EXHIBIT 4.5
EXECUTED COPY
================================================================================
NOVASTAR HOME EQUITY LOAN TRUST SERIES 1997-2
Issuer
and
FIRST UNION NATIONAL BANK
Indenture Trustee
-----------------------------------------
INDENTURE
Dated as of November 1, 1997
------------------------------------------
NOVASTAR HOME EQUITY LOAN ASSET-BACKED BONDS
SERIES 1997-2
-------------
================================================================================
TABLE OF CONTENTS
-----------------
Section Page
------- ----
ARTICLE I
Definitions
1.01. DEFINITIONS..............................................................3
1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT........................3
1.03. RULES OF CONSTRUCTION....................................................3
ARTICLE II
Original Issuance of Bonds
2.01. FORM.....................................................................5
2.02. EXECUTION, AUTHENTICATION AND DELIVERY...................................5
2.03. ACCEPTANCE OF MORTGAGE LOANS BY INDENTURE TRUSTEE........................5
ARTICLE III
Covenants
3.01. COLLECTION OF PAYMENTS WITH RESPECT TO THE MORTGAGE LOANS................8
3.02. MAINTENANCE OF OFFICE OR AGENCY..........................................8
3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST; PAYING AGENT.....................8
3.04. EXISTENCE................................................................9
3.05. PAYMENT OF PRINCIPAL AND INTEREST.......................................10
3.06. PROTECTION OF TRUST ESTATE..............................................11
3.07. OPINIONS AS TO TRUST ESTATE.............................................12
3.08. PERFORMANCE OF OBLIGATIONS..............................................13
3.09. NEGATIVE COVENANTS......................................................13
3.10. ANNUAL STATEMENT AS TO COMPLIANCE.......................................14
3.11. [Reserved]..............................................................14
3.12. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE LOANS............14
3.13. AMENDMENTS TO SERVICING AGREEMENT.......................................14
3.14. SERVICER AS AGENT AND BAILEE OF THE INDENTURE TRUSTEE...................14
3.15. INVESTMENT COMPANY ACT..................................................15
3.16. ISSUER MAY CONSOLIDATE, ETC.............................................15
3.17. SUCCESSOR OR TRANSFEREE.................................................17
3.18. NO OTHER BUSINESS.......................................................17
3.19. NO BORROWING............................................................17
3.20. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES.......................17
3.21. CAPITAL EXPENDITURES....................................................18
3.22. [Reserved]..............................................................18
3.23. RESTRICTED PAYMENTS.....................................................18
3.24. NOTICE OF EVENTS OF DEFAULT.............................................18
3.25. FURTHER INSTRUMENTS AND ACTS............................................18
3.26. STATEMENTS TO BONDHOLDERS...............................................18
3.27. DETERMINATION OF BOND INTEREST RATE.....................................18
3.28. PAYMENTS UNDER THE BOND INSURANCE POLICY................................18
ARTICLE IV
The Bonds; Satisfaction and Discharge of Indenture
4.01. THE BONDS...............................................................20
4.02. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE OF BONDS;
APPOINTMENT OF CERTIFICATE REGISTRAR....................................20
4.03. MUTILATED, DESTROYED, LOST OR STOLEN BONDS..............................21
4.04. PERSONS DEEMED OWNERS...................................................22
4.05. CANCELLATION............................................................22
4.06. BOOK-ENTRY BONDS........................................................22
4.07. NOTICES TO DEPOSITORY...................................................23
4.08. DEFINITIVE BONDS........................................................23
4.09. TAX TREATMENT...........................................................24
4.10. SATISFACTION AND DISCHARGE OF INDENTURE.................................24
4.11. APPLICATION OF TRUST MONEY..............................................25
4.12. SUBROGATION AND COOPERATION.............................................25
4.13. REPAYMENT OF MONIES HELD BY PAYING AGENT................................27
4.14. TEMPORARY BONDS.........................................................27
ARTICLE V
DEFAULT AND REMEDIES
5.01. EVENTS OF DEFAULT.......................................................28
5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT......................28
5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE.......................................................29
5.04. REMEDIES; PRIORITIES....................................................31
5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE...............................33
5.06. LIMITATION OF SUITS.....................................................33
5.07. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST............................................................34
5.08. RESTORATION OF RIGHTS AND REMEDIES......................................34
5.09. RIGHTS AND REMEDIES CUMULATIVE..........................................34
5.10. DELAY OR OMISSION NOT A WAIVER..........................................35
5.11. CONTROL BY BOND INSURER.................................................35
5.12. WAIVER OF PAST DEFAULTS.................................................35
5.13. UNDERTAKING FOR COSTS...................................................36
5.14. WAIVER OF STAY OR EXTENSION LAWS........................................36
5.15. SALE OF TRUST ESTATE....................................................36
5.16. ACTION ON BONDS.........................................................38
ARTICLE VI
THE INDENTURE TRUSTEE
6.01. DUTIES OF INDENTURE TRUSTEE.............................................40
6.02. RIGHTS OF INDENTURE TRUSTEE.............................................41
6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE..................................42
6.04. INDENTURE TRUSTEE'S DISCLAIMER..........................................42
6.05. NOTICE OF EVENT OF DEFAULT..............................................42
6.06. TAX ADMINISTRATION OF THE ISSUER........................................42
6.07. COMPENSATION AND INDEMNITY..............................................42
6.08. REPLACEMENT OF INDENTURE TRUSTEE........................................43
6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER...................................44
6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE.......44
6.11. ELIGIBILITY; DISQUALIFICATION...........................................45
6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER........................46
6.13. REPRESENTATIONS AND WARRANTIES..........................................46
6.14. DIRECTIONS TO INDENTURE TRUSTEE.........................................46
6.15. THE AGENTS..............................................................47
ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
BONDHOLDERS.............................................................47
7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO BONDHOLDERS..............47
7.03. REPORTS BY [THE INDENTURE TRUSTEE]; ISSUER FISCAL YEAR..................48
7.04. REPORTS BY INDENTURE TRUSTEE............................................48
7.05. STATEMENTS TO BONDHOLDERS...............................................49
7.06. BOOKS AND RECORDS.......................................................50
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
8.01. COLLECTION OF MONEY.....................................................51
8.02. TRUST ACCOUNTS..........................................................51
8.03. OFFICER'S CERTIFICATE...................................................52
8.04. TERMINATION UPON DISTRIBUTION TO BONDHOLDERS............................52
8.05. RELEASE OF TRUST ESTATE.................................................52
8.06. SURRENDER OF BONDS UPON FINAL PAYMENT...................................53
8.07. OPTIONAL REDEMPTION OF THE BONDS........................................53
8.08. PRE-FUNDING ACCOUNT.....................................................53
8.09. INTEREST COVERAGE ACCOUNT...............................................54
ARTICLE IX
SUPPLEMENTAL INDENTURES
9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS..................55
9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS.....................56
9.03. EXECUTION OF SUPPLEMENTAL INDENTURES....................................58
9.04. EFFECT OF SUPPLEMENTAL INDENTURE........................................58
9.05. CONFORMITY WITH TRUST INDENTURE ACT.....................................58
9.06. REFERENCE IN BONDS TO SUPPLEMENTAL INDENTURES...........................58
ARTICLE X
MISCELLANEOUS
10.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC...............................59
10.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE........................60
10.03. ACTS OF BONDHOLDERS.....................................................61
10.04. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER, BOND INSURER AND
INDENTURE TRUSTEE.......................................................61
10.05. NOTICES TO BONDHOLDERS; WAIVER..........................................63
10.06. CONFLICT WITH TRUST INDENTURE ACT. .....................................63
10.07. EFFECT OF HEADINGS......................................................63
10.08. SUCCESSORS AND ASSIGNS..................................................64
10.09. SEPARABILITY............................................................64
10.10. BENEFITS OF INDENTURE...................................................64
10.11. LEGAL HOLIDAYS..........................................................64
10.12. GOVERNING LAW...........................................................64
10.13. COUNTERPARTS............................................................64
10.14. RECORDING OF INDENTURE..................................................64
10.15. ISSUER OBLIGATION.......................................................64
10.16. NO PETITION.............................................................65
10.17. INSPECTION..............................................................65
Signatures and Seals ....................................................................... 66
Acknowledgments ............................................................................ 67
EXHIBITS
Exhibit A - Form of Bonds
Exhibit B - Trustee's Initial Certification
Exhibit C - Trustee's Final Certification
Exhibit D - Mortgage Loan Schedule
Appendix A Definitions
This Indenture, dated as of November 1, 1997, between NovaStar
Home Equity Loan Trust Series 1997-2, a Delaware business trust, as Issuer (the
"Issuer"), and First Union National Bank, a national banking association, as
Indenture Trustee (the "Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the NovaStar
Home Equity Loan Asset-Backed Bonds, Series 0000-0 (xxx "Xxxxx") and the Bond
Insurer.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, as trustee for the benefit of the Holders of the Bonds and the
Bond Insurer, all of the Issuer's right, title and interest in and to whether
now existing or hereafter created by (a) the Initial Mortgage Loans, the
Subsequent Mortgage Loans, the Eligible Substitute Mortgage Loans and the
proceeds thereof and all rights under the Related Documents (including the
related Mortgage Files); (b) all funds on deposit from time to time in the
Collection Account allocable to the Mortgage Loans excluding any investment
income from such funds; (c) all funds on deposit from time to time in the
Payment Account and in all proceeds thereof, including any income on funds
deposited in, or investments made with funds deposited in, the Payment Account,
which income shall belong to, and be for the account of, the Indenture Trustee;
(d) all funds on deposit from time to time in the Interest Coverage Account and
the Pre-Funding Account in each case including any income on funds deposited in,
or investments made with funds deposited in such accounts, which income shall
belong to, and be for the account of, the Indenture Trustee; (e) all rights
under the (i) Home Equity Loan Purchase Agreement as assigned to the Issuer,
(ii) the Ownership Transfer Agreement as assigned to the Issuer, (iii) the
Servicing Agreement and any Subservicing Agreements and (iv) any title and
hazard insurance policies with respect to the Mortgaged Properties; and (f) all
present and future claims, demands, causes and choses in action in respect of
any or all of the foregoing and all payments on or under, and all proceeds of
every kind and nature whatsoever in respect of, any or all of the foregoing and
all payments on or under, and all proceeds of every kind and nature whatsoever
in the conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, checks, deposit accounts, rights to payment of any and every kind,
and other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the "Trust Estate" or the "Collateral").
The foregoing Grant is made in trust to secure (i) the payment
of principal of and interest on, and any other amounts owing in respect of, the
Bonds, equally and ratably without prejudice, priority or distinction, (ii) the
payment of all other amounts payable under this Indenture and (iii) compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee, as trustee on behalf of the Holders of
the Bonds and the Bond Insurer, acknowledges such Grant, accepts the trust under
this Indenture in accordance with the provisions hereof and agrees to perform
its duties as Indenture Trustee as required herein. The
Indenture Trustee agrees that it will hold the Bond Insurance Policy in trust
and that it will hold any proceeds of any claim made upon the Bond Insurance
Policy solely for the use and benefit of the Holders of the Bonds in accordance
with the terms hereof and the terms of the Bond Insurance Policy.
The Indenture Trustee further acknowledges that in the event
(i) the transfer of the Mortgage Loans from the Seller to NovaStar Assets
pursuant to the Home Equity Loan Purchase Agreement is determined to be a
financing; (ii) the transfer of the Initial Mortgage Loans from NovaStar Assets
to the Company pursuant to the Ownership Transfer Agreement is determined to be
a financing; (iii) the transfer of the Initial Mortgage Loans from the Company
to the Issuer pursuant to the Trust Agreement is determined to be a financing;
and/or (iv) the transfer of the Subsequent Mortgage Loans by the Seller to the
Issuer pursuant to the Home Equity Loan Purchase Agreement is determined to
constitute a financing, then in each case the Indenture Trustee holds the
Mortgage Loans as the designee and bailee of NovaStar Assets, the Company and
the Issuer, respectively, subject however, in each case, to a prior lien in
favor of the Bondholders and the Bond Insurer pursuant to the terms of this
Indenture.
2
ARTICLE I
Definitions
Section 1.01. DEFINITIONS. For all purposes of this Indenture, except
as otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions attached hereto as Appendix A, which is
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.
Section 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the Trust Indenture Act (the
"TIA"), the provision is incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Bonds.
"indenture security holder" means a Bondholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA by reference to another statute or defined by Commission
rules, have the meanings assigned to them by such definitions.
Section 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
3
(v) words in the singular include the plural and words
in the plural include the singular; and
(vi) any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or statute as
from time to time amended, modified or supplemented and includes (in
the case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein; references to a Person
are also to its permitted successors and assigns.
4
ARTICLE II
Original Issuance of Bonds
Section 2.01. FORM. The Bonds, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture.
The Bonds shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders).
The terms of the Bonds set forth in Exhibit A are part of the terms of
this Indenture.
Section 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Bonds shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Bonds may be manual or
facsimile.
Bonds bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Bonds or did not hold
such offices at the date of such Bonds.
The Indenture Trustee shall upon Issuer Request authenticate and
deliver Bonds for original issue in an aggregate initial principal amount of
$212,113,000.
Each Bond shall be dated the date of its authentication. The Bonds
shall be issuable as registered Bonds and the Bonds shall be issuable in the
minimum initial Bond Principal Balances of $25,000 and in integral multiples of
$1,000 in excess thereof.
No Bond shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Bond a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Bond shall be conclusive
evidence, and the only evidence, that such Bond has been duly authenticated and
delivered hereunder.
Section 2.03. ACCEPTANCE OF MORTGAGE LOANS BY INDENTURE TRUSTEE. (a)
The Indenture Trustee acknowledges receipt of, subject to the review described
below and any exceptions it notes pursuant to the procedures described below,
the documents (or certified copies thereof) referred to in Section 2.1(b) of the
Home Equity Loan Purchase Agreement and declares that it holds and will continue
to hold those documents and any amendments, replacements or supplements thereto
and all other assets of the Trust Estate as Indenture Trustee in trust for the
use and benefit of all present and future Holders of the Bonds and the Bond
Insurer. No later than 45 days after the Closing Date and each Subsequent
Transfer Date (or, with respect to any Eligible Substitute Mortgage Loan, within
5 Business Days after the receipt by the Indenture Trustee thereof and,
5
with respect to any documents received beyond 45 days after the Closing Date,
promptly thereafter), the Indenture Trustee agrees, for the benefit of the
Bondholders and the Bond Insurer, to review each Mortgage File delivered to it
and to execute and deliver, or cause to be executed and delivered, to the Seller
and the Bond Insurer an initial certification in the form annexed hereto as
Exhibit B. In conducting such review, the Trustee will ascertain whether all
required documents described in Section 2.1(b) of the Home Equity Loan Purchase
Agreement have been executed and received and whether those documents relate,
determined on the basis of the Mortgagor name, original principal balance and
loan number, to the Mortgage Loans it has received, as identified in Exhibit D
to this Indenture, as supplemented (PROVIDED, HOWEVER, that with respect to
those documents described in subclause (b)(vi) of such section, the Indenture
Trustee's obligations shall extend only to documents actually delivered pursuant
to such subclause). In performing any such review, the Indenture Trustee may
conclusively rely on the purported due execution and genuineness of any such
document and on the purported genuineness of any signature thereon. If the
Indenture Trustee finds that any document constituting part of the Mortgage File
not to have been executed or received, or to be unrelated to the Mortgage Loans
identified in Exhibit D or Attachment B to Exhibit 2 of the Home Equity Loan
Purchase Agreement or to appear to be defective on its face, the Indenture
Trustee shall promptly notify the Seller and the Bond Insurer of such finding
and the Seller's obligation to cure such defect or repurchase or substitute for
the related Mortgage Loan.
Pursuant to Section 5.11 of this Indenture, the Bond Insurer, so long
as no Bond Insurer Default exists, has the right to exercise any trust or power
conferred on the Indenture Trustee. In connection with the acceptance of the
Subsequent Mortgage Loans by the Indenture Trustee, the Bond Insurer has
provided a Certificate (the "MBIA Certificate") stating that the Subsequent
Mortgage Loans are acceptable to the Bond Insurer. Since the Bond Insurer is
acting on behalf of the Bondholders, the MBIA Certificate will be binding upon
those Bondholders. The Indenture Trustee shall not agree to any transfer of
Subsequent Mortgage Loans to it without (i) receipt of the MBIA Certificate and
(ii) confirmation from the Rating Agencies that the purchase of such Subsequent
Mortgage Loans will not result in a downgrade, withdrawal or qualification of
the ratings then in effect for the Outstanding Bonds (without regard to the Bond
Insurance Policy).
(b) No later than 180 days after the Closing Date, the Indenture
Trustee will review, for the benefit of the Bondholders and the Bond Insurer,
the Mortgage Files and will execute and deliver or cause to be executed and
delivered to the Seller and the Bond Insurer, a final certification in the form
annexed hereto as Exhibit C. In conducting such review, the Indenture Trustee
will ascertain whether an original of each document described in subclauses
(b)(ii)-(iv) of Section 2.1 of the Home Equity Loan Purchase Agreement required
to be recorded has been returned from the recording office with evidence of
recording thereon or a certified copy has been obtained from the recording
office. If the Indenture Trustee finds any document constituting part of the
Mortgage File has not been received, or to be unrelated, determined on the basis
of the Mortgagor name, original principal balance and loan number, to the
Mortgage Loans identified in Exhibit D or Attachment B to Exhibit 2 of the Home
Equity Loan Purchase Agreement or to appear defective on its face, the Indenture
Trustee shall promptly notify the Seller and the Bond Insurer of such finding
and the Seller's obligation to cure such defect or repurchase or substitute for
the related Mortgage Loan.
6
(c) Upon deposit of the Repurchase Price in the Payment Account, the
Indenture Trustee shall release to the Seller the related Mortgage File and
shall execute and deliver all instruments of transfer or assignment, without
recourse, furnished to it by the Seller as are necessary to vest in the Seller
title to and rights under the related Mortgage Loan. Such purchase shall be
deemed to have occurred on the date on which certification of the deposit of the
Repurchase Price in the Payment Account was received by the Indenture Trustee.
The Indenture Trustee shall amend the applicable Mortgage Loan Schedule to
reflect such repurchase and shall promptly notify the Servicer, the Bond Insurer
and the Rating Agencies of such amendment.
7
ARTICLE III
Covenants
Section 3.01. COLLECTION OF PAYMENTS WITH RESPECT TO THE MORTGAGE
LOANS. The Indenture Trustee shall establish and maintain an Eligible Account
(the "Payment Account"), held in trust for the benefit of the Bondholders and
the Bond Insurer. The Indenture Trustee shall, subject to the terms of this
paragraph, deposit in the Payment Account, (i) on the date of receipt (if
received prior to 3:00 p.m. Eastern Standard Time, and if not, then on the
Business Day following receipt) from the Servicer, each remittance received by
the Indenture Trustee with respect to the Mortgage Loans and (ii) amounts
transferred from the Pre-Funding Account and the Interest Coverage Account
pursuant to Section 8.08 and 8.09 hereof. The Indenture Trustee shall make all
payments of principal of and interest on the Bonds, subject to Section 3.03, as
provided in Section 3.05 from monies on deposit in the Payment Account.
Section 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
within the United States of America, an office or agency where, subject to
satisfaction of conditions set forth herein, Bonds may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Bonds and this Indenture may be served. The Issuer
hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Indenture Trustee with the address
thereof, such surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Indenture Trustee, and the Issuer hereby appoints
the Indenture Trustee as its agent to receive all such surrenders, notices and
demands.
Section 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST; PAYING AGENT. (a)
As provided in Section 3.01, all payments of amounts due and payable with
respect to any Bonds that are to be made from amounts withdrawn from the Payment
Account pursuant to Section 3.01 shall be made on behalf of the Issuer by the
Indenture Trustee or by the Paying Agent, and no amounts so withdrawn from the
Payment Account for payments of Bonds shall be paid over to the Issuer except as
provided in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent it hereby so agrees), subject to the provisions of
this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Bonds in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee and the Bond Insurer
notice of any default by the Issuer of which it has actual knowledge in
the making of any payment required to be made with respect to the
Bonds;
8
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Bonds if at any time it ceases to meet the standards
required to be met by a Paying Agent at the time of its appointment;
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any Bonds of
any applicable withholding taxes imposed thereon and with respect to
any applicable reporting requirements in connection therewith; and
(vi) not commence a bankruptcy proceeding against the
Issuer in connection with this Indenture.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Request direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Bond (other than amounts paid under the Bond
Insurance Policy) and remaining unclaimed for one year after such amount has
become due and payable shall be discharged from such trust and be paid to the
Issuer upon receipt of an Issuer Request; and the Holder of such Bond shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
an Authorized Newspaper, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee with the consent of the Bond
Insurer, so long as no Bond Insurer Default exists, may also adopt and employ,
at the expense and direction of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of
such repayment to Holders whose Bonds have been called but have not been
surrendered for redemption or whose right to or interest in monies due and
payable but not claimed is determinable from the records of the Indenture
Trustee or of any Paying Agent, at the last address of record for each such
Holder).
Section 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a business trust under the laws of the State
of Delaware (unless it becomes, or any
9
successor Issuer hereunder is or becomes, organized under the laws of any other
state or of the United States of America, in which case the Issuer will keep in
full effect its existence, rights and franchises under the laws of such other
jurisdiction) and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Bonds, the
Mortgage Loans and each other instrument or agreement included in the Trust
Estate.
Section 3.05. PAYMENT OF PRINCIPAL AND INTEREST. (a) On each Payment
Date from amounts on deposit in the Payment Account in accordance with Section
8.02 hereof, the Indenture Trustee shall pay to the Bondholders and to other
Persons the amounts to which they are entitled as set forth below; PROVIDED,
HOWEVER, that any amounts representing payments from the Bond Insurer shall only
be used to pay interest and principal to the Bondholders pursuant to clauses
(iii) and (iv):
(i) to the Indenture Trustee, the Indenture Trustee
Fee;
(ii) to the Bond Insurer, the Bond Insurance Premium;
(iii) to the Bondholders, the Interest Payment Amount
with respect to such Payment Date;
(iv) to the Bondholders, as principal on the Bonds, the
Principal Payment Amount with respect to such Payment Date;
(v) to the Bond Insurer, the sum of (a) all payments
previously paid by the Bond Insurer under the Bond Insurance Policy
which have not previously been reimbursed, (b) any other amounts due to
the Bond Insurer pursuant to the Insurance Agreement, to the extent not
previously paid or reimbursed and (c) interest on the foregoing as set
forth in the Insurance Agreement from the date such amounts become due
until paid in full;
(vi) to the Bondholders, as principal on the Bonds, the
Subordination Increase Amount for such Payment Date;
(vii) to the Bondholders, any Carry-Forward Amount for
such Payment Date;
(viii) to the Indenture Trustee, any amounts owing to the
Indenture Trustee under any Basic Documents remaining unpaid;
(ix) to the Servicer, any amounts owing to the Servicer
pursuant to Section 5.03 of the Servicing Agreement in connection with
the indemnity by the Issuer thereunder; and
(x) any remaining amount, to the Issuer or the
Certificate Paying Agent as its designee, on behalf of the
Certificateholders.
10
On each Payment Date, the Certificate Paying Agent shall deposit in the
Certificate Distribution Account all amounts it received pursuant to this
Section 3.05 for the purpose of distributing such funds to the
Certificateholders after payment of trust expenses to the Owner Trustee or the
Indenture Trustee pursuant to the Trust Agreement.
Interest will accrue on the Bonds during an Interest Period on the
basis of the actual number of days in such Interest Period and a year assumed to
consist of 360 days.
Any installment of interest or principal, if any, payable on any Bond
that is punctually paid or duly provided for by the Issuer on the applicable
Payment Date shall, so long as the Bonds are Book-Entry Bonds registered in the
name of the Depository or its nominee, be paid by wire transfer to the
Depository or its nominee; otherwise if such Holder shall have so requested at
least five Business Days prior to the related Record Date and such Holder holds
Bonds of an aggregate initial Bond Principal Balance of at least $5,000,000,
such installment shall be paid on such Payment Date to each Holder of record on
the preceding Record Date, by wire transfer to an account specified in writing
by such Holder reasonably satisfactory to the Indenture Trustee as of the
preceding Record Date, and in all other cases or if no such instructions have
been delivered to the Indenture Trustee, by check to such Bondholder mailed to
such Holder's address as it appears in the Bond Register in the amount required
to be distributed to such Holder on such Payment Date; PROVIDED, HOWEVER, that
the Indenture Trustee shall not pay to such Holders any amount required to be
withheld from a payment to such Holder by the Code. The Indenture Trustee may
deduct a reasonable wire transfer fee from any payment made by wire transfer.
(b) The principal of each Bond shall be due and payable in full on the
Final Scheduled Payment Date for such Bond as provided in the form of Bond set
forth in Exhibit A. All principal payments on the Bonds shall be made to the
Bondholders entitled thereto in accordance with the Percentage Interests
represented by such Bonds. Upon notice to the Indenture Trustee by the Issuer,
the Indenture Trustee shall notify the Person in whose name a Bond is registered
at the close of business on the Record Date preceding the Final Scheduled
Payment Date or other final Payment Date (including any final Payment Date
resulting from any redemption pursuant to Section 8.07 hereof). Such notice
shall to the extent practicable be mailed no later than five Business Days prior
to such Final Scheduled Payment Date or other final Payment Date and shall
specify that payment of the principal amount and any interest due with respect
to such Bond at the Final Scheduled Payment Date or other final Payment Date
will be payable only upon presentation and surrender of such Bond and shall
specify the place where such Bond may be presented and surrendered for such
final payment. No interest shall accrue on the Bonds on or after the Final
Scheduled Payment Date or any such other final Payment Date.
Section 3.06. PROTECTION OF TRUST ESTATE. (a) The Issuer will from time
to time prepare, execute and deliver all such supplements and amendments hereto
and all such financing statements, continuation statements, instruments of
further assurance and other instruments, and will take such other action
necessary or advisable to:
(i) maintain or preserve the lien and security interest
(and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
11
(ii) perfect, publish notice of or protect the validity
of any Grant made or to be made by this Indenture;
(iii) cause the Issuer or the Servicer to enforce any of
their rights with respect to the Mortgage Loans; and
(iv) preserve and defend title to the Trust Estate and
the rights of the Indenture Trustee, the Bond Insurer and the
Bondholders in such Trust Estate against the claims of all persons and
parties.
(b) Except as otherwise provided in this Indenture, the Indenture
Trustee shall not remove any portion of the Trust Estate that consists of money
or is evidenced by an instrument, certificate or other writing from the
jurisdiction in which it was held at the date of the most recent Opinion of
Counsel delivered pursuant to Section 3.07 hereof, 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.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to sign any financing statement, continuation statement or
other instrument required to be signed pursuant to this Section 3.06 upon the
Issuer's preparation thereof and delivery to the Indenture Trustee.
Section 3.07. OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee, the Bond Insurer and the Owner
Trustee an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording and filing of
this Indenture, any indentures supplemental hereto, and any other requisite
documents, and with respect to the execution and filing of any financing
statements and continuation statements, as are necessary to perfect and make
effective the lien and first priority security interest in the Collateral and
reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien and first priority
security interest effective.
(b) On or before September 1 in each calendar year, beginning in 1998,
the Issuer shall furnish to the Indenture Trustee and the Bond Insurer an
Opinion of Counsel at the expense of the Issuer either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
is necessary to maintain the lien and first priority security interest in the
Collateral and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest in the
Collateral until December 31 in the following calendar year.
12
Section 3.08. PERFORMANCE OF OBLIGATIONS. (a) The Issuer will
punctually perform and observe all of its obligations and agreements contained
in this Indenture, the Basic Documents and in the instruments and agreements
included in the Trust Estate.
(b) The Issuer, with the consent of the Bond Insurer so long as no Bond
Insurer Default exists, may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate of
the Issuer shall be deemed to be action taken by the Issuer.
(c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Mortgage
Loans or under any instrument included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or discharge
of, or impair the validity or effectiveness of, any of the documents relating to
the Mortgage Loans or any such instrument, except such actions as the Servicer
is expressly permitted to take in the Servicing Agreement. The Indenture
Trustee, as pledgee of the Mortgage Loans, shall with the consent of, or
direction of, the Bond Insurer, so long as no Bond Insurer Default exists, be
able to exercise the rights of the Issuer to direct the actions of the Servicer
pursuant to the Servicing Agreement.
Section 3.09. NEGATIVE COVENANTS. So long as any Bonds are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture,
sell, transfer, exchange or otherwise dispose of the Trust Estate,
unless directed to do so by the Bond Insurer or the Indenture Trustee
with the consent of the Bond Insurer, so long as no Bond Insurer
Default exists;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Bonds (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Bondholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate;
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Bonds under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or
the proceeds thereof or (C) permit the lien of this Indenture not to
constitute a valid first priority security interest in the Trust
Estate; or
(iv) waive or impair, or fail to assert rights under,
the Mortgage Loans, or impair or cause to be impaired the Issuer's
interest in the Mortgage Loans, the Home
13
Equity Loan Purchase Agreement or any other Basic Document, if any such
action would materially and adversely affect the interests of the
Bondholders or the Bond Insurer.
Section 3.10. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will
deliver to the Indenture Trustee and the Bond Insurer, within 120 days after the
end of each fiscal year of the Issuer (commencing with the fiscal year 1998), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(i) a review of the activities of the Issuer during
such year and of its performance under this Indenture has been made
under such Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
Section 3.11. [Reserved].
Section 3.12. REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE
LOANS. The Indenture Trustee, as pledgee of the Mortgage Loans, has the benefit
of the representations and warranties made by the Seller in the Home Equity Loan
Purchase Agreement concerning the Seller and the Mortgage Loans and the right to
enforce the remedies against the Seller provided in such Home Equity Loan
Purchase Agreement to the same extent as though such representations and
warranties were made directly to the Indenture Trustee. If the Indenture Trustee
has actual knowledge of any breach of any representation or warranty made by the
Seller in the Home Equity Loan Purchase Agreement, the Indenture Trustee shall
promptly notify the Seller and the Bond Insurer of such finding and the Seller's
obligation to cure such breach or repurchase or substitute for the related
Mortgage Loan.
Section 3.13. AMENDMENTS TO SERVICING AGREEMENT. The Issuer covenants
with the Indenture Trustee and the Bond Insurer that it will not enter into any
amendment or supplement to the Servicing Agreement without the prior written
consent of the Indenture Trustee and the Bond Insurer. The Indenture Trustee, as
pledgee of the Mortgage Loans, may, with the consent of the Bond Insurer so long
as no Bond Insurer Default exists, decline to enter into or consent to any such
supplement or amendment if the Bond Insurer's or Bondholders' rights, duties or
immunities would be materially and adversely affected thereby. The Indenture
Trustee may, but shall not be obligated to, enter into any amendment or
supplement to the Servicing Agreement that affects the Indenture Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
Section 3.14. SERVICER AS AGENT AND BAILEE OF THE INDENTURE TRUSTEE.
Solely for purposes of perfection under Section 9-305 of the Uniform Commercial
Code or other similar applicable law, rule or regulation of the state in which
such property is held by the Servicer, the Issuer and the Indenture Trustee
hereby acknowledge that the Servicer is acting as agent and bailee of the
14
Indenture Trustee in holding amounts on deposit in the Collection Account, as
well as its agent and bailee in holding any Related Documents released to the
Servicer, and any other items constituting a part of the Trust Estate which from
time to time come into the possession of the Servicer. It is intended that, by
the Servicer's acceptance of such agency, the Indenture Trustee, as a secured
party of the Mortgage Loans, will be deemed to have possession of such Related
Documents, such monies and such other items for purposes of Section 9-305 of the
Uniform Commercial Code of the state in which such property is held by the
Servicer.
Section 3.15. INVESTMENT COMPANY ACT. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.15
if it shall have obtained an order exempting it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.
Section 3.16. ISSUER MAY CONSOLIDATE, ETC. (a) The Issuer shall not
consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any state or
the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form reasonably satisfactory to the Indenture Trustee and the Bond
Insurer, the due and punctual payment of the principal of and interest
on all Bonds and to the Certificate Paying Agent, on behalf of the
Certificateholders, and the payment of the Bond Insurance Premium and
all other amounts payable to the Bond Insurer and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such
transaction, no Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer
that such transaction shall not cause the rating of the Bonds to be
reduced, suspended or withdrawn or to be considered by either Rating
Agency to be below investment grade without taking into account the
Bond Insurance Policy;
(iv) the Issuer and the Bond Insurer shall have received
an Opinion of Counsel (and shall have delivered a copy thereof to the
Indenture Trustee) to the effect that such transaction will not (A)
adversely affect the status of the Bonds as indebtedness for federal
income tax purposes, or (B) cause the Trust to be subject to an entity
level tax for federal income tax purposes;
15
(v) any action that is necessary to maintain the lien
and security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture
Trustee and the Bond Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such consolidation or merger and such
supplemental indenture comply with this Article III and that all
conditions precedent herein provided for relating to such transaction
have been complied with (including any filing required by the Exchange
Act); and
(vii) the Bond Insurer, so long as no Bond Insurer
Default exists, shall have given its prior written consent.
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer
the properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any state, (B) expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee, the due and punctual
payment of the principal of and interest on all Bonds and to the
Certificate Paying Agent, on behalf of the Certificateholders, and the
payment of the Bond Insurance Premium and all other amounts payable to
the Bond Insurer and the performance or observance of every agreement
and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agree by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the
rights of the Holders of the Bonds and the Bond Insurer, (D) unless
otherwise provided in such supplemental indenture, expressly agree to
indemnify, defend and hold harmless the Issuer, the Indenture Trustee
and the Bond Insurer against and from any loss, liability or expense
arising under or related to this Indenture and the Bonds and (E)
expressly agree by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person) shall make
all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Bonds;
;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agencies shall have notified the Issuer
that such transaction shall not cause the rating of the Bonds or the
rating of the Bonds without taking into account the Bond Insurance
Policy to be reduced, suspended or withdrawn;
(iv) the Issuer and the Bond Insurer shall have received
an Opinion of Counsel (and shall have delivered a copy thereof to the
Indenture Trustee) to the effect that such transaction will not (A)
adversely affect the status of the Bonds as indebtedness for federal
16
income tax purposes, or (B) cause the Trust to be subject to an entity
level tax for federal income tax purposes;
(v) any action that is necessary to maintain the lien
and security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture
Trustee and the Bond Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such conveyance or transfer and such
supplemental indenture comply with this Article III and that all
conditions precedent herein provided for relating to such transaction
have been complied with (including any filing required by the Exchange
Act); and
(vii) the Bond Insurer, so long as no Bond Insurer
Default exists, shall have given its prior written consent.
Section 3.17. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.16(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.16(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Bonds immediately upon the delivery of written
notice to the Indenture Trustee and the Bond Insurer of such conveyance or
transfer and approval of such transaction given by the Bond Insurer to the
Indenture Trustee.
Section 3.18. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Mortgage Loans and the issuance of the Bonds and Certificates in the manner
contemplated by this Indenture and the Basic Documents and all activities
incidental thereto.
Section 3.19. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Bonds and amounts due to the Bond Insurer under this
Indenture and the Insurance Agreement.
Section 3.20. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except
as contemplated by this Indenture or the Basic Documents, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
17
Section 3.21. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.22. [Reserved]
Section 3.23. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that
the Issuer may make, or cause to be made, (x) distributions to the Owner Trustee
and the Certificateholders as contemplated by, and to the extent funds are
available for such purpose under this Indenture and the Trust Agreement and (y)
payments to the Servicer pursuant to the terms of the Servicing Agreement. The
Issuer will not, directly or indirectly, make payments to or distributions from
the Collection Account except in accordance with this Indenture and the Basic
Documents.
Section 3.24. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee, the Bond Insurer and the Rating Agencies prompt written
notice of each Event of Default hereunder and under the Trust Agreement.
Section 3.25. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Indenture Trustee or the Bond Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
Section 3.26. STATEMENTS TO BONDHOLDERS. On each Payment Date, the
Indenture Trustee and the Certificate Registrar shall forward by mail to each
Bondholder and Certificateholder, respectively, the statement prepared pursuant
to Section 7.05 of this Indenture. The Indenture Trustee shall have no
responsibility to (i) verify information provided by the Servicer to be included
in such statement or (ii) include any information required to be included in
such statement if the Servicer has failed to timely produce such information to
the Indenture Trustee as required pursuant to the Servicing Agreement.
Section 3.27. DETERMINATION OF BOND INTEREST RATE. On the second LIBOR
Business Day immediately preceding each Payment Date, the Indenture Trustee
shall determine One-Month LIBOR and the Bond Interest Rate for the following
Interest Period and shall inform the Issuer, the Servicer and the Company at
their respective facsimile numbers given to the Indenture Trustee in writing
thereof.
Section 3.28. PAYMENTS UNDER THE BOND INSURANCE POLICY. (a) On the
second Business Day immediately preceding any Payment Date, the Indenture
Trustee on behalf of the Bondholders shall file a notice of claim to the Bond
Insurer in an amount, if any, equal to the Deficiency Amount.
18
.
(b) If the Indenture Trustee determines that a Deficiency Amount will
exist for the following Payment Date, then the Indenture Trustee shall submit a
Notice (as defined in the Bond Insurance Policy) for payment in the amount of
the Deficiency Amount to the Bond Insurer no later than 12:00 Noon, New York
City time, on the second Business Day prior to the applicable Payment Date. Upon
receipt of such Deficiency Amount in accordance with the terms of the Bond
Insurance Policy, the Indenture Trustee shall deposit such Deficiency Amount in
the Payment Account for distribution to Bondholders pursuant to Section 3.05
hereof or with respect to an acceleration pursuant to Section 6.02 hereof. All
amounts received by the Indenture Trustee under the Bond Insurance Policy shall
remain uninvested.
In addition, a claim may be made under the Bond Insurance Policy in
respect of any Preference Amount (as defined in and pursuant to the terms and
conditions of the Bond Insurance Policy) and the Indenture Trustee shall submit
a Notice (as defined in the Bond Insurance Policy) for payment with respect
thereto together with the other documents required to be delivered to the Bond
Insurer pursuant to the Bond Insurance Policy in connection with a claim in
respect of any Preference Amount.
19
ARTICLE IV
The Bonds; Satisfaction and Discharge of Indenture
Section 4.01. THE BONDS. The Bonds shall be registered in the name of a
nominee designated by the Depository. Beneficial Owners will hold interests in
the Bonds through the book-entry facilities of the Depository in minimum
initial Bond Principal Balances of $25,000 and integral multiples of $1,000 in
excess thereof.
Subject to the last sentence of Section 4.12 , the Indenture Trustee
may for all purposes (including the making of payments due on the Bonds) deal
with the Depository as the authorized representative of the Beneficial Owners
with respect to the Bonds for the purposes of exercising the rights of Holders
of Bonds hereunder. In addition, subject to the last sentence of Section 4.12,
except as provided in the next succeeding paragraph of this Section 4.01, the
rights of Beneficial Owners with respect to the Bonds shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08
hereof, Beneficial Owners shall not be entitled to definitive certificates for
the Bonds as to which they are the Beneficial Owners. Requests and directions
from, and votes of, the Depository as Holder of the Bonds shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners. The
Indenture Trustee may establish a reasonable record date in connection with
solicitations of consents from or voting by Bondholders and give notice to the
Depository of such record date. Without the consent of the Issuer and the
Indenture Trustee, no Bond may be transferred by the Depository except to a
successor Depository that agrees to hold such Bond for the account of the
Beneficial Owners.
In the event The Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint a
successor Depository. If no successor Depository has been appointed within 30
days of the effective date of the Depository's resignation or removal, each
Beneficial Owner shall be entitled to certificates representing the Bonds it
beneficially owns in the manner prescribed in Section 4.08.
The Bonds shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Indenture Trustee and delivered by the Indenture
Trustee to or upon the order of the Issuer.
Section 4.02. REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE
OF BONDS; APPOINTMENT OF CERTIFICATE REGISTRAR. The Issuer shall cause the
Indenture Trustee, as Bond Registrar, to keep at the Corporate Trust Office a
Bond Register in which, subject to such reasonable regulations as it may
prescribe, the Bond Registrar shall provide for the registration of Bonds and of
transfers and exchanges of Bonds as herein provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Bond at the Corporate Trust
Office, the Issuer shall execute and the Indenture Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one
20
or more new Bonds in authorized initial Bond Principal Balances evidencing the
same aggregate Percentage Interests.
Subject to the foregoing, at the option of the Bondholders, Bonds may
be exchanged for other Bonds of like tenor and in authorized initial Bond
Principal Balances evidencing the same aggregate Percentage Interests upon
surrender of the Bonds to be exchanged at the Corporate Trust Office of the Bond
Registrar. Whenever any Bonds are so surrendered for exchange, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver the Bonds which
the Bondholder making the exchange is entitled to receive. Each Bond presented
or surrendered for registration of transfer or exchange shall (if so required by
the Bond Registrar) be duly endorsed by, or be accompanied by a written
instrument of transfer in form reasonably satisfactory to the Bond Registrar
duly executed by the Holder thereof or his attorney duly authorized in writing
with such signature guaranteed by a commercial bank or trust company located or
having a correspondent located in the City of New York or the city in which any
Corporate Trust Office is located. Bonds delivered upon any such transfer or
exchange will evidence the same obligations, and will be entitled to the same
rights and privileges, as the Bonds surrendered.
No service charge shall be made for any registration of transfer or
exchange of Bonds, but the Bond Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Bonds.
The Issuer hereby appoints the Indenture Trustee as Certificate
Registrar to keep at its Corporate Trust Office a Certificate Register pursuant
to Section 3.09 of the Trust Agreement in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges thereof pursuant to
Section 3.05 of the Trust Agreement. The Indenture Trustee hereby accepts such
appointment.
Section 4.03. MUTILATED, DESTROYED, LOST OR STOLEN BONDS. If (i) any
mutilated Bond is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Bond, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer, the Bond Insurer and the
Indenture Trustee harmless, then, in the absence of notice to the Issuer, the
Bond Registrar or the Indenture Trustee that such Bond has been acquired by a
bona fide purchaser, and provided that the requirements of Section 8-405 of the
UCC are met, the Issuer shall execute, and upon its request the Indenture
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Bond, a replacement Bond; provided,
however, that if any such destroyed, lost or stolen Bond, but not a mutilated
Bond, shall have become or within seven days shall be due and payable, instead
of issuing a replacement Bond, the Issuer may pay such destroyed, lost or stolen
Bond when so due or payable without surrender thereof. If, after the delivery of
such replacement Bond or payment of a destroyed, lost or stolen Bond pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Bond in lieu of which such replacement Bond was issued presents for payment such
original Bond, the Issuer, the Bond Insurer and the Indenture Trustee shall be
entitled to recover such replacement Bond (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Bond from such
Person to whom such replacement Bond was delivered or any assignee of such
Person,
21
except a bona fide purchaser, and shall be entitled to recover upon the security
or indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer, the Bond Insurer or the Indenture Trustee in
connection therewith.
Upon the issuance of any replacement Bond under this Section 4.03, the
Issuer may require the payment by the Holder of such Bond of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Bond issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Bond shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Bond shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Bonds duly issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Bonds.
Section 4.04. PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer of any Bond, the Issuer, the Bond Insurer, the
Indenture Trustee and any agent of the Issuer, the Bond Insurer, or the
Indenture Trustee may treat the Person in whose name any Bond is registered (as
of the day of determination) as the owner of such Bond for the purpose of
receiving payments of principal of and interest, if any, on such Bond and for
all other purposes whatsoever, whether or not such Bond be overdue, and neither
the Issuer, the Bond Insurer, the Indenture Trustee nor any agent of the Issuer,
the Bond Insurer or the Indenture Trustee shall be affected by notice to the
contrary.
Section 4.05. CANCELLATION. All Bonds surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly canceled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Bonds previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Bonds so delivered shall be promptly canceled by the
Indenture Trustee. No Bonds shall be authenticated in lieu of or in exchange for
any Bonds canceled as provided in this Section 4.05, except as expressly
permitted by this Indenture. All canceled Bonds may be held or disposed of by
the Indenture Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Request that they be destroyed or returned to it; provided, however, that such
Issuer Request is timely and the Bonds have not been previously disposed of by
the Indenture Trustee.
Section 4.06. BOOK-ENTRY BONDS. The Bonds, upon original issuance, will
be issued in the form of definitive Bonds representing the Book-Entry Bonds, to
be delivered to The Depository Trust Company, the initial Depository, by, or on
behalf of, the Issuer. Such Bonds shall initially be registered on the Bond
Register in the name of Cede & Co., the nominee of the
22
initial Depository, and no Beneficial Owner will receive a Definitive Bond
representing such Beneficial Owner's interest in such Bond, except as provided
in Section 4.08. Unless and until definitive, fully registered Bonds (the
"Definitive Bonds") have been issued to Beneficial Owners
pursuant to Section 4.08:
(i) the provisions of this Section 4.06 shall be in full
force and effect;
(ii) the Bond Registrar, the Bond Insurer and the
Indenture Trustee shall be entitled to deal with the Depository for all
purposes of this Indenture (including the payment of principal of and
interest on the Bonds and the giving of instructions or directions
hereunder) as the sole holder of the Bonds, and shall have no
obligation to the Beneficial Owners of Bonds;
(iii) to the extent that the provisions of this Section
4.06 conflict with any other provisions of this Indenture, the
provisions of this Section 4.06 shall control;
(iv) subject to the last sentence of Section 4.12, the
rights of Beneficial Owners shall be exercised only through the
Depository and shall be limited to those established by law and
agreements between such Beneficial Owners of Bonds and the Depository
and/or the Depository Participants. Unless and until Definitive Bonds
are issued pursuant to Section 4.08, the initial Depository will make
book-entry transfers among the Depository Participants and receive and
transmit payments of principal of and interest on the Bonds to such
Depository Participants; and
(v) subject to the last sentence of Section 4.12,
whenever this Indenture requires or permits actions to be taken based
upon instructions or directions of Holders of Bonds evidencing a
specified percentage of the Bond Principal Balances of the Bonds, the
Depository shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Beneficial
Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Bonds and has delivered such instructions to the Indenture Trustee.
Section 4.07. NOTICES TO DEPOSITORY. Whenever a notice or other
communication to the Bondholders is required under this Indenture, unless and
until Definitive Bonds shall have been issued to Beneficial Owners pursuant to
Section 4.08, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Bonds to the
Depository, and shall have no obligation to the Beneficial Owners.
Section 4.08. DEFINITIVE BONDS. If (i) the Indenture Trustee determines
that the Depository is no longer willing or able to properly discharge its
responsibilities with respect to the Bonds and the Indenture Trustee is unable
to locate a qualified successor, (ii) the Indenture Trustee elects to terminate
the book-entry system through the Depository or (iii) after the occurrence of an
Event of Default, Beneficial Owners of Bonds representing beneficial interests
aggregating at least a majority of the Bond Principal Balances of the Bonds
advise the Depository in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of
23
the Beneficial Owners, then the Depository shall notify all Beneficial Owners
and the Indenture Trustee of the occurrence of any such event and of the
availability of Definitive Bonds to Beneficial Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Bonds representing the
Book-Entry Bonds by the Depository, accompanied by registration instructions,
the Issuer shall execute and the Indenture Trustee shall authenticate the
Definitive Bonds in accordance with the instructions of the Depository. None of
the Issuer, the Bond Registrar or the Indenture Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Bonds, the Indenture Trustee shall recognize the Holders of the Definitive Bonds
as Bondholders. The Indenture Trustee shall notify the Bond Insurer upon the
issuance of Definitive Bonds.
Section 4.09. TAX TREATMENT. The Issuer has entered into this
Indenture, and the Bonds will be issued, with the intention that, for federal,
state and local income, single business and franchise tax purposes, the Bonds
will qualify as indebtedness. The Issuer, by entering into this Indenture, and
each Bondholder, by its acceptance of its Bond (and each Beneficial Owner by its
acceptance of an interest in the applicable Book-Entry Bond), agree to treat the
Bonds for federal, state and local income, single business and franchise tax
purposes as indebtedness.
Section 4.10. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Bonds, except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Bonds, (iii) rights of Bondholders (and the Bond
Insurer, as subrogee of the Bondholders) to receive payments of principal
thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09, 3.16, 3.18
and 3.19, (v) the rights, obligations and immunities of the Indenture Trustee
hereunder (including the rights of the Indenture Trustee under Section 6.07 and
the obligations of the Indenture Trustee under Section 4.11) and (vi) the rights
of Bondholders as beneficiaries hereof with respect to the property so deposited
with the Indenture Trustee payable to all or any of them, and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Bonds and shall release and deliver the Collateral to or upon the
order of the Issuer, when
(A) either
(1) all Bonds theretofore authenticated and delivered (other
than (i) Bonds that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 4.03 hereof and (ii) Bonds
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 3.03) have
been delivered to the Indenture Trustee for cancellation; or
(2) all Bonds not theretofore delivered to the Indenture
Trustee for cancellation
a. have become due and payable,
24
b. will become due and payable at the Final Scheduled
Payment Date within one year, or
c. have been called for early redemption pursuant to
Section 8.07 hereof,
and the Issuer, in the case of a. or b. above, has irrevocably
deposited or caused to be irrevocably deposited with the Indenture
Trustee cash or direct obligations of or obligations guaranteed by the
United States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such Bonds
then outstanding not theretofore delivered to the Indenture Trustee for
cancellation when due on the Final Scheduled Payment Date or other
final Payment Date and has delivered to the Indenture Trustee and the
Bond Insurer a verification report from a nationally recognized
accounting firm certifying that the amounts deposited with the
Indenture Trustee are sufficient to pay and discharge the entire
indebtedness of such Bonds, or, in the case of c. above, the Issuer
shall have complied with all requirements of Section 8.07 hereof;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder and under the Insurance Agreement by the Issuer as
evidenced by the written consent of the Bond Insurer; and
(C) the Issuer has delivered to the Indenture Trustee and the
Bond Insurer an Officer's Certificate and an Opinion of Counsel, each
meeting the applicable requirements of Section 10.01 hereof, each
stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been complied
with and, if the Opinion of Counsel relates to a deposit made in
connection with Section 4.10(A)(2)b. above, such opinion shall further
be to the effect that such deposit will constitute an "in-substance
defeasance" within the meaning of Revenue Ruling 85-42, 1985-1 C.B. 36,
and in accordance therewith, the Issuer will be the owner of the assets
deposited in trust for federal income tax purposes.
Section 4.11. APPLICATION OF TRUST MONEY. All monies deposited with the
Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Bonds and this
Indenture, to the payment, either directly or through any Paying Agent or the
Issuer, Certificate Paying Agent as designee of the Issuer or the Bond Insurer,
as applicable, as the Indenture Trustee may determine, to the Holders of Bonds,
of all sums due and to become due thereon for principal and interest or
otherwise; but such monies need not be segregated from other funds except to the
extent required herein or required by law.
Section 4.12. SUBROGATION AND COOPERATION. (a) The Issuer and the
Indenture Trustee acknowledge (and each Bondholder by acceptance of its Bond
hereby agrees) that (i) to the extent the Bond Insurer makes payments under the
Bond Insurance Policy on account of principal of or interest on the Bonds, the
Bond Insurer will be fully subrogated to the rights of such Holders to receive
such principal and interest from the Issuer, and (ii) the Bond Insurer shall be
paid such
25
principal and interest but only from the sources and in the manner provided
herein and in the Insurance Agreement for the payment of such principal and
interest.
Insured Payments disbursed by the Indenture Trustee from proceeds of
the Bond Insurance Policy shall not be considered payment by the Issuer with
respect to the Bonds, nor shall such disbursement of such Insured Payments
discharge the obligations of the Issuer with respect to the amounts thereof, and
the Bond Insurer shall become the owner of such amounts as the deemed subrogee
of such Bondholders.
So long as no Bond Insurer Default exists, the Indenture Trustee shall
cooperate in all respects with any reasonable request by the Bond Insurer for
action to preserve or enforce the Bond Insurer's rights or interest under this
Indenture or the Insurance Agreement, consistent with this Indenture and without
limiting the rights of the Bondholders as otherwise set forth in the Indenture,
including, without limitation, upon the occurrence and continuance of a default
under the Insurance Agreement, a request to take any one or more of the
following actions:
(i) institute Proceedings for the collection of all
amounts then payable on the Bonds, or under this Indenture in respect
to the Bonds and all amounts payable under the Insurance Agreement,
enforce any judgment obtained and collect from the Issuer monies
adjudged due;
(ii) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private Sales
called and conducted in any manner permitted by law;
(iii) file or record all Assignments of Mortgage that
have not previously been recorded;
(iv) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture; and
(v) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Bond Insurer hereunder;
provided, however, action shall be taken pursuant to this Section 4.12 by the
Indenture Trustee to preserve the Bond Insurer's rights or interest under this
Agreement or the Insurance Agreement only to the extent such action is available
to the Bondholders or the Bond Insurer under other provisions of this Indenture.
Notwithstanding any provision of this Indenture to the contrary, so
long as no Bond Insurer Default exists, the Bond Insurer shall at all times be
treated as if it were the exclusive Bondholder for the purposes of all
approvals, consents, waivers and the institution of any action and the direction
of all remedies hereunder, and the Indenture Trustee shall act in accordance
with the directions of the Bond Insurer so long as it is indemnified therefor to
its reasonable satisfaction; provided, however, that the provisions of the first
paragraph of Section 5.06 shall not apply to the
26
Bond Insurer when the Bond Insurer is exercising the rights of the Bondholders
pursuant to this paragraph.
Section 4.13. REPAYMENT OF MONIES HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to the Bonds,
all monies then held by any Person other than the Indenture Trustee under the
provisions of this Indenture with respect to such Bonds shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.05 and thereupon such Person shall be released from all further
liability with respect to such monies.
Section 4.14. TEMPORARY BONDS. Pending the preparation of any
Definitive Bonds, the Issuer may execute and upon its written direction, the
Indenture Trustee may authenticate and make available for delivery, temporary
Bonds that are printed, lithographed, typewritten, photocopied or otherwise
produced, in any denomination, substantially of the tenor of the Definitive
Bonds in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such
Bonds may reasonably determine, as evidenced by their execution of such Bonds.
If temporary Bonds are issued, the Issuer will cause Definitive Bonds
to be prepared without unreasonable delay. After the preparation of the
Definitive Bonds, the temporary Bonds shall be exchangeable for Definitive Bonds
upon surrender of the temporary Bonds at the office or agency of the Indenture
Trustee, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Bonds, the Issuer shall execute and the Indenture Trustee
shall authenticate and make available for delivery, in exchange therefor,
Definitive Bonds of authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Bonds shall in all respects
be entitled to the same benefits under this Indenture as Definitive Bonds.
27
ARTICLE V
DEFAULT AND REMEDIES
--------------------
Section 5.01. EVENTS OF DEFAULT. The Issuer shall deliver to the
Indenture Trustee and the Bond Insurer, within five days after learning of the
occurrence of a Default or an Event of Default, written notice in the form of an
Officer's Certificate of the occurrence of such Default or Event of Default, its
status and what action the Issuer is taking or proposes to take with respect
thereto.
Section 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur and be continuing, then and in every such case the
Indenture Trustee may (with the prior written consent of the Bond Insurer), and,
at the written direction of the Bond Insurer (which such written direction shall
include a statement to the effect that such acceleration is at the sole option
of the Bond Insurer and that an amount equal to the excess, if any, of the sum
of the unpaid Bond Principal Balance of the Bonds together with accrued and
unpaid interest thereon through the date of payment of such accelerated Bonds,
over Available Funds for such date of payment, would constitute a Deficiency
Amount pursuant to the terms of the Bond Insurance Policy and will be paid by
the Bond Insurer in connection with the acceleration in accordance with the
terms of the Bond Insurance Policy), or if a Bond Insurer Default exists, the
Holders of Bonds representing not less than a majority of the Bond Principal
Balances of all Bonds, shall, declare the Bonds to be immediately due and
payable, by a notice in writing to the Issuer (and to the Indenture Trustee if
given by Bondholders), and upon any such declaration the unpaid Bond Principal
Balance of the Bonds, together with accrued and unpaid interest thereon through
the date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity with
respect to an Event of Default has been made and before a judgment or decree for
payment of the money due has been obtained by the Indenture Trustee as
hereinafter in this Article V provided, the Bond Insurer or, if a Bond Insurer
Default exists, the Holders of Bonds representing a majority of the Bond
Principal Balances of all Bonds, by written notice to the Issuer and the
Indenture Trustee, may waive the related Event of Default and rescind and annul
such declaration and its consequences if:
(i) the Issuer or the Bond Insurer has paid or
deposited with the Indenture Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on the
Bonds and all other amounts that would then be due hereunder
or upon the Bonds if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums reasonably paid or advanced by the
Indenture Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee
and its agents and counsel; and
28
(ii) all Events of Default, other than the nonpayment of
the principal of the Bonds that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
provided, however, the Bond Insurer, so long as no Bond Insurer Default exists,
may waive an Event of Default regardless of Section 5.02(i) or (ii) above.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the
payment of any interest (including the Interest Payment Amount) on any Bond when
the same becomes due and payable, and such default continues for a period of
five days, or (ii) default is made in the payment of the principal (including
the Principal Payment Amount and the Subordination Increase Amount) of or any
installment of the principal of any Bond when the same becomes due and payable,
the Issuer shall, upon demand of the Indenture Trustee, at the direction of the
Bond Insurer, so long as no Bond Insurer Default exists, pay to the Indenture
Trustee, for the benefit of the Holders of Bonds and of the Bond Insurer, the
whole amount then due and payable on the Bonds for principal and interest, with
interest at the Bond Interest Rate upon the overdue principal, and in addition
thereto such further amount as shall be sufficient to cover the reasonable costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, and at the direction of the Bond Insurer, so long as no Bond Insurer
Default exists, subject to the provisions of Section
10.16
hereof, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon the Bonds and collect
in the manner provided by law out of the property of the Issuer or other obligor
the Bonds, wherever situated, the monies adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee, at the direction of the Bond Insurer, so long as no Bond Insurer
Default exists, subject to the provisions of Section 10.16 hereof may, as more
particularly provided in Section 5.04 hereof, in its discretion, proceed to
protect and enforce its rights and the rights of the Bondholders and the Bond
Insurer, by such appropriate Proceedings as the Indenture Trustee, at the
direction of the Bond Insurer, so long as no Bond Insurer Default exists, shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Indenture Trustee by this Indenture or
by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Bonds or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings
29
under Title 11 of the United States Code or any other applicable federal or
state bankruptcy, insolvency or other similar law, or in case a receiver,
assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or
similar official shall have been appointed for or taken possession of the Issuer
or its property or such other obligor or Person, or in case of any other
comparable judicial Proceedings relative to the Issuer or other obligor upon the
Bonds, or to the creditors or property of the Issuer or such other obligor, the
Indenture Trustee, at the direction of the Bond Insurer, so long as no Bond
Insurer Default exists, irrespective of whether the principal of any Bonds shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Bonds and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all reasonable
expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence or bad faith), the Bond Insurer and of the
Bondholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of Bonds in any election
of a trustee, a standby trustee or Person performing similar functions
in any such Proceedings;
(iii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Bondholders, the Bond
Insurer and of the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee, the Bond Insurer or the Holders of Bonds
allowed in any judicial proceedings relative to the Issuer, its
creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Bondholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee,
with the consent of the Bond Insurer, so long as no Bond Insurer Default exists,
shall consent to the making of payments directly to such Bondholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, all other reasonable expenses
and liabilities incurred, all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee, except as a result of negligence or bad faith,
and all amounts due to the Bond Insurer.
30
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Bondholder any plan of reorganization, arrangement, adjustment or
composition affecting the Bonds or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any Bond
holder in any such proceeding except, as aforesaid, to vote for the election of
a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Bonds, may be enforced by the Indenture Trustee without the
possession of any of the Bonds or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the reasonable
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders of the Bonds and the Bond Insurer,
subject to Section 5.05 hereof.
(g) In any Proceedings brought by the Indenture Trustee with the
consent of the Bond Insurer, so long as no Bond Insurer Default exists (and also
any Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Bonds, and it shall not be necessary to
make any Bondholder a party to any such Proceedings.
Section 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default shall
have occurred and be continuing and if an acceleration has been declared and not
rescinded pursuant to Section 5.02 hereof, the Indenture Trustee, subject to the
provisions of Section 10.16 hereof and with the consent of the Bond Insurer so
long as no Bond Insurer Default exists, may and, at the direction of the Bond
Insurer so long as no Bond Insurer Default exists, shall, do one or more of the
following (subject to Section 5.05 hereof):
(i) institute Proceedings in its own name and as
trustee of an express trust for the collection of all amounts then
payable on the Bonds or under this Indenture with respect thereto,
whether by declaration or otherwise, and all amounts payable under the
Insurance Agreement, enforce any judgment obtained, and collect from
the Issuer and any other obligor upon such Bonds monies adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Trust Estate;
(iii) exercise any remedies of a secured party under the
UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Indenture Trustee, the Holders of the Bonds
and the Bond Insurer; and
(iv) sell the Trust Estate or any portion thereof or
rights or interest therein, at one or more public or private sales
called and conducted in any manner permitted by law;
31
provided, however, that so long as a Bond Insurer Default exists, the Indenture
Trustee may not sell or otherwise liquidate the Trust Estate following an Event
of Default, unless (A) the Indenture Trustee obtains the consent of the Holders
of 100% of the aggregate Bond Principal Balance, (B) the proceeds of such sale
or liquidation distributable to the Holders of the Bonds are sufficient to
discharge in full all amounts then due and unpaid upon the Bonds for principal
and interest and to reimburse the Bond Insurer for any amounts drawn under the
Bond Insurance Policy and any other amounts due to the Bond Insurer under the
Insurance Agreement or (C) the Indenture Trustee determines that the Mortgage
Loans will not continue to provide sufficient funds for the payment of principal
of and interest on the Bonds as they would have become due if the Bonds had not
been declared due and payable, and the Indenture Trustee obtains the consent of
the Holders of a majority of the aggregate Bond Principal Balance. In
determining such sufficiency or insufficiency with respect to clause (B) and
(C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of
an Independent investment banking or accounting firm of national reputation as
to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order;
PROVIDED, HOWEVER, that any amounts representing payments from the Bond Insurer
shall only be used to pay interest and principal to the Bondholders pursuant to
clauses THIRD and FOURTH below:
FIRST: to the Indenture Trustee for amounts due under Section
6.07 hereof;
SECOND: to the Bond Insurer, provided no Bond Insurer Default
exists, with respect to any Bond Insurance Premium then due;
THIRD: to the Bondholders for amounts due and unpaid on the
Bonds with respect to interest, ratably, without preference or
priority of any kind, according to the amounts due and payable
on the Bonds for interest (including the Interest Payment
Amount but not including any Prepayment Interest Shortfalls,
any Relief Act Shortfalls and the Carry-Forward Amount) from
amounts available in the Trust Estate for the Bondholders;
FOURTH: to Bondholders for amounts due and unpaid on the Bonds
with respect to principal (including, but not limited to, any
Principal Payment Amount), from amounts available in the Trust
Estate for the Bondholders, and to each Bondholder ratably,
without preference or priority of any kind, according to the
amounts due and payable on the Bonds for principal, until the
Bond Principal Balance is reduced to zero;
FIFTH: to the Bond Insurer, the sum of (a) all payments
previously paid by the Bond Insurer under the Bond Insurance
Policy which have not previously been reimbursed, (b) any
other amounts due to the Bond Insurer pursuant to the
Insurance Agreement, to the extent not previously paid or
reimbursed and (c) interest on the foregoing as set forth in
the Insurance Agreement from the date such
32
amounts become due until paid in full (including any Bond
Insurance Premium not paid pursuant to clause SECOND above);
SIXTH: to the Bondholders for amounts due and unpaid on the
Bonds with respect to the Carry-Forward Amount, ratably,
without preference or priority of any kind, according to the
amounts due and payable on the Bonds with respect thereto,
from amounts available in the Trust Estate for the
Bondholders; and
SEVENTH: to the payment of the remainder, if any, to the
Issuer or any other person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any
payment to Bondholders pursuant to this Section 5.04. With respect to any
acceleration at the direction of the Bond Insurer, the first payment date after
the acceleration shall be the first Payment Date after the acceleration. At
least 15 days before such record date, the Indenture Trustee shall mail to each
Bondholder a notice that states the record date, the payment date and the amount
to be paid.
Section 5.05. OPTIONAL PRESERVATION OF THE TRUST ESTATE. If the Bonds
have been declared to be due and payable under Section 5.02 following an Event
of Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, with the consent of the Bond Insurer, and
shall, at the direction of the Bond Insurer, so long as no Bond Insurer Default
exists, elect to take and maintain possession of the Trust Estate. It is the
desire of the parties hereto and the Bondholders that there be at all times
sufficient funds for the payment of principal of and interest on the Bonds and
other obligations of the Issuer including payment to the Bond Insurer, and the
Indenture Trustee shall take such desire into account when determining whether
or not to take and maintain possession of the Trust Estate. In determining
whether to take and maintain possession of the Trust Estate, the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
Section 5.06. LIMITATION OF SUITS. No Holder of any Bond shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless subject to the provisions of Section 10.16 hereof:
(i) such Holder has previously given written notice to
the Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Bond
Principal Balances of the Bonds have made a written request to the
Indenture Trustee to institute such Proceeding in respect of such Event
of Default in its own name as Indenture Trustee hereunder;
33
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt
of such notice of request and offer of indemnity has failed to
institute such Proceedings;
(v) no direction inconsistent with such written request
has been given to the Indenture Trustee during such 60-day period by
the Holders of a majority of the Bond Principal Balances of the Bonds;
and
(vi) such Holder or Holders have the consent of the Bond
Insurer, unless a Bond Insurer Default exists.
It is understood and intended that no one or more Holders of Bonds shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Bonds or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
Subject to the last paragraph of Section 4.12 herein, in the event the
Indenture Trustee shall receive conflicting or inconsistent requests and
indemnity from two or more groups of Holders of Bonds, each representing less
than a majority of the Bond Principal Balances of the Bonds, the Indenture
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
Section 5.07. UNCONDITIONAL RIGHTS OF BONDHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in this Indenture, the Holder
of any Bond shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Bond on or
after the respective due dates thereof expressed in such Bond or in this
Indenture and to institute suit for the enforcement of any such payment, and
such right shall not be impaired without the consent of such Holder.
Section 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee or any Bondholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee, the Bond Insurer or to such Bondholder, then and in every such case the
Issuer, the Indenture Trustee, the Bond Insurer and the Bondholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Indenture Trustee, the Bond Insurer and the Bondholders shall
continue as though no such Proceeding had been instituted.
Section 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee, the Bond Insurer or to the
Bondholders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the
34
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of
the Indenture Trustee, the Bond Insurer or any Holder of any Bond to exercise
any right or remedy accruing upon any Event of Default shall impair any such
right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Indenture Trustee, the Bond Insurer or to the Bondholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee, the Bond Insurer or by the Bondholders, as the case may be.
Section 5.11. CONTROL BY BOND INSURER. The Bond Insurer, or if a Bond
Insurer Default exists, the Holders of a majority of the Bond Principal Balances
of Bonds shall have the right (subject to the provisions of Section 5.06) to
direct the time, method and place of conducting any Proceeding for any remedy
available to the Indenture Trustee with respect to the Bonds or exercising any
trust or power conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) if a Bond Insurer Default exists, subject to the
express terms of Section 5.04, any direction to the Indenture Trustee
to sell or liquidate the Trust Estate shall be by Holders of Bonds
representing 100% of the Bond Principal Balances of the Bonds;
(iii) if the conditions set forth in Section 5.05 hereof
have been satisfied and the Indenture Trustee, with the consent of the
Bond Insurer, so long as no Bond Insurer Default exists, elects to
retain the Trust Estate pursuant to such Section, then any direction to
the Indenture Trustee by Holders of Bonds (other than with respect to
the Bond Insurer exercising the rights of Bondholders pursuant to the
last sentence of Section 4.12) to sell or liquidate the Trust Estate
shall be of no force and effect; and
(iv) if a Bond Insurer Default exists, the Indenture
Trustee may take any other action deemed proper by the Indenture
Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Bondholders set forth in this Section, subject to
Section 6.01, the Indenture Trustee need not take any action that it determines
might involve it in liability or, if a Bond Insurer Default exists, might
materially adversely affect the rights of any Bondholders not consenting to such
action.
Section 5.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Bonds as provided in Section 5.02 hereof,
the Bond Insurer, or if a Bond Insurer Default exists, the Holders of Bonds of
not less than a majority of the Bond Principal
35
Balances of the Bonds, may waive any past Event of Default and its consequences
except an Event of Default (a) with respect to payment of principal of or
interest on any of the Bonds or (b) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the Holder of each
Bond or (c) the waiver of which would materially and adversely affect the
interests of the Bond Insurer or modify its obligation under the Bond Insurance
Policy. In the case of any such waiver, the Issuer, the Indenture Trustee and
the Holders of the Bonds shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.
Section 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Bond by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee or the Bond Insurer, (b) any suit instituted by any
Bondholder, or group of Bondholders, in each case holding in the aggregate more
than 10% of the Bond Principal Balances of the Bonds or (c) any suit instituted
by any Bondholder for the enforcement of the payment of principal of or interest
on any Bond on or after the respective due dates expressed in such Bond and in
this Indenture.
Section 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.15. SALE OF TRUST ESTATE. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 hereof is expressly subject to the provisions of Section 5.05
hereof and this Section 5.15. The power to effect any such Sale shall not be
exhausted by any one or more Sales as to any portion of the Trust Estate
remaining unsold, but shall continue unimpaired until the entire Trust Estate
shall have been sold or all amounts payable on the Bonds and under this
Indenture and under the Insurance Agreement shall have been paid. The Indenture
Trustee with the consent of the Bond Insurer, so long as no Bond Insurer Default
exists, may from time to time postpone any public Sale by public
36
announcement made at the time and place of such Sale. The Indenture Trustee
hereby expressly waives its right to any amount fixed by law as compensation for
any Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
(1) the Bond Insurer or, if a Bond Insurer Default exists, the
Holders of all Bonds, consent to or direct the Indenture Trustee to make, such
Sale, or
(2) unless the Bond Insurer otherwise consents, the proceeds
of such Sale would be not less than the entire amount which would be payable to
the Bondholders under the Bonds and the Bond Insurer in respect of amounts drawn
under the Bond Insurance Policy and any other amounts due to the Bond Insurer
under the Insurance Agreement, in full payment thereof in accordance with
Section 5.02 hereof, on the Payment Date next succeeding the date of such Sale,
or
(3) The Indenture Trustee determines with the consent of the
Bond Insurer, so long as no Bond Insurer Default exists, that the conditions for
retention of the Trust Estate set forth in Section 5.05 hereof cannot be
satisfied (in making any such determination, the Indenture Trustee may rely upon
an opinion of an Independent investment banking firm obtained and delivered as
provided in Section 5.05 hereof), and the Bond Insurer consents to such Sale, or
if a Bond Insurer Default exists, the Holders of Bonds representing at least
66-2/3% of the Bond Principal Balances of the Bonds consent to such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust Estate
at a private Sale shall not be deemed a Sale or other disposition thereof for
purposes of this Section 5.15(b).
(c) Unless the Bond Insurer or, if a Bond Insurer Default exists, the
Holders of Bonds representing at least 66-2/3% of the Bond Principal Balances of
the Bonds have otherwise consented or directed the Indenture Trustee, at any
public Sale of all or any portion of the Trust Estate at which a minimum bid
equal to or greater than the amount described in paragraph (2) of subsection (b)
of this Section 5.15 has not been established by the Indenture Trustee and no
Person bids an amount equal to or greater than such amount, the Indenture
Trustee shall bid an amount at least $1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust
Estate,
(1) any Holder or Holders of Bonds may bid for and with the
consent of the Bond Insurer 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 Bonds or claims for interest thereon in lieu of cash
up to the amount which shall, upon distribution of the net proceeds of such
sale, be payable thereon, and such Bonds, in case the amounts so payable thereon
shall be less than the amount due thereon, shall be returned to the Holders
thereof after being appropriately stamped to show such partial payment;
37
(2) the Indenture Trustee, with the consent of the Bond
Insurer, so long as no Bond Insurer Default exists, may bid for and acquire the
property offered for Sale in connection with any Sale thereof, and, subject to
any requirements of, and to the extent permitted by, applicable law in
connection therewith, may purchase all or any portion of the Trust Estate in a
private sale, and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting the gross Sale price against the sum of (A) the
amount which would be distributable to the Holders of the Bonds and Holders of
Certificates and amounts owing to the Bond Insurer as a result of such Sale in
accordance with Section 5.04(b) hereof on the Payment Date next succeeding the
date of such Sale and (B) the reasonable expenses of the Sale and of any
Proceedings in connection therewith which are reimbursable to it, without being
required to produce the Bonds in order to complete any such Sale or in order for
the net Sale price to be credited against such Bonds, and any property so
acquired by the Indenture Trustee shall be held and dealt with by it in
accordance with the provisions of this Indenture;
(3) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion of
the Trust Estate in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its interest in
any portion of the Trust Estate in connection with a Sale thereof, and to take
all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any monies.
Section 5.16. ACTION ON BONDS. The Indenture Trustee's right to seek
and recover judgment on the Bonds or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee, the Bond Insurer or the Bondholders shall be
impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Trust Estate or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with Section
5.04(b) hereof.
Section 5.17. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so, the Issuer, in
its capacity as holder of the Mortgage Loans, shall take all such lawful action
as the Indenture Trustee or the Bond Insurer may request to cause the Issuer to
compel or secure the performance and observance by the Seller and the Servicer,
as applicable, of each of their obligations to the Issuer under or in connection
with the Home Equity Loan Purchase Agreement and the Servicing Agreement, and to
exercise any and all rights, remedies, powers and privileges lawfully available
to the Issuer under or in connection with the Home Equity Loan Purchase
Agreement and the Servicing Agreement to the extent and in the manner directed
by the Indenture Trustee, with the consent of the Bond Insurer, so long as no
Bond Insurer Default exists, as pledgee of the Mortgage Loans, including the
transmission of
38
notices of default on the part of the Seller or the Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Seller or the Servicer of each of their obligations
under the Home Equity Loan Purchase Agreement and the Servicing Agreement. So
long as no Bond Insurer Default exists, the Bond Insurer shall have the right to
approve or reject any proposed successor to the Servicer (other than the
Indenture Trustee) under the Servicing Agreement.
(b) The Indenture Trustee, as pledgee of the Mortgage Loans, subject to
the rights of the Bond Insurer under this Agreement and the Servicing Agreement
may, and at the direction (which direction shall be in writing or by telephone
(confirmed in writing promptly thereafter)) of the Bond Insurer or, if a Bond
Insurer Default exists, the Holders of 66-2/3% of the Bond Principal Balances of
the Bonds, shall exercise all rights, remedies, powers, privileges and claims of
the Issuer against the Seller or the Servicer under or in connection with the
Home Equity Loan Purchase Agreement and the Servicing Agreement, including the
right or power to take any action to compel or secure performance or observance
by the Seller or the Servicer, as the case may be, of each of their obligations
to the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Home Equity Loan Purchase Agreement and
the Servicing Agreement, as the case may be, and any right of the Issuer to take
such action shall not be suspended.
39
ARTICLE VI
THE INDENTURE TRUSTEE
---------------------
Section 6.01. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it (A) pursuant to Sections
5.11 or 5.15 or (B) from the Bond Insurer, which it is entitled to give
under any of the Basic Documents.
(d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(e) Money held in trust by the Indenture Trustee need not be segregated
from other trust funds except to the extent required by law or the terms of this
Indenture or the Trust Agreement.
(f) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
40
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
(h) The Indenture Trustee shall act in accordance with Sections 6.03
and 6.04 of the Servicing Agreement and shall act as successor to the Servicer
in accordance with Section 6.02 of the Servicing Agreement.
(i) 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
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 which is in fact such an Event of Default or Default is received by
the Indenture Trustee at the Corporate Trust Office, and such notice references
the Bonds generally, the Issuer, the Trust Estate or this Indenture.
The Indenture Trustee is hereby authorized to execute and shall execute
the Servicing Agreement and the Home Equity Loan Purchase Agreement and shall
perform its duties and satisfy its obligations thereunder. Every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Indenture Trustee shall apply to the Indenture
Trustee's execution of the Servicing Agreement and the Home Equity Loan Purchase
Agreement and the performance of its duties and satisfaction of its obligations
thereunder.
Section 6.02. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee, which Officer's
Certificate or Opinion of Counsel shall not be at the expense of the Indenture
Trustee or the Trust Estate (except in the priority set forth in Section
3.05(a)(viii)). The Indenture Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on an Officer's Certificate or
Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.
41
(e) The Indenture Trustee may consult with counsel chosen by it with
due care, and the advice or opinion of counsel with respect to legal matters
relating to this Indenture and the Bonds shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
Section 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Bonds and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Bond Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Section 6.11 hereof.
Section 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Bonds, it shall not be accountable for the
Issuer's use of the proceeds from the Bonds, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Bonds or in the Bonds other than the Indenture
Trustee's certificate of authentication.
Section 6.05. NOTICE OF EVENT OF DEFAULT. If an Event of Default occurs
and is continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall give notice thereof to the Bond Insurer.
The Trustee shall mail to each Bondholder notice of the Event of Default within
10 days after a Responsible Officer has actual knowledge thereof unless such
Event of Default shall have been waived or cured. Except in the case of an Event
of Default in payment of principal of or interest on any Bond, the Indenture
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of Bondholders.
Section 6.06. TAX ADMINISTRATION OF THE ISSUER. The Indenture Trustee,
based solely on information timely provided by the Servicer, shall prepare and
file (or cause to be prepared and filed), on behalf of the Owner Trustee, all
tax returns and information reports, tax elections and such annual or other
reports of the Issuer as are necessary for preparation of tax returns and
information reports as provided in Section 5.03 of the Trust Agreement,
including without limitation Form 1099. All tax returns and information reports
shall be signed by the Owner Trustee as provided in Section 5.03 of the Trust
Agreement.
Section 6.07. COMPENSATION AND INDEMNITY. The Issuer shall pay to the
Indenture Trustee on each Payment Date reasonable compensation for its services.
The amount of the Indenture Trustee Fee shall be paid to the Indenture Trustee
on each Payment Date pursuant to Section 3.05(a)(i) of this Indenture, and all
amounts owing to the Indenture Trustee hereunder in excess of such amount shall
be paid solely as provided in Section 3.05(a)(viii) hereof and Section 5.06 of
the Servicing Agreement. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to
compensation for its services subject to the priorities established by
42
Sections 3.05(a)(viii) and 5.04(b) of this Indenture. Such expenses shall
include reasonable compensation and expenses, disbursements and advances of the
Indenture Trustee's agents, counsel, accountants and experts. Subject to the
priorities established in Section 3.05(a)(viii) and Section 5.04(b) of this
Indenture, the Issuer shall indemnify the Indenture Trustee against any and all
loss, liability or expense (including reasonable attorneys' fees) incurred by it
in connection with the administration of this Trust Estate and the performance
of its duties hereunder. The Indenture Trustee shall notify the Issuer promptly
of any claim for which it may seek indemnity. Failure by the Indenture Trustee
to so notify the Issuer shall not relieve the Issuer of its obligations
hereunder. The Issuer shall defend any such claim, and the Indenture Trustee may
have separate counsel and the Issuer shall pay the reasonable fees and expenses
of such counsel. The Issuer is not obligated to reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of an Event of Default
with respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other
applicable federal or state bankruptcy, insolvency or similar law.
Section 6.08. REPLACEMENT OF INDENTURE TRUSTEE. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer and the Bond Insurer. The Bond
Insurer or, if a Bond Insurer Default exists, the Holders of a majority of Bond
Principal Balances of the Bonds may remove the Indenture Trustee by so notifying
the Issuer and the Indenture Trustee and the Bond Insurer and may appoint a
successor Indenture Trustee. The Issuer shall, with the consent of the Bond
Insurer, so long as no Bond Insurer Default exists, remove the Indenture Trustee
if:
(i) the Indenture Trustee fails to comply with Section
6.11 hereof;
(ii) the Indenture Trustee is adjudged a bankrupt or
insolvent;
(iii) a receiver or other public officer takes charge of
the Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of the Indenture Trustee for any reason (the Indenture Trustee in
such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall, with the consent of the Bond Insurer, so long as no Bond Insurer
Default exists, promptly appoint a successor Indenture Trustee reasonably
acceptable to the Bond Insurer.
43
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee, the Bond Insurer and to the
Issuer. Thereupon, the resignation or removal of the retiring Indenture Trustee
shall become effective, and the successor Indenture Trustee shall have all the
rights, powers and duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession to the
Bondholders. The retiring Indenture Trustee shall promptly transfer all property
held by it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer, the Bond Insurer or the Holders of a majority of
Bond Principal Balances of the Bonds may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Indenture Trustee.
Section 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation, without any further act, shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11 hereof. The Indenture Trustee shall
provide the Issuer, the Rating Agencies and the Bond Insurer with prior written
notice of any such transaction.
If at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture and any of the Bonds shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee and deliver such Bonds so
authenticated; and if at that time any of the Bonds shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Bonds either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is in the Bonds or in this Indenture provided
that the certificate of the Indenture Trustee shall have.
Section 6.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE
TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meet ing any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust Estate, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Bondholders and the Bond Insurer, such title to the Trust Estate, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee or the Bond
Insurer may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of
44
eligibility as a successor trustee under Section 6.11 hereof and notice to, and
the consent of, the Bond Insurer (but not the Bondholders) of the appointment of
any co-trustee or separate trustee shall be required.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately
without the Indenture Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times be reasonably acceptable to the Bond Insurer and authorized
to exercise corporate trust powers. The Indenture Trustee shall also satisfy the
requirements of TIA ss.310(a) and have a combined
45
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition and it or its parent shall have a long-term
debt rating of Baa3 or better by Moody's and BBB or better by Standard & Poor's.
The Indenture Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. If at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect specified in Section 6.08 hereof.
Section 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 6.13. REPRESENTATIONS AND WARRANTIES. The Indenture Trustee
hereby represents that:
(i) The Indenture Trustee is duly organized and validly
existing as a national banking association in good standing under the
laws of the United States with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted;
(ii) The Indenture Trustee has the power and authority to
execute and deliver this Indenture and to carry out its terms; and the
execution, delivery and performance of this Indenture have been duly
authorized by the Indenture Trustee by all necessary corporate action;
(iii) The consummation of the transactions contemplated by
this Indenture and the fulfillment of the terms hereof do not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the articles of organization or bylaws of the Indenture Trustee or any
agreement or other instrument to which the Indenture Trustee is a party
or by which it is bound; and
(iv) To the Indenture Trustee's best knowledge, there are no
proceedings or investigations pending or threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Indenture Trustee or its
properties: (A) asserting the invalidity of this Indenture, (B) seeking
to prevent the consummation of any of the transactions contemplated by
this Indenture or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Indenture
Trustee of its obligations under, or the validity or enforceability of,
this Indenture.
Section 6.14. DIRECTIONS TO INDENTURE TRUSTEE. The Indenture Trustee is
hereby directed:
46
(a) to accept the pledge of the Mortgage Loans and hold the assets of
the Owner Trust Estate in trust for the Bondholders and the Bond Insurer;
(b) to authenticate and deliver the Bonds substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the
terms of this Indenture.
Section 6.15. THE AGENTS. The provisions of this Indenture relating to
the limitations of the Indenture Trustee's liability and to its indemnity shall
inure also to the Paying Agent, the Bond Registrar, the Certificate Paying Agent
and the Certificate Registrar.
ARTICLE VII
BONDHOLDERS' LISTS AND REPORTS
------------------------------
Section 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES
OF BONDHOLDERS. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after each Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Bonds as of such Record Date, (b) at such other
times as the Indenture Trustee and the Bond Insurer may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that so long as the Indenture Trustee
is the Bond Registrar, no such list shall be required to be furnished.
Section 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
BONDHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Bonds
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 hereof and the names and addresses of Holders of Bonds received
by the Indenture Trustee in its capacity as Bond Registrar. The Indenture
Trustee may destroy any list furnished to it as provided in such Section 7.01
upon receipt of a new list so furnished.
(b) Bondholders may communicate pursuant to TIA ss.312(b) with other
Bondholders with respect to their rights under this Indenture or under the
Bonds.
(c) The Issuer, the Indenture Trustee and the Bond Registrar shall have
the protection of TIA ss. 312(c).
47
Section 7.03. REPORTS BY [THE INDENTURE TRUSTEE]; ISSUER FISCAL YEAR.
(a) The [Indenture Trustee] shall:
(i) file with the Company and the Bond Insurer, within
15 days after the Issuer is required to file the same with the
Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) that the Issuer may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act. Such
filings shall be as follows: within 15 days after each Payment Date,
the Indenture Trustee shall file with the Commission via the Electronic
Data Gathering and Retrieval System, a Form 8-K with a copy of the
statement to Bondholders for such Payment Date as an exhibit thereto.
Prior to January 30, 1998, the Indenture Trustee shall file a Form 15
Suspension Notification with respect to the Trust Fund, if applicable.
Prior to March 30, 1998, the Indenture Trustee shall file a Form 10-K,
in substance conforming to industry standards, with respect to the
Trust Fund. The Company hereby grants to the Indenture Trustee a
limited power of attorney to execute and file each such document on
behalf of the Company. Such power of attorney shall continue until the
earlier of (i) receipt by the Trustee from the Company of written
termination of such power of attorney and (ii) the termination of the
Trust Fund. At least three Business Days prior to filing any Form 8-K
or Form 10-K pursuant to this Section 7.03, the Indenture Trustee shall
deliver a copy of such Form 8-K or Form 10-K, as the case may be, to
the Company.
(ii) file with the Company, the Bond Insurer and the
Commission in accordance with rules and regulations prescribed from
time to time by the Commission such additional information, documents
and reports with respect to compliance by the Issuer with the
conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations; and
(iii) supply to the Company and the Bond Insurer (and the
Indenture Trustee shall transmit by mail to all Bondholders described
in TIA ss. 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.03(a) and by rules and regulations prescribed
from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. REPORTS BY INDENTURE TRUSTEE. If required by TIA ss.
313(a), within 60 days after each January 1 beginning with January 1, 1998, the
Indenture Trustee shall mail to each Bondholder as required by TIA ss. 313(c)
and to the Bond Insurer a brief report dated as of such date that complies with
TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to Bondholders shall
be filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Bonds are
48
listed. The Issuer shall notify the Indenture Trustee and the Bond Insurer if
and when the Bonds are listed on any stock exchange.
Section 7.05. STATEMENTS TO BONDHOLDERS. (a) Subject to Section 3.26 of
this Indenture, with respect to each Payment Date, the Indenture Trustee shall
deliver to each Certificateholder and Bondholder, the Bond Insurer, the Company,
the Owner Trustee, the Certificate Paying Agent and each Rating Agency, a
statement setting forth the following information as to the Bonds, to the extent
applicable:
(i) the aggregate amount of collections with respect to the
Mortgage Loans with respect to such Payment Date;
(ii) the Interest Payment Amount, Principal Payment Amount and
Subordination Increase Amount payable to the Bondholders for such Payment Date,
the Guaranteed Interest Payment Amount and the Carry-Forward Amount for such
Payment Date and the aggregate unpaid Carry-Forward Amount for all prior Payment
Dates;
(iii) the amount of the aggregate distribution to the
Bondholders for such Payment Date;
(iv) the Insured Payments, if any, paid by the Bond Insurer
under the Bond Insurance Policy for such Payment Date and the aggregate Insured
Payments for all prior Payment Dates paid by the Bond Insurer under the Bond
Insurance Policy and not yet reimbursed;
(v) the aggregate Principal Balance of the Mortgage Loans as
of the end of the preceding Due Period;
(vi) the number and aggregate Principal Balances of Mortgage
Loans (a) as to which the Monthly Payment is delinquent for 30-59 days, 60-89
days and 90 or more days (excluding any Mortgage Loans in foreclosure or that
have become REO Property), respectively, (b) in foreclosure and (c) that have
become REO Property, in each case as of the end of the preceding Due Period;
provided, however, that such information will not be provided on the statements
relating to the first Payment Date;
(vii) the Weighted Average Net Mortgage Rate for the related
Payment Date;
(viii) the Required Subordination Amount, Subordination
Amount, Net Monthly Excess Cashflow and Subordination Reduction Amount for such
Payment Date;
(ix) the amount of any Advances and Compensating Interest
Payments for such Payment Date;
49
(x) the aggregate Realized Losses with respect to the related
Payment Date and cumulative Realized Losses since the Closing Date;
(xi) the amount of any unpaid accrued interest on the Bonds
after such Payment Date;
(xii) the aggregate Bond Principal Balance of the Bonds after
giving effect to the distribution of principal on such Payment Date;
(xiii) the Maximum Bond Interest Rate and Bond Interest Rate
for such Payment Date;
(xiv) the number and aggregate Principal Balance of Mortgage
Loans repurchased pursuant to the Home Equity Loan Purchase Agreement for the
related Payment Date and cumulatively since the Closing Date;
(xv) the Cumulative Loss Percentage, Delinquency Percentage,
Delinquency Amount and Rolling Delinquency Percentage for such Payment Date;
(xvi) the amount of any Prepayment Interest Shortfalls or
Relief Act Shortfalls for such Payment Date;
(xvii) the aggregate Principal Balance of Mortgage Loans
purchased pursuant to Section 3.18 of the Servicing Agreement for the related
Payment Date and cumulatively since the Closing Date; and
(xviii) the aggregate amount collected with respect to any
prepayment penalties on the Mortgage Loans.
Items (iii) and (xii) above shall be presented on the basis of a Bond
having a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Bonds are outstanding, the Indenture Trustee
shall furnish a report to each Bondholder of record if so requested in writing
at any time during each calendar year as to the aggregate of amounts reported
pursuant to (iii) and (xii) with respect to the Bonds for such calendar year.
The Indenture Trustee in the absence of manifest error may conclusively
rely upon the Determination Date Report provided by the Servicer pursuant to
Section 4.01 of the Servicing Agreement in its preparation of its Statement to
the Bondholders pursuant to this Section 7.04.
Section 7.06. BOOKS AND RECORDS.
The Issuer hereby covenants with the Indenture Trustee and the
Bond Insurer that, so long as any of the Bonds remain Outstanding, it shall:
50
(a) at all times cause to be kept proper books of account and
allow the Indenture Trustee and the Bond Insurer and any person appointed by it,
to whom the Issuer shall have no reasonable objection, access to the books of
account of the Issuer at all reasonable times, on reasonable prior notice and
during normal business hours;
(b) at all times conduct and continue to conduct business in
its own corporate name;
(c) at all times act and continue to act through its duly
authorized officers and agents; and
(d) so far as permitted by law, at all times cause to be given
to the Indenture Trustee and the Bond Insurer such information as it shall
reasonably require for the purpose of the discharge of the duties, powers,
trusts, authorities and discretions vested in it by this Indenture or by
operation of law.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
------------------------------------
Section 8.01. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable to
or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
Section 8.02. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the
Issuer shall cause the Indenture Trustee to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Bondholders and the Bond
Insurer, the Payment Account as provided in Section 3.01 hereof.
(b) All monies deposited from time to time in the Payment Account
(other than investments made with such monies including all income or other gain
from such investments pursuant to this Indenture), including assumption fees and
prepayment penalties, and all deposits therein pursuant to this Indenture are
for the benefit of the Bondholders and the Bond Insurer.
On each Payment Date, the Indenture Trustee shall distribute all
amounts on deposit in the Payment Account to Bondholders in respect of the Bonds
and to such other persons in the order
51
of priority set forth in Section 3.05 hereof (except as otherwise provided in
Section 5.04(b) hereof).
The Indenture Trustee may invest any funds in the Payment Account
(other than the proceeds of the Bond Insurance Policy) in Eligible Investments,
in its discretion, maturing no later than the Business Day preceding each
Payment Date (provided, however, that with respect to Eligible Investments that
consist of obligations of the Indenture Trustee or its affiliates, such Eligible
Investments may mature on the related Payment Date) and such Eligible
Investments shall not be sold or disposed of prior to their maturity. All income
or other gain from such investments may be released from the Payment Account and
paid to the Indenture Trustee from time to time as part of its compensation for
acting as Indenture Trustee.
Section 8.03. OFFICER'S CERTIFICATE. The Indenture Trustee shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.05(a) hereof, accompanied by copies of any
instruments to be executed, and the Indenture Trustee shall also require, as a
condition to such action, an Officer's Certificate, in form and substance
reasonably satisfactory to the Indenture Trustee, stating the legal effect of
any such action, outlining the steps required to complete such action, and
concluding that all conditions precedent to the taking of such action have been
complied with.
Section 8.04. TERMINATION UPON DISTRIBUTION TO BONDHOLDERS. This
Indenture and the respective obligations and responsibilities of the Issuer and
the Indenture Trustee created hereby shall terminate upon the distribution to
Bondholders, the Bond Insurer, the Certificate Paying Agent on behalf of the
Certificateholders and the Indenture Trustee of all amounts required to be
distributed pursuant to Article III; provided, however, that in no event shall
the trust created hereby continue beyond the expiration of 21 years from the
death of the survivor of the descendants of Xxxxxx X. Xxxxxxx, the late
ambassador of the United States to the Court of St. Xxxxx, living on the date
hereof.
Section 8.05. RELEASE OF TRUST ESTATE. (a) Subject to the payment of
its reasonable fees and expenses, the Indenture Trustee may, and when required
by the provisions of this Indenture shall, execute instruments to release
property from the lien of this Indenture, or convey the Indenture Trustee's
interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture.
(b) The Indenture Trustee shall, at such time as (i) there are no Bonds
Outstanding, (ii) all sums due to the Indenture Trustee pursuant to this
Indenture have been paid, and (iii) all sums due to the Bond Insurer have been
paid, release any remaining portion of the Trust Estate that secured the Bonds
from the lien of this Indenture.
(c) The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of a request from the
Issuer accompanied by an Officers' Certificate and an Opinion of Counsel stating
that all applicable requirements have been satisfied, and a letter from the Bond
Insurer stating that the Bond Insurer has no objection to such request from the
Issuer.
52
Section 8.06. SURRENDER OF BONDS UPON FINAL PAYMENT. By acceptance of
any Bond, the Holder thereof agrees to surrender such Bond to the Indenture
Trustee promptly, prior to such Bondholder's receipt of the final payment
thereon.
Section 8.07. OPTIONAL REDEMPTION OF THE BONDS. (a) The Issuer shall
have the option to redeem the Bonds in whole, but not in part, on any Payment
Date on or after the earlier of (i) the Payment Date on which the aggregate
Principal Balance of the Initial Mortgage Loans is less than or equal to 25% of
the sum of the aggregate Principal Balance of the Initial Mortgage Loans as of
the Cut-Off Date and the Original Pre-Funded Amount or (ii) the Payment Date
occurring in December 2004. The aggregate redemption price for the Bonds will be
equal to the unpaid Bond Principal Balance of the Bonds as of the Payment Date
on which the proposed redemption will take place in accordance with the
foregoing, together with accrued and unpaid interest thereon at the Bond
Interest Rate through such Payment Date (including any Carry-Forward Amount),
plus an amount sufficient to pay in full all amounts owing to the Bond Insurer
and the Indenture Trustee under this Indenture and the Insurance Agreement
(which amounts shall be specified in writing upon request of the Issuer by the
Indenture Trustee and the Bond Insurer).
(b) In order to exercise the foregoing option, the Issuer shall, not
less than 15 days prior to the proposed Payment Date on which such redemption is
to be made, deposit the aggregate redemption price specified in (a) above with
the Indenture Trustee (and the Indenture Trustee shall deposit such funds in the
Payment Account), and shall provide written notice of its exercise of such
option to the Indenture Trustee, the Bond Insurer, the Owner Trustee and the
Servicer. Following receipt of the notice and the aggregate redemption price,
calculated as specified in Section 8.07(a) hereof, pursuant to the foregoing,
the Indenture Trustee shall provide notice to the Bondholders of the final
payment on the Bonds and shall apply such funds to make final payments of
principal and interest on the Bonds in accordance with Section 3.05(a) hereof,
and this Indenture shall be discharged, subject to the provisions of Section
4.10 hereof. If for any reason the amount deposited by the Issuer is not
sufficient to make such redemption or such redemption cannot be completed for
any reason, the amount so deposited by the Issuer with the Indenture Trustee
shall be immediately returned to the Issuer in full and shall not be used for
any other purpose or be deemed to be part of the Trust Estate.
Section 8.08. PRE-FUNDING ACCOUNT.
(a) No later than the Closing Date, the Indenture Trustee shall
establish and maintain in the name of the Indenture Trustee one or more
segregated trust accounts that are Eligible Accounts, which shall be titled
"Pre-Funding Account, First Union National Bank, as indenture trustee for the
registered Bondholders of NovaStar Home Equity Loan Asset-Backed Bonds Series
1997-2" (the "Pre-Funding Account"). On the Closing Date, the Original
Pre-Funded Amount shall be deposited in the Pre-Funding Account from the
proceeds of the sale of the Bonds and retained therein. Funds deposited in the
Pre-Funding Account shall be held in trust by the Indenture Trustee for the
Holders of the Bonds and the Bond Insurer for the uses and purposes set forth in
the Indenture and the Home Equity Loan Purchase Agreement. If the Indenture
Trustee shall not have received an investment direction from the Issuer, the
Indenture Trustee will invest funds deposited in the Pre-Funding Account in
Eligible Investments of the kind described in clause
53
(vii) of the definition of Eligible Investments. The Issuer shall be the owner
of the Pre-Funding Account and shall report all items of income, deduction, gain
or loss arising therefrom. All income and gain realized from investment of funds
deposited in the Pre-Funding Account shall be transferred to the Interest
Coverage Account on each Payment Date.
(ii) Amounts on deposit in the Pre-Funding Account shall be
withdrawn by the Indenture Trustee as follows:
(A) On any Subsequent Transfer Date, the Indenture Trustee
shall withdraw from the Pre-Funding Account an amount equal to 100% of
the Principal Balances of the Subsequent Mortgage Loans transferred and
assigned to the Indenture Trustee on such Subsequent Transfer Date and
pay such amount to or upon the order of the Seller upon satisfaction of
the conditions set forth in Section 2.2 of the Home Equity Loan
Purchase Agreement with respect to such transfer and assignment; and
(B) If the Pre-Funded Amount has not been reduced to zero
during the Funding Period, on the Payment Date following the end of the
Funding Period, the Indenture Trustee shall deposit into the Payment
Account any amounts remaining in the Pre-Funding Account.
Section 8.09. INTEREST COVERAGE ACCOUNT.
(a) No later than the Closing Date, the Indenture Trustee shall
establish and maintain on behalf of itself one or more segregated trust
accounts, which shall be Eligible Accounts, titled "Interest Coverage Account,
First Union National Bank, as indenture trustee for the registered Bondholders
of NovaStar Home Equity Loan Asset-Backed Notes, Series 1997-2" (the "Interest
Coverage Account"). On the Closing Date, the Interest Coverage Amount shall be
deposited into the Interest Coverage Account and retained therein. In addition,
the Indenture Trustee shall deposit into the Interest Coverage Account all
income and gain on investments in the Pre-Funding Account pursuant to Section
8.08. Funds deposited in the Interest Coverage Account shall be held in trust by
the Indenture Trustee for the Holders of the Bonds and the Bond Insurer for the
uses and purposes set forth herein. The Issuer shall be the owner of the
Interest Coverage Account and shall report all items of income, deduction, gain
or loss arising therefrom.
(b) On each Payment Date during the Funding Period, the Indenture
Trustee shall withdraw from the Interest Coverage Account and deposit into the
Payment Account the applicable Interest Coverage Addition.
(c) Upon the earlier of (i) termination of the Trust Fund in accordance
with Section 8.01 of the Trust Agreement and (ii) the Payment Date following the
end of the Funding Period, any amount remaining on deposit in the Interest
Coverage Account shall be withdrawn by the Indenture Trustee and deposited in
the Payment Account.
54
ARTICLE IX
SUPPLEMENTAL INDENTURES
-----------------------
Section 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF BONDHOLDERS.
(a) Without the consent of the Holders of any Bonds but with the prior written
consent of the Bond Insurer and prior notice to the Rating Agencies, the Issuer
and the Indenture Trustee, when authorized by an Issuer Request, at any time and
from time to time, may enter into one or more indentures supplemental hereto
(which shall conform to the provisions of the TIA as in force at the date of the
execution thereof), in form reasonably satisfactory to the Indenture Trustee and
the Bond Insurer, for any of the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of this Indenture, or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Bonds contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Bonds, or to surrender any right or power
herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity or to correct or supplement
any provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture;
(vi) to make any other provisions with respect to
matters or questions arising under this Indenture or in any
supplemental indenture; provided, that such action shall not materially
and adversely affect the interests of the Holders of the Bonds;
(vii) to evidence and provide for the acceptance of the
appointment hereunder by a successor Indenture Trustee with respect to
the Bonds and to add to or change any of the provisions of this
Indenture as shall be necessary to facilitate the administration of the
trusts hereunder by more than one trustee, pursuant to the requirements
of Article VI hereof; or
(viii) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA;
55
provided, however, that no such supplemental indenture shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such supplemental indenture will not (A) result in a "substantial
modification" of the Bonds under Treasury Regulation Section 1.1001.3 or
adversely affect the status of the Bonds as indebtedness for federal income tax
purposes or (B) cause the Trust to be subject to an entity level tax.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may
be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Bonds but
with the prior written consent of the Bond Insurer and prior notice to the
Rating Agencies, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Bonds under this Indenture; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel (or,
in the alternative, with respect to clause (i), as evidenced by a rating letter
confirming the existing ratings on the Bonds (without taking into account the
Bond Insurance Policy)) (i) adversely affect in any material respect the
interests of any Bondholder or (ii) if 100% of the Certificates are not owned by
NCFC or if the Bond Insurance Policy is outstanding, cause the Issuer to be
subject to an entity level tax for federal income tax purposes.
Section 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and with the prior written consent
of the Bond Insurer and the consent of the Holders of not less than a majority
of the Bond Principal Balances of the Bonds affected thereby, by Act (as defined
in Section 10.03 hereof) of such Holders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Bonds under this Indenture; provided,
however, that no such supplemental indenture shall, without the consent of the
Holder of each Bond affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Bond, or reduce the principal amount
thereof or the interest rate thereon, change the provisions of this
Indenture relating to the application of collections on, or the
proceeds of the sale of, the Trust Estate to payment of principal of or
interest on the Bonds, or change any place of payment where, or the
coin or currency in which, any Bond or the interest thereon is payable,
or impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Bonds on or after the respective due dates
thereof;
(ii) reduce the percentage of the Bond Principal
Balances of the Bonds, the consent of the Holders of which is required
for any such supplemental indenture, or the
56
consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this
Indenture;
(iii) modify or alter the provisions of the proviso to
the definition of the term "Outstanding" or modify or alter the
exception in the definition of the term
"Bondholder";
(iv) reduce the percentage of the Bond Principal
Balances of the Bonds required to direct the Indenture Trustee to
direct the Issuer to sell or liquidate the Trust Estate pursuant to
Section 5.04 hereof;
(v) modify any provision of this Section 9.02 except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents cannot
be modified or waived without the consent of the Holder
of each Bond affected thereby;
(vi) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest or principal due on any Bond on any Payment Date (including
the calculation of any of the individual components of such
calculation); or
(vii) permit the creation of any lien ranking prior to
or on a parity with the lien of this Indenture with respect to any part
of the Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Bond of the security
provided by the lien of this Indenture; and provided, further, that
such action shall not, as evidenced by an Opinion of Counsel, cause the
Issuer to be subject to an entity level tax.
The Indenture Trustee may, with the consent of the Bond Insurer, so
long as no Bond Insurer Default exists, in its discretion determine whether or
not any Bonds would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Bonds, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Bondholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Bonds to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
57
Section 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02 hereof, shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Indenture Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
that affects the Indenture Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise.
Section 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Bonds affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Bonds
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. REFERENCE IN BONDS TO SUPPLEMENTAL INDENTURES. Bonds
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Bonds so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Bonds.
58
ARTICLE X
MISCELLANEOUS
-------------
Section 10.01. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and to the Bond Insurer (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that, in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate
or opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
signatory, such signatory has made such examination or investigation as
is necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
(4) a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been complied with; and
(5) if the signatory of such certificate or opinion is
required to be Independent, the statement required by the definition of
the term "Independent".
(b) (i) Except with respect to the substitution of Mortgage Loans
pursuant to Section 2.1 of the Home Equity Loan Purchase Agreement, prior to the
deposit of any Collateral or other property or securities with the Indenture
Trustee that is to be made the basis for the release of any property or
securities subject to the lien of this Indenture, the Issuer shall, in addition
to any obligation imposed in Section 10.01(a) or elsewhere in this Indenture,
furnish to the Indenture Trustee and the Bond Insurer an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such deposit) to the Issuer of the Collateral
or other property or securities to be so deposited and a report from a
nationally recognized accounting firm verifying such value.
59
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee and the Bond Insurer an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described in clause
(i) above, the Issuer shall also deliver to the Indenture Trustee an Independent
Certificate from a nationally recognized accounting firm as to the same matters,
if the fair value to the Issuer of the securities to be so deposited and of all
other such securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this clause (ii), is 10%
or more of the Bond Principal Balances of the Bonds, but such a certificate need
not be furnished with respect to any securities so deposited, if the fair value
thereof to the Issuer as set forth in the related Officer's Certificate is less
than $25,000 or less than one percent of the Bond Principal Balances of the
Bonds.
(iii) Except with respect to the substitution of Mortgage
Loans pursuant to Section 2.1 of the Home Equity Loan Purchase Agreement,
whenever any property or securities are to be released from the lien of this
Indenture, the Issuer shall also furnish to the Indenture Trustee and the Bond
Insurer an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the security
under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee and the Bond Insurer an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described in clause
(iii) above, the Issuer shall also furnish to the Indenture Trustee an
Independent Certificate as to the same matters if the fair value of the property
or securities and of all other property, other than securities released from the
lien of this Indenture since the commencement of the then-current calendar year,
as set forth in the certificates required by clause (iii) above and this clause
(iv), equals 10% or more of the Bond Principal Balances of the Bonds, but such
certificate need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the then Bond
Principal Balances of the Bonds.
Section 10.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations
60
by, an officer or officers of the Seller or the Issuer, stating that the
information with respect to such factual matters is in the possession of the
Seller or the Issuer, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
Section 10.03. ACTS OF BONDHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Bondholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Bondholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee, and,
where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Bondholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section 10.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Bonds shall be proved by the Bond Registrar.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Bonds shall bind the Holder of every
Bond issued upon the registration 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 Bond.
Section 10.04. NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER, BOND
INSURER AND RATING AGENCIES. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Bond-
61
holders or other documents provided or permitted by this Indenture shall be in
writing and if such request, demand, authorization, direction, notice, consent,
waiver or Act of Bondholders is to be made upon, given or furnished to or filed
with:
(i) the Indenture Trustee by any Bondholder or by
the Issuer or the Bond Insurer shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the
Indenture Trustee at the Corporate Trust Office. The Indenture Trustee
shall promptly transmit any notice received by it from the Bondholders
to the Issuer; or
(ii) the Issuer by the Indenture Trustee or by any
Bondholder or the Bond Insurer shall be sufficient for every purpose
hereunder if in writing and mailed first-class, postage prepaid, to the
Issuer addressed to: NovaStar Home Equity Loan Trust Series 1997-2, in
care of Wilmington Trust Company, Xxxxxx Square North, 0000 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention: Corporate
Trust Administration (telecopy number (000) 000-0000), or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer. The Issuer shall promptly transmit any notice received by it
from the Bondholders to the Indenture Trustee; or
(iii) the Company by the Indenture Trustee or by any
Bondholder or the Bond Insurer shall be sufficient for every purpose
hereunder if in writing and mailed first-class, postage prepaid, to the
Company addressed to: Xxxxxxx Xxxxx Mortgage Investors, Inc., 000 Xxxxx
Xxxxxx, Xxxxx Financial Xxxxxx/Xxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention: Legal Department, Xxxxxxx XxXxxxxx (telecopy
number (000) 000-0000), or at any other address previously furnished in
writing to the Indenture Trustee by the Company. The Company shall
promptly transmit any notice received by it from the Bondholders to the
Indenture Trustee; or
(iv) the Seller by the Indenture Trustee or by any
Bondholder or the Bond Insurer shall be sufficient for every purpose
hereunder if in writing and mailed first-class, postage prepaid, to the
Issuer addressed to: NovaStar Financial, Inc., 0000 Xxxx 00xx Xxxxx,
Xxxxx 000, Xxxxxxxx, Xxxxxx, Attention: Xxxxx X. Xxxxxxx (telecopy
number (000) 000-0000), or at any other address previously furnished in
writing to the Indenture Trustee by the Seller. The Seller shall
promptly transmit any notice received by it from the Bondholders to the
Indenture Trustee; or
(v) the Bond Insurer by the Issuer, the Indenture
Trustee or by any Bondholders shall be sufficient for every purpose
hereunder if in writing and mailed, first-class, postage pre-paid, or
personally delivered or telecopied to: MBIA Insurance Corporation, 000
Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000, Attention: Insured Portfolio
Mgmt-SF (telecopy number (000) 000-0000).
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally delivered
or mailed first-class postage pre-paid, to (i) in the case of Moody's, at the
following address: Xxxxx'x Investors Service, Inc.,
62
Residential Mortgage Monitoring Department, 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 and (ii) in the case of Standard & Poor's, at the following address:
Standard & Poor's Ratings Group, 00 Xxxxxxxx (00xx Xxxxx), Xxx Xxxx, Xxx Xxxx
00000, Attention of Asset Backed Surveillance Department; or as to each of the
foregoing, at such other address as shall be designated by written notice to the
other parties.
Section 10.05. NOTICES TO BONDHOLDERS; WAIVER. Where this Indenture
provides for notice to Bondholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed first-class, postage prepaid, to each Bondholder affected by such
event, at such Person's address as it appears on the Bond Register, not later
than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Bondholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Bondholder shall affect the sufficiency of such notice with
respect to other Bondholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given regardless of
whether such notice is in fact actually received.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Bondholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Bondholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.
Section 10.06. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA xx.xx. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 10.07. EFFECT OF HEADINGS. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
63
Section 10.08. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Bonds by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.
Section 10.09. SEPARABILITY. In case any provision in this Indenture or
in the Bonds shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 10.10. BENEFITS OF INDENTURE. The Bond Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture. To the extent that this Indenture confers upon or gives or
grants to the Bond Insurer any right, remedy or claim under or by reason of this
Indenture, the Bond Insurer may enforce any such right, remedy or claim
conferred, given or granted hereunder. Nothing in this Indenture or in the
Bonds, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Bondholders and the Bond Insurer,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 10.11. LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Bonds or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 10.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.13. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 10.14. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Bondholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 10.15. ISSUER OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Bonds or under this Indenture or any certificate or
other writing delivered in connection herewith or
64
therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Indenture Trustee or the Owner Trustee in its individual capacity,
any holder of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Indenture Trustee and the Owner
Trustee have no such obligations in their individual capacity) and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Article VI, VII and
VIII of the Trust Agreement.
Section 10.16. NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each Bondholder, by accepting a Bond, hereby covenant and
agree that they will not at any time institute against NovaStar Assets, the
Company or the Issuer, or join in any institution against NovaStar Assets, the
Company or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Bonds, this Indenture or any of the Basic Documents.
This Section 10.16 will survive for one year and one day following the
termination of this Indenture.
Section 10.17. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it shall permit any representative of the Indenture Trustee and the Bond
Insurer, during the Issuer's normal business hours, to examine all the books of
account, records, reports and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by Independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Indenture Trustee and the Bond Insurer shall cause their
representatives to hold in confidence all such information except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is necessary to
perform its obligations hereunder.
65
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.
NOVASTAR HOME EQUITY LOAN TRUST SERIES 1997-2,
as Issuer
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
By:_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Indenture
Trustee and as Bond Registrar
By:_________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
hereby accepts the appointment as
Certificate Paying Agent pursuant to Section
3.10 of the Trust Agreement and as
Certificate Registrar pursuant to Section
4.02 hereof.
By:_________________________________
Name:
Title:
STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE)
On this 11th day of December, before me personally appeared Xxxxxx X.
Xxxxxx, to me known, who being by me duly sworn, did depose and say, that he
resides at _____________, he is the Administrative Account Manager of the Owner
Trustee, one of the corporations described in and which executed the above
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order of the
Board of Directors of said corporation; and that he signed his name thereto by
like order.
Notary Public
[NOTARIAL SEAL]
STATE OF NORTH CAROLINA)
) ss.:
COUNTY OF MECKLENBURG )
On this 11th day of December, before me personally appeared Xxxxxx
Xxxxxxx, to me known, who being by me duly sworn, did depose and say, that he is
the Vice President of First Union National Bank, as Indenture Trustee, a
national banking association, which executed the above instrument; that he knows
the seal of said national banking association; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board
of Directors of said national banking association; and that she signed her name
thereto by like order.
Notary Public
[NOTARIAL SEAL]
EXHIBIT A
FORM OF BONDS
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND 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.
THIS BOND IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE BOND INSURANCE POLICY
AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE
PERSONALLY LIABLE FOR PAYMENTS ON THIS BOND.
PRINCIPAL OF THIS BOND IS PAYABLE OVER TIME AS SET FORTH HEREIN. ACCORDINGLY,
THE OUTSTANDING PRINCIPAL OF THIS BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.
NOVASTAR HOME EQUITY LOAN TRUST SERIES 1997-2
NOVASTAR HOME EQUITY LOAN ASSET-BACKED BONDS, SERIES 1997-2
AGGREGATE BOND PRINCIPAL
BALANCE: $212,113,000
INITIAL BOND PRINCIPAL
BALANCE OF THIS BOND: $ CUSIP NO.
BOND NUMBER:
NovaStar Home Equity Loan Trust Series 1997-2 (the "Issuer"), a
Delaware business trust, for value received, hereby promises to pay to
__________ or registered assigns, the principal sum
of ______________________________________ ($___________) in monthly installments
on the twenty-fifth day of each month or, if such day is not a Business Day, the
next succeeding Business Day (each a "Payment Date"), commencing in December
1997 and ending on or before the Payment Date occurring in December, 2027 (the
"Stated Maturity") and to pay interest on the Bond Principal Balance of this
Bond outstanding from time to time as provided below.
This Bond is one of a duly authorized issue of NovaStar Home Equity
Loan Asset-Backed Bonds, Series 0000-0 (xxx "Xxxxx"), issued under an Indenture,
dated as of November 1, 1997 (the "Indenture"), between the Issuer and First
Union National Bank, as indenture trustee (the "Indenture Trustee", which term
includes any successor Indenture Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights thereunder of the Issuer, the Indenture
Trustee, and the Holders of the Bonds and the terms upon which the Bonds are to
be authenticated and delivered. All terms used in this Bond which are defined in
the Indenture shall have the meanings assigned to them in the Indenture.
Payments of principal and interest on the Bonds will be made on each
Payment Date to Bondholders of record as of the related Record Date. On each
Payment Date, Bondholders will be entitled to receive interest payments in an
aggregate amount equal to the Interest Payment Amount for such Payment Date,
together with principal payments in an aggregate amount equal to the Principal
Payment Amount plus the Subordination Increase Amount, if any, for such Payment
Date. In addition, on each Payment Date, Bondholders in the aggregate will be
entitled to receive additional interest payments equal to the Carry-Forward
Amount for such Payment Date, to the extent of available funds. The "Bond
Principal Balance" of a Bond 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 Bond on account of
principal.
The principal of, and interest on, this Bond are due and payable as
described in the Indenture, 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 Bond shall
be equal to this Bond's pro rata share of the aggregate payments on all Bonds as
described above, and shall be applied as between interest and principal as
provided in the Indenture.
MBIA Insurance Corporation (the "Bond Insurer"), in consideration of
the payment of the premium and subject to the terms of the financial guaranty
insurance policy (the "Bond Insurance Policy") issued thereby, has
unconditionally and irrevocably guaranteed the payment of the Insured Payment.
The Bond Insurance Policy will not cover any Prepayment Interest Shortfalls,
Relief Act Shortfalls or Carry-Forward Amount.
All principal and interest accrued on the Bonds, if not previously
paid, will become finally due and payable at the Final Scheduled Payment Date.
The Bonds are subject to redemption in whole, but not in part, by the
Issuer on any Payment Date on or after the earlier of (i) the Payment Date on
which the aggregate Principal Balance of the Mortgage Loans is less than or
equal to 25% of the sum of the aggregate Principal
Balance of the Initial Mortgage Loans as of the Cut-Off Date and the Original
Pre-Funded Amount and (ii) the Payment Date in December 2004.
The Issuer shall not be liable upon the indebtedness evidenced by the
Bonds except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Bonds. The assets included in the
Trust Estate and payments under the Bond Insurance Policy will be the sole
source of payments on the Bonds, and each Holder hereof, by its acceptance of
this Bond, agrees that (i) such Bond will be limited in right of payment to
amounts available from the Trust Estate and the Bond Insurance Policy as
provided in the Indenture and (ii) such Holder shall have no recourse to the
Issuer, the Owner Trustee, the Indenture Trustee, the Company, the 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 Bonds pursuant
to the Indenture.
Any payment of principal or interest payable on this Bond which is
punctually paid on the applicable Payment Date shall be paid to the Person in
whose name such Bond (or one or more predecessor Bonds) is registered at the
close of business on the Record Date for such Payment Date by check mailed to
such person's address as it appears in the Bond Register on such Record Date,
except for the final installment of principal and interest payable with respect
to such Bond, which shall be payable as provided below. Notwithstanding the
foregoing, upon written request with appropriate instructions by the Holder of
this Bond (holding an aggregate initial Bond Principal Balance of at least
$5,000,000), 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. All reductions in the principal amount of a Bond (or
one or more predecessor Bonds) effected by payments of principal made on any
Payment Date shall be binding upon all Holders of this Bond and of any bond
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, whether or not such payment is noted on such Bond. The final
payment of this Bond shall be payable upon presentation and surrender thereof on
or after the Payment Date thereof at the Corporate Trust Office or the office or
agency of the Issuer maintained by it for such purpose pursuant to Section 3.02
of the Indenture.
Subject to the foregoing provisions, each Bond delivered under the
Indenture, upon registration of transfer of or in exchange for or in lieu of any
other Bond, shall carry the rights to unpaid principal and interest that were
carried by such other Bond.
If an Event of Default as defined in the Indenture shall occur and be
continuing with respect to the Bonds, the Bonds may become or be declared to be
due and payable in the manner and with the effect provided in the Indenture. If
any such acceleration of maturity occurs prior to the payment of the entire
unpaid Bond Principal Balance of the Bonds, the amount payable to the Holder of
this Bond will be equal to the sum of the unpaid Bond Principal Balance of the
Bonds, together with accrued and unpaid interest thereon as described in the
Indenture. The Indenture provides that, notwithstanding the acceleration of the
maturity of the Bonds, under certain circumstances specified therein, all
amounts collected as proceeds of the Trust Estate securing the Bonds or
otherwise shall continue to be applied to payments of principal of and interest
on the Bonds as if they had not been declared due and payable.
-71-
The failure to pay any Subordination Increase Amount or Carry-Forward
Amount at any time when funds are not available to make such payment as provided
in the Indenture shall not constitute an Event of Default under the Indenture.
Pursuant to the Indenture, unless a Bond Insurer Default exists (i) the
Bond Insurer shall be deemed to be the holder of the Bonds for certain purposes
specified in the Indenture (other than with respect to payment on the Bonds),
and will be entitled to exercise all rights of the Bondholders thereunder,
including the rights of Bondholders relating to the occurrence of, and the
remedies with respect to, an Event of Default, without the consent of such
Bondholders, 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 Bond Insurer.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Bond may be registered on the Bond Register of
the Issuer. Upon surrender for registration of transfer of, or presentation of a
written instrument of transfer for, this Bond at the Corporate Trust Office,
accompanied by proper instruments of assignment in form satisfactory to the
Indenture Trustee, one or more new Bonds of any authorized denominations and of
a like aggregate initial Bond Principal Balance will be issued to the designated
transferee or transferees.
Prior to the due presentment for registration of transfer of this Bond,
the Issuer, the Bond Insurer, the Indenture Trustee and any agent of the Issuer,
the Bond Insurer or the Indenture Trustee may treat the Person in whose name
this Bond is registered as the owner of such Bond (i) on the applicable Record
Date for the purpose of making payments and interest of such Bond, and (ii) on
any other date for all other purposes whatsoever, as the owner hereof, whether
or not this Bond be overdue, and none of the Issuer, the Bond Insurer, the
Indenture Trustee or any such agent of the Issuer or the Indenture Trustee 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 Bonds under the Indenture at any
time by the Issuer with the consent of the Bond Insurer and the Holders of a
majority of all Bonds at the time outstanding. The Indenture also contains
provisions permitting (i) the Bond Insurer or (ii) if a Bond Insurer Default
exists, the Holders of Bonds representing specified percentages of the aggregate
Bond Principal Balance of the Bonds on behalf of the Holders of all the Bonds,
to waive any past Event of Default under the Indenture and its consequences. Any
such waiver by the Holder, at the time of the giving thereof, of this Bond (or
any one or more predecessor Bonds) shall bind the Holder of every Bond 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 such
Bond. The Indenture also permits the Issuer and the Indenture Trustee to amend
or waive certain terms and conditions set forth in the Indenture without the
consent of the Holders of the Bonds issued thereunder.
Initially, the Bonds will be represented by two bonds registered in the
name of CEDE & Co. as nominee of DTC, acting in its capacity as the Depository
for the Bonds. The Bonds will be delivered in denominations as provided in the
Indenture and subject to certain limitations
-72-
therein set forth. The Bonds are exchangeable for a like aggregate initial Bond
Principal Balance of Bonds of different authorized denominations, as requested
by the Holder surrendering the same.
Unless the Certificate of Authentication hereon has been executed by
the Indenture Trustee by manual signature, this Bond shall not be entitled to
any benefit under the Indenture, or be valid or obligatory for any purpose.
Each Bondholder, by accepting a Bond, hereby covenants and agrees that
such Bondholder will not at any time institute against NovaStar Assets, the
Company or the Issuer, or join in any institution against NovaStar Assets, the
Company or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Bonds, the Indenture or any of the Basic Documents.
So long as no Bond Insurer Default exists, the Bond Insurer shall at
all times be treated as if it were the exclusive Bondholder for the purposes of
all approvals, consents, waivers and the institution of any action and the
direction of all remedies, and the Indenture Trustee shall act in accordance
with the directions of the Bond Insurer so long as it is indemnified therefor to
its reasonable satisfaction.
AS PROVIDED IN THE INDENTURE, THIS BOND AND THE INDENTURE CREATING THIS
BOND SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
-73-
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed by Wilmington Trust Company, not in its individual capacity but solely
as Owner Trustee.
Dated:
NOVASTAR HOME EQUITY LOAN TRUST SERIES 1997-2
BY: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely in its
capacity as Owner Trustee
By:___________________________________________
Authorized Signatory
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Bonds referred to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK, not in its individual
capacity but solely as Indenture Trustee
By:_________________________________
Authorized Signatory
-74-
ABBREVIATIONS
-------------
The following abbreviations, when used in the inscription on the face
of the Bond, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT -- ______________ Custodian_________________________
(Cust) (Minor)
under Uniform Gifts to Minor Act_________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE:
_________________________________________________
_________________________________________________
_________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
________________________________________________________________________________
the within bond and all rights thereunder, hereby irrevocably constitution and
appointing ______________________________ attorney to transfer said Bond on the
books of the Issuer, with full power of substitution in the premises.
Dated:______________________________ ___________________________________
Signature Guaranteed by________________________________________________
NOTICE: The signature(s) to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without alteration
or enlargement or any change whatsoever. Signature(s) must be guaranteed by a
commercial bank or by a member firm of the New York Stock Exchange or another
national securities exchange. Notarized or witnessed signatures are not
acceptable.
EXHIBIT B
FORM OF TRUSTEE INITIAL CERTIFICATION
[Closing Date]
[Seller]
[Servicer]
[Bond Insurer]
[Company]
_________________________
_________________________
Re: Indenture, dated as of November 1, 1997 (the
"Indenture"), between NovaStar Home Equity
Loan Trust Series 1997-2 (the "Issuer") and
First Union National Bank (the "Indenture
Trustee") -- NovaStar Home Equity Loan
Asset-Backed Bonds, Series 0000-0
Xxxxxxxxx:
In accordance with Section 2.03 of the above-captioned
Indenture, and Section 2.1(b) of the Home Equity Loan Purchase Agreement, dated
as of November 1, 1997, between NovaStar Financial, Inc., the Issuer, the
Indenture Trustee and NovaStar Assets Corp. (the "Home Equity Loan Purchase
Agreement"; and together with the Indenture, the "Agreements"), the undersigned,
as Indenture Trustee, hereby certifies that as to each Mortgage Loan listed in
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attachment hereto) it has reviewed the Mortgage File and the Mortgage
Loan Schedule and has determined that: (i) all documents required to be included
in the Mortgage File are in its possession; (ii) such documents have been
reviewed by it and appear regular on their face and relate to such Mortgage
Loan; and (iii) based on examination by it, and only as to such documents, the
information set forth in items (i) - (vii) and (xiv) of the definition or
description of "Mortgage Loan Schedule" is correct.
The Indenture Trustee has made no independent examination of
any documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Agreements. The Indenture Trustee makes no
representation that any documents specified in clause (vi) of Section 2.1(b) of
the Home Equity Loan Purchase Agreement should be included in any Mortgage File.
The Indenture Trustee makes no representations as to and shall not be
responsible to verify: (i) the validity, legality, sufficiency, enforceability,
due authorization, recordability or genuineness of any of the documents
contained in each Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule, (ii) the collectability, insurability,
-2-
effectiveness or suitability of any such Mortgage Loan, or (iii) the existence
of any assumption, modification, written assurance or substitution agreement
with respect to any Mortgage File if no such documents appear in the Mortgage
File delivered to the Indenture Trustee.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Indenture.
FIRST UNION NATIONAL BANK, not in its individual
capacity but solely as Indenture Trustee
By:______________________________________________
Name:
Title:
-3-
EXHIBIT C
FORM OF TRUSTEE FINAL CERTIFICATION
[date]
[Seller]
[Servicer]
[Bond Insurer]
[Company]
__________________________
__________________________
Re: Indenture, dated as of November 1, 1997 (the
"Indenture"), between NovaStar Home Equity Loan Trust
Series 1997-2 (the "Issuer") and First Union National
Bank (the "Indenture Trustee") -- NovaStar Home
Equity Loan Asset-Backed Bonds, Series 0000-0
Xxxxxxxxx:
In accordance with Section 2.03 of the above-captioned
Indenture, and Section 2.1(b) of the Home Equity Loan Purchase Agreement, dated
as of November 1, 1997, between NovaStar Financial, Inc., the Issuer, the
Indenture Trustee and NovaStar Assets Corp. (the "Home Equity Loan Purchase
Agreement"; and together with the Indenture, the "Agreements"), the undersigned,
as Indenture Trustee, hereby certifies that as to each Mortgage Loan listed in
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attachment hereto) it has received the documents set forth in Section
2.1(b) of the Home Equity Loan Purchase Agreement.
The Indenture Trustee has made no independent examination of
any documents contained in each Mortgage File beyond the review specifically
required in the Agreements. The Indenture Trustee makes no representation that
any documents specified in clause (vi) of Section 2.1(b) should be included in
any Mortgage File. The Indenture Trustee makes no representations as to and
shall not be responsible to verify: (i) the validity, legality, sufficiency,
enforceability, due authorization, recordability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan or (iii) the existence of
any assumption, modification, written assurance or substitution agreement with
respect to any Mortgage File if no such documents appear in the Mortgage File
delivered to the Indenture Trustee.
-4-
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Indenture.
FIRST UNION NATIONAL BANK, not in its individual
capacity but solely as Indenture Trustee
By:______________________________________________
Name:
Title:
-5-
EXHIBIT D
MORTGAGE LOAN SCHEDULE
[See Tab 4]
-6-
