounts payable in connection with the repurchase of
any Mortgage Loan and any Substitution Amount;
(G) any amount contributed by the Issuer to be used for payment
of principal and/or interest on the Notes or for any other purpose
identified by the Issuer;
(H) any prepayment penalties or charges collected by the Master
Servicer;
(I) any amount expressly required to be deposited in the
Collection Account in accordance with certain provisions of this
Agreement; and
provided, however, that the Master Servicer shall be entitled, at
its election, either (a) to withhold and to pay to itself the applicable
Master Servicing Fee from any payment on account of interest or other
recovery (including Net REO Proceeds) as received and prior to deposit of
such payments in the Collection Account or (b) to withdraw the applicable
Master Servicing Fee from the Collection Account after the entire payment
or recovery has been deposited therein; provided, further, that with
respect to any payment of interest received by the Master Servicer in
respect of a Mortgage Loan (whether paid by the Mortgagor or received as
Liquidation Proceeds, Insurance Proceeds or otherwise) which is less than
the full amount of interest then due with respect to such Mortgage Loan,
only that portion of such payment that bears the same relationship to the
total amount of such payment of interest as the rate used to determine
the Master Servicing Fee bears to the Mortgage Rate borne by such
Mortgage Loan shall be allocated to the Master Servicing Fee with respect
to such Mortgage Loan. All other amounts shall be deposited in the
Collection Account not later than the second Business Day following the
day of receipt by the Master Servicer.
The Master Servicer may invest the funds in its Collection Account
only in Permitted Investments, which shall mature not later than the
Remittance Date with respect to available funds to be withdrawn on that
date and, in each case, shall not be sold or disposed of prior to its
maturity. All such Permitted Investments shall be made in the name of the
Trustee, for the benefit of the Noteholders and FSA. All income and gain
(net of any losses) realized from any such investment of funds on deposit
in the Collection Account shall be for the benefit of the Master Servicer
and shall be retained or withdrawn by it monthly as provided herein. The
amount of any realized losses in the Collection Account incurred in any
such account in respect of any such investments shall promptly be
deposited by the Master Servicer in the Collection Account. The Trustee
shall not be liable for the amount of any loss incurred in respect of any
investment or lack of investment of funds held in the Collection Account
and made in accordance with this subsection.
The foregoing requirements for deposit in the Collection Account
shall be exclusive, it being understood and agreed that, without limiting
the generality of the foregoing, payments in the nature of those
described in the last paragraph of Section 5 and payments in the nature
of late payment charges, modification fees or assumption fees,
insufficient funds charges or other amounts the Master Servicer may
charge with respect to the Mortgage Loans (but not prepayment penalties
or charges) need not be deposited by the Master Servicer in the
Collection Account. If the Master Servicer deposits in the Collection
Account any amount not required to be deposited therein, it may at any
time withdraw such amount from the Collection Account, any provision
herein to the contrary notwithstanding. All funds (excluding investment
earnings thereon) deposited by the Master Servicer in the Collection
Account shall be held in the Collection Account for the account of the
Trustee in trust for the Noteholders until disbursed or withdrawn in
accordance with Section 3(g)(iii).
Prior to the time of their required deposit in the Collection
Account, all amounts required to be deposited therein may be deposited in
an account in the name of Master Servicer, provided that such account is
an Eligible Account. All such funds shall be held by the Master Servicer
in trust for the benefit of the Noteholders and FSA pursuant to the terms
hereof.
The Collection Account may, upon written notice by the Master
Servicer to the Trustee and FSA, be transferred to a different depository
so long as such transfer is to an Eligible Account.
(iii) The Master Servicer may, from time to time, make withdrawals
from the Collection Account for the following purposes, without
duplication:
(A) to reimburse itself for any accrued unpaid Master Servicing
Fees and for unreimbursed Monthly Advances and Servicing Advances.
The Master Servicer's right to reimbursement for unpaid Master
Servicing Fees and unreimbursed Monthly Advances and Servicing
Advances shall be limited (subject to clause (B) below) to late
collections on the related Mortgage Loan, including Liquidation
Proceeds, Released Mortgaged Property Proceeds, Insurance Proceeds
and such other amounts as may be collected by the Master Servicer
from the related Mortgagor or otherwise relating to the Mortgage
Loan in respect of which such unreimbursed amounts are owed;
(B) to reimburse itself for any Monthly Advances or Servicing
Advances determined in good faith to have become Nonrecoverable
Advances, such reimbursement to be made from any funds in the
Collection Account;
(C) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code
in accordance with a final, nonappealable order of a court having
competent jurisdiction;
(D) to withdraw any funds deposited in the Collection Account
that were not required to be deposited therein;
(E) to pay itself the Master Servicing Fee (net of any
Compensating Interest) and any additional servicing compensation set
forth in Section 5 hereof to the extent not otherwise retained or
paid;
(F) to pay to AmREIT with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or
replaced pursuant to Section 2(a) or 2(c) or to pay to the Issuer
with respect to each Mortgage Loan or property acquired in respect
thereof that has been released from the Lien of the Indenture
following a redemption pursuant to Section 10.01 of the Indenture
all amounts received thereon and not required to be distributed to
the Collection Account;
(G) to pay to AmREIT any Monthly Payments due before the
Cut-off Date;
(H) to make deposits to the Note Payment Account in the amounts
and in the manner provided for in Section 3(g)(iv);
(I) to pay itself any interest earned on or investment income
earned with respect to funds in the Collection Account;
(J) to reimburse itself for expenses, costs and liabilities
pursuant to Section 6(e);
(K) to pay prepayment penalties collected on the Mortgage Loans
to the Issuer as provided in Section 3(a);
(L) to pay premiums due on Insurance Policies as provided in
Section 3(a); and
(M) to clear and terminate the Collection Account upon the
termination of this Agreement.
The Master Servicer shall keep and maintain separate accounting, on
a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account pursuant to such subclauses (A)
through (M). Prior to making any withdrawal from the Collection Account
pursuant to subclause (B), the Master Servicer shall deliver to the
Trustee an Officer's Certificate of a Servicing Officer indicating the
amount of any previous Monthly Advance, or Servicing Advance determined
by the Master Servicer to be a Nonrecoverable Advance and identifying the
related Mortgage Loan(s).
(iv) On each Remittance Date, after payment of any amounts described
in Section 3(g)(iii) of this Agreement, the Master Servicer will withdraw
from the Collection Account and remit to the Trustee for deposit into the
Note Payment Account the Remittance Amount in respect of the related
Payment Date.
(h) Master Servicer Monthly Data.
Not later than each Remittance Date, the Master Servicer shall prepare
and forward to the Trustee and FSA a statement (each, a "Remittance Date
Statement"), in such electronic format and in such hardcopy format as the
Master Servicer, the Trustee and FSA shall agree, setting forth with respect
to the related distribution:
(i) the aggregate Remittance Amount in respect of the related
Payment Date, setting forth separately the amounts of the principal and
interest components thereof;
(ii) the amount of the Master Servicing Fees paid to or retained by
the Master Servicer with respect to such Payment Date;
(iii) the Pool Principal Balance for the following Payment Date;
(iv) the amount of Monthly Advances included in the distribution on
such Payment Date;
(v) the number and aggregate principal amounts of Mortgage Loans (A)
Delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 to 59 days
(2) 60 to 89 days and (3) 90 or more days, (B) in foreclosure and
Delinquent (1) 1 to 29 days (2) 30 to 59 days, (3) 60 to 89 days and (4)
90 or more days, as of the close of business on the last day of the
calendar month preceding such Payment Date and (C) for which the related
Mortgagor was in a bankruptcy proceeding or paying a reduced Monthly
Payment as a result of a bankruptcy work-out;
(vi) the aggregate dollar amount of the Monthly Payments (A) due on
all Outstanding Mortgage Loans on each of the Due Dates in the related
Collection Period and (B) Delinquent 90 days or more on each of the Due
Dates in the related Collection Period;
(vii) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number and Stated Principal
Balance of such Mortgage Loan as of the close of business on the last day
of the calendar month preceding such Payment Date and the date of
acquisition thereof;
(viii) the total number and principal balance of any REO Properties
(and market value, if available) as of the close of business on the last
day of the calendar month preceding such Payment Date;
(ix) the aggregate outstanding principal balance of the three
largest outstanding Mortgage Loans;
(x) the Weighted Average Net Mortgage Rate on the Mortgage Loans as
of the first day of the month prior to the Remittance Date; and
(xi) the aggregate amount of Realized Losses incurred during the
preceding calendar month.
(i) Payment of Taxes, Insurance and Other Charges.
With respect to each Mortgage Loan, the Master Servicer shall maintain
accurate records reflecting casualty insurance coverage.
With respect to each Mortgage Loan as to which the Master Servicer
maintains escrow accounts, the Master Servicer shall maintain accurate records
reflecting the status of ground rents, taxes, assessments, water rates and
other charges which are or may become a lien upon the Mortgaged Property and
the status of primary mortgage guaranty insurance premiums, if any, and
casualty insurance coverage and shall obtain, from time to time, all bills for
the payment of such charges (including renewal premiums) and shall effect
payment thereof prior to the applicable penalty or termination date and at a
time appropriate for securing maximum discounts allowable, employing for such
purpose deposits of the Mortgagor in any escrow account which shall have been
estimated and accumulated by the Master Servicer in amounts sufficient for
such purposes, as allowed under the terms of the Mortgage. To the extent that
a Mortgage does not provide for escrow payments, the Master Servicer shall, if
it has received notice of a default or deficiency, monitor such payments to
determine if they are made by the Mortgagor. The Master Servicer, through the
use of a tax tracking vendor, shall monitor the payment of taxes for Mortgages
without escrow payments. In the event Mortgagors fail to pay their real
property taxes, the Master Servicer shall make a Servicing Advance, but only
to the extent it deems such Servicing Advance recoverable.
(j) Maintenance of Casualty Insurance.
The Master Servicer shall cause to be maintained for each Mortgage Loan a
casualty insurance policy with extended coverage issued by a generally
acceptable insurer in an amount which is not less than the full insurable
value of the Mortgaged Property securing such Mortgage Loan or the unpaid
principal balance of such Mortgage Loan, whichever is less; provided, however,
that such insurance may not be less than the minimum amount required to fully
compensate for any loss or damage on a replacement cost basis. If, upon
origination of the Mortgage Loan, the improvements on the Mortgaged Property
were in an area identified in the Federal Register by the Federal Emergency
Management Agency as having special flood hazards (and such flood insurance
has been made available) the Master Servicer will cause to be maintained a
flood insurance policy meeting the requirements of the current guidelines of
the Federal Insurance Administration with a generally acceptable insurance
carrier, in an amount representing coverage not less than the lesser of (i)
the unpaid principal balance of the Mortgage Loan and (ii) the maximum amount
of insurance which was available under the Flood Disaster Protection Act of
1973. The Master Servicer shall also maintain similar fire insurance coverage
and, if applicable, flood insurance on property acquired upon foreclosure, or
by deed in lieu of foreclosure, of any Mortgage Loan in an amount which is at
least equal to the lesser of (i) the full insurable value of the improvements
which are a part of such property and (ii) the principal balance owing on such
Mortgage Loan at the time of such foreclosure or grant of deed in lieu of
foreclosure; provided, however, that such insurance may not be less than the
minimum amount required to fully compensate for any loss or damage on a
replacement cost basis. It is understood and agreed that such insurance shall
be with insurers approved by the Master Servicer and that no earthquake or
other additional insurance is to be required of any Mortgagor, other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. Pursuant to Section
3(g), any amounts collected by the Master Servicer under any insurance
policies maintained pursuant to this Section 3(j) (other than amounts to be
applied to the restoration or repair of the related Mortgaged Property or
released to the Mortgagor in accordance with Accepted Servicing Practices)
shall be deposited into the Collection Account, subject to withdrawal pursuant
to Section 3(g). Any cost incurred by the Master Servicer in maintaining any
such insurance shall be added to the amount owing under the Mortgage Loan
where the terms of the Mortgage Loan so permit; provided, however, that the
addition of any such cost shall not be taken into account for purposes of
calculating the principal amount of the Mortgage Note or Mortgage Loan, the
Monthly Payments on the Mortgage Note or the distributions to be made to the
Noteholders. Such costs shall be recoverable by the Master Servicer pursuant
to Section 3(g). In the event that the Master Servicer shall obtain and
maintain a blanket policy issued by an insurer that is acceptable under
Accepted Servicing Practices, insuring against hazard losses on all of the
Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligation as set forth in this Section 3(j), 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 or acquired property an insurance policy complying with the
first sentence of this Section 3(j) and there shall have been a loss which
would have been covered by such a policy had it been maintained, be required
to deposit from its own funds into the Collection Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
(k) Reserved.
(l) Fidelity Bond; Errors and Omissions Policy.
(i) The Master Servicer shall maintain with a responsible company,
and at its own expense, a blanket fidelity bond (a "Fidelity Bond") and
an errors and omissions insurance policy (an "Errors and Omissions
Policy"), in an amount generally maintained by prudent mortgage loan
servicers having servicing portfolios of a similar size.
(ii) The Master Servicer shall be deemed to have complied with this
provision if one of its respective Affiliates has such a Fidelity Bond
and Errors and Omissions Policy and, by the terms of such fidelity bond
and errors and omission policy, the coverage afforded thereunder extends
to the Master Servicer. The Master Servicer shall cause each and every
Subservicer for it to maintain a policy of insurance covering errors and
omissions and a fidelity bond which would meet the requirements of this
Section 3(l).
(m) Collection of Taxes, Assessments and Other Items; Servicing
Account.
In addition to the Collection Account, the Master Servicer shall
establish and maintain a Servicing Account with respect to those Mortgage
Loans that have an escrow feature, which shall be an Eligible Account, and
shall deposit therein all payments by Mortgagors for taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items. Withdrawals
from the Servicing Account may be made to effect payment of taxes,
assessments, primary mortgage or hazard insurance premiums or comparable
items, to reimburse the Master Servicer out of related collections for any
advances made in the nature of any of the foregoing, to refund to any
Mortgagors any sums determined to be overages, or to pay any interest owed to
Mortgagors on such account to the extent required by law or to clear and
terminate the Servicing Account at the termination of this Agreement. The
Master Servicer shall advance the payments referred to in the first sentence
of this Section 3(m) that are not timely paid by the Mortgagors on the date
when the tax, premium or other cost for which such payment is intended is due,
but the Master Servicer shall be required to so advance only to the extent
that such advances, in the good faith judgment of the Master Servicer, will be
recoverable by the Master Servicer pursuant to Section 3(g) out of Liquidation
Proceeds, Insurance Proceeds or otherwise.
(n) Periodic Filings with the Securities and Exchange Commission;
Additional Information.
The Master Servicer agrees to promptly furnish to the Issuer, from time
to time upon request, such information, reports and financial statements
within its control related to this Agreement and the Mortgage Loans as the
Issuer reasonably deems appropriate to prepare and file all necessary reports
with the Commission.
(o) Enforcement of Due-on-Sale Clauses; Assumption Agreements.
In any case in which a Mortgaged Property is about to be conveyed by the
Mortgagor (whether by absolute conveyance or by contract of sale, and whether
or not the Mortgagor remains liable thereon) and the Master Servicer has
knowledge of such prospective conveyance, the Master Servicer shall effect
assumptions in accordance with the terms of any due-on-sale provision
contained in the related Mortgage Note or Mortgage. The Master Servicer shall
enforce any due-on-sale provision contained in such Mortgage Note or Mortgage
to the extent the requirements thereunder for an assumption of the Mortgage
Loan have not been satisfied to the extent permitted under the terms of the
related Mortgage Note, unless such provision is not exercisable under
applicable law and governmental regulations or in the Master Servicer's
judgment, such exercise is reasonably likely to result in legal action by the
Mortgagor, or such conveyance is in connection with a permitted assumption of
the related Mortgage Loan. Subject to the foregoing, the Master Servicer is
authorized to take or enter into an assumption agreement from or with the
Person to whom such property is about to be conveyed, pursuant to which such
person becomes liable under the related Mortgage Note and, unless prohibited
by applicable state law, the Mortgagor remains liable thereon, provided that
the Mortgage Rate with respect to such Mortgage Loan shall remain unchanged.
The Master Servicer is also authorized, to release the original Mortgagor from
liability upon the Mortgage Loan and substitute the new Mortgagor as obligor
thereon. In connection with such assumption or substitution, the Master
Servicer shall apply such underwriting standards and follow such practices and
procedures as shall be normal and usual for mortgage loans similar to the
Mortgage Loans and as it applies to mortgage loans owned solely by it. The
Master Servicer shall notify the Trustee that any such assumption or
substitution agreement has been completed by forwarding to the Trustee a copy
of such assumption or substitution agreement, and the Master Servicer shall
deliver the original thereof to the Custodian to be added to the related
Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. In connection with any such assumption or
substitution agreement, the Mortgage Rate of the related Mortgage Note and the
payment terms shall not be changed. Any fee collected by the Master Servicer
for entering into an assumption or substitution of liability agreement will be
retained by the Master Servicer as servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any conveyance
by the Mortgagor of the property subject to the Mortgage or any assumption of
a Mortgage Loan by operation of law which the Master Servicer in good faith
determines it may be restricted by law from preventing, for any reason
whatsoever, or if the exercise of such right would impair or threaten to
impair any recovery under any applicable insurance policy or, in the Master
Servicer's judgment, be reasonably likely to result in legal action by the
Mortgagor.
(p) Realization Upon Defaulted Mortgage Loans.
Except as provided in the last two paragraphs of this Section 3(p), the
Master Servicer shall foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made
for collection of Delinquent payments. In connection with such foreclosure or
other conversion, the Master Servicer shall follow Accepted Servicing
Practices. Without limiting the foregoing, the Master Servicer agrees to
provide any required notices to any Mortgage Insurer, to file claims and other
required reports and to take any other actions as may be necessary to obtain
payments under any Insurance Policy covering a defaulted Mortgage Loan. 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 to
restore any damaged property unless it shall determine that such expenses will
be recoverable to it through Liquidation Proceeds (respecting which it shall
have priority for purposes of withdrawal from the Collection Account pursuant
to Section 3(g) or otherwise). The Master Servicer shall be entitled to
reimbursement of the Master Servicing Fee and other amounts due it, if any, to
the extent, but only to the extent, that withdrawals from the Collection
Account with respect thereto are permitted under Section 3(g).
The Master Servicer may foreclose against the Mortgaged Property securing
a defaulted Mortgage Loan either by foreclosure, by sale or by strict
foreclosure, and in the event a deficiency judgment is available against the
Mortgagor or any other person, may proceed for the deficiency.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or
certificate of sale shall be issued to the Master Servicer on behalf of the
Trustee in the name of the Trustee, as trustee on behalf of the Noteholders.
Notwithstanding any such acquisition of title and cancellation of the related
Mortgage Loan, such Mortgage Loan shall be considered to be a Mortgage Loan
held in the Trust Estate until such time as the related Mortgaged Property
shall be sold and such Mortgage Loan becomes a Liquidated Mortgage Loan.
Consistent with the foregoing, for purposes of all calculations hereunder, so
long as such Mortgage Loan shall be considered to be an Outstanding Mortgage
Loan:
(i) It shall be assumed that, notwithstanding that the indebtedness
evidenced by the related Mortgage Note shall have been discharged, such
Mortgage Note and the related amortization schedule in effect at the time
of any such acquisition of title (after giving effect to any previous
Curtailments and before any adjustment thereto by reason of any
bankruptcy or similar proceeding or any moratorium or similar waiver or
grace period) remain in effect, except that such schedule shall be
adjusted to reflect the application of Net REO Proceeds received in any
month pursuant to the succeeding clause.
(ii) Net REO Proceeds received in any month shall be deemed to have
been received first in payment of the accrued interest that remained
unpaid on the date that such Mortgage Loan became an REO Mortgage Loan,
with the excess thereof, if any, being deemed to have been received in
respect of the Delinquent principal installments that remained unpaid on
such date. Thereafter, Net REO Proceeds received in any month shall be
applied to the payment of installments of principal and accrued interest
on such Mortgage Loan deemed to be due and payable in accordance with the
terms of such Mortgage Note and such amortization schedule and any excess
shall be treated as a Curtailment received in respect of such Mortgage
Loan.
(iii) Only that portion of Net REO Proceeds allocable to interest
that bears the same relationship to the total amount of Net REO Proceeds
allocable to interest as the rate of the Master Servicing Fee bears to
the Mortgage Interest Rate borne by such Mortgage Loan shall be allocated
to the Master Servicing Fee with respect thereto.
In lieu of foreclosing upon any defaulted Mortgage Loan, the Master
Servicer may, in its discretion, permit the assumption of such Mortgage Loan
in accordance with Accepted Servicing Practices. In connection with any such
assumption, the Mortgage Rate of the related Mortgage Note and the payment
terms shall not be changed. Any fee collected by the Master Servicer for
entering into an assumption agreement will be retained by the Master Servicer
as servicing compensation. Alternatively, the Master Servicer may encourage
the refinancing of any defaulted Mortgage Loan by the Mortgagor.
Notwithstanding the foregoing, to the extent the Master Servicer has
actual knowledge of environmental hazards, prior to taking title to any
Mortgaged Property, the Master Servicer shall make, or cause to be made,
inspection of the Mortgaged Property in accordance with the Accepted Servicing
Practices. The Master Servicer shall be entitled to rely upon the results of
any such inspection made by others. In cases where the inspection reveals that
such Mortgaged Property is potentially contaminated with or affected by
hazardous wastes or hazardous substances, the Master Servicer shall promptly
give written notice of such fact to FSA and the Trustee. The Master Servicer
shall not take title to any Mortgaged Property with respect to this paragraph
without obtaining the written consent of FSA and, if taken in the name of the
Trustee, the written consent of the Trustee.
(q) Trustee to Cooperate; Release of Mortgage Files.
Upon the payment in full of any Mortgage Loan, or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, or for any other servicing procedure to be
performed in connection with a Mortgage Loan, the Master Servicer will
immediately notify the Trustee and deliver, or cause to be delivered, to the
Custodian, a Request for Release, in accordance with the Custodial Agreement.
Upon receipt of such request, the Custodian will release the related Trustee
Mortgage File to the Master Servicer in accordance with the terms of the
Custodial Agreement. Subject to the further limitations set forth below, the
Master Servicer shall cause the Trustee Mortgage File or documents so released
to be returned to the Custodian when the need therefor by the Master Servicer
no longer exists, unless the Mortgage Loan is liquidated and the proceeds
thereof are deposited in the Collection Account, in which case the Master
Servicer shall deliver to the Custodian a supplemental Request for Release
reflecting such liquidation, signed by a Servicing Officer of the Master
Servicer.
If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by the Servicing
Provisions, the Master Servicer shall deliver or cause to be delivered to the
Trustee, for signature, as appropriate, any court pleadings, requests for
trustee's sale or other documents necessary to effectuate such foreclosure or
any legal action brought to obtain judgment against the Mortgagor on the
Mortgage Note or the Mortgage or to obtain a deficiency judgment or to enforce
any other remedies or rights provided by the Mortgage Note or the Mortgage or
otherwise available at law or in equity.
(r) Reports by the Master Servicer; Collection Account Statement.
Not later than 45 days after each Payment Date, the Master Servicer shall
provide to the Issuer, the Trustee and FSA a statement, certified by a
Servicing Officer, setting forth the status of the Collection Account as of
the close of business on the last day of the immediately preceding calendar
month, stating that all distributions required by this Agreement to be made by
the Master Servicer have been made (or if any required distribution has not
been made by the Master Servicer, specifying the nature and status thereof)
and showing, for the period covered by such statement, the aggregate of
deposits into and withdrawals from the Collection Account for each category of
deposit specified in 3(g) and each category of withdrawal specified in Section
3(g) and the amount transferred to the Collection Account. Such statement
shall also state the aggregate unpaid principal balance of all the Mortgage
Loans as of the close of business on the last day of the month preceding the
month in which such Payment Date occurs.
(s) Annual Statement as to Compliance.
The Master Servicer will deliver to the Issuer, the Trustee and FSA on or
before April 30th of each year, beginning with April 30, 2000, an Officers'
Certificate stating as to each signer thereof, that (i) a review of the
activities of the Master Servicer during the preceding calendar year and of
its performance under this Agreement has been made under such officer's
supervision, and (ii) to the best of such officer's knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Such Officers' Certificate shall be
accompanied by the statement described in Section 3(t) of this Agreement.
(t) Annual Independent Public Accountants' Servicing Report.
On or before April 30th of every year, beginning with April 30, 2000, the
Master Servicer, at its expense, shall cause a firm of nationally recognized
independent public accountants to furnish a statement to the Master Servicer
to the effect that, on the basis of an examination of certain documents and
records relating to the servicing of the mortgage loans being serviced by the
Master Servicer under servicing agreements similar to this Agreement,
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or Statement of Auditing Standards No. 70, such
firm is of the opinion that such servicing has been conducted in compliance
with this Agreement.
(u) Liquidation Report.
With respect to the liquidation of a Mortgage Loan or disposition of an
REO Property, upon the determination by the Master Servicer that all
Liquidation Proceeds which it expects to recover with respect to such Mortgage
Loan or REO Property have been recovered, the Master Servicer shall promptly
deliver to the Issuer and FSA a related Liquidation Report with respect to
such Mortgage Loan.
(v) Adjustment of Servicing Compensation in Respect of Prepaid
Mortgage Loans.
Not later than the close of business on the Remittance Date prior to each
Payment Date, the Master Servicer shall remit to the Trustee (without right or
reimbursement therefor) for deposit into the Note Payment Account an amount
equal to the lesser of (a) the aggregate of the Prepayment Interest Shortfalls
for the related Payment Date resulting from Principal Prepayments in Full or
Curtailments during the related Collection Period and (b) its aggregate Master
Servicing Fees payable with respect to the related Due Period and shall not
have the right to reimbursement therefor (the "Compensating Interest"),
provided, however, that the Master Servicer shall not be required to pay
Compensating Interest due to application of the Relief Act.
(w) Maintenance of Corporate Existence and Licenses.
Except as provided in Section 6(b), the Master Servicer will keep in full
effect its existence, rights and franchises as a corporation, will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 2(c) to be true and correct at
all times under this Agreement.
(x) Optional Purchase of Defaulted Mortgage Loans.
Any Affiliate of AmREIT, in its sole discretion, shall have the right to
elect (by written notice sent to the Trustee and the Master Servicer), but
shall not be obligated, to purchase for its own account from the Trust Estate
(or, in the case of the Issuer, to remove from the Lien of the Indenture) any
Mortgage Loan which is 90 days or more Delinquent in the manner and at the
Purchase Price specified in Section 2(c)(iv) with respect to Deleted Mortgage
Loans and subject to the limitations of Section 8.05 of the Indenture;
provided, however, such repurchase rights (i) must first be exercised as to
those Mortgage Loans most Delinquent in payment at the time of repurchase and
(ii) may be exercised, in the aggregate (but excluding those Mortgage Loans
being removed to satisfy any Mortgage Insurer's right to purchase Delinquent
Mortgage Loans covered by an Insurance Policy), with respect to no more than
three percent (3.0%) of the Original Pool Principal Balance without FSA's
prior consent. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited in the Collection Account and the Custodian, upon notice of
receipt by the Master Servicer of such deposit, shall release to the purchaser
of such Mortgage Loan the related Trustee's Mortgage File. The Issuer and the
Trustee (or the Master Servicer as its agent) shall execute and deliver such
instruments of transfer or assignment prepared by the purchaser of such
Mortgage Loan, in each case without recourse, as shall be necessary to vest in
the purchaser such Mortgage Loan. The purchaser of such Mortgage Loan shall
succeed to all the Issuer's right, title and interest in and to such Mortgage
Loan and all security and documents related thereto. Such assignment shall be
an assignment outright and not for security. The purchaser of such Mortgage
Loan shall thereupon own such Mortgage Loan, and all security and documents,
free of any obligation to the Trustee or the Noteholders with respect thereto.
(y) No Solicitation.
The Master Servicer agrees not to use the Master Servicer's records to
specifically solicit or permit any affiliate to solicit any Mortgagor with
respect to the refinancing of a Mortgage Loan. The Master Servicer agrees that
it will not take, permit or cause any action to be taken, directly or
indirectly, to solicit any Mortgagor to refinance the related written consent
of the Issuer and FSA; provided, however, all promotions of any kind directed
to the general public derived from marketing lists of any nature shall not be
considered solicitation pursuant to this section and shall be permitted
provided such marketing list shall not have been generated from the Master
Servicer's servicing records. Furthermore, the Master Servicer shall not be
prohibited from responding to unsolicited requests or inquiries made by a
Mortgagor. The Master Servicer agrees not to refer a Mortgagor's inquiry to
the Master Servicer's affiliates; provided, however, that the Master Servicer
or its affiliates shall have no liability to the Issuer or FSA if the
Mortgagor proceeds directly to the Master Servicer's affiliates. It is
understood and agreed that all rights and benefits relating to the
solicitation of any Mortgagor and the attendant rights, title and interest in
and to the list of Mortgagors and data relating to their Mortgage Loans shall
be retained by the Issuer.
4. Monthly Advances.
If, on any Remittance Date, the Master Servicer determines that any
Monthly Payments due on the Due Date immediately preceding such Remittance
Date have not been received as of the close of business on the Business Day
preceding such Remittance Date, the Master Servicer shall make a Monthly
Advance with respect to such Delinquent Monthly Payments; provided, however,
that in no event shall the Master Servicer be required to make any Monthly
Advances that the Master Servicer determines would constitute a Nonrecoverable
Advance. The Master Servicer shall include in the amount to be deposited in
the Note Payment Account on such Remittance Date an amount equal to such
Monthly Advance, if any, which deposit may be made in whole or in part from
the Amount Held for Future Distribution. Any funds being held for future
distribution to the Note Payment Account and so used shall be replaced by the
Master Servicer from its own funds by deposit in the Collection Account on or
before the Business Day preceding any such future Remittance Date to the
extent that funds in the Collection Account on such Remittance Date shall be
less than payments to the Note Payment Account required to be made on such
date.
The Master Servicer shall designate on its records the specific Mortgage
Loans and related installments (or portions thereof) as to which such Monthly
Advance shall be deemed to have been made, such determination being conclusive
for purposes of withdrawals from the Collection Account pursuant to Section
3(g). The Master Servicer shall deliver to the Issuer, the Trustee and FSA on
the related Remittance Date an Officer's Certificate of a Servicing Officer
indicating the amount of any proposed Monthly Advance determined by the Master
Servicer to be a Nonrecoverable Advance.
In the event that the Master Servicer fails to make a Monthly Advance
required to be made by it hereunder and such failure is not cured within the
cure period provided in Section 7(a)(i) (a "Defaulted Monthly Advance"), then
the Trustee shall make such Defaulted Monthly Advance on the related Payment
Date (by depositing an amount equal to the Defaulted Monthly Advance in the
Note Payment Account); provided, however, that the Trustee shall not be
obligated to make the Defaulted Monthly Advance if it determines that such
advance would constitute a Nonrecoverable Advance; and provided, further, that
the Trustee shall have no obligation to make any subsequent Monthly Advances
under this provision with respect to such Master Servicing Default unless the
Trustee shall have assumed all of the obligations of the Master Servicer in
accordance with the provisions of Section 7(b) (in lieu of FSA directing that
a different successor Master Servicer be appointed). Notwithstanding the
foregoing, if the Master Servicer is not terminated pursuant to Section 7(a)
as a result of such Master Servicing Default, and if thereafter the Master
Servicer fails to make a Monthly Advance required to be made under this
Section 4, then the Trustee shall have no obligation to make any Monthly
Advance under this Section 4.
5. Master Servicing Compensation and Expenses.
The Master Servicer shall be entitled, at its election, either (a) to pay
itself the Master Servicing Fee out of any Mortgagor payment on account of
interest or Net REO Proceeds prior to the deposit of such payment in the
Collection Account or (b) to withdraw from the Collection Account such Master
Servicing Fee pursuant to Section 3(g). The Master Servicer shall also be
entitled, at its election, either (a) to pay itself the Master Servicing Fee
in respect of each Delinquent Mortgage Loan out of Liquidation Proceeds in
respect of such Mortgage Loan or other recoveries with respect thereto to the
extent permitted in Section 3(g) or (b) to withdraw from the Collection
Account the Master Servicing Fee in respect of each such Mortgage Loan to the
extent of such Liquidation Proceeds or other recoveries, to the extent
permitted by Section 3(g).
Servicing compensation in the form of assumption fees, late payment
charges, tax service fees, fees for statement of account or payoff of the
Mortgage Loan (to the extent permitted by applicable law) or otherwise shall
be retained by the Master Servicer and are not required to be deposited in the
Collection Account; provided, however, that all prepayment penalties shall be
remitted to the Collection Account. The aggregate Master Servicing Fee is
reserved for the administration of the Trust Estate and, in the event of
replacement of the Master Servicer as servicer of the Mortgage Loans, for the
payment of other expenses related to such replacement. The aggregate Master
Servicing Fee shall be offset as provided in Section 3(v). The Master Servicer
shall be required to pay all expenses incurred by it in connection with its
servicing activities hereunder (including maintenance of the casualty
insurance required by Section 3(j)) and shall not be entitled to reimbursement
therefor except as specifically provided herein.
6. Master Servicer.
(a) Liabilities 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 it
herein.
(b) Merger or Consolidation of the Master Servicer.
Any Person into which the Master Servicer may be merged or consolidated,
or any Person resulting from any merger, conversion, other change in form or
consolidation to which the Master Servicer shall be a party, or any Person
succeeding to the business of the Master Servicer, shall be the successor to
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; provided, however, that the successor or
resulting Person to the Master Servicer shall be a Person that shall be
qualified to act as Master Servicer hereunder and shall have a net worth of
not less than $15,000,000 and FSA shall have consented in writing to its
assumptions of such master servicing obligations.
(c) Resignation of Master Servicer; Termination Without Cause.
Except as otherwise provided in subsections (b) and (d) hereof, the
Master Servicer shall not resign from the obligations and duties hereby
imposed on it except (i) upon appointment of a successor Master Servicer
acceptable to FSA (after consultation with the Trustee) and receipt by the
Trustee of a letter from each Rating Agency that such a resignation and
appointment will not result in a downgrading of the rating of any of the Notes
(without regard to the FSA Policy) and with the prior written consent of FSA,
or (ii) upon determination that its duties hereunder are no longer permissible
under applicable law. Any such determination under clause (ii) permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
(at the expense of the Master Servicer) to such effect delivered to the
Trustee, the Issuer and FSA, which Opinion of Counsel shall be reasonably
acceptable to the Trustee, the Issuer and FSA. No such resignation shall
become effective until the Trustee shall have assumed, or a successor Master
Servicer shall have been appointed by the Trustee as directed by FSA (after
consultation with the Trustee) and until such successor shall have assumed,
the Master Servicer's responsibilities and obligations under this Agreement.
Notice of such resignation shall be given promptly by the Master Servicer to
the Trustee, FSA and the Issuer.
With the prior written consent of the Trustee and FSA, the Issuer may
terminate the Master Servicer from its rights, duties and obligations hereby
imposed upon it by delivering written notice of termination to the Master
Servicer, with copies to the Trustee and FSA, no less than sixty (60) days
prior to the effective date of termination provided, however, that no such
termination shall become effective until a successor Master Servicer
designated by AmREIT and acceptable to the Trustee and FSA shall have assumed
the Master Servicer's responsibilities and obligations under this Agreement
and the Trustee shall have received a letter from each Rating Agency that such
termination and assumption will not result in a downgrading of the rating of
any of the Notes. Upon the effective date of termination, the Master Servicer
shall be paid a termination fee of $35.00 per Mortgage Loan being serviced
hereunder at the time, which amount shall be payable by AmREIT and shall in no
case be an obligation of any other Person.
(d) Assignment or Delegation of Duties by the Master Servicer.
Except as expressly provided herein, the Master Servicer shall not assign
or transfer any of its rights, benefits or privileges hereunder to any other
Person, or delegate to or subcontract with, or authorize or appoint any other
Person to perform any of the duties, covenants or obligations to be performed
by the Master Servicer hereunder; provided, however, that the Master Servicer
shall have the right without the prior written consent of the Trustee, the
Issuer or the Rating Agencies but with the prior written consent of FSA to
delegate or assign to or subcontract with or authorize or appoint an Affiliate
of the Master Servicer to perform and carry out any duties, covenants or
obligations to be performed and carried out by the Master Servicer hereunder.
In no case, however, shall any such delegation, subcontracting or assignment
to an Affiliate of the Master Servicer relieve the Master Servicer of any
liability hereunder. Notice of such permitted assignment shall be given
promptly by the Master Servicer to the Issuer and the Trustee. If, pursuant to
any provision hereof, the duties of the Master Servicer are transferred to a
successor Master Servicer, the entire amount of the Master Servicing Fees and
other compensation payable to the Master Servicer pursuant hereto, including
amounts payable to or permitted to be retained or withdrawn by the Master
Servicer pursuant to provision hereof, shall thereafter be payable to such
successor Master Servicer.
(e) Limitation on Liability of the Master Servicer and Others.
Neither the Master Servicer nor any of the directors, officers, employees
or agents of the Master Servicer shall be under any liability to the Trustee
or the Noteholders for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the Master
Servicer or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in its
performance of its duties or by reason of reckless disregard for its
obligations and duties under this Agreement. The Master Servicer and any
director, officer, 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 Issuer (as
provided in Section 8.02(d) of the Indenture) and AmREIT hereby jointly and
severally agree to indemnify and hold harmless the Master Servicer each of its
directors, officers, employees and agents, and its and their respective
successors and assigns, as applicable, from and against any and all losses,
liabilities, claims, charges, damages, fines, penalties, judgments, actions,
suits, costs and expenses of any kind or nature whatsoever (including
reasonable attorneys' fees and expenses and reasonable fees and expenses of
experts) imposed on, incurred by, or asserted against the Master Servicer or
any of its directors, officers, employees, agents, or any of their respective
successors or assigns, in any way related to or arising out of this Agreement
other than any such loss, liability or claim resulting solely from the Master
Servicer's willful misfeasance, bad faith or negligence in the performance of
its duties hereunder. This indemnification will survive the termination of the
Master Servicer or this Agreement. The Master Servicer shall be under no
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties to master service the Mortgage Loans in accordance
with this Agreement and that in its opinion may involve it in any expenses or
liability; provided, however, that the Master Servicer may in its sole
discretion undertake any such action that it may deem necessary or desirable
in respect to this Agreement and the rights and duties of the parties hereto
and the interests of the Noteholders hereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall
be expenses, costs and liabilities of the Issuer and the Master Servicer shall
be entitled to be reimbursed therefor out of the Collection Account as
provided by Section 3(g).
7. Master Servicing Default; Termination and Liabilities.
(a) Master Servicing Default.
Any of the following acts or occurrences shall constitute a Master
Servicing Default by the Master Servicer under this Agreement:
(i) any failure by the Master Servicer to remit any payment, other
than a Servicing Advance, required to be made by the Master Servicer
under the terms of this Agreement which continues unremedied for three
Business Days after the date upon which such payment was required to be
made or which causes a claim to be made on the FSA Policy;
(ii) the failure by the Master Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Master Servicer by
the Issuer, the Trustee or FSA;
(iii) any failure on the part of the Master Servicer duly to observe
or perform in any material respect any other of the covenants or
agreements on the part of the Master Servicer contained in this
Agreement, or the failure of any representation and warranty made
pursuant to Section 2(c) to be true and correct, which continues
unremedied for a period of 30 days (or 15 days in the case of a failure
to pay the premium for any insurance policy which is required to be
maintained under this Agreement) after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given
to the Master Servicer by the Trustee, at the direction of FSA, or by FSA
or, with the consent of FSA, the Noteholders holding Voting Interests
aggregating not less than 51%;
(iv) a decree or order of a court or agency or supervisory authority
having jurisdiction in an involuntary case under any present or future
federal or state bankruptcy, insolvency or similar law or for the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Master Servicer and such decree or order
shall have remained in force, undischarged or unstayed for a period of 60
days;
(v) the Master Servicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to all or substantially
all of the Master Servicer's property;
(vi) the Master Servicer shall admit in writing its inability to pay
its debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend payment of its
obligations;
(vii) on any Payment Date the Rolling Delinquency Percentage exceeds
15%;
(viii) if on any Payment Date the Annual Loss Percentage exceeds
1.65%; or
(ix) if (a) on any Payment Date occurring before May 1, 2000, the
aggregate Realized Losses since the Cut-off Date exceed 1.40% of the
Original Pool Principal Balance, (b) on any Payment Date on or after May
1, 2000 and before May 1, 2001, the aggregate Realized Losses since the
Cut-off Date exceed 2.25% of the Original Pool Principal Balance, (c) on
any Payment Date on or after May 1, 2001 and before May 1, 2002, the
aggregate Realized Losses since the Cut-off Date exceed 2.60% of the
Original Pool Principal Balance, (d) on any Payment Date on or after May
1, 2002 and before May 1, 2003, the aggregate Realized Losses since the
Cut-off Date exceed 3.20% of the Original Pool Principal Balance, (e) on
any Payment Date on or after May 1, 2003 and before May 1, 2004, the
aggregate Realized Losses since the Cut-off Date exceed 3.75% of the
Original Pool Principal Balance or (f) on any Payment Date on or after
May 1, 2004, the aggregate Realized Losses since the Cut-off Date exceed
5.00% of the Original Pool Principal Balance.
If a Master Servicing Default shall occur, then, and in each and every
such case, so long as such Master Servicing Default shall not have been
remedied the Trustee may with the prior written consent of FSA, and shall at
the direction of FSA or the Holders of Notes aggregating not less than 51% of
all Voting Interests with the prior written consent of FSA, by notice in
writing to the Master Servicer (with a copy to each Rating Agency and FSA),
and in addition to any other rights the Trustee may have on behalf of the
Noteholders or FSA as a result of such Master Servicing Default, terminate all
of the rights and obligations of the Master Servicer thereafter arising under
this Agreement and in and to the Mortgage Loans and the proceeds thereof,
other than its rights as a Noteholder under the Indenture and its obligations
which are not assumed by the Trustee pursuant to Section 3(f). On and after
the receipt by the Master Servicer of such written notice, all authority and
power of the Master Servicer as such hereunder, whether with respect to the
Mortgage Loans or otherwise, unless an alternative successor Master Servicer
shall have been appointed by FSA (after consultation with the Trustee), shall
pass to and be vested in the Trustee. The 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 or assignment of the Mortgage Loans and related
documents, or otherwise.
The Master Servicer agrees to cooperate with the Trustee in effecting the
termination of the Master Servicer's responsibilities and rights as such
hereunder, including, without limitation, the transfer to the Trustee or other
successor Master Servicer of all cash amounts which shall at the time be
credited to the Collection Account or thereafter be received by the Master
Servicer as such with respect to the Mortgage Loans. The Master Servicer shall
promptly provide the Trustee or other successor Master Servicer, as
applicable, at the Master Servicer's cost and expense, all documents and
records reasonably requested by it to enable it to assume the Master
Servicer's functions hereunder. Any collections received by the Master
Servicer after such removal shall be appropriately endorsed by it and remitted
directly to the Trustee or, at the direction of the Trustee, to the successor
Master Servicer. Neither the Trustee nor any other successor Master Servicer
shall be held liable by reason of any failure to make, or any delay in making,
any distribution hereunder or any portion thereof caused by (i) the failure of
the Master Servicer to deliver, or any delay in delivering, cash, documents or
records to it, or (ii) restrictions imposed by any regulatory authority having
jurisdiction over the Master Servicer hereunder.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive any amounts
payable to such Master Servicer hereunder the entitlement to which arose prior
to the termination of its activities hereunder.
The Trustee shall not be required to take notice or be deemed to have
notice or knowledge of any default or Master Servicing Default unless a
Responsible Officer of the Trustee's corporate trust department shall have
actual knowledge thereof or shall have received a notice of default from FSA
or the Master Servicer. In the absence of such notice, the Trustee may
conclusively assume there is no such default or Master Servicing Default.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of,
any of the obligations of the Master Servicer under this Agreement, except
during such time, if any, as the Trustee shall be the successor to, and be
vested with the rights, duties, powers and privileges of, the Master Servicer
in accordance with the terms of this Agreement or except as provided in
Section 4 hereof.
(b) Trustee to Act; Appointment of Successor.
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7(a) or FSA fails to deliver the Extension
Notice contemplated in Section 7(e), the Trustee shall, subject to and to the
extent provided in Section 3(f), unless an alternative Master Servicer
designated by FSA (after consultation with the Trustee) has been appointed, be
the successor to the Master Servicer in its capacity as master servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Master Servicer by the terms and provisions hereof and
applicable law including the obligation to make Monthly Advances pursuant to
Section 4; provided, however, that it is understood and acknowledged by the
parties that there will be a period of transition (not to exceed sixty (60)
days) before the servicing transfer is fully effected. As compensation
therefor, the Trustee or other successor Master Servicer shall be entitled to
all funds relating to the Mortgage Loans that the Master Servicer would have
been entitled to hereunder if the Master Servicer had continued to act
hereunder and any additional amounts agreed to by FSA. Notwithstanding the
foregoing, if the Trustee has become the successor to the Master Servicer in
accordance with Section 7(a), the Trustee may, if it shall be unwilling to so
act, or shall, if it is prohibited by applicable law from making Monthly
Advances pursuant to Section 4 or if it is otherwise unable to so act,
appoint, or petition a court of competent jurisdiction to appoint, any
established mortgage loan servicing institution acceptable to FSA the
appointment of which does not adversely affect the then current rating of the
Notes (without regard to the FSA Policy) by each Rating Agency 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. Any successor to the Master Servicer shall be an institution which
is a FNMA and FHLMC approved seller/servicer in good standing, which has a net
worth of at least $15,000,000, which is willing to master service the Mortgage
Loans and which executes and delivers to the Issuer and the Trustee an
agreement accepting such delegation and assignment, containing an assumption
by such Person of the rights, powers, duties, responsibilities, obligations
and liabilities of the Master Servicer (other than liabilities of the Master
Servicer under Section 6(e) incurred prior to termination of the Master
Servicer under Section 7(a)), with like effect as if originally named as a
party to this Agreement; provided that each Rating Agency acknowledges that
its rating of the Notes (without regard to the existence of the FSA Policy) in
effect immediately prior to such assignment and delegation will not be
qualified or reduced as a result of such assignment and delegation. Pending
appointment of a successor to the Master Servicer hereunder, the Trustee,
unless the Trustee is prohibited by law from so acting, shall, subject to
Section 3(f), act in such capacity as hereinabove provided. In connection with
such appointment and assumption, FSA may make such arrangements for the
compensation of such successor out of earnings on the accounts as it and such
successor shall agree. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Neither the Trustee nor any other successor Master Servicer shall
be deemed to be in default hereunder by reason of any failure to make, or any
delay in making, any distribution hereunder or any portion thereof or any
failure to perform, or any delay in performing, any duties or responsibilities
hereunder, in either case caused by the failure of the preceding Master
Servicer to deliver or provide, or any delay in delivering or providing, any
cash, information, documents or records to it.
The Master Servicer shall pay the expenses of transferring the Trustee
Mortgage Files in connection with the transfer of servicing from the Master
Servicer to a successor Master Servicer (whether or not the Trustee is the
successor Master Servicer). Notwithstanding anything in this Agreement to the
contrary, the Trustee shall be entitled to be reimbursed by the Issuer (as
provided in Section 8.02(d) of the Indenture) and AmREIT for all other costs
and expenses incurred by the Trustee in connection with or associated with the
transfer of servicing from the Master Servicer to a successor Master Servicer
(whether or not the Trustee is the successor Master Servicer), including,
without limitation, any costs or expenses associated with the complete
transfer of all servicing data and the completion, correction and/or
manipulation of such servicing data as may be required to correct any errors
or insufficiencies in the servicing data provided by the Master Servicer or as
otherwise may be required to enable the successor Master Servicer (including
the Trustee) to service the Mortgage Loans properly and effectively in
accordance with the provisions of this Agreement.
Any successor to the Master Servicer as master servicer shall give notice
to the Subservicers of such change of master servicer and shall, during the
term of its service as master servicer, maintain in force the policy or
policies that the Master Servicer is required to maintain pursuant to Section
3(l).
(c) Waivers by FSA
FSA (so long as no Note Insurer Default has occurred and is continuing),
may waive any events permitting removal of the Master Servicer pursuant to
this Section 7. Upon any waiver of a past default, such default shall cease to
exist, and any Master Servicing Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto except to the extent expressly so waived.
(d) Notification to Noteholders.
(i) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Noteholders, the Issuer, FSA and each Rating Agency.
(ii) Within 60 days after the occurrence of any Master Servicing
Default, the Trustee shall transmit by mail to all Noteholders and the
Issuer notice of each such Master Servicing Default hereunder known to
the Trustee, unless such Master Servicing Default shall have been cured
or waived.
(e) Term of Service Appointment.
Upon the occurrence of a Master Servicing Default, the Master Servicer
shall act as Master Servicer under this Agreement, subject to the right of
removal set forth in Section 7(a) above, for an initial period commencing on
the date on which such Master Servicing Default occurred and ending on the
last day of the calendar quarter in which such Master Servicing Default
occurred, which period may be extended by FSA in its sole discretion (an
"Extension Notice") for a succeeding quarterly period ending on December 31,
March 31, June 30 and September 30 of each year (each such quarterly period
for which the Master Servicer shall be designated to act as Master Servicer
hereunder, a "Term of Service"); provided that nothing in this clause (e)
shall prohibit the Trustee with consent of FSA or at the direction of FSA from
removing the Master Servicer pursuant to Section 7(a) above. In the event FSA
fails to deliver an Extension Notice prior to the end of any Term of Service,
the Master Servicer shall be automatically terminated.
8. Miscellaneous.
(a) Term of Master Servicing Agreement.
The obligations to be performed by the Master Servicer under this
Agreement shall commence on and as of the date on which the Issuer issues the
Notes and shall terminate as to each Mortgage Loan upon (i) the payment in
full of all principal and interest due under such Mortgage Loan or other
liquidation of such Mortgage Loan as contemplated by this Agreement, (ii) the
termination of the Master Servicer's rights and powers under this Agreement by
the Trustee as provided in Section 7(a) or 7(e), or (iii) the release by the
Trustee of its security interest in such Mortgage Loan.
(b) Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6(d), this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and FSA and written
notice to the Issuer.
(c) Notices.
All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when delivered at the following
addresses:
The Master Servicer: Advanta Mortgage Corp. USA
10790 Rancho Bernardo Road
San Diego, California 92127
Attention: SVP Loan Servicing
The Issuer: American Residential Eagle Bond Trust (1999-1)
----------
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 N. Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
With a copy to:
American Residential Eagle, Inc.
445 Marine View Avenue, Suite 230
Del Mar, California 92014
Attention: Lisa Faulk and/or Rollie Lynn
Seller: American Residential Investment Trust, Inc.
445 Marine View Avenue, Suite 230
Del Mar, California 92014
Attention: Lisa Faulk and/or Rollie Lynn
The Trustee: Norwest Bank Minnesota, National Association
Norwest
Sixth and Marquette
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust Administration/
AmREIT 1999-1
with a copy to:
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Corporate Trust Administration/
(AMREIT 1999-1)
Facsimile No.: (410) 884-2360
FSA: Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Transaction Oversight
Re: American Residential Eagle Bond
Trust 1999-1
Confirmation: (212) 826-0100
Facsimile Nos.:(212) 339-3518 or (212) 339-3529
(in each case in which notice or other
communication to FSA refers to a Master
Servicing Default, a claim on the Policy or
with respect to which failure on the part of
FSA to respond shall be deemed to constitute
consent or acceptance, then a copy of such
notice or other communication should also be
sent to the attention of each of the General
Counsel and the Head--Financial Guaranty
Group and shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
Any Rating Agency: The address specified therefor in the definition
corresponding to the name of such Rating Agency.
Any of the above entities may at any time give notice in writing to the
others of a change of its address for the purpose of this Section 8(c).
(d) Governing Law.
This Agreement shall be construed in accordance with and governed by the
substantive laws of the State of New York applicable to agreements made and to
be performed in the State of New York and the obligations, rights and remedies
of the parties hereto and the Noteholders shall be determined in accordance
with such laws.
(e) Amendments.
This Agreement shall not be amended, changed, modified, terminated or
discharged in whole or in part except (i) by an instrument in writing signed
by all parties hereto, or their respective successors or assigns, (ii) in
compliance with Section 8.08 of the Indenture and (iii) with the prior written
consent of FSA.
(f) Severability.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions
of this Agreement.
(g) No Joint Venture.
The Master Servicer and the Issuer are not partners or joint venturers
with each other and nothing herein shall be construed to make them such
partners or joint venturers or impose any liability as such of either of them.
(h) Execution in Counterparts.
This Agreement may be executed in one or more counterparts, any of which
shall constitute an original as against any party whose signature appears on
it, and all of which shall together constitute a single instrument. This
Agreement shall become binding when one or more counterparts, individually or
taken together, bear the signatures of all parties.
(i) Limitation of Liability of Wilmington Trust Company.
It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of American Residential
Eagle Bond Trust 1999-1 under the Deposit Trust Agreement, in the exercise of
the powers and authority conferred and vested in it as Owner Trustee, (b) each
of the representations, undertakings and agreements herein made on the part of
the Issuer is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company, and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Agreement or the other Operative
Agreements.
(j) Nonpetition Covenants.
Notwithstanding any prior termination of this Agreement, the Master
Servicer and the Trustee shall not, prior to the date which is one year and
one day after the termination of this Agreement with respect to the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer (or any assignee)
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer.
(k) Third-Party Beneficiary.
FSA shall be a third-party beneficiary of this Agreement and shall be
entitled to enforce the provisions hereof as if a party hereto; provided,
however, that notwithstanding the foregoing, for so long as a Note Insurer
Default is continuing with respect to FSA's obligations under the FSA Policy,
the Noteholders shall succeed to FSA's rights hereunder other than any right
of FSA to payments hereunder.
(l) Trust Estate and Accounts Held for Benefit of FSA.
The Master Servicer shall hold any property in its possession that is
included in the Trust Estate, including funds in the Collection Account (but
excluding any Master Servicing Fees and any other amounts or reimbursements to
which the Master Servicer is entitled to deduct under this Agreement) for the
benefit of the Noteholders and FSA and all references in this Agreement and in
the Notes to the benefit of Holders of the Notes shall be deemed to include
FSA.
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Noteholder shall
also be sent to FSA.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, each party has caused this Master Servicing Agreement
to be executed by its duly authorized officer or officers as of the day and
year first above written.
AMERICAN RESIDENTIAL EAGLE BOND
TRUST 1999-1, as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Emmett Harmon
-----------------------------
Its: Emmett Harmon, Vice President
ADVANTA MORTGAGE CORP. USA, as
Master Servicer
By: /s/ William S. Garland
-----------------------------
Its: William S. Garland, Senior Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Amy Wahl
-----------------------------
Its: Amy Wahl, Assistant Vice President
ACKNOWLEDGED AS TO SECTION 2,
SECTION 6(c), SECTION 6(e) AND SECTION 7(b):
AMERICAN RESIDENTIAL INVESTMENT
TRUST, INC.
By: /s/ Jay M. Fuller
--------------------------
Its: Jay M. Fullerr
ACKNOWLEDGED AS TO SECTION 6(e)
AND SECTION 7(b):
AMERICAN RESIDENTIAL EAGLE, INC
By: /s/ Jay M. Fuller
--------------------------
Its: Jay M. Fuller
SCHEDULE I
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
Schedule of Mortgage Loans
SCHEDULE II
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
Representations and Warranties of the Master Servicer
Advanta Mortgage Corp. USA ("Advanta") hereby makes the representations
and warranties set forth in this Schedule II to the Issuer and the Trustee, as
of the Closing Date. Capitalized terms used but not otherwise defined in this
Schedule II shall have the meanings ascribed thereto in the Master Servicing
Agreement (the "Master Servicing Agreement") relating to the above-referenced
Notes, among Advanta, as Master Servicer, American Residential Eagle Bond
Trust 1999-1, as Issuer, and Norwest Bank Minnesota, National Association, as
Trustee.
(1) Advanta is duly organized as a corporation and is validly
existing and in good standing under the laws of Delaware and is duly
authorized and qualified to transact any and all business contemplated by
the Master Servicing Agreement to be conducted by Advanta.
(2) Advanta has the full power and authority to master service the
Mortgage Loans, and to execute, deliver and perform its obligations
under, the Master Servicing Agreement and has duly authorized by all
necessary action on the part of Advanta the execution, delivery and
performance of the Master Servicing Agreement; and the Master Servicing
Agreement, and, assuming the due authorization, execution and delivery
thereof by the other parties thereto, constitutes a legal, valid and
binding obligation of Advanta, enforceable against Advanta in accordance
with its terms, except that (a) the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, receivership and other similar
laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(3) The execution and delivery of the Master Servicing Agreement by
Advanta, the master servicing of the Mortgage Loans by Advanta under the
Master Servicing Agreement, the consummation of any other of the
transactions contemplated by the Master Servicing Agreement, and the
fulfillment of or compliance with the terms thereof will not (A) result
in a material breach of any term or provision of the charter or by-laws
of Advanta or (B) materially conflict with, result in a material breach,
violation or acceleration of, or result in a material default under, the
terms of any other material agreement or instrument to which Advanta is a
party or by which it may be bound, or (C) constitute a material violation
of any statute, order or regulation applicable to Advanta of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over Advanta.
(4) No litigation is pending or, to the best of Advanta's knowledge,
threatened against Advanta that would materially and adversely affect the
execution or delivery of the Master Servicing Agreement by Advanta or
enforceability of the Master Servicing Agreement against Advanta or the
ability of Advanta to master service the Mortgage Loans or to perform any
of its other obligations under the Master Servicing Agreement in
accordance with the terms thereof.
(5) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by Advanta of its obligations under the Master Servicing
Agreement, or if any such consent, approval, authorization or order is
required, Advanta has obtained the same.
SCHEDULE III
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
Representations and Warranties as to the Mortgage Loans
In the Mortgage Loan Purchase Agreement (which has been assigned to the
Trustee), American Residential Investment Trust, Inc. (the "Seller") makes the
representations and warranties set forth in this Schedule III, as of the
Closing Date, or if so specified herein, as of the Cut-off Date or the
Statistical Cut-off Date, as the case may be. Capitalized terms used but not
otherwise defined in this Schedule III shall have the meanings ascribed
thereto in the Master Servicing Agreement (the "Master Servicing Agreement")
relating to the above-referenced Series of Notes, issued by American
Residential Eagle Bond Trust 1999-1.
(a) General. The information with respect to the Mortgage Loan set
forth in the Mortgage File and the Mortgage Loan Schedule is true and
correct in all material respects, and no Mortgage Loan has been modified,
revised, changed or altered in any manner by AmREIT. The Mortgage Loan
was originated and underwritten in accordance with Seller's underwriting
guidelines, as described in the Prospectus Supplement for the
above-referenced Notes. Each document in the related Mortgage File has
been or shall be delivered in accordance with the terms of this
agreement.
(b) Payments Current. As of March 1, 1999 (the "Statistical Cut-off
Date"), no more than 1.42% of the Mortgage Loans (by Principal Balance as
of the Statistical Cut-off Date) were 30 but not more than 59 days
Delinquent and no more than 3.72% of the Mortgage Loans (by Principal
Balance as of the Statistical Cut-off Date) were 60 days or more
Delinquent and no Mortgage Loan is more than [____] days Delinquent.
First payment due on such Mortgage Loans has been or will be made on a
timely basis.
(c) No Outstanding Charges. There are no defaults in complying with
the terms of the Mortgage Note or the Mortgage, and all taxes,
governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents which previously became due
and owing have been paid, or, if required by the Mortgage or applicable
law, an escrow of funds has been established in an amount sufficient to
pay for every such item which remains unpaid and which has been assessed
but is not yet due and payable. Seller has not advanced funds, or
induced, solicited or knowingly received any advance of funds by a party
other than the Mortgagor, directly or indirectly, for the payment of any
amount required under the Mortgage Loan, except for interest accruing
from the date of the Mortgage Note or date of disbursement of the
Mortgage Loan proceeds, whichever is earlier, to the day which precedes
by one month the Due Date of the first installment of principal and
interest.
(d) Original Terms Unmodified; No Defenses. The terms of the
Mortgage Note and Mortgage have not been impaired, waived, altered or
modified in any respect, and no Mortgagor has been released, in whole or
in part. The Mortgage Loan is not subject to any right of rescission,
set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the
Mortgage Note or the Mortgage, or the exercise of any right thereunder,
render either the Mortgage Note or the Mortgage unenforceable, in whole
or in part, no such right of rescission, set-off, counterclaim or defense
has been asserted with respect thereto, and no Mortgagor was a debtor in
any state or federal bankruptcy or insolvency proceeding at the time the
Mortgage Loan was funded.
(e) Hazard Insurance. All buildings or other improvements upon the
Mortgaged Property are insured by a generally acceptable insurer against
loss by fire, hazards of extended coverage and such other hazards as are
customarily insured against in the broad form of extended coverage hazard
insurance available for properties in the area where the Mortgaged
Property is located in an amount not less than the least of (i) the
outstanding principal balance of the Mortgage Loan (together, in the case
of a subordinate lien Mortgage Loan, with the outstanding principal
balance of the senior mortgage(s), (ii) the minimum amount required to
compensate for damage or loss on a replacement cost basis or (iii) the
full insurable value of the Mortgaged Property, but in any event in no
greater amount as may be allowed by applicable law. If upon origination
of the Mortgage Loan, the Mortgaged Property was in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards (and such flood insurance was required by federal
regulation and such flood insurance has been made available), a flood
insurance policy meeting the requirements of the current guidelines of
the Federal Insurance Administration is in effect in an amount not less
than the least of (I) the outstanding principal balance of the Mortgage
Loan (together, in the case of a subordinate lien Mortgage Loan, with the
outstanding principal balance of the senior mortgage(s), (II) the minimum
amount required to compensate for damage or loss on a replacement cost
basis or (III) the maximum amount of insurance that is available under
the Flood Disaster Protection Act of 1973. All individual insurance
policies contain a standard mortgagee loss payable clause and all
premiums thereon have been paid. The Mortgage obligates the Mortgagor
thereunder to maintain the hazard insurance policy at the Mortgagor's
cost and expense, and on the Mortgagor's failure to do so, authorizes the
holder of the Mortgage to obtain and maintain such insurance at such
Mortgagor's cost and expense, and to seek reimbursement therefor from the
Mortgagor. Where required by state law or regulation, the Mortgagor has
been given an opportunity to choose the carrier of the required hazard
insurance, provided the policy is not a "master" or "blanket" hazard
insurance policy covering the common facilities of a planned unit
development. Each insurance policy required hereunder is the valid and
binding obligation of the insurer, is in full force and effect, and will
be in full force and effect and inure to the benefit of Purchaser upon
the consummation of the sale of the Mortgage Loan to Purchaser pursuant
to this Agreement. Seller has not engaged in, and has no knowledge of the
Mortgagor's having engaged in, any act or omission which would impair the
coverage of any such policy, the benefits of the endorsement provided for
herein, or the validity and binding effect of either including, without
limitation, the payment, retention, or realization of any unlawful fee,
commission, kickback, or other unlawful compensation or value of any kind
to or by any attorney, firm or other person or entity, and no such
unlawful items have been received, retained or realized by Seller.
(f) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to the
Mortgage Loan have been complied with, and Seller shall maintain in its
possession, available for Purchaser's inspection, and shall deliver to
Purchaser upon demand, evidence of compliance with all such requirements,
to the extent compliance requires preparation of one or more documents.
(g) No Satisfaction of Mortgage. The Mortgage has not been
satisfied, canceled, subordinated or rescinded, in whole or in part, and
the Mortgaged Property has not been released from the lien of the
Mortgage, in whole or in part, nor has any instrument been executed that
would effect any such release, cancellation, subordination or rescission.
Seller has not waived the performance by the Mortgagor of any action, if
the Mortgagor's failure to perform such action would cause the Mortgage
Loan to be in default, nor has Seller waived any default resulting from
any action or inaction by the Mortgagor.
(h) Valid Lien. The Mortgage is a valid, subsisting and enforceable
first lien on the Mortgaged Property, of the priority described in the
Mortgage File and the Mortgage Loan Schedule, if any, including all
buildings on the Mortgaged Property and all installations and mechanical,
electrical, plumbing, heating and air conditioning systems located in or
annexed to such buildings, and all additions, alterations and
replacements made at any time with respect to the foregoing. The lien of
the Mortgage is subject only to:
(i) the lien of current real property taxes and assessments not
yet due and payable;
(ii) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to prudent mortgage lending institutions
generally and specifically referred to in the lender's title
insurance policy delivered to the originator of the Mortgage Loan
and (a) referred to or otherwise considered in the appraisal made
for the originator of the Mortgage Loan or (b) which do not
adversely affect the Appraised Value of the Mortgaged Property set
forth in such appraisal;
(iii) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the
security intended to be provided by the mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property;
and
(iv) any senior liens identified in the Mortgage File if the
Mortgage is identified as a subordinate lien in the Mortgage File
and the Mortgage Loan Schedule, if any.
Any security agreement, chattel Mortgage or equivalent document related
to and delivered in connection with the Mortgage Loan establishes and creates
a valid, subsisting and enforceable lien and security interest, of the same
priority as the Mortgage, on the property described therein and Seller has
full right to sell and assign the same to Purchaser.
(i) Validity of Mortgage Documents. The Mortgage Note and the
Mortgage and any other agreement executed and delivered by a Mortgagee in
connection with a Mortgage Loan are genuine, and each is the legal, valid
and binding obligation of the maker thereof enforceable in accordance
with its terms. All parties to the Mortgage Note, the Mortgage and any
other such related agreements are the parties described in the Mortgage
File and had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note, the Mortgage and any such
agreement. The related Assignment of Mortgage is in recordable form and
is acceptable for recording under the laws of the jurisdiction in which
the Mortgaged Property is located.
(j) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan
have been fully disbursed and there is no requirement for future advances
thereunder. All costs, fees and expenses incurred in making or closing
the Mortgage Loan and the recording of the Mortgage or closing the
Mortgage Loan and the recording of the Mortgage were paid, and the
Mortgagor is not entitled to any refund of any amounts paid or due under
the Mortgage Note or Mortgage.
(k) Ownership. Immediately prior to the sale of the Mortgage Loan to
Purchaser hereunder, Seller has good, indefeasible and marketable title
thereto, and has full right to transfer and sell the Mortgage Loan to
Purchaser free and clear of any encumbrance, equity, participation
interest, lien, pledge, charge, claim or security interest, and has full
right and authority to subject to no interest or participation of, or
agreement with, any other party, to sell and assign the Mortgage Loan
pursuant to this Agreement, and following the sale of the Mortgage Loan,
Purchaser will own the Mortgage Loan free and clear of any encumbrance,
equity, participation interest, lien, pledge, charge, claim or security
interest. Seller intends to relinquish all rights to possess, control and
monitor the Mortgage Loan.
(l) Doing Business. All parties which have had any interest in the
Mortgage Loan, whether as a mortgagee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were)
(i) in compliance with any and all applicable licensing requirements of
the laws of the state wherein the Mortgaged Property is located, and (ii)
organized under the laws of such state, (iii) qualified to do business in
such state, (iv) federal savings and loan associations or national banks
having principal officers in such state, or (v) not doing business in
such state.
(m) Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title, the form and substance
of which is acceptable to prudent mortgage lending institutions making
mortgage loans in the area where the Mortgaged Property is located or
(ii) an ALTA or, if approved in writing by Purchaser, a CLTA lender's
title insurance policy, and each such title insurance policy is issued by
a title insurer qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the mortgagee as to the
appropriate priority of the lien of the Mortgage in the original
principal amount of the Mortgage Loan, plus the outstanding principal
balance of any senior mortgage loan in the case of a subordinate lien
Mortgage Loan (or to the extent a Mortgage Note provides for negative
amortization, the maximum amount of negative amortization in accordance
with the Mortgage), subject only to the exceptions contained in clauses
(i), (ii) and (iv) of paragraph (h) of this Section 7.02, and, in the
case of an adjustable rate Mortgage Loan, against any loss by reason of
the invalidity or unenforceability of the lien resulting from the
provisions of the Mortgage providing for adjustment to the related
Mortgage Interest Rate and Monthly Payment. Where required by state law
or regulation, the Mortgagor has been given the opportunity to choose the
carrier of the required mortgage title insurance. Such lender's title
insurance policy is valid and remains in full force and effect. No claims
have been made under such lender's title insurance policy, and neither
Seller, nor to Seller's knowledge, any prior holder of the Mortgage has
done, by act of omission, anything which would impair the coverage of
such lender's title insurance policy, including without limitation, the
payment, retention or realization of any unlawful fee, commission,
kickback or other unlawful compensation or value of any kind by or to any
attorney, firm or other person or entity, and no such unlawful items have
been received, retained or realized by Seller.
(n) No Defaults. There is no default, breach, violation or event of
acceleration existing under the Mortgage Note and no event which, with
the passage of time or with notice and the expiration of any grace or
cure period, other than the failure to make, prior to expiration of the
applicable grace period, the Monthly Payment due immediately prior to the
related Closing Date if such Closing Date occurs prior to the expiration
of such grace period, would constitute a default, breach, violation or
event of acceleration and neither AmREIT nor its predecessors have waived
any default, breach, violation or event of acceleration.
(o) No Mechanics' Liens. There is no mechanic's or similar lien or
claim which has been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such a lien) affecting
the related Mortgaged Property which is or may be a lien prior to, or
equal or coordinate with, the lien of the related Mortgage, except to the
extent insured against by the related title insurance policy.
(p) Location of Improvements; No Encroachments. All improvements
which were considered in determining the Appraised Value of the Mortgaged
Property lie wholly within the boundaries and building restriction lines
of the Mortgaged Property. No improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or
regulation.
(q) Payment Terms. The Mortgage Note is payable in monthly
installments of principal and interest sufficient to amortize the
Mortgage Loan fully by the stated maturity date, over an original term of
not more than thirty years from commencement of amortization, except for
a Mortgage Note relating to a "balloon" Mortgage Loan which amortizes the
principal balance of such Mortgage Note over a thirty year period but
provides for a balloon payment of the outstanding principal balance no
sooner than the fifth year.
(r) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including (i)
in the case of a Mortgage designated as a deed of trust, by trustee's
sale, and (ii) otherwise by judicial foreclosure. Upon default by the
Mortgagor on the Mortgage Loan and foreclosure on, or trustee's sale of,
the Mortgaged Property pursuant to the proper procedures, the holder of
the Mortgage Loan will be able to deliver good and merchantable title to
the Mortgaged Property, subject to one or more superior mortgages in the
case of a subordinate lien Mortgage Loan. There is no homestead or other
exemption available to the Mortgagor which would interfere with the right
to sell the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage.
(s) Residential Property. The Mortgaged Property is improved by a
one-to-four-family residential dwelling owned by the related Mortgagor in
fee simple; provided, however, that no such Mortgaged Property consists
of a mobile home or cooperative.
(t) Occupancy and Use of the Mortgaged Property. All inspections,
licenses and certificates required to be made or issued with respect to
all occupied portions of the Mortgaged Property and with respect to the
use and occupancy of the same, including but not limited to certificates
of occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities.
(u) Deeds of Trust. In the event the Mortgage constitutes a deed of
trust, a trustee, authorized and duly qualified under applicable law to
serve as such, has been properly designated and currently so serves and
is named in the Mortgage, and no fees or expenses are or will become
payable by Purchaser to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor.
(v) Due-On-Sale. Subject to applicable state law, the Mortgage
contains an enforceable provision for the acceleration of the payment of
the unpaid principal balance of the Mortgage Loan in the event that the
Mortgaged Property is sold or transferred without the prior written
consent of the mortgagee thereunder.
(w) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions, and no
arrangements have been made, pursuant to which Monthly Payments are or
were paid or partially paid with funds deposited in any separate account
established by Seller, the Mortgagor or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor nor does it
contain any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and
the Mortgage Loan does not have a shared appreciation or other contingent
interest feature.
(x) Consolidation of Future Monthly Advances. Any advances made
after origination of the Mortgage Loan but prior to the Cut-Off Date have
been consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured in
accordance with the requirements of paragraph (mortgage) of this Section
7.02. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan.
(y) Mortgaged Property Undamaged. To Seller's knowledge, the
Mortgaged Property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty so as to affect
adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended, and each
Mortgaged Property is in good repair. There is no proceeding pending or,
to the knowledge of Seller, threatened for the total or partial
condemnation of the Mortgaged Property. A full appraisal and a review
appraisal of the Mortgaged Property was performed or recertified in
connection with the origination of the Mortgage Loan, each within 120
days of the closing thereof, and each such appraisal was performed in
accordance with the Uniform Standards of Professional Appraisal Practice
and in accordance with the standards commonly employed by appraisers of
similar properties in the same region.
(z) Servicing; Escrow Deposits; Interest Rate Adjustments. The
Mortgage Loan has been serviced in accordance with Accepted Servicing
Practices. With respect to escrow deposits and Escrow Payments, all such
payments have or will be transferred to Purchaser and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All Escrow Payments have been
collected in full compliance with state and federal law. If required
under the Mortgage and not prohibited by applicable law, an escrow of
funds has been established in an amount sufficient to pay for every item
that remains unpaid and has been assessed but is not yet due and payable.
No escrow deposits or Escrow Payments or other charges or payments due
Seller have been capitalized under the Mortgage or the Mortgage Note. All
Mortgage Interest Rate adjustments have been made in compliance with
state and federal law and the terms of the related Mortgage Note. Any
interest required to be paid pursuant to state and local law has been
properly paid and credited.
(aa) No Violation of Environmental Laws. There is no pending action
or proceeding directly involving the Mortgaged Property in which
compliance with any environmental law, rule, regulation or order of any
federal, state or other governmental authority is an issue; and, to
Seller's knowledge, the Mortgaged Property is in compliance with all such
laws, rules, regulations and orders.
(bb) Soldiers' and Sailors' Civic Relief Act. The Mortgagor has not
notified Seller of any relief requested by the Mortgagor under the
Soldiers' and Sailors' Civic Relief Act of 1990.
(cc) Leaseholds. If the Mortgage Loan is secured by a leasehold
estate, the lease is valid and in good standing, all rents and other
payments that have become due under the lease have been paid properly,
the lessee is not in default under any provision of the lease, the lease
does not provide for its forfeiture or termination for any reason except
the nonpayment of lease rents, and the maturity date of the lease is at
least five years after the maturity date of the Mortgage.
(dd) No Misrepresentation. To Seller's knowledge, neither the
Mortgagor nor any other party has made any misrepresentation or committed
any fraud in connection with the origination of the Mortgage Loan or the
sale of the Mortgage Loan to Purchaser.
(ee) Insurance. Seller has caused to be performed any and all acts
required to be performed to preserve the rights and remedies of Purchaser
and its successors and assigns in any Insurance policies applicable to
the Mortgage Loan including any necessary notifications of insurers,
assignments of policies or interest therein, and the vesting of
co-insured, joint loss payee and mortgage rights in favor or Purchaser
and its successors and assigns. If the related Mortgagor purchased a
credit life insurance policy in connection with the closing of the
Mortgage Loan, the premium has been paid over to the insurer.
(ff) No Litigation. The Mortgage Loan has at no time been the
subject of litigation, including but not limited to foreclosure
litigation or bankruptcy proceedings.
(gg) Loan-To-Value. As of the Statistical Cut-off Date, no Mortgage
Loan had a Loan-To-Value Ratio at origination in excess of 95.00% and as
of the Statistical Cut-off Date, the weighted average Loan-To-Value Ratio
at origination is 77.62%.
(hh) Status of Originators. Each Mortgage Loan was originated by a
savings and loan association, savings bank, commercial bank, credit
union, insurance company, or similar institution which is supervised and
examined by a federal or state authority, or by a mortgagee approved by
the Secretary of Housing and Urban Development pursuant to Sections 203
and 211 of the National Housing Act.
(ii) Coverage by Mortgage Insurer. Each of the Mortgage Loans that
is identified on Schedule IV hereto is covered by an Insurance Policy
issued by the Mortgage Insurer. All requirements for the valid transfer
of each Insurance Policy listed in Schedule VI, including any assignments
or notices required, have been satisfied. As of the Closing Date, with
respect to each Mortgage Loan that is subject to an Insurance Policy,
AmREIT has not taken any action, or omitted to take any action, and has
no knowledge of any circumstances that would cause the Mortgage Insurer
to deny a claim with respect to such Mortgage Loan.
SCHEDULE IV
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
Representations and Warranties of the Issuer
American Residential Eagle Bond Trust 1999-1 (the "Issuer") hereby makes
the representations and warranties set forth in this Schedule IV to the Master
Servicer and the Trustee, as of the Closing Date. Capitalized terms used but
not otherwise defined in this Schedule IV shall have the meanings ascribed
thereto in the Master Servicing Agreement (the "Master Servicing Agreement")
relating to the above-referenced Series, among Advanta Mortgage Corp. USA, as
Master Servicer, the Issuer, and Norwest Bank Minnesota, National Association,
as Trustee.
(A) The Issuer is a statutory business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware,
and possesses all requisite authority, power, licenses, permits and
franchises to conduct any and all business contemplated by the Master
Servicing Agreement and to comply with its obligations under the terms of
that Agreement, the performance of which have been duly authorized by all
necessary action.
(B) Neither the execution and delivery of the Master Servicing
Agreement by the Issuer, nor the performance and compliance with the
terms thereof by the Issuer will (A) result in a material breach of any
term or provision of the instruments creating the Issuer or governing its
operations, or (B) materially conflict with, result in a material breach,
violation or acceleration of, or result in a material default under, the
terms of any other material agreement or instrument to which the Issuer
is a party or by which it may be bound, or (C) constitute a material
violation of any statute, order or regulation applicable to the Issuer of
any court, regulatory body, administrative agency or governmental body
having jurisdiction over the Issuer; and the Issuer is not in breach or
violation of any material indenture or other material agreement or
instrument, or in violation of any statute, order or regulation of any
court, regulatory body, administrative agency or governmental body having
jurisdiction over it which breach or violation may materially impair the
Issuer's ability to perform or meet any of its obligations under the
Master Servicing Agreement.
(C) The Master Servicing Agreement, and all documents and
instruments contemplated hereby, which are executed and delivered by the
Issuer, will, assuming due authorization, execution by and delivery to
the other parties hereto and thereto, constitute valid, legal and binding
obligations of the Issuer, enforceable in accordance with their
respective terms, except that (a) the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy
of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(D) No litigation is pending or, to the best of the Issuer's
knowledge, threatened against the Issuer that would materially and
adversely affect the execution, delivery or enforceability of the Master
Servicing Agreement or the ability of the Issuer to perform its
obligations thereunder.
(E) Immediately prior to the pledge of the Mortgage Loans to the
Trustee, the Issuer had good title to, and was the sole owner of, each
Mortgage Loan free and clear of any liens, charges or encumbrances or any
ownership or participation interests in favor of any other Person.
SCHEDULE V
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
Purchase and Sale Agreements
1. Master Mortgage Loan Sale and Purchase Agreement dated as of March 27,
1998, by and between CoreWest Banc. ("Seller") and American Residential
Investment Trust, Inc. ("Purchaser")
2. Master Mortgage Loan Sale and Purchase Agreement dated as of ________, by
and between On Call Mortgage ("Seller") and American Residential
Investment Trust, Inc. ("Purchaser")
3. Master Mortgage Loan Sale and Purchase Agreement dated as of January 27,
1999, by and between Mortgage Lenders Network, USA ("MLN") ("Seller") and
American Residential Investment Trust, Inc. ("Purchaser")
4. Master Mortgage Loan Sale and Purchase Agreement dated as of December 10,
1997, by and between Accredited Home Lenders, Inc. ("Seller") and
American Residential Investment Trust, Inc. ("Purchaser")
5. Master Mortgage Loan Sale and Purchase Agreement dated as of April 27,
1998, by and between Fieldstone Mortgage Company ("Seller") and American
Residential Investment Trust, Inc. ("Purchaser")
6. Master Mortgage Loan Sale and Purchase Agreement dated as of September 9,
1998, by and between New America Capital Markets ("Seller") and American
Residential Investment Trust, Inc. ("Purchaser")
7. Master Mortgage Loan Sale and Purchase Agreement dated as of September 9,
1998, by and between Alternative Lending Capital ("Seller") and American
Residential Investment Trust, Inc. ("Purchaser")
8. Master Mortgage Loan Sale and Purchase Agreement dated as of May 26,
1998, by and between Prime Financial Network, Inc. ("Seller") and
American Residential Investment Trust, Inc. ("Purchaser")
9. Master Mortgage Loan Sale and Purchase Agreement dated as of October 21,
1998, by and between ComUnity Lending Corporation ("Seller") and American
Residential Investment Trust, Inc. ("Purchaser")
10. Master Mortgage Loan Sale and Purchase Agreement dated as of January 29,
1998, by and between Provident Funding Associates, L.P. ("Seller") and
American Residential Investment Trust, Inc. ("Purchaser")
11. Master Mortgage Loan Sale and Purchase Agreement dated as of October 15,
1998, by and between Ameriquest Mortgage Company ("Seller") and American
Residential Investment Trust, Inc. ("Purchaser")
12. Master Mortgage Loan Sale and Purchase Agreement dated as of September
22, 1998, by and between Greentree Mortgage Company, L.P. ("Seller") and
American Residential Investment Trust, Inc. ("Purchaser")
13. Master Mortgage Loan Sale and Purchase Agreement dated as of October 6,
1998, by and between Empire Home Loan Corporation ("Seller") and American
Residential Investment Trust, Inc. ("Purchaser")
SCHEDULE VI
AMERICAN RESIDENTIAL EAGLE BOND TRUST 1999-1
Mortgage-Backed LIBOR Notes, Class A, Series 1999-1
List of Insurance Policies and Related Premiums
and Mortgage Loans
<TABLE>
<CAPTION>
Mortgage
Insurer Policy No. Loan(s) Covered Premium
<S> <C> <C>
Commonwealth Mortgage Assurance Company 55468-000 Attached as Appendix I 1.23% per annum
Incontestability Endorsement 10539 ED. 9/96
Cooperative Housing Endorsement 10570 ED. 1/98
Financed Single Premium Endorsement 10571 ED. 1/98
</TABLE>