EXHIBIT 4.2
Draft of November 25, 1997
--------------------------------------------------------------------------------
EMERGENT HOME EQUITY LOAN TRUST 1997-4
Class A Home Equity Loan Asset Backed Notes
-------------------------
INDENTURE
Dated as of November ___, 1997
-------------------------
FIRST UNION NATIONAL BANK
Indenture Trustee
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE..........................2
SECTION 1.1. Definitions...........................................2
SECTION 1.2. Incorporation by Reference of the Trust
Indenture Act........................................30
SECTION 1.3. Rules of Construction................................30
SECTION 1.4. Conflict with TIA....................................31
ARTICLE II. THE NOTES.........................................................31
SECTION 2.1. Form ................................................31
SECTION 2.2. Execution, Authentication and Delivery...............31
SECTION 2.3. Registration; Registration of Transfer and Exchange..32
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes...........33
SECTION 2.5. Persons Deemed Owners................................34
SECTION 2.6. Payment of Principal and Interest;
Defaulted Interest ...............................34
SECTION 2.7. Cancellation.........................................35
SECTION 2.8. Release of Collateral................................35
SECTION 2.9. Book-Entry Notes.....................................35
SECTION 2.10. Notices to Depository................................36
SECTION 2.11. Definitive Notes.....................................36
ARTICLE III. COVENANTS .......................................................37
SECTION 3.1. Payment of Principal and Interest....................37
SECTION 3.2. Maintenance of Office or Agency......................37
SECTION 3.3. Money for Payments to Be Held in Trust...............37
SECTION 3.4. Existence ...........................................38
SECTION 3.5. Protection of Trust Property.........................38
SECTION 3.6. Opinions as to Trust Property........................39
SECTION 3.7. Performance of Obligations; Servicing
of Mortgage Loans.................................39
SECTION 3.8. Negative Covenants...................................40
SECTION 3.9. Annual Statement as to Compliance....................41
SECTION 3.10. Issuer May Not Consolidate...........................41
SECTION 3.11. No Other Business....................................41
SECTION 3.12. No Borrowing; Use of Proceeds........................41
SECTION 3.13. Servicer's Obligations...............................42
SECTION 3.14. Guarantees, Loans, Advances and Other Liabilities....42
i
SECTION 3.15. Capital Expenditures.................................42
SECTION 3.16. Compliance with Laws.................................42
SECTION 3.17. Restricted Payments..................................42
SECTION 3.18. Notice of Events of Default and Servicer
Events of Default....................................42
SECTION 3.19. Further Instruments and Acts.........................42
SECTION 3.20. Amendments of Sale and Servicing
Agreement and Trust Agreement.....................43
SECTION 3.21. Income Tax Characterization..........................43
ARTICLE IV. SATISFACTION AND DISCHARGE........................................43
SECTION 4.1. Satisfaction and Discharge of Indenture..............43
SECTION 4.2. Application of Trust Money...........................44
SECTION 4.3. Repayment of Monies Held by Note Paying Agent........44
ARTICLE V. REMEDIES ..........................................................45
SECTION 5.1. Events of Default....................................45
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment...45
SECTION 5.3. Remedies.............................................47
SECTION 5.4. Indenture Trustee Shall File Proofs of Claim.........47
SECTION 5.5. Indenture Trustee May Enforce Claims
Without Possession of Notes..........................48
SECTION 5.6. Application of Money Collected.......................48
SECTION 5.7. Limitation on Rights of Noteholders..................48
SECTION 5.8. Unconditional Rights of Noteholders to
Receive Principal and Interest....................49
SECTION 5.9. Restoration of Rights and Remedies...................49
SECTION 5.10. Rights and Remedies Cumulative.......................49
SECTION 5.11. Delay or Omission Not a Waiver.......................50
SECTION 5.12. Control by Noteholders...............................50
SECTION 5.13. Undertaking for Costs................................50
SECTION 5.14. Waiver of Stay or Extension Laws.....................50
SECTION 5.15. Action on Notes......................................51
SECTION 5.16. Performance and Enforcement of Certain Obligations...51
SECTION 5.17. Subrogation..........................................51
SECTION 5.18. Preference Claims....................................52
SECTION 5.19. Sale of Trust Estate.................................52
SECTION 5.20. Waiver of Past Defaults..............................53
ii
ARTICLE VI. THE INDENTURE TRUSTEE.............................................54
SECTION 6.1. Duties of Indenture Trustee..........................54
SECTION 6.2. Rights of Indenture Trustee..........................56
SECTION 6.3. Individual Rights of Indenture Trustee...............57
SECTION 6.4. Indenture Trustee's Disclaimer.......................57
SECTION 6.5. Notice of Defaults...................................57
SECTION 6.6. Reports by Indenture Trustee to Holders..............57
SECTION 6.7. Compensation and Indemnity...........................58
SECTION 6.8. Replacement of Indenture Trustee.....................58
SECTION 6.9. Successor Indenture Trustee by Xxxxxx................60
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee........................60
SECTION 6.11. Eligibility: Disqualification........................61
SECTION 6.12. Preferential Collection of Claims Against Issuer.....61
SECTION 6.13. Appointment and Powers...............................62
SECTION 6.14. Performance of Duties................................62
SECTION 6.15. Limitation on Liability..............................62
SECTION 6.16. Reliance Upon Documents..............................62
SECTION 6.17. Representations and Warranties
of the Indenture Trustee.............................63
SECTION 6.18. Waiver of Setoffs....................................63
SECTION 6.19. Suits for Enforcement................................63
SECTION 6.20. Mortgagor Claims.....................................63
SECTION 6.21. Certain Available Information........................64
ARTICLE VII. NOTEHOLDERS' LISTS AND REPORTS...................................65
SECTION 7.1. Issuer to Furnish to Indenture Trustee
Names and Addresses of Noteholders................65
SECTION 7.2. Preservation of Information; Communications
to Noteholders....................................65
SECTION 7.3. Reports by Issuer....................................65
SECTION 7.4. Reports by Indenture Trustee.........................66
ARTICLE VIII. ACCOUNTS; INVESTMENT OF MONEYS; COLLECTION AND
APPLICATION OF MONEYS; REPORTS...............................66
SECTION 8.1. Collection of Money..................................66
SECTION 8.2. Release of Trust Property............................66
SECTION 8.3. Distributions........................................67
SECTION 8.4. Compliance with Withholding Requirements.............71
SECTION 8.5. Statements to Noteholders............................71
SECTION 8.6. Rights of Securityholders............................72
SECTION 8.7. Distribution Account.................................72
iii
SECTION 8.8. The Pre-Funding Account..............................73
SECTION 8.9. The Interest Coverage Account........................73
SECTION 8.10. Expense Account......................................74
SECTION 8.11. Redemption Account...................................74
SECTION 8.12. Investment of Funds..................................75
ARTICLE IX. SUPPLEMENTAL INDENTURES...........................................76
SECTION 9.1. Supplemental Indentures Without
Consent of Noteholders............................76
SECTION 9.2. Supplemental Indentures with
Consent of Noteholders............................77
SECTION 9.3. Execution of Supplemental Indentures.................79
SECTION 9.4. Effect of Supplemental Indenture.....................79
SECTION 9.5. Conformity With Trust Indenture Act..................79
SECTION 9.6. Reference in Notes to Supplemental Indentures........79
ARTICLE X. REDEMPTION OF NOTES................................................79
SECTION 10.1. Redemption ..........................................79
SECTION 10.2. Notice ..............................................80
SECTION 10.3. Presentation and Surrender of Notes and Payment......80
ARTICLE XI. CERTAIN MATTERS REGARDING THE INSURER.............................80
SECTION 11.1. Rights of the Insurer to Exercise Rights
of Class A Noteholders............................80
SECTION 11.2. Indenture Trustee to Act Solely with Consent
of the Insurer....................................80
SECTION 11.3. Trust Property and Accounts Held for Benefit
of the Insurer....................................81
SECTION 11.4. Claims Upon the Policy; Policy Payments Account......81
SECTION 11.5. Notices to the Insurer...............................82
SECTION 11.6. Third-Party Beneficiary..............................82
SECTION 11.7. Trustee to Hold the Policy...........................82
ARTICLE XII. MISCELLANEOUS....................................................82
SECTION 12.1. Compliance Certificates and Opinions, etc............82
SECTION 12.2. Form of Documents Delivered to Indenture Trustee.....83
SECTION 12.3. Acts of Noteholders..................................84
SECTION 12.4. Notices, etc. to Indenture Trustee,
Issuer and Rating Agencies.......................84
iv
SECTION 12.5. Notices to Noteholders; Waiver.......................85
SECTION 12.6. Alternate Payment and Notice Provisions..............86
SECTION 12.7. Conflict with Trust Indenture Act....................86
SECTION 12.8. Effect of Headings and Table of Contents.............86
SECTION 12.9. Successors and Assigns...............................86
SECTION 12.10. Separability.........................................86
SECTION 12.11. Benefits of Indenture................................86
SECTION 12.12. Legal Holidays.......................................87
SECTION 12.13. GOVERNING LAW........................................87
SECTION 12.14. Counterparts.........................................87
SECTION 12.15. Recording of Indenture...............................87
SECTION 12.16. Trust Obligation.....................................87
SECTION 12.17. No Petition..........................................88
SECTION 12.18. Inspection ..........................................88
SECTION 12.19. Limitation of Liability..............................88
EXHIBIT A-- Forms of Notes
Exhibit A-1 -- Form of Class A-1 Note
Exhibit A-2 -- Form of Class A-2 Note
Exhibit A-3 -- Form of Class A-3 Note
Exhibit A-4 -- Form of Class A-4 Note
Exhibit A-5 -- Form of Class A-5 Note
Exhibit A-6 -- Form of Class A-6 Note
v
EMERGENT HOME EQUITY LOAN TRUST 1997-4
Reconciliation and Tie between the Indenture
dated as of ___________, 1997 and the
Trust Indenture Act of 1939, as amended
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
ss. 310 (a) (1)
(a)(2)
(a)(3)
(a)(4)
(b)
(c)
311(a)
(b)
312(a)
(b)
(c)
313(a)
(b)(1)
(b)(2)
(c)
(d)
314(a)
(b)
(c)(1)
(c)(2)
(c)(3)
(d)
(e)
(f)
315(a)
(b)
(c)
(d)
(e)
316(a) (last sentence)
(a)(1)(A)
(a)(1)(B)
(a)(2)
317(a)(1)
(a)(2)
(b)
318(a)
(c)
vi
INDENTURE dated as of November ___, 1997, between EMERGENT
HOME EQUITY LOAN TRUST 1997-4, a Delaware business trust (the "Issuer"), and
FIRST UNION NATIONAL BANK, a national banking association, as trustee (the
"Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's Class
A Home Equity Loan Asset Backed Notes (collectively, the "Notes"):
As security for the payment and performance by the Issuer of
its obligations under this Indenture and the Notes, the Issuer has agreed to
assign the Collateral (as defined below) to the Indenture Trustee on behalf of
the Noteholders.
Financial Security Assurance, Inc. (the "Insurer") has issued
and delivered a financial guaranty insurance policy, dated the Closing Date (the
"Policy"), pursuant to which the Insurer guarantees the Guaranteed Distributions
(as defined below).
As an inducement to the Insurer to issue and deliver the
Policy, the Issuer and the Insurer have executed and delivered the Insurance and
Indemnity Agreement, dated as of November ___, 1997 (as amended from time to
time, the "Insurance Agreement"), among the Insurer, the Issuer, Emergent
Mortgage Corp., Prudential Securities Secured Financing Corporation and the
Indenture Trustee.
As an additional inducement to the Insurer to issue the
Policy, and as security for the performance by the Issuer of its respective
obligations hereunder and the other Basic Documents to the Insurer and the
Indenture Trustee, the Issuer has agreed to grant and assign the Collateral (as
defined below) to the Indenture Trustee for the benefit of the Issuer Secured
Parties, as their respective interests may appear.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the
Closing Date, for the benefit of the Issuer Secured Parties all of the Issuer's
right, title and interest in and to (i) the Initial Mortgage Loans and
Additional Mortgage Loans, (ii) any Pre-Funded Mortgage Loans acquired by the
Issuer subsequent to the Closing Date pursuant to the Sale and Servicing
Agreement, (iii) any Qualified Substitute Mortgage Loans acquired by the Issuer
subsequent to the Closing Date pursuant to the Sale and Servicing Agreement,
(iv) all interest and principal received by the Issuer on or in respect of the
Initial Mortgage Loans, the Additional Mortgage Loans, the Pre-Funded Mortgage
Loans and the Qualified Substitute Mortgage Loans pursuant to the Sale and
Servicing Agreement, (v) the Policy, (vi) the Depositor's rights under the
Unaffiliated Sponsor's Agreement (including any security interest created
thereby) assigned to the Issuer pursuant to the Sale and Servicing Agreement,
(vii) the Issuer's rights under the Sale and Servicing Agreement, (viii) any and
all other property, assets, rights and interests included or to be included in
the Trust Property, and (ix) all income, proceeds and payments with respect to
the foregoing (the foregoing "Collateral").
The foregoing Grant is made in trust to the Indenture Trustee,
for the benefit first, of the Holders of the Notes, and second, for the benefit
of the Insurer. The Indenture Trustee hereby acknowledges such Xxxxx, accepts
the trusts under this Indenture in accordance with the provisions of this
Indenture and agrees to perform its duties required in this Indenture to the
best of its ability to the end that the interests of such parties, recognizing
the priorities of their respective interests, may be adequately and effectively
protected.
ARTICLE I.
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Except as otherwise specified
herein, the following terms have the respective meanings set forth below for all
purposes of this Indenture.
"Accrued Note Interest" means, with respect to each
Distribution Date and any Class A Note, interest accrued during the related
Interest Accrual Period at the applicable Class A Note Interest Rate for such
Class A Note on the Note Principal Balance of such Class A Note immediately
prior to such Distribution Date. All distributions of interest on the Class A
Notes will be calculated on the basis of a 360-day year consisting of twelve
30-day months. Accrued Note Interest with respect to each Distribution Date, as
to any Class A Note, shall be reduced by an amount equal to the portion
allocable to such Note of the aggregate amount of any Relief Act Interest
Shortfall and/or Prepayment Interest Shortfall, if any, for such Distribution
Date.
"Act" has the meaning specified in Section 12.3(a).
"Additional Mortgage Loans" means any Mortgage Loans included
in the Mortgage Pool as of the Closing Date but not identified by the Originator
before the close of business on ___________, 1997, but excluding any Qualified
Substitute Mortgage Loans.
2
"Affiliate" means, with respect to any specified Person, any
other Person controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Newspaper" means a newspaper of general
circulation in the Borough of Manhattan, The City of New York, printed in the
English language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays.
"Authorized Officer" means, with respect to the Issuer, the
Depositor, the Sponsor and the Servicer, any officer or agent acting pursuant to
a power of attorney of the Owner Trustee, the Depositor, the Sponsor or the
Servicer, as applicable, who is authorized to act for the Owner Trustee, the
Depositor, the Sponsor or the Servicer, as applicable, in matters relating to
the Issuer, the Depositor, the Sponsor or the Servicer, as the case may be, and
who is identified on the list of Authorized Officers delivered by each of the
Owner Trustee, the Depositor, the Sponsor and the Servicer to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Available Distribution Amount" means, with respect to any
Distribution Date, an amount equal to the excess of (i) the sum of (a) the
aggregate of the Monthly Payments, Liquidation Proceeds, Insurance Proceeds,
Principal Prepayments and other unscheduled recoveries of principal and interest
in respect of the Mortgage Loans received during or with respect to the related
Collection Period, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Distribution Date pursuant to Section 3.25 of the Sale and
Servicing Agreement, (c) the aggregate of any amounts deposited in the
Distribution Account by the Servicer in respect of Prepayment Interest
Shortfalls for such Distribution Date pursuant to Section 3.26 of the Sale and
Servicing Agreement, (d) the aggregate of any Monthly Advances made by the
Servicer for such Distribution Date pursuant to Section 4.03 of the Sale and
Servicing Agreement, (e) the aggregate of any advances made by the Indenture
Trustee for such Distribution Date pursuant to Section 7.02 of the Sale and
Servicing Agreement, (f) the Stated Principal Balance of any Mortgage Loan that
was purchased during the related Collection Period pursuant to or as
contemplated by Section 2.05, 3.18(c) or 10.01 of the Sale and Servicing
Agreement and the amount of any shortfall deposited into the Collection Account
in connection with the substitution of a Deleted Mortgage Loan pursuant to
Section 2.05 of the Sale and Servicing Agreement during the related Collection
Period, and (g) the aggregate of any amounts deposited into the Distribution
Account by the Indenture Trustee from the Interest Coverage Account, the
Pre-Funding Account and the Redemption Account over (ii) the sum of (a) amounts
reimbursable or payable to the Depositor, the Servicer, the Indenture Trustee,
the Seller or any Sub-Servicer pursuant to Section 3.11 or 3.14 of the Sale and
Servicing Agreement or otherwise payable in respect of extraordinary Trust
Property expenses, (b) Stayed Funds, (c) amounts deposited in the Collection
Account or the Distribution Account, as the case may be, in error, (d) amounts
reimbursable to the Indenture Trustee for an advance made pursuant to Section
7.02(b) of the Sale and Servicing Agreement which advance the Indenture Trustee
has determined to be nonrecoverable from the Stayed Funds in respect of which it
was made, (e) the Insurer Premium
3
payable to the Insurer pursuant to Section 8.10(b), and (f) the Indenture
Trustee Fee payable from the Distribution Account pursuant to Section 6.7.
"Available Funds Cap Rate": means, for any Distribution Date,
an amount, expressed as a per annum rate, equal to (a) the aggregate amount of
interest due and collected (or advanced) on the Mortgage Loans for the related
Collection Period, minus the amounts reimbursable or payable to the Servicer or
any Sub-Servicer pursuant to Section 3.11 or 3.14 and the Insurer Premium
payable to the Insurer pursuant to Section 8.10(b), divided by (b) the Stated
Principal Balance of the Mortgage Loans immediately prior to such Distribution
Date.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978
(Title 11 of the United States Code), as amended.
"Basic Documents" means this Indenture, the Certificate of
Trust, the Trust Agreement, the Sale and Servicing Agreement, the Purchase
Agreement, the Indemnification Agreement, the Insurance Agreement and the other
documents and certificates delivered in connection therewith.
"BIF" means the Bank Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Bank Insurance Fund is not existing and performing duties now
assigned to it, the body performing such duties on such date.
"Book Entry Notes" means a beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by the
Depository as described in Section 2.9.
"Business Day" means any day other than a Saturday, Sunday or
a day on which banking and savings and loan institutions in the state of South
Carolina, or in the city in which the Corporate Trust Office is located, are
authorized or obligated by law or executive order to be closed.
"Certificate" means any of the Certificates executed by the
Owner Trustee, and authenticated and delivered by the Certificate Registrar,
pursuant to the Trust Agreement.
"Certificate Distribution Amount" means, with respect to any
Certificate, as of any date of determination, an amount equal to the Percentage
Interest evidenced by such Certificate times the excess, if any, of (A) the then
aggregate Stated Principal Balance of the Mortgage Loans over (B) the then
aggregate Note Principal Balance of all Notes then outstanding.
"Certificate Register" and "Certificate Registrar" mean the
register maintained and the registrar appointed pursuant to Section ___ of the
Trust Agreement.
"Certificate of Trust" means the certificate of trust of the
Issuer substantially in the form of Exhibit B to the Trust Agreement.
4
"Certificateholder" means the Person in whose name a
Certificate is registered in the Certificate Register.
"Class" means, collectively, all of the Notes bearing the same
class designation.
"Class A Note" means any of the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class A-5 Notes and Class A-6 Notes.
"Class A Note Interest Rate" means, with respect to the Class
A-1 Notes, the Class A-1 Interest Rate, with respect to the Class A-2 Notes, the
Class A-2 Interest Rate, with respect to the Class A-3 Notes, the Class A-3
Interest Rate, with respect to the Class A-4 Notes, the Class A-4 Interest Rate,
with respect to the Class A-5 Notes, the Class A-5 Interest Rate, and with
respect to the Class A-6 Notes, the Class A-6 Interest Rate.
"Class A Note Principal Balance" means the sum of the Class
A-1 Note Principal Balance, the Class A-2 Note Principal Balance, the Class A-3
Note Principal Balance, the Class A-4 Note Principal Balance, the Class A-5 Note
Principal Balance and the Class A-6 Note Principal Balance.
"Class A Noteholder" means any Holder of a Class A-1 Note,
Class A-2 Note, Class A-3 Note, Class A-4 Note, Class A-5 Note or Class A-6
Note.
"Class A-1 Interest Distribution Amount" means, on any
Distribution Date, the amount equal to the aggregate Accrued Note Interest on
the Class A-1 Notes.
"Class A-1 Interest Rate" means, for each Distribution Date, a
rate per annum equal to the lesser of _____% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-1 Note" means any of the Class A-1 Notes executed by
the Owner Trustee, and authenticated and delivered by the Indenture Trustee,
substantially in the form annexed hereto as Exhibit A-1.
"Class A-1 Note Principal Balance" means the Class Note
Balance for the Class A-1 Notes.
"Class A-2 Interest Distribution Amount" means, on any
Distribution Date, the amount equal to the aggregate Accrued Note Interest on
the Class A-2 Notes.
"Class A-2 Interest Rate" means, for each Distribution Date, a
rate per annum equal to the lesser of _____% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-2 Note" means any of the Class A-2 Notes executed by
the Owner Trustee, and authenticated and delivered by the Indenture Trustee,
substantially in the form annexed hereto as Exhibit A-2.
"Class A-2 Note Principal Balance" means the Class Note
Balance for the Class A-2 Notes.
5
"Class A-3 Interest Distribution Amount" means, on any
Distribution Date, the amount equal to the aggregate Accrued Note Interest on
the Class A-3 Notes.
"Class A-3 Interest Rate" means, for each Distribution Date, a
rate per annum equal to the lesser of ________% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-3 Note" means any of the Class A-3 Notes executed by
the Owner Trustee, and authenticated and delivered by the Indenture Trustee,
substantially in the form annexed hereto as Exhibit A-3.
"Class A-3 Note Principal Balance" means the Class Note
Balance for the Class A-3 Notes.
"Class A-4 Interest Distribution Amount" means, on any
Distribution Date, the amount equal to the aggregate Accrued Note Interest on
the Class A-4 Notes.
"Class A-4 Interest Rate" means, for each Distribution Date, a
rate per annum equal to the lesser of ______% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-4 Note" means any of the Class A-4 Notes executed by
the Owner Trustee, and authenticated and delivered by the Indenture Trustee,
substantially in the form annexed hereto as Exhibit A-4.
"Class A-4 Note Principal Balance" means the Class Note
Balance for the Class A-4 Notes.
"Class A-5 Interest Rate" means, for each Distribution Date, a
rate per annum equal to the lesser of ______% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-5 Interest Distribution Amount" means, on any
Distribution Date, the amount equal to the aggregate Accrued Note Interest on
the Class A-5 Notes.
"Class A-5 Note" means any of the Class A-5 Notes executed by
the Owner Trustee, and authenticated and delivered by the Indenture Trustee,
substantially in the form annexed hereto as Exhibit A-5.
"Class A-5 Note Principal Balance" means, the Class Note
Balance for the Class A-5 Notes.
"Class A-6 Interest Distribution Amount" means, on any
Distribution Date, the amount equal to the aggregate Accrued Note Interest on
the Class A-6 Notes.
"Class A-6 Interest Rate" means, for each Distribution Date, a
rate per annum equal to the lesser of ______% and the Available Funds Cap Rate
for such Distribution Date.
"Class A-6 Lockout Distribution Amount" means, for any
Distribution Date, an amount equal to the product of (x) the applicable Class
A-6 Lockout Percentage for such
6
Distribution Date and (y) the Class A-6 Lockout Pro-Rata Distribution Amount for
such Distribution Date.
"Class A-6 Lockout Percentage" means, for each Distribution
Date, the percentage specified below for the period in which such Distribution
Date occurs:
Distribution Date Lockout Percentage
----------------- ------------------
January 1998 - December 2000 0%
January 2000 - December 2002 45%
January 2002 - December 2003 80%
January 2003 - December 2004 100%
Subsequent to December 2004 300%
"Class A-6 Lockout Pro-Rata Distribution Amount" means, for
any Distribution Date, an amount equal to the product of (x) a fraction, the
numerator of which is the Class A-6 Note Principal Balance immediately prior to
such Distribution Date and the denominator of which is the Class A Note
Principal Balance immediately prior to such Distribution Date, and (y) the
Principal Distribution Amount for such Distribution Date.
"Class A-6 Note" means any of the Class A-6 Notes executed by
the Owner Trustee, and authenticated and delivered by the Indenture Trustee,
substantially in the form annexed hereto as Exhibit A-6.
"Class A-6 Note Principal Balance" means the Class Note
Balance for the Class A-6 Notes.
"Class Note Balance" means, as to any Class of Notes and any
date of determination, the aggregate of the Note Principal Balances of all Notes
of such Class as of such date of determination.
"Closing Date" means December __, 1997.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" has the meaning specified in the Granting Clause
of this Indenture.
"Collection Account" means the account or accounts created and
maintained by the Servicer pursuant to Section 3.10(a) of the Sale and Servicing
Agreement, which shall be entitled "Emergent Mortgage Corp., as Servicer for
First Union National Bank, as Indenture Trustee, in trust for (A) registered
holders of Emergent Home Equity Loan Pass-Through Certificates, Series 1997-4,
and (B) Financial Security Assurance, Inc." and which must be an Eligible
Account.
7
"Collection Period" means, in the case of the initial
Distribution Date, the period from the close of business on __________, 1997
through December 31, 1997 and, in the case of each subsequent Distribution Date,
the calendar month immediately preceding the calendar month in which such
Distribution Date occurs.
"Company" means Emergent Mortgage Corp.
"Corporate Trust Office" means the principal corporate trust
office of the Indenture Trustee at which at any particular time its corporate
trust business shall be administered, which office at the date of the execution
of this Indenture is located at 000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxx,
Xxxxx Xxxxxxxx 00000-0000, Attention: Corporate Trust Department.
"Cumulative Insurance Payments" means, as of any time of
determination, the aggregate of all Insurance Payments previously made by the
Insurer plus interest thereon from the date such amount became due until paid in
full, at a rate of interest calculated as provided in the Insurance Agreement
minus all payments previously made to the Insurer pursuant to Section 8.3 hereof
as reimbursement for such amounts.
"Cumulative Loss Percentage" means, for any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred from and including the first Collection
Period to and including the most recently ended Collection Period, and the
denominator of which is the Original Pool Balance.
"Cut-off Date" means, with respect to each Initial Mortgage
Loan, the close of business on ____________, 1997; with respect to each
Additional Mortgage Loan and each Pre-Funded Mortgage Loan, the respective
origination dates thereof; and with respect to all Qualified Substitute Mortgage
Loans, the first day of the calendar month in which the substitution occurs.
References herein to the "Cut-off Date," when used with respect to more than one
Mortgage Loan, shall be to the respective Cut-off Dates for such Mortgage Loans.
"Debt Service Reduction" means, with respect to any Mortgage
Loan, a reduction in the scheduled Monthly Payment for such Mortgage Loan by a
court of competent jurisdiction in a proceeding under the Bankruptcy Code,
except such a reduction resulting from a Deficient Valuation.
"Default" means any occurrence that is, or with notice or the
lapse of time or both would become, an Event of Default.
"Deficiency Amount" means, with respect to the Class A Notes
as of any Distribution Date (i) any shortfall in amounts available in the
Distribution Account to pay the Interest Distribution Amount, net of any Relief
Act Interest Shortfalls and Prepayment Interest Shortfalls allocated to the
Class A Notes, (ii) the Remaining Overcollateralization Deficit, if any, for
such Distribution Date, and (iii) without duplication of the amount specified in
clause (ii), the applicable Class A Note Principal Balance to the extent unpaid
on the Final Distribution Date for each Class of the Class A Notes or the
earlier termination of the Trust pursuant to the terms of the Trust Agreement.
8
"Deficiency Event" means the inability of the Indenture
Trustee to make the Guaranteed Distribution on any Distribution Date due to a
shortage of funds for such purpose then held in the Distribution Account and the
failure of the Insurer to pay in full a claim made in accordance with the Policy
with respect to such Distribution Date.
"Definitive Notes" has the meaning specified in Section 2.9.
"Deleted Mortgage Loan" means a Mortgage Loan replaced or to
be replaced by a Qualified Substitute Mortgage Loan pursuant to the terms and
provisions of the Sale and Servicing Agreement.
"Depositor" means Prudential Securities Secured Financing
Corporation, a Delaware corporation, or its successor in interest.
"Depository" means The Depository Trust Company, or any
successor Depository hereafter named. The nominee of the initial Depository, for
purposes of registering those Notes that are to be Book-Entry Notes, is CEDE &
Co. The Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended.
"Depository Institution" means any depository institution or
trust company, including the Indenture Trustee, that (a) is incorporated under
the laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and (c) has
outstanding unsecured commercial paper or other short-term unsecured debt
obligations (or, in the case of a depository institution that is the principal
subsidiary of a holding company, such holding company has unsecured commercial
paper or other short-term unsecured debt obligations) that are rated at least
P-1 by Xxxxx'x and A-1 by S&P (or comparable ratings if Xxxxx'x and S&P are not
the Rating Agencies).
"Depository Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Depository
effects book-entry transfers and pledges of securities deposited with the
Depository.
"Determination Date" means, with respect to each Distribution
Date, the fifth Business Day prior to such Distribution Date.
"Disqualified Organization" means any of the following: (i)
the United States, any State or political subdivision thereof, any possession of
the United States, or any agency or instrumentality of any of the foregoing
(other than an instrumentality which is a corporation if all of its activities
are subject to tax and, except for the FHLMC, a majority of its board of
directors is not selected by such governmental unit), (ii) any foreign
government, any international organization, or any agency or instrumentality of
any of the foregoing, (iii) any organization (other than certain farmers'
cooperatives described in Section 521 of the Code) which is exempt from the tax
imposed by Chapter 1 of the Code (including the tax imposed by Section 511 of
the Code on unrelated business taxable income), (iv) rural electric and
telephone cooperatives described in Section 1381(a)(2)(C) of the Code, and (v)
any other Person so designated by the Indenture Trustee based upon an Opinion of
Counsel that the holding of an Ownership Interest in
9
a Certificate by such Person may cause the Issuer or the Trust Property or any
Person having an Ownership Interest in any Certificate (other than such Person)
to incur a liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the Transfer of an Ownership Interest in a
Certificate to such Person. The terms "United States," "State" and
"international organization" shall have the meanings set forth in Section 7701
of the Code or successor provisions.
"Distribution Account" means the trust account or accounts
created and maintained by the Trustee pursuant to Section 8.7.
"Distribution Date" means the 20th day of any month, or if
such 20th day is not a Business Day, the Business Day immediately following such
20th day, commencing in January, 1998.
"Due Date" means, with respect to each Distribution Date, the
day of the month on which the Monthly Payment is due on a Mortgage Loan during
the related Collection Period, exclusive of any days of grace.
"Eligible Account" means any of (i) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding
company) are rated at least P-1 by Xxxxx'x and A-1 by S&P (or comparable ratings
if Xxxxx'x and S&P are not the Rating Agencies) at the time any amounts are held
on deposit therein, (ii) an account or accounts the deposits in which are fully
insured by the FDIC or (iii) a trust account or accounts maintained with the
trust department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity. Eligible Accounts may bear interest.
"ERISA" means Employee Retirement Income Security Act of 1974,
as amended.
"Estate in Real Property" means a fee simple estate in a
parcel of land.
"Excess Subordinated Amount" means, with respect to the Class
A Notes and any Distribution Date, the excess, if any, of (i) the Subordinated
Amount for such Distribution Date over (ii) the Required Subordinated Amount for
such Distribution Date.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expense Account" means the account established and maintained
pursuant to Section 8.10.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation or
any successor thereto.
10
"Final Distribution Date" means (i) in the case of the Class
A-1 Notes, ___________, (ii) in the case of the Class A-2 Notes, ___________,
(iii) in the case of the Class A-3 Notes, ___________, (iv) in the case of the
Class A-4 Notes, ___________, (v) in the case of the Class A-5 Notes,
___________, and (vi) in the case of the Class A-6 Notes, ___________.
"Final Maturity Date" means, with respect to any Class of the
Class A Notes, the Final Distribution Date for such Class or, if earlier, the
Redemption Date.
"Final Recovery Determination" means, with respect to any
defaulted Mortgage Loan or any REO Property (other than a Mortgage Loan or REO
Property purchased by the Sponsor, the Depositor, the Servicer or the Insurer
pursuant to or as contemplated by Section 2.05, 3.18(c) or 10.01 of the Sale and
Servicing Agreement), a determination made by the Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered.
"FNMA" means the Federal National Mortgage Association or any
successor thereto.
"Grant" means mortgage, pledge, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, create, xxxxx x xxxx upon
and a security interest in and right of set-off against, deposit, set over and
confirm pursuant to this Indenture. A Grant of the Collateral or of any other
agreement or instrument shall include all rights, powers and options (but none
of the obligations) of the Granting party thereunder, including the immediate
and continuing right to claim for, collect, receive and give receipt for
principal and interest payments in respect of the Collateral and all other
monies payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the Granting party or otherwise and generally
to do and receive anything that the Granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Guaranteed Distribution" has the meaning ascribed thereto in
the Policy.
"Indebtedness" means, with respect to any Person at any time,
(a) indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
11
"Indenture" means this Indenture as amended and supplemented
from time to time.
"Indenture Trustee" means First Union National Bank, a
national banking association, not in its individual capacity but as trustee
under this Indenture, or any successor trustee under this Indenture.
"Indenture Trustee's Fee": The amount payable to the Indenture
Trustee on each Distribution Date pursuant to Section 6.7 as compensation for
all services rendered by it in the execution of the trust hereby created and in
the exercise and performance of any of the powers and duties of the Indenture
Trustee hereunder, which amount shall equal one twelfth of the product of (i)
the Indenture Trustee's Fee Rate, multiplied by (ii) the aggregate Stated
Principal Balance of the Mortgage Loans and any REO Properties as of the
preceding Distribution Date, (or, in the case of the initial Distribution Date,
as of the Cut-off Date).
"Indenture Trustee's Fee Rate" means 0.015% per annum.
"Indenture Trustee Issuer Secured Obligations" means all
amounts and obligations which the Issuer may at any time owe to the Indenture
Trustee for the benefit of the Noteholders under this Indenture or the Notes.
"Independent" means, when used with respect to any specified
Person, that the person (a) is in fact independent of the Issuer, the Sponsor,
the Depositor, the Servicer and their respective Affiliates, (b) does not have
any direct financial interest or any material indirect financial interest in the
Issuer, the Sponsor, the Depositor, the Servicer or any Affiliate thereof and
(c) is not connected with the Issuer, the Sponsor, the Depositor, the Servicer
or any Affiliate thereof as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions; provided,
however, that a Person shall not fail to be Independent of the Issuer, the
Sponsor, the Depositor or the Servicer or any Affiliate thereof merely because
such Person is the beneficial owner of 1% or less of any class of securities
issued by the Issuer, the Sponsor, the Depositor or the Servicer or any
Affiliate thereof, as the case may be.
"Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1, prepared
by an Independent appraiser or other expert appointed pursuant to an Issuer
Order and approved by the Indenture Trustee in the exercise of reasonable care,
and such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is Independent
within the meaning thereof.
"Initial Mortgage Loan" means any Mortgage Loan identified by
the Originator as of the close of business on __________, 1997, which Mortgage
Loans will have a Cut-off Date as of the close of business on __________, 1997.
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of ____________, 1997, among the Issuer, the Depositor, the
Servicer, the Seller, Emergent Group, Inc. and the Certificate Insurer, as
amended or supplemented in accordance with the provisions thereof.
12
"Insurance Payment" means any payment made by the Insurer
under the Policy with respect to the Class A Notes.
"Insurance Proceeds" means proceeds of any title policy,
hazard policy or other insurance policy covering a Mortgage Loan, to the extent
such proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing mortgage loans held for its own account,
subject to the terms and conditions of the related Mortgage Note and Mortgage.
"Insurer" means Financial Security Assurance, Inc., a stock
insurance company organized and created under the laws of the State of New York,
and any successors thereto.
"Insurer Default" means the existence and continuance of any
of the following:
(a) the Insurer fails to make a payment required under the
Policy in accordance with its terms; or
(b) the Insurer shall have (i) filed a petition or commenced
any case or proceeding under any provision or chapter of the United
States Bankruptcy Code, the New York State Insurance Law or any other
similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation, or reorganization, (ii) made a general
assignment for the benefit of its creditors or (iii) had an order for
relief entered against it under the United States Bankruptcy Code, the
New York State Insurance Law or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation, or
reorganization that is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department
of Insurance or any other competent regulatory authority shall have
entered a final and nonappealable order, judgment or decree (i)
appointing a custodian, trustee, agent, or receiver for the Insurer or
for all or any material portion of its property or (ii) authorizing the
taking of possession by a custodian, trustee, agent, or receiver of the
Insurer of all or any material portion of its property.
"Insurer Issuer Secured Obligations" means all amounts and
obligations which the Issuer may at any time owe to or on behalf of the Insurer
under this Indenture, the Insurance Agreement or any other Basic Document.
"Insurer Premium" means the Policy premium payable pursuant to
Section 8.10(b).
"Insurer Premium Rate" means [0.18%] per annum.
"Interest Accrual Period" means, with respect to any
Distribution Date and the Class A Notes, the calendar month immediately
preceding the month in which such Distribution Date occurs.
"Interest Coverage Account" means the account established and
maintained pursuant to Section 8.9.
13
"Interest Distribution Amount" means, with respect to any
Distribution Date and the Class A Notes, the aggregate Accrued Note Interest on
the Class A Notes for such Distribution Date.
"Investment Account" has the meaning ascribed thereto in
Section 8.12.
"Issuer" means the party named as such in this Indenture until
a successor replaces it and, thereafter, means the successor and, for purposes
of any provision contained herein and required by the TIA, each other obligor on
the Notes.
"Issuer Order" and "Issuer Request" mean a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"Issuer Secured Obligations" means the Insurer Issuer Secured
Obligations and the Indenture Trustee Issuer Secured Obligations.
"Issuer Secured Parties" means each of the Indenture Trustee
in respect of the Indenture Trustee Issuer Secured Obligations and the Insurer
in respect of the Insurer Issuer Secured Obligations.
"Liquidation Event" means, with respect to any Mortgage Loan,
any of the following events: (i) such Mortgage Loan is paid in full; (ii) a
Final Recovery Determination is made as to such Mortgage Loan, or (iii) such
Mortgage Loan is removed from the Trust Property by reason of its being
purchased, sold or replaced pursuant to or as contemplated by Section 2.05,
Section 3.18(c) or Section 10.01 of the Sale and Servicing Agreement. With
respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from the Trust Property by reason of its being purchased
pursuant to Section 10.01 of the Sale and Servicing Agreement.
"Liquidation Proceeds" means the amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation and (ii) the liquidation of a defaulted Mortgage Loan by
means of a trustee's sale, foreclosure sale or otherwise.
"Majority Certificateholder" means any single Holder of
Certificates representing a greater than 50% Percentage Interest in the
Certificates.
"Monthly Advance" means, as to any Mortgage Loan or REO
Property, any advance made by the Servicer in respect of any Distribution Date
pursuant to Section 4.03 of the Sale and Servicing Agreement.
"Moody's" means Xxxxx'x Investors Service, Inc. or its
successor in interest.
"Mortgage File" means the mortgage documents listed in Section
2.03 of the Sale and Servicing Agreement pertaining to a particular Mortgage
Loan and any additional documents required to be added to the Mortgage File
pursuant to this Agreement.
14
"Mortgage Loan" means each mortgage loan transferred and
assigned to the Indenture Trustee pursuant to Section 2.01, Section 2.02 or
Section 2.05(d) of the Sale and Servicing Agreement as from time to time held as
a part of the Trust Property, the Mortgage Loans so held being identified in the
Mortgage Loan Schedule.
"Mortgage Pool" means the pool of Mortgage Loans, identified
on the Mortgage Loan Schedule from time to time, and any REO Properties acquired
in respect thereof.
"Mortgage Rate" means, with respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan in accordance with
the provisions of the related Mortgage Note.
"Mortgage Schedule" has the meaning ascribed thereto in the
Sale and Servicing Agreement.
"Mortgaged Property" means the underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property.
"Mortgagor" means the obligor on a Mortgage Note.
"Net Monthly Excess Cashflow" means, with respect to any
Distribution Date, an amount equal to the excess of (x) the Available
Distribution Amount for such Distribution Date over (y) the sum for such
Distribution Date of (A) the amount described in Section 8.3(a)(i) hereof and
(B) the amount described in clauses (b)(i)-(iii) of the definition of Principal
Distribution Amount minus the amount of any Subordination Reduction Amount for
the Class A Notes for such Distribution Date.
"Net Mortgage Rate" means, with respect to any Mortgage Loan
(or the related REO Property), as of any date of determination, a per annum rate
of interest equal to the then applicable Mortgage Rate for such Mortgage Loan
minus the Servicing Fee Rate.
"Nonrecoverable Monthly Advance" means any Monthly Advance or
Servicing Advance previously made or proposed to be made in respect of a
Mortgage Loan or REO Property that, in the good faith business judgment of the
Servicer, will not or, in the case of a proposed Monthly Advance, would not be
ultimately recoverable from related late payments, Insurance Proceeds or
Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.
"Non-United States Person" means any Person other than a
United States Person.
"Note" means a Class A-1 Note, Class A-2 Note, Class A-3 Note,
Class A-4 Note, Class A-5 Note or Class A-6 Note.
"Note Factor" means, with respect to any Class of Notes as of
any Distribution Date, a fraction, expressed as a decimal carried to six places,
the numerator of which is the Class Note Balance of such Class of Notes on such
Distribution Date (after giving effect to any distributions of principal in
reduction of the Class Note Balance of such Class of Notes to be
15
made on such Distribution Date), and the denominator of which is the initial
Class Note Balance of such Class of Notes as of the Closing Date.
"Note Owner" means, with respect to a Book-Entry Note, the
Person who is the beneficial owner of such Note as reflected on the books of the
Depository or on the books of a Depository Participant or on the books of an
indirect participating brokerage firm for which a Depository Participant acts as
agent.
"Note Paying Agent" means the Indenture Trustee or any other
Person that meets the eligibility standards for the Indenture Trustee specified
in Section 6.11 and is authorized by the Issuer to make payments to and
distributions from the Distribution Account, including payment of principal of
or interest on the Notes on behalf of the Issuer.
"Note Principal Balance" means, with respect to each Class A
Note as of any date of determination, the Note Principal Balance of such Class A
Note on the Distribution Date immediately prior to such date of determination,
minus all distributions allocable to principal made thereon on such immediately
prior Distribution Date (or, in the case of any date of determination up to and
including the first Distribution Date, the initial Note Principal Balance of
such Class A Note, as stated on the face thereof).
"Note Register" and "Note Registrar" have the respective
meanings specified in Section 2.3.
"Noteholder" means the Person in whose name a Note is
registered in the Note Register, and the Insurer to the extent of Cumulative
Insurance Payments, except that for purposes hereof and, solely for the purposes
of determining whether the Holders of the requisite Outstanding Amount of the
Notes of any Class have given any request, demand, authorization, direction,
notice, consent or waiver under this Indenture or any Basic Document, any Note
registered in the name of the Issuer, the Sponsor or the Servicer or any
Affiliate thereof shall be disregarded and deemed not to be Outstanding and the
Voting Rights to which it is entitled shall not be taken into account in
determining whether the requisite percentage of Voting Rights necessary to
effect any such request, demand, authorization, direction, notice, consent or
waiver has been obtained, except that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer either actually knows to be so owned or has received written
notice thereof shall be so disregarded and Notes so owned that have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to the Notes and that the pledgee is not the Issuer, the Sponsor or the Servicer
or an Affiliate of any thereof. The Indenture Trustee may conclusively rely upon
a certificate of the Issuer, the Sponsor or the Servicer in determining whether
a Note is held by an Affiliate of any thereof. All references herein to
"Holders" or "Noteholders" shall reflect the rights of Note Owners as they may
indirectly exercise such rights through the Depository and participating members
thereof, except as otherwise specified herein; provided, however, that the
Indenture Trustee shall be required to recognize as a "Holder" or "Noteholder"
only the Person in whose name a Note is registered in the Note Register.
16
"Officer's Certificate" means a certificate signed by any
Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 12.1 and TIA
ss. 314, and delivered to the Indenture Trustee.
"Opinion of Counsel" means a written opinion of counsel, who
may, except as otherwise expressly provided in this Indenture, be salaried
counsel to the Issuer, the Sponsor, the Depositor or the Servicer, which is
satisfactory to the Indenture Trustee and, if addressed to the Insurer, to the
Insurer and which shall comply with any applicable requirements of Section 12.1.
"Original Pool Balance" means an amount equal to the aggregate
of the Stated Principal Balances of the Mortgage Loans as of the Cut-off Date.
"Original Pre-Funded Amount" means US$__________, being the
amount of cash to be deposited in the Pre-Funding Account on the Closing Date.
"Originator" means Emergent Mortgage Corp.
"Outstanding" means, as of the date of determination, all
Notes theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Indenture
Trustee or any Note Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision therefor, satisfactory to the Indenture Trustee has been
made); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a protected or bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Policy
shall continue to remain Outstanding for purposes of this Indenture until the
Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Indenture Trustee, and the Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Insurer; provided
further, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, the Sponsor or the Servicer or any Affiliate thereof shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that a Responsible Officer either actually knows to be so owned or has received
written notice thereof shall be so disregarded and Notes so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
17
to the satisfaction of the Indenture Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer, the Sponsor or the
Servicer or any Affiliate of any thereof.
"Outstanding Amount" means the aggregate principal amount of
all Notes, or class of Notes, as applicable, Outstanding at the date of
determination.
"Overcollateralization Deficit" means, with respect to any
Distribution Date, the excess, if any, of (i) the Class A Note Principal
Balance, after taking into account the distribution of the Principal
Distribution Amount (other than any portion thereof constituting the
Overcollateralization Deficit or the Subordination Increase Amount) over (ii)
the sum of the aggregate Stated Principal Balances of the Mortgage Loans then
outstanding;
"Owner Trustee" means Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity, but solely as owner trustee
under the Trust Agreement, and any successor Owner Trustee thereunder.
"Owner Trustee Fee Rate" has the meaning as defined in the
Sale and Servicing Agreement.
"Ownership Interest" means, as to any Certificate, any
ownership or security interest in such Certificate, including any interest in
such Certificate as the Holder thereof and any other interest therein, whether
direct or indirect, legal or beneficial, as owner or as pledgee.
"Percentage Interest" means, with respect to any Note, the
fraction, expressed as a percentage, the numerator of which is the initial Note
Principal Balance represented by such Note and the denominator of which is the
initial aggregate Note Principal Balance of all of the Notes of such Class. With
respect to any Certificate, the undivided percentage ownership of the
Certificates evidenced by such Certificate, as set forth on the face of such
Certificate.
"Permitted Investments" means any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Sponsor, the Depositor, the Servicer, the
Trustee or any of their respective Affiliates:
(i) direct obligations of, or obligations fully guaranteed
as to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States; provided,
however, that any obligation of, or guaranteed by, FHLMC or FNMA, other
than a senior debt or a mortgage participation or pass-through
certificate guaranteed by FHLMC or FNMA shall be a Permitted Investment
only if, at the time of investment, such investment is acceptable to
the Insurer;
(ii) demand and time deposits in, certificates of deposit
of, or banker's acceptances issued by, any Depository Institution;
(iii) repurchase obligations with respect to any security
described in clause (i) above entered into with a Depository
Institution (acting as principal);
18
(iv) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the United
States of America or any State thereof and that are rated by each
Rating Agency in its highest long-term unsecured rating categories at
the time of such investment or contractual commitment providing for
such investment;
(v) commercial paper (including both noninterest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than 30 days after the date of
acquisition thereof) that is rated by each Rating Agency in its highest
short-term unsecured debt rating available at the time of such
investment;
(vi) units of money market funds that have been rated "Aaa" by
Xxxxx'x and "AAA" by S&P; and
(vii) if previously confirmed in writing to the Trustee, any
other demand, money market or time deposit, or any other obligation,
security or investment, as may be acceptable to the Rating Agencies and
the Certificate Insurer as a permitted investment of funds backing
securities that have been rated "Aaa" by Xxxxx'x and "AAA" by S&P;
provided that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee" means any Transferee of a Certificate
other than a Disqualified Organization or Non-United States Person.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy" means the Financial Guaranty Insurance Policy (No.
__________) issued by the Insurer relating to the Class A Certificates,
including any endorsements thereto, attached as Exhibit A to the Sale and
Servicing Agreement.
"Policy Payments Account" means the account established
pursuant to Section 11.4(b).
"Predecessor Note" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purpose of this definition, any
Note authenticated and delivered under Section 2.4 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Preference Claim" has the meaning ascribed thereto in the
Sale and Servicing Agreement.
19
"Pre-Funded Loan Transfer" means the transfer and assignment
by the Depositor to the Issuer of the Pre-Funded Mortgage Loans pursuant to
Section 2.02 of the Sale and Servicing Agreement.
"Pre-Funded Loan Transfer Date" means the Business Day on
which a Pre-Funded Loan Transfer occurs.
"Pre-Funded Mortgage Loans" has the meaning ascribed thereto
in Section 2.02 of the Sale and Servicing Agreement.
"Pre-Funding Account" means the Pre-Funding Account
established in accordance with Section 8.8 hereof and maintained by the Trustee.
"Pre-Funding Amount" means, with respect to any date, the
amount on deposit in the Pre-Funding Account.
"Pre-Funding Earnings" means the actual investment earnings
realized on amounts deposited in the Pre-Funding Account.
"Pre-Funding Period" means the period commencing on the
Startup Date and ending on __________, 1998.
"Prepayment Assumption" means the assumption that a pool of
loans prepays in the first month at a constant annual prepayment rate of 1.7%
and increases by an additional 1.7% each month thereafter until the tenth month,
where it remains at a constant annual prepayment rate equal to 17%.
"Prepayment Interest Shortfall" means, with respect to any
Distribution Date, for each Mortgage Loan that was during the related Collection
Period the subject of a Principal Prepayment in full or in part that was applied
by the Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the succeeding Collection Period, an amount equal
to the excess of (i) interest at the applicable Net Mortgage Rate on the amount
of such Principal Prepayment for the number of days commencing on the date on
which the prepayment is applied and ending on the last day of the related
Collection Period over (ii) the amount, if any, of the interest paid by the
Mortgagor in connection with such Principal Prepayment. The obligations of the
Servicer in respect of any Prepayment Interest Shortfall are set forth in
Section 3.26 of the Sale and Servicing Agreement.
"Principal Distribution Amount" means, with respect to any
Distribution Date, the lesser of:
(a) the excess of the Available Distribution Amount over the
amount payable on the Class A Notes pursuant to Sections 8.3 (a)(i) and
8.3(g); and
(b) the sum of:
(i) the principal portion of each Monthly Payment due
during the related Collection Period, to the extent received, on each
Mortgage Loan;
20
(ii) the Stated Principal Balance of any Mortgage Loan that
was purchased during the related Collection Period pursuant to or as
contemplated by Section 2.05, 3.18(c) or 10.01 of the Sale and
Servicing Agreement and the amount of any shortfall deposited in the
Collection Account in connection with the substitution of a Deleted
Mortgage Loan pursuant to Section 2.05 of the Sale and Servicing
Agreement during the related Collection Period;
(iii) the principal portion of all other unscheduled
collections (including, without limitation, Principal Prepayments,
Insurance Proceeds, Liquidation Proceeds, payments pursuant to Section
3.28 of the Sale and Servicing Agreement and REO Principal
Amortization) received during the related Collection Period, net of any
portion thereof that represents a recovery of principal for which an
advance was made by the Servicer pursuant to Section 4.03 of the Sale
and Servicing Agreement in respect of a preceding Distribution Date,
and deposits into the Distribution Account from the Pre-Funding Account
pursuant to Section 8.8(c) and the Redemption Account pursuant to
Section 8.11, if any, not required to be distributed pursuant to
Section 8.3(g);
(iv) the amount of any Overcollateralization Deficit for
such Distribution Date; and
(v) the amount of any Subordination Increase Amount for
the Class A Notes for such Distribution Date;
minus:
(vi) the amount of any Subordination Reduction Amount for
the Class A Notes for such Distribution Date.
"Principal Prepayment" means any payment of principal made by
the Mortgagor on a Mortgage Loan which is received in advance of its scheduled
Due Date and which is not accompanied by an amount of interest representing the
full amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"Purchase and Assignment Agreement" means the Purchase and
Assignment Agreement dated as of ________, 1997 between the Originator and the
Sponsor providing for the sale of the Mortgage Loans from the Originator to the
Sponsor.
"Rating Agency" or "Rating Agencies" means Xxxxx'x and S&P or
their successors. If such agencies or their successors are no longer in
existence, "Rating Agencies" shall be such nationally recognized statistical
rating agencies, or other comparable Persons, designated by the Depositor and
the Insurer, notice of which designation shall be given to the Indenture
Trustee, the Sponsor and the Servicer.
"Realized Loss" means, with respect to each Mortgage Loan as
to which a Final Recovery Determination has been made an amount (not less than
zero) equal to (i) the unpaid
21
principal balance of such Mortgage Loan as of the commencement of the calendar
month in which the Final Recovery Determination was made, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
through the end of the calendar month in which such Final Recovery Determination
was made, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on such Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of such Mortgage Loan as of the close of business on the
Distribution Date during such calendar month, plus (iii) any amounts previously
withdrawn from the Collection Account in respect of such Mortgage Loan pursuant
to Sections 3.11(ix) and 3.18(b) of the Sale and Servicing Agreement, minus (iv)
the proceeds, if any, received in respect of such Mortgage Loan during the
calendar month in which such Final Recovery Determination was made, net of
amounts that are payable therefrom to the Servicer with respect to such Mortgage
Loan pursuant to clause (iii) of Section 3.11 of the Sale and Servicing
Agreement.
With respect to any REO Property as to which a Final Recovery
Determination has been made an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the Trust Property, plus (ii)
accrued interest from the Due Date as to which interest was last paid by the
Mortgagor in respect of the related Mortgage Loan through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, calculated in the case of each calendar month during such
period (A) at an annual rate equal to the annual rate at which interest was then
accruing on the related Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of the related Mortgage Loan as of the close of
business on the Distribution Date during such calendar month, plus (iii) REO
Imputed Interest for such REO Property for each calendar month commencing with
the calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Sections 3.11(ix) and 3.18(b) of the Sale and
Servicing Agreement, minus (v) the aggregate of all Monthly Advances made by the
Servicer in respect of such REO Property or the related Mortgage Loan for which
the Servicer has been or, in connection with such Final Recovery Determination,
will be reimbursed pursuant to Section 3.25 of the Sale and Servicing Agreement
out of rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.25 of the
Sale and Servicing Agreement.
With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
With respect to each Mortgage Loan which has become the
subject of a Debt Service Reduction, the portion, if any, of the reduction in
each affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction.
22
Each such Realized Loss shall be deemed to have been incurred on the Due Date
for each affected Monthly Payment.
A Realized Loss within the meaning of the foregoing provisions
shall constitute a Realized Loss regardless of how such Realized Loss shall have
arisen (e.g., whether by virtue of any default, bankruptcy, fraud, special
hazard or any other reason).
"Record Date" means, with respect to each Distribution Date,
the last Business Day of the month immediately preceding the month in which such
Distribution Date occurs.
"Redemption Account" has the meaning ascribed thereto in
Section 8.11.
"Redemption Date" means, in the case of a redemption of the
Notes pursuant to Section 10.1(a), the Distribution Date specified by the
Servicer or the Issuer pursuant to Section 10.1(a).
"Redemption Price" means, in the case of a redemption of the
Notes pursuant to Section 10.1(a), an amount equal to the unpaid principal
amount of the then outstanding principal amount of each class of Notes being
redeemed plus accrued and unpaid interest thereon to but excluding the
Redemption Date.
"Relief Act" means the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
"Relief Act Interest Shortfall" means, with respect to any
Distribution Date and any Mortgage Loan, any reduction in the amount of interest
collectible on such Mortgage Loan for the most recently ended calendar month as
a result of the application of the Relief Act.
"Remaining Overcollateralization Deficit" means, with respect
to any Distribution Date, the excess, if any, of (i) the Overcollateralization
Deficit for such Distribution Date over (ii) the Net Monthly Excess Cashflow for
such Distribution Date.
"Remittance Report" has the meaning ascribed thereto in
Section 4.02 of the Sale and Servicing Agreement.
"REO Account" means the account or accounts maintained by the
Servicer in respect of an REO Property pursuant to Section 3.25 of the Sale and
Servicing Agreement.
"REO Disposition" means the sale or other disposition of an
REO Property on behalf of the Issuer.
"REO Imputed Interest" means as to any REO Property, for any
calendar month during which such REO Property was at any time part of the Trust
Property, one month's interest at the applicable Net Mortgage Rate on the Stated
Principal Balance of such REO Property (or, in the case of the first such
calendar month, of the related Mortgage Loan if appropriate) as of the close of
business on the Distribution Date in such calendar month.
23
"REO Principal Amortization" means, with respect to any REO
Property, for any calendar month, the excess, if any, of (a) the aggregate of
all amounts received in respect of such REO Property during such calendar month,
whether in the form of rental income, sale proceeds (including, without
limitation, that portion of the Termination Price paid in connection with a
purchase of all of the Mortgage Loans and REO Properties pursuant to Section
10.01 of the Sale and Servicing Agreement that is allocable to such REO
Property) or otherwise, net of any portion of such amounts (i) payable pursuant
to Section 3.25(c) of the Sale and Servicing Agreement in respect of the proper
operation, management and maintenance of such REO Property or (ii) payable or
reimbursable to the Servicer pursuant to Section 3.25(d) of the Sale and
Servicing Agreement for unpaid Servicing Fees in respect of the related Mortgage
Loan and unreimbursed Servicing Advances and Monthly Advances in respect of such
REO Property or the related Mortgage Loan, over (b) the REO Imputed Interest in
respect of such REO Property for such calendar month.
"REO Property" means a Mortgaged Property acquired by the
Servicer on behalf of the Issuer through foreclosure or deed in lieu of
foreclosure, as described in Section 3.25 of the Sale and Servicing Agreement.
"Request for Release" means a release signed by a Servicing
Officer, in the form of Exhibit E-1 or Exhibit E-2 attached hereto.
"Required Subordinated Amount" means, with respect to any
Distribution Date, an amount equal to 3.75% of the Original Pool Balance,
subject to the following: (i) if the Step Up Trigger has occurred with respect
to such Distribution Date, the Required Subordinated Amount for such
Distribution Date will be an amount equal to the entire aggregate Stated
Principal Balance of the Mortgage Loans as of such Distribution Date, (ii) if
the Step Down Trigger has occurred, the Required Subordinated Amount for such
Distribution Date will be an amount equal to the greater of (A) 0.50% of the
Original Pool Balance and (B) the lesser of (x) 3.75%, of the Original Pool
Balance and (y) the Stepped Down Required Subordinated Percentage of the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date.
"Responsible Officer" means, with respect to the Indenture
Trustee, any officer of the Corporate Trust Department of the Indenture Trustee,
including any Senior Vice President, any Assistant Vice President, any Assistant
Secretary, any Trust Officer or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers to whom, with respect to a particular matter, such matter is
referred.
"Rolling Delinquency Percentage" means, for any Distribution
Date, the average of the Delinquency Percentages as of the last day of each of
the three (or one or two, in the case of the first and second Distribution
Dates) most recently ended Collection Periods.
"Rolling Loss Percentage" means, as of any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Realized Losses incurred during the preceding twelve Collection
Periods, and the denominator of which is the aggregate Stated Principal Balance
of the Mortgage Loans as of the first day of the twelfth preceding Collection
Period.
24
"SAIF" means the Savings Association Insurance Fund, as from
time to time constituted, created under the Financial Institutions Reform,
Recovery and Enhancement Act of 1989, or if at any time after the execution of
this instrument the Savings Association Insurance Fund is not existing and
performing duties now assigned to it, the body performing such duties on such
date.
"Sale and Servicing Agreement" means the Sale and Servicing
Agreement dated as of _________, 1997, among the Issuer, the Depositor, the
Servicer and the Indenture Trustee, as the same may be amended or supplemented
from time to time.
"Securityholder" or "Holder" means a Noteholder and/a
Certificateholder as the context requires.
"Servicer" means Emergent Mortgage Corp., a South Carolina
corporation, or any successor servicer appointed as herein provided, in its
capacity as Servicer hereunder.
"Servicer Event of Default" means one or more of the events
described in Section 7.01 of the Sale and Servicing Agreement.
"Servicer Extension Notice" has the meaning ascribed thereto
in Section 7.01 of the Sale and Servicing Agreement.
"Servicer Remittance Date" means, with respect to any
Distribution Date, 12:00 noon New York time on the fourth Business Day prior to
such Distribution Date.
"Servicing Account" means the account or accounts created and
maintained pursuant to Section 3.09 of the Sale and Servicing Agreement.
"Servicing Advances" means the reasonable "out-of-pocket"
costs and expenses incurred by the Servicer in connection with a default,
delinquency or other unanticipated event by the Servicer in the performance of
its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, in respect of a
particular Mortgage Loan, (iii) the management (including reasonable fees in
connection therewith) and liquidation of any REO Property, and (iv) the
performance of its obligations under Sections 3.01, 3.09, 3.16, 3.18 and 3.25 of
the Sale and Servicing Agreement.
"Servicing Fee" means, with respect to each Mortgage Loan and
for any calendar month, an amount equal to one month's interest (or in the event
of any payment of interest which accompanies a Principal Prepayment in full made
by the Mortgagor during such calendar month, interest for the number of days
covered by such payment of interest) at the Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.
"Servicing Fee Rate" means 0.50% per annum.
25
"Sponsor" means Emergent Mortgage Holdings Corporation, or its
successor-in-interest, in its capacity as seller under the Unaffiliated Seller's
Agreement and initial Majority Certificateholder.
"S&P" means Standard & Poor's Ratings Services, a division of
XxXxxx-Xxxx Inc., or its successor in interest.
"Start-up Day" means the day designated as such pursuant to
Section ______ of the Sale and Servicing Agreement.
"Stated Principal Balance" means, with respect to any Mortgage
Loan: (a) as of any date of determination up to but not including the
Distribution Date on which the proceeds, if any, of a Liquidation Event with
respect to such Mortgage Loan would be distributed, the outstanding principal
balance of such Mortgage Loan as of the Cut-off Date, as shown in the Mortgage
Loan Schedule, minus the sum of (i) the principal portion of each Monthly
Payment due on a Due Date subsequent to the Cut-off Date, to the extent received
from the Mortgagor or included in a Monthly Advance and distributed pursuant to
Section 8.3 on or before such date of determination, (ii) all Principal
Prepayments received after the Cut-off Date, to the extent distributed pursuant
to Section 8.3 on or before such date of determination, (iii) all Liquidation
Proceeds and Insurance Proceeds applied by the Servicer as recoveries of
principal in accordance with the provisions of Section 3.18 of the Sale and
Servicing Agreement, to the extent distributed pursuant to Section 8.3 on or
before such date of determination, and (iv) any Realized Loss incurred with
respect thereto coinciding with or preceding such date of determination; and (b)
as of any date of determination coinciding with or subsequent to the
Distribution Date on which the proceeds, if any, of a Liquidation Event with
respect to such Mortgage Loan would be distributed, zero. With respect to any
REO Property: (a) as of any date of determination up to but not including the
Distribution Date on which the proceeds, if any, of a Liquidation Event with
respect to such REO Property would be distributed, an amount (not less than
zero) equal to the Stated Principal Balance of the related Mortgage Loan as of
the date on which such REO Property was acquired on behalf of the Trust
Property, minus the aggregate amount of REO Principal Amortization in respect of
such REO Property for all previously ended calendar months, to the extent
distributed pursuant to Section 8.3 on or before such date of determination, and
(b) as of any date of determination coinciding with or subsequent to the
Distribution Date on which the proceeds, if any, of a Liquidation Event with
respect to such REO Property would be distributed, zero.
"Stayed Funds" has the meaning ascribed thereto in Section
7.02(b) of the Sale and Servicing Agreement.
"Step Down Cumulative Loss Test" means the Step Down
Cumulative Loss Test will be met with respect to a Distribution Date as follows:
(i) for the 30th through the 41st Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is 2.00% or less, (ii) for the 42nd
through the 53rd Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is 2.50% or less, (iii) for the 54th through the 65th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.90% or less and (iv) for 66th Distribution Date and any Distribution Date
thereafter, if the Cumulative Loss Percentage for such Distribution Date is
3.25% or less.
26
"Step Down Rolling Delinquency Test" means the Step Down
Rolling Delinquency Test will be met with respect to a Distribution Date if the
Rolling Delinquency Percentage for such Distribution Date is 8.00% or less.
"Step Down Rolling Loss Test" means the Step Down Rolling Loss
Test will be met with respect to a Distribution Date if the Rolling Loss
Percentage for such Distribution Date is less than 1.00%.
"Step Down Trigger" means, for any Distribution Date after the
30th Distribution Date, the Step Down Trigger will have occurred if each of the
Step Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the
Step Down Rolling Loss Test is met. In no event will the Step Down Trigger be
deemed to have occurred for the 30th Distribution Date or any preceding
Distribution Date.
"Stepped Down Required Subordinated Percentage means, for any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
3.75% of the Original Pool Balance, and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date, minus (ii) the percentage equivalent of a fraction, the numerator of which
is the product of (A) the percentage calculated under clause (i) above minus
7.50%, multiplied by (B) the number of consecutive Distribution Dates through
and including the Distribution Date for which the Stepped Down Required
Subordinated Percentage is being calculated, up to a maximum of six, for which
the Step Down Trigger has occurred, and the denominator of which is six.
"Step Up Cumulative Loss Test" means the Step Up Cumulative
Loss Test will be met with respect to a Distribution Date as follows (i) for the
1st through the 12th Distribution Dates, if the Cumulative Loss Percentage for
such Distribution Date is more than 1.00%, (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.50%, (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 2.15%,
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.65% and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.25%.
"Step Up Rolling Delinquency Test" means the Step Up Rolling
Delinquency Test will be met with respect to a Distribution Date if the Rolling
Delinquency Percentage for such Distribution Date is more than 10.00%.
"Step Up Rolling Loss Test" means the Step Up Rolling Loss
Test will be met with respect to a Distribution Date if the Rolling Loss
Percentage for such Distribution Date is 1.50% or more.
"Step Up Trigger" means, for any Distribution Date, the Step
Up Trigger will have occurred if any one of the Step Up Cumulative Loss Test,
the Step Up Rolling Delinquency Test or the Step Up Rolling Loss Test is met
with respect to such Distribution Date.
27
"Subordinated Amount" means, with respect to any Distribution
Date, the excess, if any, of (a) the sum of (i) the aggregate Stated Principal
Balances of the Mortgage Loans immediately following such Distribution Date and
(ii) the amount on deposit in the Pre-Funding Account immediately following such
Distribution Date over (b) the Class A Note Principal Balance as of such
Distribution Date (after taking into account the payment of the amounts
described in clauses (b)(i) through (iv) of the definition of Principal
Distribution Amount on such Distribution Date); provided, however, that such
amount shall not be less than zero.
"Subordination Deficiency Amount" means, with respect to any
Distribution Date, the excess, if any, of (a) the Required Subordinated Amount
applicable to such Distribution Date over (b) the Subordinated Amount applicable
to such Distribution Date prior to taking into account the payment of any
Subordination Increase Amounts on such Distribution Date.
"Subordination Increase Amount" means, with respect to any
Distribution Date, the lesser of (a) the Subordination Deficiency Amount as of
such Distribution Date (after taking into account the payment of the Principal
Distribution Amount, on such Distribution Date, exclusive of the payment of any
Subordination Increase Amount) and (b) the amount of Net Monthly Excess Cashflow
on such Distribution Date as reduced by any Cumulative Insurance Payments or
payments allocated to the Overcollateralization Deficit.
"Subordination Reduction Amount" means, with respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess Subordinated
Amount and (b) the sum of the amounts available for distribution specified in
clauses (b)(i) through (iii) of the definition of Principal Distribution Amount.
"Sub-Servicer" means any Person with which the Servicer has
entered into a Sub-Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02 of the Sale and Servicing Agreement.
"Termination Date" means the latest of (i) the termination of
the Policy and the return of the Policy to the Insurer for cancellation, (ii)
the date on which the shall have received payment and performance of all Insurer
Issuer Secured obligations and (iii) the date on which the Indenture Trustee
shall have received payment and performance of all Indenture Trustee Issuer
Secured Obligations.
"Termination Price" has the meaning ascribed thereto in
Section 10.01 of the Sale and Servicing Agreement.
"Terminator" has the meaning ascribed thereto in Section 10.01
of the Sale and Servicing Agreement.
"Trust Accounts" means the Pre-Funding Account, the Redemption
Account, the Collection Account, the Distribution Account, the Interest Coverage
Account and the Expense Account.
"Trust Agreement" means the Trust Agreement dated as of
November __, 1997 between the Sponsor and the Owner Trustee relating to the
establishment of the Issuer.
28
"Trust Indenture Act" or "TIA" means the Trust Indenture Act
of 1939, as amended and as in force on the date hereof, unless otherwise
specifically provided.
"Trust Property" means the segregated pool of assets subject
to the Sale and Servicing Agreement and the Trust Agreement, constituting the
primary trust created hereby and to be administered hereunder, consisting of:
(i) such Mortgage Loans as from time to time are subject to the Sale and
Servicing Agreement and this Indenture, together with the Mortgage Files
relating thereto, and together with all collections thereon and proceeds
thereof, (ii) any REO Property, together with all collections thereon and
proceeds thereof, (iii) the Indenture Trustee's rights with respect to the
Mortgage Loans under all insurance policies required to be maintained pursuant
to this Agreement and any proceeds thereof, (iv) the Depositor's rights under
the Unaffiliated Seller's Agreement (including any security interest created
thereby), (v) the Collection Account, the Distribution Account, any REO Account
and the Expense Account and such assets that are deposited therein from time to
time and any investments thereof, (vi) any amounts on deposit in the Pre-Funding
Account and the Redemption Account, and (vii) the Indenture Trustee's rights
under the Policy, together with any and all income, proceeds and payments with
respect thereto. Notwithstanding the foregoing, however, the Trust Property
specifically excludes all payments and other collections of principal and
interest on the Mortgage Loans received on or before the Cut-off Date.
"Trustee's Fee" means the amount payable to the Trustee on
each Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Stated Principal Balance of the Mortgage Loans
and any REO Properties as of the preceding Distribution Date (or, in the case of
the initial Distribution Date, as of the Cut-off Date).
"Trustee's Fee Rate" means 0.015% per annum.
"Unaffiliated Seller's Agreement" means the Unaffiliated
Seller's Agreement dated as of ____________, 1997 between the Sponsor and the
Depositor and providing for the transfer of Mortgage Loans from the Sponsor to
the Depositor.
"United States Person" means a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in, or under the laws of, the United States or any political subdivision
thereof, or an estate or trust whose income from sources without the United
States is ineludible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business
within the United States. The term "United States" shall have the meaning set
forth in Section 7701 of the Code.
"Voting Rights" means the voting rights hereunder of Holders
of the Notes or, so long as no Insurer Default shall have occurred and be
continuing, of the Insurer in the place and stead of the Holders of the Notes as
provided in Section 11.1. With respect to any date of determination, the
percentage of all the Voting Rights allocable to Holders of the Notes of each
Class shall be the fraction, expressed as a percentage, the numerator of which
is the Note Principal Balance of the Notes of such Class then outstanding and
the denominator of which is
29
the aggregate Note Principal Balance of the Notes of all Classes then
outstanding. The Voting Rights allocated to each Class of Note shall be
allocated among Holders of the Notes of such Class in proportion to the
outstanding Note Principal Balances of such Notes.
"Warehouse Liens" means the security interests in and liens on
the Trust Property securing the Warehouse Loans.
"Warehouse Loans" means loans and other indebtedness of the
Originator and Emergent Group, Inc. under or in respect of (i) the Interim
Warehouse and Security Agreement dated as of March 4, 1997, as amended, among
Prudential Securities Credit Corporation, the Originator and Emergent Group,
Inc., (ii) the Mortgage Loan Warehousing Agreement dated as of March 20, 1997,
as amended, between the Originator and First Union National Bank, [and (iii) the
Mortgage Loan Warehousing Credit Agreement dated as of November 22, 1994, as
amended, between First Union National Bank and Carolina Investors, Inc.]
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Sale and Servicing Agreement or
the Trust Agreement.
SECTION 1.2. Incorporation by Reference of the Trust Indenture Act
. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Indenture Trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by
the TIA, or defined by Commission rule have the meaning assigned to them by such
definitions.
SECTION 1.3. 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; and
30
(v) words in the singular include the plural and words in the
plural include the singular.
SECTION 1.4. Conflict with TIA. If any provision hereof
limits, qualifies or conflicts with a provision of the TIA that is required
under the TIA to be part of and govern this Indenture, the latter provision
shall control and all provisions required by the TIA are hereby incorporated by
reference. If any provision of this Indenture modifies or excludes any provision
of the TIA that may be so modified or excluded, such provisions of the TIA shall
be deemed to apply to this Indenture as so modified or excluded, as the case may
be.
ARTICLE II.
The Notes
SECTION 2.1. Form. The Class A Notes, in each case together
with the Indenture Trustee's certificate of authentication, shall be in
substantially the forms set forth in Exhibits A-1 through A-6, respectively,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may, consistently herewith, be determined by the officers executing
such Notes, as evidenced by their execution of the Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The
terms of the Notes set forth in Exhibits A-1 through A-6 are part of the terms
of this Indenture.
SECTION 2.2. Execution, Authentication and Delivery. The Notes
shall be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be original or
facsimile.
Notes bearing the original or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
The Indenture Trustee shall authenticate and deliver Class A
Notes for original issue in an aggregate principal amount of $___________. The
Class A Notes outstanding at any time may not exceed such amount except as
provided in Section 2.4.
Each Note shall be dated the date of its authentication. The
Notes shall be issuable as registered Notes in the minimum denomination of
$1,000 and in integral multiples of $1,000 in excess thereof.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose, unless there appears attached to such
Note 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 attached to any
31
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder. Subject to Section 2.9, the
Notes shall be Book-Entry Notes.
SECTION 2.3. Registration; Registration of Transfer and
Exchange. The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation of any Note Registrar, the Issuer shall promptly appoint a successor
or, if it elects not to make such an appointment, assume the duties of Note
Registrar.
If a Person other than the Indenture Trustee is appointed by
the Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Indenture Trustee
shall have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof. The Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Authorized Officer
thereof as to the names and addresses of the Holders of the Notes and the
principal amounts and number of such Notes.
Upon surrender for registration or transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.2, and
if the requirements of Section 8-401(a) of the UCC are met, the Issuer shall
execute or cause the Indenture Trustee to authenticate one or more new Notes, in
any authorized denominations, of the same class and a like aggregate principal
amount. A Noteholder may also obtain from the Indenture Trustee, in the name of
the designated transferee or transferees one or more new Notes, in any
authorized denominations, of the same Class and a like aggregate principal
amount. Such requirements shall not be deemed to create a duty on the part of
the Indenture Trustee to monitor the compliance by the Issuer with Section 8-401
of the UCC.
At the option of the Holder, Notes may be exchanged for other
Notes in any authorized denominations, of the same Class and a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, and if the
requirements of Section 8-401(a) of the UCC are met, the Issuer shall execute
and upon its request the Indenture Trustee shall authenticate the Notes which
the Noteholder making the exchange is entitled to receive. Such requirements
shall not be deemed to create a duty on the part the Indenture Trustee to
monitor the compliance by the Issuer with Section 8-401 of the UCC.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be (i) duly endorsed by, or be accompanied by a
written instrument of transfer in the form attached to Exhibits A-1 through A-6,
respectively, duly executed by, the Holder thereof or such Xxxxxx's attorney
duly authorized in writing, with such signature guaranteed by an
32
"eligible guarantor institution" meeting the requirements of the Note Registrar
all in accordance with the Exchange Act, and (ii) accompanied by such other
documents as the Note Registrar may require.
No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Note Registrar may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Notes, other than exchanges pursuant to Section 2.4 or 9.6 not
involving any transfer.
SECTION 2.4. Mutilated, Destroyed, Lost or Stolen Notes. If
(i) any mutilated Note is surrendered to the Note Registrar, or the Note
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee and the
Insurer such security or indemnity as may be required by it to hold the Issuer,
the Indenture Trustee and the Insurer harmless, then, in the absence of notice
to the Issuer, the Note Registrar or the Indenture Trustee that such Note has
been acquired by a bona fide purchaser or protected purchaser (within the
meaning of Section 8-302 of the UCC), and provided that the requirements of
Section 8-405 of the UCC are met, the Issuer shall execute and upon its request
the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Note, a replacement Note (such
requirement shall not be deemed to create a duty in the Indenture Trustee to
monitor the compliance by the Issuer with Section 8-405); provided, however,
that if any such destroyed, lost or stolen Note, but not a mutilated Note, shall
have become or within seven days shall be due and payable, or shall have been
called for redemption, the Issuer may, instead of issuing a replacement Note,
direct the Indenture Trustee, in writing, to pay such destroyed, lost or stolen
Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a protected purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer,
the Indenture Trustee and the Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a
protected purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section,
the Issuer may require the payment by the Holder of such Note of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other reasonable expenses (including the fees and
expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
33
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.5. Persons Deemed Owners. Prior to due presentment
for registration of transfer of any Note, the Issuer, the Indenture Trustee and
the Insurer and any agent of the Issuer, the Indenture Trustee and the Insurer
may treat the Person in whose name any Note is registered (as of the Record
Date) as the owner of such Note for the purpose of receiving payments of
principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the
Insurer, the Indenture Trustee nor any agent of the Issuer, the Insurer or the
Indenture Trustee shall be affected by notice to the contrary.
SECTION 2.6. Payment of Principal and Interest; Defaulted Interest
. (a) The unpaid principal of the Notes of each Class shall accrue interest as
provided herein, which (except to the extent of any Relief Act Interest
Shortfalls and/or Prepayment Interest Shortfalls which shall be due and payable
only to the extent funds are available therefor as provided herein) shall be due
and payable on each Distribution Date prior to the Final Maturity Date thereof
and (without regard to the availability of funds for the payment of Relief Act
Interest Shortfalls and/or Prepayment Interest Shortfalls) on such Final
Maturity Date. The unpaid principal of the Notes of each Class shall be due and
payable (to the extent of funds available therefor as provided herein) on each
Distribution Date as provided in Section 8.3 and (regardless of the availability
of sufficient funds therefor) on the Final Maturity Date for such Class. Any
installment of interest or principal, if any, payable on any Note which is
punctually paid or duly provided for by the Issuer on the applicable
Distribution Date shall be paid to the Person in whose name such Note (or one or
more Predecessor Notes) is registered on the Record Date, by check mailed
first-class, postage prepaid, to such Person's address as it appears on the Note
Register on such Record Date, except that, unless Definitive Notes have been
issued pursuant to Section 2.11, with respect to Notes registered on the Record
Date in the name of the nominee of the Depository (initially, such nominee to be
Cede & Co.), payment will be made by wire transfer in immediately available
funds to the account designated by such nominee and except for the final
installment of principal payable with respect to such Note on a Distribution
Date or on the Final Distribution Date (and except for the Redemption Price for
any Note called for redemption pursuant to Section 10.1(a)) which shall be
payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.3.
(b) [Intentionally Omitted.]
[(c) If the Issuer fails to make any payment of interest on
the Notes when due and payable (as provided in Section 2.6(a)), the Issuer shall
pay defaulted interest (plus interest on such defaulted interest to the extent
lawful) at the applicable Interest Rate to the extent lawful. The Issuer may pay
such defaulted interest to the Persons who are Noteholders on a subsequent
special record date, which date shall be at least five Business Days prior to
the payment date. The Issuer shall fix or cause to be fixed any such special
record date and payment date, and, at least 15 days before any such special
record date, the Issuer shall mail to each Noteholder and the Indenture Trustee
a notice that states the special record date, the payment date and the amount
34
of defaulted interest to be paid. No defaulted interest shall accrue or be
payable in respect of Relief Act Interest Shortfalls and/or Prepayment Interest
Shortfalls.]
(d) Promptly following the date on which all principal of and
interest on the Notes has been paid in full and the Notes have been surrendered
to the Indenture Trustee, the Indenture Trustee shall, upon written notice from
the Servicer of the amounts, if any, that the Insurer has paid in respect of the
Notes under the Policy or otherwise which has not been reimbursed to it, deliver
such surrendered Notes to the Insurer to the extent not previously cancelled or
destroyed.
SECTION 2.7. Cancellation. Subject to Section 2.6(d), all
Notes 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. Subject to Section 2.6(d), the Issuer may at any time deliver
to the Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly canceled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes canceled
as provided in this Section, except as expressly permitted by this Indenture.
Subject to Section 2.6(d), all canceled Notes may be held or disposed of by the
Indenture Trustee in accordance with its standard retention or disposal policy
as in effect at the time unless the Issuer shall direct by an Issuer Order that
they be destroyed or returned to it; provided that such Issuer Order is timely
and the Notes have not been previously disposed of by the Indenture Trustee.
SECTION 2.8. Release of Collateral. The Indenture Trustee
shall, on or after the Termination Date, release any remaining portion of the
Trust Property from the lien created by this Indenture in accordance with the
provisions of Section 10.01 of the Sale and Servicing Agreement upon receipt of
an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and (if required by the TIA) Independent Certificates in accordance with TIA
xx.xx. 314(c) and 314(d)(1) meeting the applicable requirements of Section
10.02.
SECTION 2.9. Book-Entry Notes. The Notes, upon original
issuance, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to the Depository or its nominee by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the Depository, and no Note
Owner will receive a Definitive Note representing such Note Owner's interest in
such Note, except as provided in Section 2.11. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.11:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and
the giving of instructions or directions hereunder) as the sole Holder
of the Notes, and shall have no obligation to the Note Owners;
35
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Depository and shall be limited to those established by law and
agreements between such Note Owners and the Depository and/or the
Depository Participants. Unless and until Definitive Notes are issued
pursuant to Section 2.11, the initial Depository will make book-entry
transfers among the Depository Participants and receive and transmit
payments of principal of and interest on the Notes to such Depository
Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Depository shall be deemed to represent such percentage only
to the extent that it has received instructions to such effect from
Note Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Notes and has delivered such instructions to the Indenture Trustee;
and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Indenture Trustee at the Corporate Trust Office.
SECTION 2.10. Notices to Depository. Whenever a notice or
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to Note Owners pursuant to
Section 2.11, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Depository, and shall have no obligation to the Note Owners.
SECTION 2.11. Definitive Notes. If (i) the Depository advises
the Indenture Trustee in writing that the Depository is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option advises the Indenture Trustee in writing that it elects to terminate the
book-entry system through the Depository or (iii) after the occurrence of a
Servicer Event of Default, Holders of Notes entitled to a majority of the Voting
Rights advise the Indenture Trustee through the Depository in writing that the
continuation of a book entry system through the Depository is no longer in the
best interests of the Note Owners, then the Indenture Trustee shall notify all
Note Owners of the occurrence of any such event and of the availability of
Definitive Notes to Note Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Note or Notes representing the Book-Entry
Notes by the Depository, accompanied by registration instructions, the Issuer
shall execute and the Indenture Trustee shall authenticate Definitive Notes in
accordance with the instructions of the Depository. None of the Issuer, the Note
Registrar or the Indenture Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
36
ARTICLE III.
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer
will duly and punctually pay the principal of and interest on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, the Issuer will cause to be distributed all amounts on deposit in the
Collection Account on a Distribution Date to Class A Noteholders pursuant to the
terms and provisions hereof. Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer will
maintain in _________, __________, an office or agency where Notes may be
surrendered for registration, transfer or exchange of the Notes, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.3. Money for Payments to Be Held in Trust. The
Issuer will cause each Note Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee and the Insurer an instrument in
which such Note Paying Agent shall agree with the Indenture Trustee (and if the
Indenture Trustee acts as Note Paying Agent, it hereby so agrees), subject to
the provisions of this Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee written notice of any default
by the Issuer (or any other obligor upon the Notes) of which it has
actual knowledge in the making of any payment required to be made with
respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for the
payment of Notes if at any time it ceases to meet the standards
required to be met by a Note Paying Agent at the time of its
appointment; and
37
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
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
Order direct any Note Paying Agent to pay to the Indenture Trustee all sums held
in trust by such Note 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 Note
Paying Agent; and upon such a payment by any Note Paying Agent to the Indenture
Trustee, such Note Paying Agent shall be released from all further liability
with respect to such money.
Subject to applicable laws with respect to the escheat of
funds, any money held by the Indenture Trustee or any Note Paying Agent in trust
for the payment of any amount due with respect to any Note and remaining
unclaimed for two years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request[, and
shall be deposited by the Indenture Trustee in the Collection Account;] and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Indenture Trustee or such Note
Paying Agent with respect to such trust money shall thereupon cease.
SECTION 3.4. Existence. Except as otherwise permitted by the
provisions of Section 3.10, the Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Trust Property, the Notes, and each other
instrument or agreement included in the Trust Property.
SECTION 3.5. Protection of Trust Property. The Issuer intends
the security interest granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Property,
and the Issuer shall take all actions necessary to discharge and release the
Warehouse Liens upon the acquisition by the Trust of the related Mortgage Loans
and thereafter to obtain and maintain, in favor of the Indenture Trustee, for
the benefit of the Issuer Secured Parties, a first lien on and a first priority,
perfected security interest in the Trust Property. The Issuer will from time to
time prepare (or shall cause to be prepared), 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) Grant more effectively all or any portion of the Trust
Property;
38
(ii) maintain or preserve the lien and security interest (and
the priority thereof) in favor of the Indenture Trustee for the benefit
of the Issuer Secured Parties created by this Indenture or carry out
more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Property and the
rights of the Indenture Trustee in such Trust Property against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Property when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Trustee pursuant to this Section;
provided that, such designation shall not be deemed to create a duty in the
Indenture Trustee or the Indenture Trustee to monitor the compliance of the
Issuer with respect to its duties under this Section 3.5 or the adequacy of any
financing statement, continuation statement or other instrument prepared by the
Issuer.
SECTION 3.6. Opinions as to Trust Property. (a) On the Closing
Date, the Issuer shall furnish to the Indenture Trustee and the Insurer an
Opinion of Counsel stating that, in the opinion of such counsel, such actions
have 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 first priority
lien and security interest in favor of the Indenture Trustee, for the benefit of
the Issuer Secured Parties, created by this Indenture.
(b) Within 90 days after the beginning of each calendar year,
beginning with the first calendar year beginning more than six months after the
Closing Date, the Issuer shall furnish to the Indenture Trustee and the Insurer,
an Opinion of Counsel either stating that, in the opinion of such counsel, such
actions have 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 are necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action or stating that in the opinion of such counsel, no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe 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 of this Indenture.
SECTION 3.7. Performance of Obligations; Servicing of Mortgage
Loans. (a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Trust Property or that would result
39
in the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as ordered by any bankruptcy or other court or as expressly provided or
permitted in this Indenture, the Basic Documents or such other instrument or
agreement.
(b) The Issuer may contract with other Persons acceptable to
the Insurer to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Indenture Trustee and
the Insurer in an Officer's Certificate of the Issuer shall be deemed to be
action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer to assist the Issuer in performing its duties under this Indenture.
(c) 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 Property, including, but
not limited, to preparing (or causing to be prepared) and filing (or causing to
be filed) all UCC financing statements and continuation statements required to
be filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Indenture Trustee, the Insurer or the Holders
of at least a majority of the Outstanding Amount of the Notes. (d) If a
Responsible Officer of the Owner Trustee shall have actual knowledge of the
occurrence of a Servicer Event of Default under the Sale and Servicing
Agreement, the Issuer shall promptly notify the Indenture Trustee, the Insurer
and the Rating Agencies thereof in accordance with Section 12.4, and shall
specify in such notice the action, if any, being taken or to be taken by the
Issuer or other Persons. (e) The Issuer agrees that it will not waive timely
performance or observance by the Servicer or the Sponsor of their respective
duties under the Basic Documents (x) without the prior consent of the Insurer or
(y) if the effect thereof would adversely affect the Holders of the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as permitted by this Indenture or the Basic
Documents, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the
Trust Property, without the consent of the Insurer (which consent may
not be unreasonably withheld);
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Property; or
40
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Indenture
Trustee created by this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Property or
any part thereof or any interest therein or the proceeds thereof (other
than (i) tax liens, mechanics' liens and other liens that arise by
operation of law, in each case on a Mortgaged Property and arising
solely as a result of an action or omission of the related Mortgagor
and (ii) the Warehouse Liens provided that such Warehouse Liens are
discharged and released as provided in Section 3.12), (C) permit the
lien of this Indenture not to constitute a valid first priority (other
than with respect to any such tax, mechanics' or other lien or such
Warehouse Liens) security interest in the Trust Property or (D) amend,
modify or fail to comply with the provisions of the Basic Documents
without the prior written consent of the Insurer, which consent may not
be unreasonably withheld.
SECTION 3.9. Annual Statement as to Compliance. The Issuer
will deliver to the Indenture Trustee and the Insurer, within 90 days after the
end of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 1997), and otherwise in compliance with the requirements of TIA
Section 314(a)(4) 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 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 the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. Issuer May Not Consolidate. The Issuer may not
consolidate or merge with or into any other Person.
SECTION 3.11. No Other Business. The Issuer shall not engage
in any business other than purchasing, owning, selling and managing the Mortgage
Loans and other assets included in the Trust Property in the manner contemplated
by this Indenture and the Basic Documents and activities incidental thereto.
SECTION 3.12. No Borrowing; Use of Proceeds. The Issuer shall
not issue, incur, assume, guarantee or otherwise become liable, directly or
indirectly, for any Indebtedness except for (i) the Notes, (ii) obligations
owing from time to time to the Insurer under the Insurance Agreement and (iii)
any other Indebtedness permitted by or arising under the Basic Documents. The
proceeds of the Notes and the Certificates shall be used exclusively to repay
the Warehouse Loans and obtain the release and discharge of the Warehouse Liens,
to fund the
41
Pre-Funding Account, the Redemption Account and the Interest Coverage Account,
to make any other payments required by the terms of any of the Basic Documents
and to pay the Issuer's organizational, transactional and start-up expenses.
SECTION 3.13. Servicer's Obligations. The Issuer shall cause
the Servicer to comply with Sections 3.22 and 4.02 of the Sale and Servicing
Agreement.
SECTION 3.14. Guarantees, Loans, Advances and Other
Liabilities. Except as contemplated by the Sale and Servicing Agreement, 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 continently
liable, directly or indirectly, in connection with the obligations, stocks or
dividends of, or own, purchase, repurchase or acquire (or agree continently to
do so) any stock, obligations, assets or securities of, or any other interest
in, or make any capital contribution to, any other Person.
SECTION 3.15. Capital Expenditures. Except as and to the
extent authorized by the Basic Documents, the Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personally).
SECTION 3.16. Compliance with Laws. The Issuer shall comply
with the requirements of all applicable laws, the noncompliance with which
would, individually or in the aggregate, materially and adversely affect the
ability of the Issuer to perform its obligations under the Notes, this Indenture
or any Basic Document.
SECTION 3.17. Restricted Payments. The Issuer shall not,
directly or indirectly, (i) pay any dividend or make any distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, to the Owner Trustee or any owner of a beneficial interest
in the Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire
or otherwise acquire for value any such ownership or equity interest or security
or (iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Indenture Trustee and the
Certificateholders as permitted by, and to the extent funds are available for
such purpose under, the Sale and Servicing Agreement, this Indenture or the
Trust Agreement. The Issuer will not, directly or indirectly, make payments to
or distributions from the Collection Account except in accordance with this
Indenture, the Sale and Servicing Agreement and the Basic Documents.
SECTION 3.18. Notice of Events of Default and Servicer Events
of Default. Upon a Responsible Officer of the Owner Trustee having actual
knowledge thereof, the Issuer agrees to give the Indenture Trustee, the Insurer
and the Rating Agencies prompt written notice of each Event of Default hereunder
or Servicer Event of Default under the Sale and Servicing Agreement.
SECTION 3.19. Further Instruments and Acts. Upon request of
the Indenture Trustee or the Insurer, the Issuer will execute and deliver such
further instruments and do such
42
further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 3.20. Amendments of Sale and Servicing Agreement and
Trust Agreement. The Issuer shall not agree to any amendment to Section 12.01 of
the Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to
eliminate the requirements thereunder that the Indenture Trustee, the Insurer or
the Holders of the Notes consent to amendments thereto as provided therein.
SECTION 3.21. Income Tax Characterization. For purposes of
federal income, state and local income and franchise and any other income taxes,
the Issuer will treat the Notes as indebtedness of the Issuer and hereby
instructs the Indenture Trustee to treat the Notes as indebtedness of the Issuer
for federal and state tax reporting purposes.
ARTICLE IV.
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. Upon
payment in full of the Notes, this Indenture shall cease to be of further effect
with respect to the Notes except as to (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes,
(iii) rights of Noteholders to receive payments of principal thereof and
interest thereon, (iv) Sections 3.1, 3.3, 3.4, 3.5, 3.8, 3.10, 3.11, 3.12, 3.14,
3.15, 3.19 and 3.21, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.7 and the obligations of the Indenture Trustee under Section 4.2) and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.4 and (ii) Notes for
which money in payment of which has theretofore been deposited in trust
or segregated and held in trust and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3) have been
delivered to the Indenture Trustee for cancellation and the Policy has
terminated and been returned to the Insurer for cancellation and all
amounts owing to the Insurer have been paid in full; or
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation
(i) have become due and payable,
43
(ii) will become due and payable at the Final
Maturity Date within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Indenture Trustee for
the giving of notice of redemption by the Indenture Trustee in
the name, and at the expense, of the Issuer,
and in the case of (i), (ii) or (iii) above
(A) the Issuer, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or direct obligations of
or obligations guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for cancellation when due on the
Final Maturity Date or the Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.1), as the case may be;
(B) the Issuer has paid or caused to be paid all Insurer
Issuer Secured Obligations and all Indenture Trustee Issuer Secured Obligations;
and
(C) the Issuer has delivered to the Indenture Trustee and the
Insurer an Officer's Certificate, an Opinion of Counsel and if required by the
TIA, the Indenture Trustee or the Insurer an Independent Certificate from a firm
of certified public accountants, each meeting the applicable requirements of
Section 12.1 and each stating that all conditions precedent herein provided
relating to the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.2. Application of Trust Money. All monies deposited
with the Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Note Paying Agent, as
the Indenture Trustee may determine, to the Holders of the particular Notes for
the payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest.
SECTION 4.3. Repayment of Monies Held by Note Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all monies then held by any Note Paying Agent other than the
Indenture Trustee under the provisions of this Indenture with respect to such
Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 3.3 and thereupon such Note Paying Agent
shall be released from all further liability with respect to such monies.
44
ARTICLE V.
Remedies
SECTION 5.1. Events of Default. "Event of Default" means any
one of the following events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be affected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) (i) default in the payment of any interest on or in
respect of any Note when due and payable (as provided in Section 2.6(a)), which
default shall continue for a period of five days, or (ii) the failure to apply
funds which are available for payment in accordance with the priority of
distribution set forth in Article VIII hereof, which failure shall continue for
a period of five days, or (iii) default in the payment of principal due on any
Class of Notes on the Final Maturity Date thereof; or
(b) the occurrence and continuance of an Insurer Default; or
(c) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Issuer in an involuntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (ii) a decree or order adjudging the
Issuer a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of or in respect
of the Issuer under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or other
similar official of the Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(d) the commencement by the Issuer of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Issuer in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable federal
or state law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator, or similar official of the Issuer or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the Issuer's failure to pay its debts generally as they
become due, or the taking of corporate action by the Issuer in furtherance of
any such action.
SECTION 5.2. Acceleration of Maturity; Rescission and
Annulment. (a) If an Event of Default of the kind specified in Section 5.1(c) or
Section 6.1(d) occurs, the unpaid principal amount of the Notes shall
automatically become due and payable at par together with
45
all accrued and unpaid interest thereon, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Issuer. If an Event of
Default (other than an Event of Default of the kind described in Section 5.1(c)
and Section 5.1(d) occurs and is continuing, then and in every such case the
Indenture Trustee may, and if so directed by the Holders entitled to at least
66-2/3% of the Voting Rights shall, declare the unpaid principal amount of all
the Notes to be due and payable immediately, by a notice in writing to the
Issuer, the Servicer and the Insurer, and upon any such declaration such
principal amount shall become immediately due and payable together with all
accrued and unpaid interest thereon, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Issuer.
(b) At any time after such a declaration of acceleration has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article provided, the
Holders of Notes entitled to at least 66-2/3% of the Voting Rights (with the
consent of the Insurer if no Insurer Default shall have occurred and be
continuing), by written notice to the Issuer, Servicer, Insurer and the
Indenture Trustee, may rescind and annul such declaration and its consequences,
if:
(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all overdue amounts payable on or in respect of the
Notes (other than amounts due solely as a result of
the acceleration),
(B) to the extent that payment of interest on such amount
is lawful, interest on such overdue amounts at the
applicable Class A Note Interest Rate as contemplated
in Section 2.6(c);
(C) all unpaid amounts referred to in Section 6.7 and
clauses (iii) and (v) of Section 8.3(a);
(D) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses,
disbursements, and advances of the Indenture Trustee,
its agents and counsel;
and
(ii) all Events of Default, other than the nonpayment of
amounts payable on or in respect of the Notes which have become due
solely by such declaration of acceleration, have been cured or waived
as provided in Section 5.20.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
46
SECTION 5.3. Remedies. (a) If an Event of Default occurs and
is continuing of which a Responsible Officer has actual knowledge, the Indenture
Trustee shall give notice to each Noteholder as set forth in Section 6.5.
(b) Following any acceleration of the Notes, the Indenture
Trustee shall, subject to Section 5.3(d), have all of the rights, powers and
remedies with respect to the Trust Property as are available to secured parties
under the Uniform Commercial Code or other applicable law. Such rights, powers
and remedies may be exercised by the Indenture Trustee in its own name as
trustee of an express trust.
(c) If an Event of Default specified in Section 5.1(a) occurs
and is continuing, the Indenture Trustee is authorized to recover judgment in
its own name and as trustee of an express trust against the Issuer for the whole
amount of principal and interest remaining not paid when due and payable. (d) In
exercising its rights and obligations under this Section 5.3, the Indenture
Trustee may sell the Trust Property subject to the provisions of Section 5.19.
Neither the Indenture Trustee nor any Noteholder shall have any rights against
the Issuer other than to enforce the Grant hereunder and to sell the Trust
Property.
SECTION 5.4. Indenture Trustee Shall File Proofs of Claim. (a)
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition, or other
judicial proceeding relative to the Issuer, the Servicer, the Sponsor, the
Insurer or any other obligor upon or in respect of the Notes or the other
obligations secured hereby or relating to the property of the Issuer, the
Servicer, the Sponsor, the Insurer or of such other obligor or their creditors,
the Indenture Trustee (irrespective of whether the principal of the Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand on the
Issuer, the Servicer, the Sponsor or the Insurer for the payment of overdue
principal or interest or any such other obligation) shall by intervention in
such proceeding or otherwise:
(i) file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Notes and any other
obligation secured hereby 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 the reasonable compensation,
expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel) and of the Noteholders allowed in such judicial
proceeding; and
(ii) collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder to make such payments to the Indenture Trustee and, in the event
that the Indenture Trustee shall consent to the making of such payments directly
to the Noteholders to pay to the Indenture Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel, and any other amounts due the Indenture Trustee
under Section 6.7.
47
(b) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any holder thereof or to authorize the
Indenture Trustee to vote in respect of the claim of any Noteholder in any such
proceeding.
SECTION 5.5. Indenture Trustee May Enforce Claims Without
Possession of Notes. All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Indenture Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel, be for the ratable benefit of the holders of the Notes in
respect of which such judgment has been recovered.
SECTION 5.6. Application of Money Collected. Any money
collected by the Indenture Trustee pursuant to this Article (including all
collections from, and proceeds of the sale or liquidation of, the Trust
Property), and any moneys that may then be held or thereafter received by the
Indenture Trustee shall be applied in the following order, at the date or dates
fixed by the Indenture Trustee and, in case of the distribution of the entire
amount due on account of principal or interest, upon presentation of the Notes
and surrender thereof:
first, to the payment of all costs and expenses of collection
incurred by the Indenture Trustee and the Noteholders (including the
reasonable fees and expenses of any counsel to the Indenture Trustee
and the Noteholders); and
second, in the same order as specified in Section 8.3.
SECTION 5.7. Limitation on Rights of Noteholders. (a) No
Holder of any Note shall have any right to institute any Proceeding with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of Notes entitled to not less than 25% of the
Voting Rights have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its
own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee indemnity reasonably satisfactory to it against the costs,
expenses and liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such Proceedings;
48
(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 Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no Holders of Notes shall have any right
in any manner whatsoever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Notes or to obtain or to seek to obtain priority or preference over any other
Holders or to enforce any right under this Indenture, except in the manner
herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Outstanding Amount of the
Notes, the Indenture Trustee in its sole discretion may determine what action,
if any, shall be taken, notwithstanding any other provisions of this Indenture.
(b) The death or incapacity of any Noteholder shall not
operate to terminate this Indenture, nor entitle such Noteholder's legal
representatives or heirs to claim an accounting or to take any action or
Proceeding in any court for a partition or winding up of the Issuer, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(c) No Noteholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Issuer, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the Notes,
be construed so as to constitute the Noteholders from time to time as partners
or members of an association; nor shall any Noteholder be under any liability to
any third person by reason of any action taken by the parties to this Indenture
pursuant to any provision hereof.
SECTION 5.8. Unconditional Rights of Noteholders to Receive
Principal and Interest. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest on such Note
on or after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) 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 5.9. Restoration of Rights and Remedies. If any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Indenture and such Proceeding has been discontinued or abandoned for any
reason, then and in every such case the Issuer, the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the Noteholders shall
continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Noteholders is intended to be
exclusive of any other right or
49
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee or any Holder of any Note to exercise any
right or remedy accruing upon any Default or Event of Default shall impair any
such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this Article
V or by law to the Indenture Trustee or to the Noteholders may be exercised from
time to time, and as often as may be deemed expedient, by the Indenture Trustee
or by the Noteholders, as the case may be.
SECTION 5.12. Control by Noteholders. The Holders entitled to
a majority of the Voting Rights (with the consent of the Insurer so long as no
Insurer Event of Default has occurred and is continuing), shall have the right
to direct the time, method and place of conducting any Proceeding for any remedy
available to the Indenture Trustee with respect to the Notes or exercising any
trust or power conferred on the Indenture Trustee; provided that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.13. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by such Xxxxxx'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 shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates thereof expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
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
50
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 will not hinder, delay or
impede the execution of any power herein granted to the Indenture Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right
to seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Noteholders shall be impaired
by the recovery of any judgment by the Indenture Trustee against the Issuer or
by the levy of any execution under such judgment upon any portion of the Trust
Property or upon any of the assets of the Issuer.
SECTION 5.16. Performance and Enforcement of Certain
Obligations. (a) Promptly following a request from the Indenture Trustee to do
so and at the Servicer's expense, the Issuer agrees to take all such lawful
action as the Indenture Trustee may request to compel or secure the performance
and observance by the Sponsor and the Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement to the extent and in the
manner directed by the Indenture Trustee, including the transmission of notices
of default on the part of the Sponsor or the Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by the Sponsor or the Servicer of each of their obligations
under the Sale and Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and, at the written direction of Holders of Notes
entitled to at least 66-2/3% of the Voting Rights (with the consent of the
Insurer if no Insurer Default shall have occurred and be continuing) shall,
exercise all rights, remedies, powers, privileges and claims of the Issuer
against the Sponsor or the Servicer under or in connection with the Sale and
Servicing Agreement, including the right or power to take any action to compel
or secure performance or observance by the Sponsor or the Servicer of each of
their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
SECTION 5.17. Subrogation. The Indenture Trustee shall receive
as attorney-in-fact of each Noteholder any amount received from the Insurer
under the Policy. Any and all amounts disbursed by the Indenture Trustee from
claims made under the Policy shall not be considered payment by the Issuer with
respect to such Notes, and shall not discharge the obligations of the Issuer
with respect thereto. The Insurer shall, to the extent it makes any payment with
respect to the Notes, become subrogated to the rights of the recipient of such
payments to the extent of such payments. Subject to and conditioned upon any
payment with respect to the Notes by or on behalf of the Insurer, the Indenture
Trustee shall assign to the Insurer all rights to the payment of interest or
principal with respect to the Notes which are then due for payment to the extent
of all such payments made by the Insurer, and the Insurer may
51
exercise any option, vote right, power or the like with respect to the Notes to
the extent that it has made payment pursuant to the Policy.
SECTION 5.18. Preference Claims. The Indenture Trustee shall
promptly notify the Insurer of any proceeding or the institution of any action,
of which a Responsible Officer has actual knowledge, seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any distribution made with respect to the
Class A Notes. Each Class A Noteholder, by its purchase of Class A Notes, the
Servicer and the Indenture Trustee hereby agree that the Insurer (so long as no
Insurer Default has occurred and is continuing) may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim, including, without limitation, (i) the
direction of any appeal of any order relating to such Preference Claim and (ii)
the posting of any surety, supersedes or performance bond pending any such
appeal. In addition and without limitation of the foregoing, the Insurer shall
be subrogated to the rights of the Servicer, the Indenture Trustee and each
Class A Noteholder in the conduct of any such Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
SECTION 5.19. Sale of Trust Estate. (a) The power to effect
any sale of any portion of the Trust Property pursuant to Section 5.19 shall not
be exhausted by any one or more sales as to any portion of the Trust Property
remaining unsold, but shall continue unimpaired until the entire Trust Property
shall have been sold or all amounts payable on the Notes shall have been paid.
The Indenture Trustee may from time to time, upon directions in accordance with
Section 5.12, postpone any public sale by public announcement made at the time
and place of such sale.
(b) To the extent permitted by applicable law, the Indenture
Trustee shall not in any private sale sell to a third party the Trust Property,
or any portion thereof unless,
(i) until such time as the conditions specified in Sections
10.1(i) or 10.01(ii) of the Sale and Servicing Agreement have been
satisfied in full, the Holders of Notes entitled to at least 66-2/3% of
the Voting Rights (with the consent of the Insurer if no Insurer
Default shall have occurred and be continuing) consent to or direct the
Indenture Trustee in writing to make such sale; or
(ii) the proceeds of such sale would be not less than the sum
of all amounts due to the Indenture Trustee hereunder and the entire
unpaid principal amount of the Notes and all interest due or to become
due thereon in accordance with Section 8.3(a) on the Distribution Date
next succeeding the date of such sale. The foregoing provisions shall
not preclude or limit the ability of the Indenture Trustee to purchase
all or any portion of the Trust Property at a private sale.
(c) In connection with a sale of all or any portion of the
Trust Property:
(i) any one or more Noteholders may bid for and purchase the
property offered for sale, and upon compliance with the terms of sale
may hold, retain, and possess
52
and dispose of such property, without further accountability, and any
Noteholder may, in paying the purchase money therefor, deliver in lieu
of cash any Outstanding Notes or claims for interest thereon for credit
in the amount that shall, upon distribution of the net proceeds of such
sale, be payable thereon, and the Notes, in case the amounts so payable
thereon shall be less than the amount due thereon, shall be returned to
the Noteholders after being appropriately stamped to show such partial
payment;
(ii) the Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any
portion of the Trust Property in connection with a sale thereof;
(iii) 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 Property in connection with a sale
thereof, and to take all action necessary to effect such sale; and
(iv) no purchaser or transferee at such a sale shall be bound
to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of
any moneys.
(d) The method, manner, time, place and terms of any sale of
all or any portion of the Trust Property shall be commercially reasonable.
(e) The provisions of this Section 5.19 shall not be construed
to restrict the ability of the Indenture Trustee to exercise any rights and
powers against the Issuer or the Trust Property that are vested in the Indenture
Trustee by this Indenture, including, without limitation, the power of the
Indenture Trustee to proceed against the Collateral and to institute judicial
proceedings for the collection of any deficiency remaining thereafter or the
ability of the Servicer to exercise any rights or powers or to perform its
obligations under the Sale and Servicing Agreement.
SECTION 5.20. Waiver of Past Defaults. Prior to the time a
judgment or decree for payment of the money due has been obtained by the
Indenture Trustee, the Holders of Notes entitled to at least 66-2/3% of the
Voting Rights (with the consent of the Insurer if no Insurer Default shall have
occurred and be continuing) may on behalf of the Holders of all the Notes waive
any past Default or Event of Default and its consequences, except a Default or
Event of Default:
(a) In the payment of the principal of or interest on any Note
when due and payable, or
(b) In respect of a covenant or provision hereof that under
Section 9.2 cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected.
In the case of any such waiver, the Issuer, the Indenture
Trustee and the Holders of the Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto. Upon such waiver, such Default or Event of Default shall cease to
53
exist, and any Event of Default arising from any such Default shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
ARTICLE VI.
The Indenture Trustee
SECTION 6.1. Duties of Indenture Trustee. (a) If a Servicer
Event of Default or 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 the Basic Documents and use the same degree of care and skill in
its exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs; provided, however, that if the
Indenture Trustee is acting as Servicer, it shall use the same degree of care
and skill as is required of the Servicer under the Sale and Servicing Agreement.
(b) Except during the continuance of a Servicer Event of
Default or 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 the Basic Documents and no implied covenants or obligations shall
be read into this Indenture or the Basic Documents 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 and the Basic Documents; however, the
Indenture Trustee shall examine the certificates and opinions to
determine whether or not they conform on their face to the requirements
of this Indenture and the Basic Documents.
(c) The Indenture Trustee may not be relieved from liability
for its own gross negligent action, its own gross negligent failure to act or
its own misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(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;
(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 from Holders of Notes entitled to a
majority of the Voting Rights (or such greater percentage as may be
required by the terms hereof), with the consent of the Insurer if no
Insurer Default shall have occurred and be continuing, relating to the
time, method and place of conducting
54
any Proceeding for any remedy available to the Indenture Trustee, or
exercising any trust or power conferred upon the Indenture Trustee,
under this Indenture; and
(iv) the Indenture Trustee shall not be charged with knowledge
of any failure by the Servicer to comply with the obligations of the
Servicer under the Sale and Servicing Agreement unless a Responsible
Officer obtains actual knowledge of such failure or occurrence or the
Indenture Trustee receives written notice of such failure or occurrence
from the Servicer, the Insurer or the Holders of Notes entitled to a
majority of the Voting Rights.
(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) 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
repayment of such funds or indemnity reasonably satisfactory to it against such
risk or liability is not reasonably assured to it.
(f) 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.
(g) The Indenture Trustee shall, upon one Business Day's prior
written notice to the Indenture Trustee, permit any representative of the
Insurer, during the Indenture Trustee's normal business hours, to examine all
books of account, records, reports and other papers of the Indenture Trustee
relating to the Notes, to make copies and extracts therefrom and to discuss the
Indenture Trustee's affairs and actions, as such affairs and actions relate to
the Indenture Trustee's duties with respect to the Notes, with the Indenture
Trustee's officers and employees responsible for carrying out the Indenture
Trustee's duties with respect to the Notes.
(h) The Indenture Trustee shall, and hereby agrees that it
will, perform all of the obligations and duties required of it under the Sale
and Servicing Agreement.
(i) The Indenture Trustee shall, and hereby agrees that it
will, hold the Policy in trust, and will hold any proceeds of any claim on the
Policy in trust solely for the use and benefit of the Noteholders.
(j) In no event shall the Indenture Trustee, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.
55
SECTION 6.2. Rights of Indenture Trustee. (a) The Indenture
Trustee may rely on any document reasonably believed by it to be genuine and to
have been signed or presented by the proper person. The Indenture Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on the 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.
(e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Indenture Trustee shall be under no obligation to
institute, conduct or defend any litigation under this Indenture or in relation
to this Indenture, at the request, order or direction of any of the Holders of
Notes, pursuant to the provisions of this Indenture, unless such Holders of
Notes shall have offered to the Indenture Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; provided, however, that the Indenture Trustee shall, upon
the occurrence of a Servicer Event of Default or Event of Default (that has not
been cured or waived), exercise the rights and powers vested in it by this
Indenture or the Sale and Servicing Agreement with reasonable care and skill.
(g) Prior to the occurrence of a Servicer Event of Default or
Event of Default, the Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing to do so
by the Insurer or by the Holders of Notes entitled to not less than 25% of the
Voting Rights; provided, however, that if the payment within a reasonable time
to the Indenture Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of the
Indenture Trustee, not reasonably assured to the Indenture Trustee by the
security afforded to it by the terms of this Indenture or the Sale and Servicing
Agreement, the Indenture Trustee may require indemnity reasonably satisfactory
to it against such cost, expense or liability as a condition to so proceeding;
the reasonable expense of every such examination shall be paid by the Person
making such request, or, if paid by the Indenture Trustee shall be reimbursed by
the Person making such request upon demand.
56
(h) The Indenture Trustee shall not be accountable, shall have
no liability and makes no representation as to any acts or omissions hereunder
or under the Sale and Servicing Agreement of the Servicer until such time as the
Indenture Trustee may be required to act as Servicer.
(i) The Indenture Trustee shall not be personally liable for
any loss resulting from the investment of funds held in any Investment Account
at the direction of the Servicer pursuant to Section 8.11.
SECTION 6.3. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any Note
Paying Agent, Note Registrar, co-registrar or co-paying agent may do the same
with like rights. However, the Indenture Trustee must comply with Sections 6.11
and 6.12.
SECTION 6.4. 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 any of the Basic Documents, the Trust
Property or the Notes, it shall not be accountable for the Issuer's use of the
proceeds from the Notes, 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 Notes or in the Notes other than the Indenture Trustee's certificate
of authentication.
SECTION 6.5. Notice of Defaults. If a Servicer Event of
Default or an Event of Default occurs and is continuing and if it is either
known by, or written notice of the existence thereof has been delivered to, a
Responsible Officer, the Indenture Trustee shall mail to each Noteholder of such
event within 90 days after such knowledge or notice occurs. Except in the case
of a Default in payment of principal of or interest on any Note when due and
payable, the Indenture Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of Noteholders.
SECTION 6.6. Reports by Indenture Trustee to Holders. Upon
written request, the Note Paying Agent or the Servicer shall on behalf of the
Issuer deliver to each Noteholder such information as may be reasonably required
to enable such Holder to prepare its Federal and state income tax returns
required by law.
57
SECTION 6.7. Compensation and Indemnity. (a) The Indenture
Trustee shall withdraw from the Distribution Account on each Distribution Date
and pay to itself the Indenture Trustee's Fee and, to the extent that the funds
therein are at anytime insufficient for such purpose, the Servicer shall pay
such fees. The Indenture Trustee and any director, officer, employee or agent of
the Indenture Trustee shall be indemnified by the Issuer from the Trust Property
and held harmless against any loss, liability or expense (not including
expenses, disbursements and advances incurred or made by the Indenture Trustee,
including the compensation and the expenses and disbursements of its agents and
counsel, in the ordinary course of the Indenture Trustee's performance in
accordance with the provisions of this Agreement) incurred by the Indenture
Trustee arising out of or in connection with the acceptance or administration of
its obligations and duties under this Agreement, other than any loss, liability
or expense (i) resulting from the Servicer's actions or omissions in connection
with the Sale and Servicing Agreement and the Mortgage Loans (but only to the
extent the Indenture Trustee is actually indemnified by the Servicer pursuant to
the Sale and Servicing Agreement), (ii) that constitutes a specific liability of
the Indenture Trustee pursuant to Section [11.01(c)] or (iii) any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence in the performance of the Indenture Trustee's duties hereunder
or by reason of reckless disregard of the Indenture Trustee's obligations and
duties hereunder or as a result of a breach of the Indenture Trustee's
obligations under [Article XI] hereof.
(b) The Issuer's payment obligations to the Indenture Trustee
pursuant to this Section shall survive the discharge of this Indenture.
Notwithstanding anything else set forth in this Indenture or the Basic
Documents, the Indenture Trustee agrees that the obligations of the Issuer (but
not the Servicer) to the Indenture Trustee hereunder and under the Basic
Documents shall be recourse to the Trust Property only and specifically shall
not be recourse to the assets of the Issuer or any Securityholder. In addition,
the Indenture Trustee agrees that its recourse to the Issuer, the Trust Property
and amounts held in any of the Trust Accounts shall be limited to the right to
receive the distributions referred to in Section 8.3 hereof.
SECTION 6.8. Replacement of Indenture Trustee. The Indenture
Trustee may resign at any time by so notifying the Issuer, the Servicer, the
Sponsor and the Insurer by written notice. Upon receiving such notice of
resignation, the Issuer shall promptly appoint a successor Indenture Trustee
(approved in writing by the Insurer, so long as such approval is not
unreasonably withheld) by written instrument, in duplicate, one copy of such
instrument shall be delivered to the resigning Indenture Trustee (who shall
deliver a copy to the Servicer) and one copy to the successor Trustee; provided,
however, that any such successor Indenture Trustee shall be subject to the prior
written approval of the Servicer. The Issuer may and, at the request of the
Insurer shall, remove the Indenture Trustee, if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Indenture Trustee in an involuntary case or proceeding under
federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting relief or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or similar official) for
the Indenture Trustee or for any substantial part of the Indenture
58
Trustee's property, or ordering the winding-up or liquidation of the
Indenture Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Indenture Trustee and such case is not dismissed within 60 days;
(iv) the Indenture Trustee commences a voluntary case under
any federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, conservator, sequestrator (or other similar official) for the
Indenture Trustee or for any substantial part of the Indenture
Trustee's property, or makes any assignment for the benefit of
creditors or fails generally to pay its debts as such debts become due
or takes any corporate action in furtherance of any of the foregoing;
or
(v) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Insurer. If the Issuer fails to appoint such a successor Indenture Trustee, the
Insurer may appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, to the 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 retiring Indenture Trustee
under this Indenture. The successor Indenture Trustee shall mail a notice of its
succession to Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor Indenture
Trustee.
If a successor Indenture Trustee does not take office within
30 days after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of Notes entitled to a majority of
the Voting Rights or, if no Insurer Default shall have occurred and be
continuing, the Insurer, may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee acceptable to the Insurer.
If the Indenture Trustee fails to comply with Section 6.11,
any Noteholder or the Insurer may petition any court of competent jurisdiction
for the removal of the Indenture Trustee and the appointment of a successor
Indenture Trustee acceptable to the Insurer.
Any resignation or removal of the Indenture Trustee and
appointment of a successor Indenture Trustee pursuant to any of the provisions
of this Section shall not become effective until acceptance of appointment by
the successor Indenture Trustee pursuant to Section 6.8 and payment of all fees
and expenses owed to the outgoing Indenture Trustee.
59
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Issuer's and the Servicer's indemnity obligations
under Section 6.7 shall continue for the benefit of the retiring Indenture
Trustee and the Servicer shall pay any amounts owing to the Indenture Trustee.
SECTION 6.9. Successor Indenture Trustee by Xxxxxx. If the
Indenture Trustee consolidates with, merges or converts into, or transfers all
or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust may at the time be located, the
Indenture Trustee with the consent of the Insurer 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, and to vest in such Person or Persons, in such capacity
and for the benefit of the Noteholders, such title to the Trust, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.11 and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust 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;
60
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder, including acts
or omissions of predecessor or successor trustees; and
(iii) the Indenture Trustee and the Servicer acting jointly
may at any time accept the resignation of or remove any separate
trustee or co-trustee except that following the occurrence of a
Servicer Event of Default, the Indenture Trustee acting alone may
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, dissolve, become insolvent, 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.
(e) The Servicer shall be responsible for the fees of any
co-trustee or separate trustee appointed hereunder.
SECTION 6.11. Eligibility: Disqualification. The Indenture
Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Indenture Trustee shall provide copies of such reports to the
Insurer upon request. The Indenture Trustee shall comply with TIA ss. 310(b),
including the optional provision permitted by the second sentence of TIA ss.
310(b)(9); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against
Issuer. The Indenture Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). An Indenture Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated.
61
SECTION 6.13. Appointment and Powers. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints First
Union National Bank as the Indenture Trustee with respect to the Collateral, and
First Union National Bank hereby accepts such appointment and agrees to act as
Indenture Trustee with respect to the Trust Property for the Issuer Secured
Parties, to maintain custody and possession of such Trust Property (except as
otherwise provided hereunder or under the Sale and Servicing Agreement) and to
perform the other duties of the Indenture Trustee in accordance with the
provisions of this Indenture and the other Basic Documents. Each Issuer Secured
Party hereby authorizes the Indenture Trustee to take such action on its behalf,
and to exercise such rights, remedies, powers and privileges hereunder, as the
Holders of Notes entitled to a majority (or such greater percentage as may be
required by the terms hereof) of the Voting Rights (with the consent of the
Insurer if no Insurer Default shall have occurred and be continuing) may direct
and as are specifically authorized to be exercised by the Indenture Trustee by
the terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto. The Indenture Trustee shall act
upon and in compliance with the written instructions of the Holders of Notes
entitled to a majority (or such greater percentage as may be required by the
terms hereof) of the Voting Rights (with the consent of the Insurer if no
Insurer Default shall have occurred and be continuing) delivered pursuant to
this Indenture promptly following receipt of such written instructions; provided
that the Indenture Trustee shall not act in accordance with any instructions (i)
which are not authorized by, or in violation of the provisions of, this
Indenture or (ii) for which the Indenture Trustee has not received reasonable
indemnity. Receipt of such instructions shall not be a condition to the exercise
by the Indenture Trustee of its express duties hereunder, except where this
Indenture provides that the Indenture Trustee is permitted to act only following
and in accordance with such instructions.
SECTION 6.14. Performance of Duties. The Indenture Trustee
shall have no duties or responsibilities except those expressly set forth in
this Indenture and the other Basic Documents to which the Indenture Trustee is a
party or as directed by the Controlling Party in accordance with this Indenture.
The Indenture Trustee shall not be required to take any discretionary actions
hereunder except at the written direction of the Holders of Notes entitled to a
majority (or such greater percentage as may be required by the terms hereof) of
the Voting Rights (with the consent of the Insurer if no Insurer Default shall
have occurred and be continuing) and with indemnification as provided herein.
SECTION 6.15. Limitation on Liability. Neither the Indenture
Trustee nor any of its directors, officers, employees and agents shall be liable
for any action taken or omitted to be taken by it or them hereunder, or in
connection herewith, except that the Indenture Trustee shall be liable for its
negligence, bad faith or willful misconduct; nor shall the Indenture Trustee be
responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Issuer of this Indenture or any of the Trust Property
(or any part thereof).
SECTION 6.16. Reliance Upon Documents. In the absence of
negligence, bad faith or willful misconduct on its part, the Indenture Trustee
shall be entitled to rely on any communication, instrument, paper or other
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons and shall have no liability in
acting, or omitting to act, where such action or omission to act is in
reasonable reliance upon any statement or opinion contained in any such document
or instrument.
62
SECTION 6.17. Representations and Warranties of the Indenture
Trustee. The Indenture Trustee represents and warrants to the Issuer and to each
Issuer Secured Party as follows:
(a) Due Organization. The Indenture Trustee is a national
banking association, duly organized, validly existing and in good
standing under the laws of the United States and is duly authorized and
licensed under applicable law to conduct its business as presently
conducted.
(b) Corporate Power. The Indenture Trustee has all requisite
right, power and authority to execute and deliver this Indenture and to
perform all of its duties as the Indenture Trustee hereunder.
(c) Due Authorization. The execution and delivery by the
Indenture Trustee of this Indenture and the other Basic Documents to
which it is a party, and the performance by the Indenture Trustee of
its duties hereunder and thereunder, have been duly authorized by all
necessary corporate proceedings, are required for the valid execution
and delivery by the Indenture Trustee, or the performance by the
Indenture Trustee, of this Indenture and such other Basic Documents.
(d) Xxxxx and Binding Indenture. The Indenture Trustee has
duly executed and delivered this Indenture and each other Basic
Document to which it is a party, and each of this Indenture and each
such other Basic Document constitutes the legal, valid and binding
obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms, except as (i) such enforceability
may be limited by bankruptcy, insolvency, reorganization and similar
laws relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of equitable remedies may be
limited by equitable principles of general applicability.
SECTION 6.18. Waiver of Setoffs. The Indenture Trustee hereby
expressly waives any and all rights of setoff that the Indenture Trustee may
otherwise at any time have under applicable law with respect to any Trust
Account and agrees that amounts in the Trust Accounts shall at all times be held
and applied solely in accordance with the provisions hereof.
SECTION 6.19. Suits for Enforcement. In case a Servicer Event
of Default or other default by the Servicer under the Sale and Servicing
Agreement shall occur and be continuing, the Indenture Trustee may proceed to
protect and enforce its rights and the rights of the Noteholders under this
Indenture by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or other remedy, as the
Indenture Trustee, being advised by counsel, shall deem most effectual to
protect and enforce any of the rights of the Indenture Trustee and the
Noteholders.
SECTION 6.20. Mortgagor Claims. In connection with any offset
defenses, or affirmative claim for recovery, asserted in legal actions brought
by Xxxxxxxxxx under one or
63
more Mortgage Loans based upon provisions therein or upon other rights or
remedies arising from any requirements of law applicable to the Mortgage Loans:
(a) The Indenture Trustee is the holder of Mortgage Loans only
as trustee on behalf of the holders of the Notes, and not as a
principal or in any individual or personal capacity.
(b) The Indenture Trustee shall not be personally liable for,
or obligated to pay Mortgagors, any affirmative claims asserted
thereby, or responsible to holders of the Notes for any offset defense
amounts applied against Mortgage Loan payments, pursuant to such legal
actions.
(c) The Indenture Trustee will pay, solely from available
Trust money, affirmative claims for recovery by Xxxxxxxxxx only
pursuant to final judicial orders or judgments, or judicially approved
settlement agreements, resulting from such legal actions.
(d) The Indenture Trustee will comply with judicial orders and
judgments which require its actions or cooperation in connection with
Xxxxxxxxxx' legal actions to recover affirmative claims against holders
of the Notes.
(e) The Indenture Trustee will cooperate with and assist the
Servicer, the Sponsor, or holders of the Notes in their defense of
legal actions by Xxxxxxxxxx to recover affirmative claims if such
cooperation and assistance is not contrary to the interests of the
Indenture Trustee as a party to such legal actions and if the Indenture
Trustee is satisfactorily indemnified for all liability, costs and
expenses arising therefrom.
(f) The Issuer hereby agrees to indemnify, hold harmless and
defend the Indenture Trustee from and against any and all liability,
loss, costs and expenses of the Indenture Trustee resulting from any
affirmative claims for recovery asserted or collected by mortgagors
under the Mortgage Loans.
SECTION 6.21. Certain Available Information. The Indenture
Trustee shall maintain its Corporate Trust Office and make available free of
charge during normal business hours for review by any Holder of a Note or
Certificate or any Person identified to the Indenture Trustee as a prospective
transferee of a Note or Certificate, originals or copies of the following items:
(A) this Indenture and any supplements hereto entered into pursuant to Article
IX, (B) the Sale and Servicing Agreement and any amendments thereto entered into
pursuant to Section 12.01 of the Sale and Servicing Agreement, (C) all monthly
statements required to be delivered to Securityholders of the relevant Class
pursuant to Section 4.02 of the Sale and Servicing Agreement since the Closing
Date, and all other notices, reports, statements and written communications
delivered to the Securityholders of the relevant Class pursuant to this
Indenture or the Sale and Servicing Agreement since the Closing Date, (D) all
certifications delivered by a Responsible Officer since the Closing Date
pursuant to [Section 11.01(h)], (E) any and all Officer's Certificates delivered
to the Indenture Trustee by the Servicer since the Closing Date to evidence the
Servicer's determination that any Monthly Advance or Servicing Advance, was, or
if made, would be a Nonrecoverable Monthly Advance, and (F) any and all
Officer's
64
Certificates delivered to the Indenture Trustee by the Servicer since the
Closing Date pursuant to Section 4.04 of the Sale and Servicing Agreement.
Copies and mailing of any and all of the foregoing items will be available from
the Indenture Trustee upon request at the expense of the Person requesting the
same.
ARTICLE VII.
Noteholders' Lists and Reports
SECTION 7.1. Issuer to Furnish to Indenture Trustee Names and
Addresses of Noteholders. The Issuer will furnish or cause to be furnished to
the Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Holders as of such Record Date, (b) at such other times as the Indenture
Trustee may request in writing, within 30 days after receipt by the Issuer of
any such request, a list of similar form and content as of a date not more than
10 days prior to the time such list is furnished; provided, however, that so
long as the Indenture Trustee is the Note Registrar, no such list shall be
required to be furnished. The Indenture Trustee or, if the Indenture Trustee is
not the Note Registrar, the Issuer shall furnish to the Insurer or the Issuer in
writing upon their written request and at such other times as the Insurer or the
Issuer may request a copy of the list.
SECTION 7.2. Preservation of Information; Communications to
Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.1 and the names and addresses of Holders received by the Indenture Trustee in
its capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.1 upon receipt of a new list so
furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA ss. 312(c).
SECTION 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer or Depositor is required to file the same with the Commission,
copies of the annual reports and copies 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) which the Issuer or Depositor may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by the Issuer or Depositor
65
with the conditions and covenants of this Indenture as may be required
from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA ss.
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer or Depositor pursuant to clauses (i)
and (ii) of this Section 7.3(a) as may be required 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 7.4. Reports by Indenture Trustee. If required by TIA
ss. 313(a), within 60 days after each August 31, beginning with August 31, 1998,
the Indenture Trustee shall mail to each Noteholder as required by TIA ss.
313(c) a brief report dated as of such date that complies with TIA ss. 313(a).
The Indenture Trustee also shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to
Noteholders shall be filed by the Indenture Trustee with the Commission and each
stock exchange, if any, on which the Notes are listed. The Issuer shall notify
the Indenture Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII.
Accounts; Investment of Moneys;
Collection and Application of Moneys; Reports
SECTION 8.1. 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 and the Sale and Servicing Agreement. The Indenture Trustee shall
apply all such money received by it as provided in this Indenture and the Sale
and Servicing Agreement. Except as otherwise expressly provided in this
Indenture or in the Sale and Servicing Agreement, if any default occurs in the
making of any payment or performance under any agreement or instrument that is
part of the Trust Property, 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.
SECTION 8.2. Release of Trust Property. (a) Subject to Section
8.9 and the payment of its fees and expenses pursuant to Section 6.7, the
Indenture Trustee may, and when required by the Issuer and the provisions of
this Indenture shall, execute instruments to release property from the lien of
this Indenture, in a manner and under circumstances that are not inconsistent
with the provisions of this Indenture or the Sale and Servicing Agreement. No
party relying upon an instrument executed by the Indenture Trustee as provided
in this Article VIII 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. The Indenture Trustee may require
66
as a condition to any such release, an Opinion of Counsel, stating the legal
effect of any such action, outlining the steps required to complete the same,
and concluding that all conditions precedent to the taking of such action have
been complied with and such action will not materially and adversely impair the
security for the Notes or the rights of the Noteholders or the Insurer in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Property. Counsel rendering any such opinion may rely,
without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Indenture Trustee in connection
with any such release.
(b) The Indenture Trustee shall, at such time as there are no
Notes outstanding and all sums due the Indenture Trustee pursuant to Section 6.7
and to the Insurer pursuant to the Insurance Agreement have been paid, release
any remaining portion of the Trust Property that secured the Notes from the lien
of this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Trust Accounts. The Indenture Trustee shall
release property from the lien of this Indenture pursuant to this Section 8.2(b)
only upon receipt of an Issuer Request accompanied by an Officer's Certificate,
an Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA xx.xx. 314(c) and 314(d)(1) meeting the applicable
requirements of Section 12.1.
SECTION 8.3. Distribution. (a) On each Distribution Date, the
Indenture Trustee or the Note Paying Agent, as the case may be, shall, based
solely on information contained in the Remittance Report for such Distribution
Date, withdraw from the Distribution Account an amount equal to the Available
Distribution Amount (less any amount distributed on such Distribution Date as
provided in Section 8.3(g)) and distribute to the following Persons the
following amounts, in the following order of priority:
(i) concurrently:
(A) the Holders of the Class A-1 Notes an amount equal to
(A) the Class A-1 Interest Distribution Amount for
such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause
(A) from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders
of the Class A-1 Notes;
(B) the Holders of the Class A-2 Notes an amount equal to
(A) the Class A-2 Interest Distribution Amount for
such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause
(A) from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders
of the Class A-2 Notes;
(C) the Holders of the Class A-3 Notes an amount equal to
(A) the Class A-3 Interest Distribution Amount for
such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause
(A) from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders
of the Class A-3 Notes;
67
(D) the Holders of the Class A-4 Notes an amount equal to
(A) the Class A-4 Interest Distribution Amount for
such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause
(A) from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders
of the Class A-4 Notes;
(E) the Holders of the Class A-5 Notes an amount equal to
(A) the Class A-5 Interest Distribution Amount for
such Distribution Date, plus (B) any undistributed
amount described in the immediately preceding clause
(A) from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders
of the Class A-5 Notes; and
(F) the Holders of the Class A-6 Notes an amount equal to
(A) the Class A-6 Interest Distribution Amount for
such Distribution Date, plus (B) an undistributed
amount described in the immediately preceding clause
(A) from any previous Distribution Date for which no
Insurance Payment has been previously paid to Holders
of the Class A-6 Notes;
(ii) to the Holders of the Class of Class A Notes then
entitled to receive payment of principal, as provided in paragraph (b)
below, a distribution of principal in an amount equal to the Principal
Distribution Amount (except for any portion thereof consisting of any
related Subordination Increase Amount);
(iii) to the Insurer, to reimburse the Insurer for claims
under the Policy, to the extent of Cumulative Insurance Payments;
(iv) to the Holders of the Class of Class A Notes then
entitled to receive payment of principal, as provided in paragraph (b)
below, a distribution of principal in an amount equal to the portion of
the Principal Distribution Amount consisting of any Subordination
Increase Amount;
(v) to the Insurer, any amounts remaining due to the
Certificate Insurer under the terms of the Insurance Agreement;
(vi) to the Holders of the Class A Notes, payable from the
remaining Net Monthly Excess Cashflow, an amount equal to any Relief
Act Interest Shortfalls and/or any Prepayment Interest Shortfalls that
were allocated to such holders and therefore not distributed pursuant
to clause (i) above or this clause (vi) for all prior Distribution
Dates; and
(vii) to the Holders of the Certificates, the balance, if any,
of the amount in the Distribution Account for such Distribution Date;
provided, however, that if an Insurer Default shall have occurred and be
continuing, the distributions with respect to clauses (ii) and (iv) above shall
be made, pro rata, to the Class A-1 Noteholders, the Class A-2 Noteholders, the
Class A-3 Noteholders, the Class A-4 Certificateholders, the Class A-5
Noteholders and the Class A-6 Noteholders on such Distribution Date.
68
(b) All principal distributed with respect to the Class A
Notes pursuant to Sections 8.3(a)(ii), 8.3(a)(iv) and 8.3(a)(vi) shall be
distributed in the following order: first, to the Holders of the Class A-6
Notes, to the extent of the least of (x) the Principal Distribution Amount, (y)
the Class A-6 Note Principal Balance and (z) the Class A-6 Lockout Distribution
Amount; second, to the Holders of the Class A-1 Notes, to reduce the Class A-1
Note Principal Balance to zero; third, to the Holders of the Class A-2 Notes, to
reduce the Class A-2 Note Principal Balance to zero; fourth, to the Holders of
the Class A-3 Notes, to reduce the Class A-3 Note Principal Balance to zero;
fifth, to the Holders of the Class A-4 Notes, to reduce the Class A-4 Note
Principal Balance to zero; and sixth, to the Holders of the Class A-5 Notes, to
reduce the Class A-5 Note Principal Balance to zero. In addition to making the
distributions required pursuant to Section 8.3(a), on each Distribution Date for
which there exists a Deficiency Amount, the Trustee shall withdraw from the
Distribution Account any amount therein that was transferred from the Policy
Payments Account to the Distribution Account pursuant to Section 11.4 and
distribute to the Holders of the Class A Notes (i) an amount equal to any amount
required to be paid to such Class pursuant to Section 8.3(a)(i) for such
Distribution Date remaining unpaid after giving effect to all distributions made
pursuant to Section 8.3(a) for such Distribution Date, (ii) an amount equal to
any Remaining Overcollateralization Deficit on such Distribution Date after
giving effect to all distributions made pursuant to Section 8.3(a) for such
Distribution Date and (iii) without duplication, any other amount constituting a
Deficiency Amount. All references above to the Note Principal Balance of any
Class of Notes shall be to the Note Principal Balance of such Class immediately
prior to the relevant Distribution Date.
(c) All distributions made with respect to each Class of Notes
on each Distribution Date shall be allocated, pro rata, among the outstanding
Notes in such Class based on their respective Note Principal Balances.
(d) Payments in respect of each Class of Notes on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 8.3(f)
respecting the final distribution on such Class), based on the aggregate
Percentage Interest represented by their respective Notes. So long as the
Book-Entry Notes are registered in the name of the Depository or its nominee,
the Indenture Trustee shall make all distributions on such Notes by wire
transfers of immediately available funds to the Depository or its nominee. In
the case of Notes issued in fully registered, certificated form, distributions
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Indenture Trustee in writing
at least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Notes having an initial
aggregate Note Principal Balance that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Class Note Balance of such Class of
Notes, or otherwise by check mailed by first class mail to the address of such
Holder appearing in the Note Register. The Indenture Trustee may deduct a
reasonable wire transfer fee from any payment made by wire transfer. The final
distribution on each Note will be made in like manner, but only upon presentment
and surrender of such Note at the Corporate Trust Office or such other location
specified in the notice to Noteholders of such final distribution. Payments to
the Insurer on any Distribution Date will be made by wire transfer of
immediately available funds to the account designated by the Insurer.
69
Each distribution with respect to a Book-Entry Note shall be
paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Note Owners that it represents and to each indirect participating brokerage
firm (a "brokerage firm" or "indirect participating firm") for which it acts as
agent. Each brokerage firm shall be responsible for disbursing funds to the Note
Owners that it represents. None of the Indenture Trustee, the Note Registrar,
the Depositor or the Servicer shall have any responsibility therefor except as
otherwise provided by this Agreement or applicable law.
Distributions in respect of Certificates shall be made (i) in
the case of Certificates held by the Majority Certificateholder, by wire
transfer of immediately available funds to the account of the Majority
Certificateholder at a bank or other entity having appropriate facilities
therefor, provided that the Majority Certificateholder shall have notified the
Indenture Trustee in writing at least five Business Days prior to the Record
Date immediately prior to such Distribution Date, and (ii) in the case of
Certificates held other than by the Majority Certificateholder and, if the
Majority Certificateholder shall have failed to give the notification referred
to in clause (i), also in the case of Certificates held by the Majority
Certificateholder, by check mailed by first class mail to the address of such
Holder appearing in the Certificate Register as advised in writing by the
Certificate Registrar to the Indenture Trustee pursuant to Section _____ of the
Trust Agreement. The Indenture Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. The final distribution on each
Certificate will be made in like manner, but only upon presentment and surrender
of such Certificate to the Certificate Registrar, as advised in writing by the
Certificate Registrar to the Indenture Trustee pursuant to Section _____ of the
Trust Agreement.
(e) The rights of the Noteholders to receive distributions in
respect of the Notes, and all interests of the Noteholders in such
distributions, shall be as set forth in this Indenture. Neither the Holders of
any Class of Notes nor the Indenture Trustee, Sponsor or Servicer shall in any
way be responsible or liable to the Holders of any other Class of Notes in
respect of amounts properly previously distributed on the Notes.
(f) Whenever the Indenture Trustee expects that the Final
Distribution Date with respect to any Class of Notes will occur on the next
Distribution Date, the Indenture Trustee shall mail to each Holder on such date
of such Class of Notes and to the Insurer a notice to the effect that:
(i) the Indenture Trustee expects that the final distribution
with respect to such Class of Notes will be made on such Distribution
Date but only upon presentation and surrender of such Notes at the
office of the Indenture Trustee therein specified;
(ii) no interest shall accrue on such Notes from and after the
end of the related Interest Accrual Period.
Such notice shall be given by the Indenture Trustee (a) in the event such notice
is given in connection with a redemption of the Notes pursuant to Article X, not
earlier than the 10th day and not later than the 15th day of the month next
preceding the Redemption Date or
70
(b) otherwise, during the month of such Final Distribution Date on or before the
Determination Date in respect of such Final Distribution Date.
Any funds not distributed to any Holder or Holders of Notes of such Class on the
related Final Distribution Date because of the failure of such Holder or Holders
to tender their Notes shall, on such date, be set aside and held in trust and
credited to the account of the appropriate non-tendering Holder or Holders. If
any Note as to which notice has been given pursuant to this Section 8.3(f) shall
not have been surrendered for cancellation within six months after the time
specified in such notice, the Indenture Trustee shall mail a second notice to
the remaining non-tendering Noteholders to surrender their Notes for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Notes shall not have been
surrendered for cancellation, the Indenture Trustee shall, directly or through
an agent, contact the remaining non-tendering Noteholders concerning surrender
of their Notes in the manner reasonably specified to the Indenture Trustee by
the Servicer in writing. The costs and expenses of maintaining the funds in
trust and of contacting such Noteholders shall be paid out of the assets so held
in trust for such Noteholders. If in one year after the second notice any such
Notes shall not have been surrendered for cancellation, the Servicer shall pay
to the Insurer any amount of such funds that were paid by the Insurer under the
Policy but shall continue to hold any remaining funds for the benefit of the
non-tendering Noteholders, and such Noteholders shall thereafter look solely to
the Servicer for payment thereof, and all liability of the Insurer with respect
to such Trust Properties shall thereupon cease. No interest shall accrue or be
payable to any Noteholder on any amount held in trust by the Servicer as a
result of such Noteholder's failure to surrender its Note(s) for final payment
thereof in accordance with this Section 83(f).
(g) If the amount withdrawn from the Redemption Account and
deposited into the Distribution Account pursuant to Section 8.11 is $100,000 or
more (but not otherwise), the entire amount so withdrawn and deposited shall be
distributed by the Trustee on the ___________, 1998 Distribution Date as a
prepayment of principal of the Class A Certificates, pro rata, on the basis of
their respective Note Principal Balances. If the amount withdrawn from the
Pre-Funding Account and deposited into the Distribution Account pursuant to
Section 8.11 is $100,000 or more (but not otherwise), the entire amount so
withdrawn and deposited shall be distributed by the Trustee on the __________,
1998 Distribution Date as a prepayment of principal of the Class A Certificates,
pro rata, on the basis of their respective Note Principal Balances.
SECTION 8.4. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Indenture Trustee
shall comply with all federal withholding requirements respecting payments to
Noteholders of interest or original issue discount that the Trustee reasonably
believes are applicable under the Code. The consent of Noteholders shall not be
required for such withholding. In the event the Indenture Trustee does withhold
any amount from interest or original issue discount payments or advances thereof
to any Noteholder pursuant to federal withholding requirements, the Indenture
Trustee shall indicate the amount withheld to such Noteholders.
SECTION 8.5. Statements to Noteholders. Concurrently with each
distribution to Noteholders, the Indenture Trustee shall forward to each
Noteholder, the Servicer, the Insurer
71
and each Rating Agency the statement prepared by the Servicer pursuant to
Section 4.02 of the Sale and Servicing Agreement with respect to such
distribution.
To the extent that there are inconsistencies between the
telescope of the Remittance Report and the hard copy thereof and information set
forth in the computer tape or other media provided by the Servicer hereunder,
the Indenture Trustee shall be entitled to rely upon the telescope.
Within a reasonable period of time after the end of each
calendar year, the Indenture Trustee shall forward to each Person who at any
time during the calendar year was a Holder of the Notes of any Class (a) the
statement furnished to the Indenture Trustee by the Servicer pursuant to Section
4.02 of the Sale and Servicing Agreement containing the information set forth in
clauses (1) through (3) of Section 4.02 of the Sale and Servicing Agreement,
aggregated for such calendar year or applicable portion thereof during which
such person was a Noteholder and (b) such information contained in the
Remittance Reports as required to enable the Holders of the Notes to prepare
their tax returns.
Upon request, the Indenture Trustee shall forward to each
Noteholder, during the term of this Indenture, such periodic, special, or other
reports or information, whether or not provided for herein, as shall be
reasonably requested with respect to the Noteholder, or otherwise with respect
to the purposes of this Indenture, all such reports or information to be
provided at the expense of the Noteholder in accordance with such reasonable and
explicit instructions and directions as the Noteholder may provide. For purposes
of this Section 8.5, the Indenture Trustee's duties are limited to the extent
that the Indenture Trustee receives timely reports as required from the
Servicer.
SECTION 8.6. Rights of Securityholders. The Notes shall
represent obligations of the Issuer, secured by the Trust Property, including
the Trust Accounts and the right to receive interest, principal and other
amounts at the times and in the amounts specified in this Indenture; the
Certificates shall represent interests in the Issuer (other than the Trust
Accounts and the Policy).
SECTION 8.7. Distribution Account. (a) The Indenture Trustee
shall establish and maintain with itself a separate trust account (the
"Distribution Account") entitled "First Union National Bank as Indenture
Trustee, in trust for the registered holders of Emergent Home Equity Loan Trust
1997-4, Asset Backed Notes, Series 1997-4 Distribution Account". The
Distribution Account shall be an Eligible Account. Deposits to and withdrawals
from the Distribution Account shall be made as provided herein and in the Sale
and Servicing Agreement. Funds in the Distribution Account shall be invested in
Permitted Investments, at the direction of the Servicer, in accordance with
Section 8.12 hereof and Section 3.14 of the Sale and Servicing Agreement. The
Indenture Trustee shall give notice to the Issuer, the Servicer and the Insurer
of the location of the Distribution Account when established and prior to any
change thereof.
(b) Promptly upon receipt of any Stayed Funds, whether from
the Servicer, a trustee in bankruptcy, or federal bankruptcy court or other
source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) of the Sale and
Servicing Agreement or as otherwise permitted thereunder.
72
(c) The Indenture Trustee shall be entitled to withdraw
amounts from the Distribution Account and to transfer funds to the Expense
Account on the Business Day immediately preceding each Distribution Date
pursuant to Section 8.11(b) prior to any payments as required pursuant to
Section 8.3.
SECTION 8.8. The Pre-Funding Account. (a) The Indenture
Trustee shall establish and maintain with itself a separate trust account (the
"Pre-Funding Account") entitled "First Union National Bank as Indenture Trustee,
in trust for the registered holders of Emergent Home Equity Loan Trust 1997-4,
Asset Backed Notes, Series 1997-4 Pre-Funding Account." Such Account shall be an
Eligible Account. Upon receipt of the proceeds of the sale of the Notes, on the
Closing Date, the Issuer shall, from the proceeds of the sale of the Notes,
deposit, on behalf of the Noteholders, in the Pre-Funding Account, the Original
Pre-Funded Amount. Funds in the Pre-Funding Account shall be invested in
Permitted Investments, at the direction of the Servicer, in accordance with
Section 8.12 hereof and Section 3.14 of the Sale and Servicing Agreement. The
Indenture Trustee shall give notice to the Issuer, the Servicer and the Insurer
of the location of the Pre-Funding Account when established and prior to any
change thereof.
(b) On any Pre-Funding Loan Transfer Date, the Depositor shall
instruct in writing the Indenture Trustee to withdraw from the Pre-Funding
Account an amount equal to 100% of the aggregate Principal Balances as of the
related Pre-Funding Loan Cut-off Date of the Pre-Funding Loans sold to the Trust
on such Pre-Funding Loan Transfer Date and pay such amount to or upon the order
of the Sponsor upon satisfaction of the conditions set forth in Sections 2.02(b)
and (c) of the Sale and Servicing Agreement with respect to such transfer. The
Indenture Trustee may conclusively rely on such written instructions from the
Depositor.
(c) If the Pre-Funding Amount (other than Pre-Funding
Earnings) has not been reduced to zero by __________, 1998, after giving effect
to any reductions in the Pre-Funding Amount pursuant to Section 8.8(b), the
Indenture Trustee shall withdraw from the Pre-Funding Account on such date and
deposit in the Distribution Account the entire remaining Pre-Funding Amount
(exclusive of Pre-Funding Earnings) for distribution as provided in Section
8.3(a) or 8.3(g), as applicable. (d) On the _________, 1998 and __________, 1998
Distribution Dates the Indenture Trustee shall transfer from the Pre-Funding
Account to the Distribution Account the Pre-Funding Earnings, if any,
applicable, respectively, to such Distribution Dates.
SECTION 8.9. The Interest Coverage Account. (a) The Indenture
Trustee shall establish and maintain with itself a separate trust account (the
"Interest Coverage Account") entitled "First Union National Bank as Indenture
Trustee, in trust for the registered holders of Emergent Home Equity Loan Trust
1997-4 Asset Backed Notes, Series 1997-4 Interest Coverage Account." Such
account shall be an Eligible Account. Upon receipt of the proceeds of the sale
of the Notes on the Closing Date, the Issuer shall, from the proceeds of the
sale of the Notes, deposit, on behalf of the Noteholders, in the Interest
Coverage Account the amount of $__________. Funds in the Interest Coverage
Account shall be invested in Permitted Investments, at the direction of the
Servicer, in accordance with Section 8.12 hereof. The Indenture Trustee shall
give notice to the Issuer, the Servicer and the Insurer of the location of
73
the Interest Coverage Account when established and prior to any change thereof.
[The Interest Coverage Account will not be an asset of the REMIC.]
(b) On the _________, 1998 Distribution Date, the Indenture
Trustee shall withdraw $_________ from the Interest Coverage Account and deposit
it into the Distribution Account. On the __________, 1998 Distribution Date, the
Indenture Trustee shall withdraw $_________ from the Interest Coverage Account
and deposit it into the Distribution Account.
(c) The Indenture Trustee shall pay any amounts remaining in
the Interest Coverage Account after the ___________, 1998 Distribution Date to
the Sponsor immediately after such Distribution Date. The Indenture Trustee
shall thereupon terminate the Interest Coverage Account.
SECTION 8.10. Expense Account. (a) The Indenture Trustee shall
establish and maintain with itself a separate trust account (the "Expense
Account") entitled "First Union National Bank as Indenture Trustee, in trust for
the registered holders of Emergent Home Equity Loan Trust 1997-4, Asset Backed
Notes, Series 1997-4, and Financial Security Assurance Inc., Expense Account."
The Expense Account shall be an Eligible Account, and funds on deposit therein
shall be held separate and apart from, and shall not be commingled with, any
other moneys, including, without limitation, other moneys of the Trustee held
pursuant to this Agreement.
(b) On the Business Day immediately preceding each
Distribution Date, the Indenture Trustee shall withdraw from the Distribution
Account and deposit into the Expense Account an amount equal to the product of
(i) l/12 of the Insurer Premium Rate and (ii) the Class A Note Principal Balance
after giving effect to distributions of principal on such Distribution Date.
(c) The Indenture Trustee shall make withdrawals from the
Expense Account to pay the Insurer Premium on each Distribution Date.
(d) Funds in the Expense Account shall be invested in
Permitted Investments, at the direction of the Servicer, in accordance with
Section 8.12 hereof. Any earnings on such amounts shall be payable to the
Servicer as additional servicing compensation, and the Servicer shall deposit in
the Expense Account the amount of any loss incurred in respect of any such
Permitted Investments made with funds in the Expense Account immediately upon
the realization of such loss. The Indenture Trustee shall give notice to the
Issuer, the Servicer and the Insurer of the location of the Expense Account on
the Closing Date and prior to any change thereof.
(e) Upon payment in full of the principal of and interest on
the Notes, any amounts remaining in the Expense Account following the payment of
all unpaid Insurer Premiums shall be released to the Servicer as additional
servicing compensation.
SECTION 8.11. Redemption Account. (a) The Indenture Trustee
shall establish and maintain with itself a separate trust account (the
"Redemption Account") entitled "First Union National Bank as Indenture Trustee,
in trust for the registered holders of Emergent Home Equity Loan Trust 1997-4,
Asset Backed Notes, Series 1997-4, and Financial Security
74
Assurance Inc., Redemption Account." The Redemption Account shall be an Eligible
Account, and funds on deposit therein shall be held separate and apart from, and
shall not be commingled with, any other moneys, including, without limitation,
other moneys of the Trustee held pursuant to this Agreement.
(b) On the ____________, 1998 Distribution Date, the Indenture
Trustee will transfer the entire remaining amount (other than the reinvestment
income described below) on deposit in the Redemption Account into the
Distribution Account for distribution as provided in Section 8.3(a) or 8.3(g),
as applicable.
(c) [The Indenture Trustee shall pay any reinvestment income
earned on amounts on deposit in the Redemption Account to the Seller. The
Indenture Trustee shall terminate the Redemption Account immediately after the
___________, 1998 Distribution Date [and such account will not be an asset of
the REMIC.]
SECTION 8.12. Investment of Funds. (a) The Servicer may direct
the Indenture Trustee to invest funds in the Distribution Account, the
Pre-Funding Account[, the Interest Coverage Account], and the Expense Account
(each, for purposes of this Section 8.12, an "Investment Account"), to invest
the funds in such Investment Account in one or more Permitted Investments
bearing interest or sold at a discount, and maturing, unless payable on demand,
(i) no later than the Business Day immediately preceding the next Distribution
Date, if a Person other than the Indenture Trustee is the obligor thereon, and
(ii) no later than the next Distribution Date, if the Indenture Trustee is the
obligor thereon. All such Permitted Investments shall be held to maturity,
unless payable on demand. Any investment of funds in an Investment Account shall
be made in the name of the Indenture Trustee (in its capacity as such) or in the
name of a nominee of the Indenture Trustee. The Indenture Trustee shall be
entitled to sole possession over each such investment and the income thereon,
and any certificate or other instrument evidencing any such investment shall be
delivered directly to the Indenture Trustee or its agent, together with any
document of transfer necessary to transfer title to such investment to the
Indenture Trustee or its nominee. In the event amounts on deposit in an
Investment Account are at any time invested in a Permitted Investment payable on
demand, the Indenture Trustee shall at the direction of the Servicer:
(x) consistent with any notice required to be given thereunder,
demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an
amount equal to the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be withdrawn on such
date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer that such Permitted
Investment would not constitute a Permitted Investment in
respect of funds thereafter on deposit in the Investment
Account.
(b) All income and gain realized from the investment of funds
deposited in the Collection Account, the Expense Account, the Distribution
Account and the Servicing Accounts held by or on behalf of the Servicer or the
Indenture Trustee, shall be for the benefit of the Servicer and shall be subject
to its withdrawal in accordance with Section 3.11 of the Sale and
75
Servicing Agreement. Pursuant to Section 3.14(b) of the Sale and Servicing
Agreement, the Servicer shall be obligated to deposit in the Collection Account,
the Expense Account or the Distribution Account, as applicable, the amount of
any loss incurred in respect of any such Permitted Investment made with funds in
such accounts immediately upon realization of such loss.
(c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Indenture Trustee may and, subject to Article VI, upon
the request of the Insurer, shall, take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings.
ARTICLE IX.
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders. (a) Without the consent of the Holders of any Notes but with the
consent of the Insurer, as evidenced to the Indenture Trustee, the Issuer and
the Indenture Trustee, when authorized by an Issuer Order, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act as in force at the
date of the execution thereof), in form satisfactory to the Indenture Trustee,
for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or 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 adversely affect the
interests of the Holders of the Notes;
76
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) 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.
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 Order, may, also without the consent of any of the Holders of the
Notes but with the prior written consent of the Insurer and with prior notice to
the Rating Agencies by the Issuer, as evidenced to the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders. The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, also may, with prior notice to the Rating Agencies, with the consent of
the Holders of the Notes entitled to a majority of the Voting Rights (and with
the consent of the Insurer, if no Insurer Default shall have occurred and be
continuing), by Act of such Holders delivered to the Issuer and the Indenture
Trustee, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however,
that, subject to the express rights of the Insurer under the Basic Documents, no
such supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the amounts payable upon any redemption Price
thereof, change the provision of this Indenture relating to the
application of collections on, or the proceeds of the sale of, the
Trust Property to payment of principal of or interest on the Notes, or
change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
77
(iii) reduce the percentage of the Holders of Notes entitled
to Voting Rights required for any such supplemental indenture, or for
any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Holders of Notes entitled to
Voting Rights required to authorize a private sale of Trust Property as
contemplated in Section 5.19(b);
(vi) modify any provision of this Section 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 Outstanding Note
affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation); or
(viii) permit the creation of any lien (other than the
Warehouse Liens to be discharged and released as provided in Section
3.5 and 3.12) ranking prior to or on a parity with the lien of this
Indenture with respect to any part of the Trust Property or, except as
otherwise permitted or contemplated herein or in any of the Basic
Documents, terminate the lien of this Indenture on any property at any
time subject hereto or deprive the Holder of any Note of the security
provided by the lien of this Indenture.
The Indenture Trustee may determine whether or not any Notes
would be adversely affected by any supplemental indenture upon receipt of an
Opinion of Counsel to that effect and any such determination shall be conclusive
upon the Holders of all Notes, whether theretofore or thereafter authenticated
and delivered hereunder. The Indenture Trustee shall not be liable for any such
determination made in good faith.
It shall not be necessary for any Act of Noteholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section, the Indenture
Trustee shall mail to the Holders of the Notes to which such 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.
78
SECTION 9.3. Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modifications thereby of the
trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.1 and 6.2, shall be fully protected in
relying upon, an Opinion of Counsel (and, if requested, an Officer's
Certificate) 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 9.4. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.5. 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 9.6. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X.
Redemption of Notes
SECTION 10.1. Redemption. The Notes are subject to redemption
in whole, but not in part, at the written election of the Issuer with the
approval of the Majority Holder of the Certificates (and with the consent of the
Insurer if the exercise of such option would result in a draw on the Policy or
would result in outstanding amounts due to the Insurer under the Insurance
Agreement), on any Distribution Date (the "Redemption Date") on or after the
date on which the Note Principal Balance of the Class A Notes is less than 10%
of the Original Class A Note Principal Balance.
79
SECTION 10.2. Notice. Notice of the exercise of the redemption
option pursuant to this Article X shall be given by the Issuer to the Indenture
Trustee not later than the 5th day of the month next preceding the Redemption
Date. Notice of any redemption of the Notes pursuant to this Article X shall be
given to Noteholders by the Indenture Trustee in accordance with Section 8.3(f).
SECTION 10.3. Presentation and Surrender of Notes and Payment.
The provisions of Section 8.3(f) shall apply with respect to the presentation
and surrender of Notes for payment and the consequences of any failure to
present or surrender any Note for payment in connection with a redemption
pursuant to this Article X. Upon presentation and surrender of any Note in
connection with a redemption pursuant to this Article X as contemplated in this
Article X and Section 8.3(b), the Indenture Trustee shall pay to the Noteholder
in respect of such Note the amounts otherwise required to be distributed in
respect of such Note by Section 8.3 on the Redemption Date (which payment shall
be in lieu of such distribution).
ARTICLE XI.
Certain Matters Regarding the Insurer
SECTION 11.1. Rights of the Insurer to Exercise Rights of
Class A Noteholders. The Indenture Trustee and, by accepting any Note, each
Class A Noteholder, agrees that unless an Insurer Default has occurred and is
continuing, the Insurer shall have the right to exercise all rights of the Class
A Noteholders under this Indenture and the Sale and Servicing Agreement
(including all Voting Rights) (except as provided in clause (i) of Section 9.2)
without any further consent of the Class A Noteholders, including, without
limitation the rights enumerated in Sections ____, _____, _____ and _____ of
this Indenture and Sections _____, _____, _____ and _____ of the Sale and
Servicing Agreement, and, so long as no Insurer Default shall have occurred and
be continuing, the consent of the Insurer to any action or matter (except as
provided in clause (i) of Section 9.2) shall be deemed to also constitute the
consent of the requisite percentage of Noteholders required by this Indenture or
the Sale and Servicing Agreement in respect of such action or matter. In
addition, each Class A Noteholder agrees that, unless an Insurer Default has
occurred and is continuing, the rights referred to above may be exercised by the
Class A Noteholders only with the prior written consent of the Insurer.
SECTION 11.2. Indenture Trustee to Act Solely with Consent of
the Insurer. Unless an Insurer Default has occurred and is continuing, the
Indenture Trustee shall not:
(a) agree to any amendment of the Sale and Servicing Agreement
pursuant to Section 12.01 thereof;
(b) undertake any litigation pursuant to Section 8.02(a)(iii)
of the Sale and Servicing Agreement; or
(c) terminate the Servicer pursuant to Section 7.01 of the
Sale and Servicing Agreement,
80
without the prior written consent of the Insurer which consent shall not be
unreasonably withheld.
SECTION 11.3. Trust Property and Accounts Held for Benefit of
the Insurer. The Indenture Trustee shall hold the Trust Property and the
Mortgage Files for the benefit of the Noteholders and the Insurer and all
references in this Indenture and in the Notes to the benefit of Holders of the
Notes shall be deemed to include the Insurer. The Indenture Trustee shall
cooperate in all reasonable respects with any reasonable request by the Insurer
for action to preserve or enforce the Insurer's rights or interests under this
Indenture and the Notes.
SECTION 11.4. Claims Upon the Policy; Policy Payments Account.
(a) If, by the close of business on the third Business Day prior to a
Distribution Date, the Indenture Trustee determines, based on the Remittance
Report, that a Deficiency Amount for any Distribution Date is greater than zero,
then the Indenture Trustee shall give notice to the Insurer by telephone or
telecopy of the amount of such Deficiency Amount. Such notice of such Deficiency
Amount shall be confirmed in writing in the form set forth as Exhibit A to the
Policy to the Insurer and the Fiscal Agent (as defined in the Policy), if any,
at or before 10:00 a.m., New York time, on the second Business Day prior to such
Distribution Date.
(b) The Indenture Trustee shall establish a separate special
purpose trust account for the benefit of Holders of the Class A Notes and the
Insurer referred to herein as the "Policy Payments Account" over which the
Indenture Trustee shall have exclusive control and sole right of withdrawal. The
Indenture Trustee shall deposit any amount paid under the Policy in the Policy
Payments Account and distribute such amount only for purposes of payment to
Holders of Class A Notes of the Guaranteed Distribution for which a claim was
made and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Indenture Trustee or the Issuer. Amounts paid
under the Policy shall be transferred to the Distribution Account in accordance
with the next succeeding paragraph and disbursed by the Indenture Trustee to
Holders of Class A Notes in accordance with Section 8.3(b) or Article X, as
applicable. It shall not be necessary for such payments to be made by checks or
wire transfers separate from the checks or wire transfers used to pay the
Guaranteed Distribution with other funds available to make such payment.
However, the amount of any payment of principal of or interest on the Class A
Notes to be paid from funds transferred from the Policy Payments Account shall
be noted as provided in paragraph (c) below in the Note Register and in the
statement to be furnished to Holders of the Class A Notes pursuant to Section
8.5. Funds held in the Policy Payments Account shall not be invested.
On any Distribution Date with respect to which a claim has
been made under the Policy, the amount of any funds received by the Indenture
Trustee as a result of any claim under the Policy, to the extent required to
make the Guaranteed Distribution on such Distribution Date, shall be withdrawn
from the Policy Payments Account and deposited in the Distribution Account and
applied by the Indenture Trustee, together with the other funds to be withdrawn
from the Distribution Account pursuant to Section 8.3(b) or Article X, as
applicable, directly to the payment in full of the Guaranteed Distribution due
on the Class A Notes. Funds received by the Indenture Trustee as a result of any
claim under the Policy shall be deposited by the Indenture Trustee in the Policy
Payments Account and used solely for payment to the Holders of the Class A Notes
and may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Indenture Trustee
81
or the Issuer. Any funds remaining in the Policy Payments Account on the first
Business Day following a Distribution Date shall be remitted to the Insurer,
pursuant to the instructions of the Insurer, by the end of such Business Day.
(c) The Indenture Trustee shall keep a complete and accurate
record of the amount of interest and principal paid in respect of any Class A
Note from moneys received under the Policy. The Insurer shall have the right to
inspect such records at reasonable times during normal business hours upon one
Business Day's prior notice to the Indenture Trustee.
SECTION 11.5. Notices to the Insurer. All notices, statements,
reports, certificates or opinions required by this Indenture to be sent to any
other party hereto or to any of the Noteholders shall also be sent to the
Insurer.
SECTION 11.6. Third-Party Beneficiary. The Insurer shall be a
third-party beneficiary of this Agreement, entitled to enforce the provisions
hereof as if a party hereto.
SECTION 11.7. Trustee to Hold the Policy. The Indenture
Trustee will hold the Policy in trust as agent for the Holders of the Class A
Certificates for the purpose of making claims thereon and distributing the
proceeds thereof. The Policy, prior to any distributions thereon deposited into
the Policy Payments Account, [will not constitute part of the Trust Property or
assets of the REMIC Trust created by this Agreement]. Each Holder of Class A
Notes, by accepting its Class A Notes, appoints the Indenture Trustee as
attorney-in-fact for the purpose of making claims on the Policy.
ARTICLE XII.
Miscellaneous
SECTION 12.1. Compliance Certificates and Opinions, etc. 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 Insurer if the application or request is made to
the Indenture Trustee (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, (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, 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:
(i) 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;
82
(ii) 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;
(iii) 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; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
SECTION 12.2. 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 or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Sponsor or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the
Sponsor 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 conclusively
rely upon the truth and accuracy of any statement or opinion contained in any
such document as provided in Article VI.
83
SECTION 12.3. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any customary manner of the
Indenture Trustee.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 12.4. Notices, etc. to Indenture Trustee, Issuer and
Rating Agencies. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if personally
delivered, delivered by overnight courier or mailed first-class and
shall be deemed to have been duly given upon receipt to the Indenture
Trustee at its Corporate Trust Office and any notice delivered by
facsimile shall be addressed to the Corporate Trust Office, telecopy
number (000) 000-0000, or
(b) The Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if personally
delivered, delivered by facsimile or overnight courier or mailed first
class, and shall deemed to have been duly given upon receipt to the
Issuer addressed to: Emergent Home Equity Loan Trust 1997-4, in care of
[Wilmington Trust Company, Xxxxxx Square North, 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx, XX 00000-0000 Attention: Corporate Trust
Administration,] or at any other address previously furnished in
writing to the Indenture Trustee by Issuer. The Issuer shall promptly
transmit any notice received by it from the Noteholders to the
Indenture Trustee.
84
(c) The Insurer by the Issuer or the Indenture Trustee shall
be sufficient for any purpose hereunder if in writing and mailed by
first-class mail personally delivered or telecopied to the recipient as
follows:
To the Insurer: Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Surveillance Department
Re: Emergent Home Equity Loan Trust 1997-4
Telecopy: (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, delivered by overnight courier or first class or via
facsimile to (i) in the case of Moody's, at the following address: Xxxxx'x
Investors Service, Inc., 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Fax No.:
(000) 000-0000 and (ii) in the case of S&P, at the following address: Standard &
Poor's Ratings Group, 00 Xxxxxxxx (00xx Xxxxx), Xxx Xxxx, Xxx Xxxx 00000,
Attention: Asset Backed Surveillance Department, Fax No.: (000) 000-0000; or as
to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 12.5. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee
shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder.
85
SECTION 12.6. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Note Paying Agent to such Holder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such methods
are reasonable and consented to by the Indenture Trustee (which consent shall
not be unreasonably withheld). The Issuer will furnish to the Indenture Trustee
a copy of each such agreement and the Indenture Trustee will cause payments to
be made and notices to be given in accordance with such agreements.
SECTION 12.7. 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 12.8. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 12.9. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors.
SECTION 12.10. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.11. Benefits of Indenture. The Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture. Nothing in this Indenture or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the Insurer and the Noteholders, and any other party
secured hereunder, and any other person with an ownership interest in any part
of the Trust Property, any benefit or any legal or equitable right, remedy or
claim under this Indenture. The Insurer may disclaim any of its rights and
powers under this Indenture (in which case the Indenture Trustee may exercise
such right or power hereunder), but not its duties and obligations under the
Policy, upon delivery of a written notice to the Indenture Trustee.
86
SECTION 12.12. Legal Holidays. In any case where the date on
which any payment is due shall not be a Business Day, then (notwithstanding any
other provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 12.13. GOVERNING LAW. THIS INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 12.14. Counterparts. This Indenture may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 12.15. Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording offices, such recording
is to be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Trust or any other counsel reasonably
acceptable to the Indenture Trustee and the Insurer) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 12.16. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the
Sponsor, the Depositor, the Servicer, the Owner Trustee or the Indenture Trustee
on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Sponsor, the
Depositor, the Servicer, 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 Sponsor, the Depositor, the Servicer, the Indenture Trustee or the
Owner Trustee in its individual capacity, any holder of a beneficial interest in
the Issuer, the Sponsor, the Depositor, the Servicer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Sponsor, the Depositor,
the Servicer, 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 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 Articles VI, VII and VIII of the Trust
Agreement.
87
SECTION 12.17. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder, by accepting a Note, hereby covenant
and agree that they will not at any time institute against the Sponsor, the
Depositor, or the Issuer, or join in any institution against the Sponsor, the
Depositor, or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Basic Documents.
SECTION 12.18. Inspection. The Issuer agrees that, on
reasonable prior notice, it will permit any representative of the Indenture
Trustee or of the 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 shall and shall cause its
representatives to hold in confidence all such information except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its Obligations hereunder.
SECTION 12.19. Limitation of Liability. It is expressly
understood and agreed by the parties hereto that (a) this Agreement is executed
and delivered by [Wilmington Trust Company,] not individually or personally but
solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise
of the powers and authority conferred and vested in it, (b) each of the
representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and
agreements by [Wilmington Trust Company] but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on [Wilmington Trust Company] individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties to
this Agreement and by any person claiming by, through or under them and (d)
under no circumstances shall [Wilmington Trust Company] be personally liable for
the payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaking by the Issuer under this Agreement or any related documents.
88
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers, hereunto
duly authorized, all as of the day and year first above written.
EMERGENT HOME EQUITY LOAN TRUST 1997-4,
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,
By:_______________________________________
Name:
Title:
EXHIBIT A-1
[Form of Class A-1 Note]
REGISTERED $_____________
No. A
CUSIP NO.
Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
================================================================================
Series 1997-4, Class A-1 Class A-1 Note Principal Balance
as of the Issue Date:
--------------------------------------------------------------------------------
Interest Rate: ________% $
--------------------------------------------------------------------------------
Date of Sale and Servicing Agreement: Denomination: $____________
November __, 1997
--------------------------------------------------------------------------------
First Distribution Date: Servicer:
January 20, 1997 Emergent Mortgage Corp.
--------------------------------------------------------------------------------
Final Maturity Date: ___________ Indenture Trustee:
or, if earlier, the Redemption Date First Union National Bank
(as defined)
--------------------------------------------------------------------------------
Issue Date: December __, 1997
--------------------------------------------------------------------------------
CUSIP:
================================================================================
THE INTEREST RATE INDICATED ABOVE IS SUBJECT TO THE AVAILABLE FUNDS CAP
RATE SPECIFIED IN THE INDENTURE.
A-1
PAYMENTS IN REDUCTION OF THE NOTE PRINCIPAL BALANCE OF THIS NOTE MAY BE
MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING NOTE
PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN
ABOVE.
THIS NOTE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN THE
SERVICER, THE INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE SPONSOR, THE
DEPOSITOR OR ANY OF THEIR AFFILIATES. NEITHER THIS NOTE NOR THE
UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY AGENCY OR
INSTRUMENTALITY OF THE UNITED STATES.
EMERGENT HOME EQUITY LOAN TRUST 1997-4
CLASS A-1 ASSET BACKED NOTES
Emergent Home Equity Loan Trust 1997-4, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of ($____________), such amount payable
on each Distribution Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is the initial Note Principal
Balance hereof and the denominator of which is the initial aggregate Note
Principal Balance of the Class A-1 Notes by (ii) the aggregate amount, if any,
payable on such Distribution Date in respect of principal on the Class A-1 Notes
pursuant to Section 8.3 of the Indenture; provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the Final
Maturity Date. The unpaid principal of this Note shall accrue interest at the
rate of ____% per annum (subject to the applicable Available Funds Cap Rate
specified in the Indenture), which (except to the extent of any Relief Act
Interest Shortfalls and/or Prepayment Interest Shortfalls which shall be due and
payable only to the extent funds are available therefor as provided in the
Indenture) shall be due and payable on each Distribution Date prior to the Final
Maturity Date and (without regard to the availability of funds for the payment
of Relief Act Interest and/or Prepayment Interest Shortfalls) on the Final
Maturity Date. The Interest Accrual Period for any Distribution Date is the
calendar month immediately preceding the month in which such Distribution Date
occurs [or, in the case of the initial Distribution Date, the period from
November __, 1997 through December 31, 1997]. All calculations of interest on
the Class A-1 Notes will be based on a 360-day year consisting of twelve 30-day
months. Payments in respect of principal and interest will be made of each
Distribution Date to the Person in whose name this Note is registered on the
last Business Day of the month immediately preceding the month of such payment
as provided in the Indenture.
The principal of and interest on this Note are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
A-2
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by Financial Security Assurance Inc. (the
"Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of principal and interest (excluding Relief Act Interest Shortfalls and
Prepayment Interest Shortfalls), all as more fully set forth in the Indenture
and the Policy.
For purposes of federal income, state and local income and
franchise and any other income taxes, the Issuer will treat the Notes as
indebtedness of the Issuer and hereby instructs the Indenture Trustee to treat
the Notes as indebtedness of the Issuer for federal state tax reporting
purposes.
Reference is made to the further provisions of this Note
following the Indenture Trustee's Certificate of Authentication, which shall
have the same effect as though fully set forth herein.
Unless the Certificate of Authentication hereon has been
executed by the Indenture Trustee whose name appears below by manual signature,
this Note shall not be entitled to any benefit under the Indenture referred to
on the reverse hereof, or be valid or obligatory for any purpose.
A-3
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
Date: December __, 1997 EMERGENT HOME EQUITY LOAN TRUST 1997-4
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely
as Owner Trustee under the Trust
Agreement
By: ______________________________________
Name:
Title:
A-4
INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date: December __, 1997 FIRST UNION NATIONAL BANK, not in its
individual capacity but solely
as Indenture Trustee,
By: ________________________________
Authorized Signatory
A-5
FURTHER PROVISIONS
This Class A-1 Note is one of a duly authorized issue of Notes
of the Issuer, designated as its Class A Asset Backed Notes (herein called the
"Class A Notes"), all issued under an Indenture dated as of November __, 1997
(such Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and First Union National Bank, as 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 and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A Notes are and will be equally and ratably secured
by the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A Notes will be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the twentieth day of each month, or, if any such date is not a Business
Day, the next succeeding Business Day, commencing January 20, 1998. The term
"Distribution Date" shall be deemed to include the Final Distribution Date and,
unless the context otherwise requires, the Final Maturity Date. The Final
Maturity Date of the Class A-1 Notes is ____________________ or, if earlier, the
Redemption Date (as defined below).
As described above, the entire unpaid principal amount of this
Note shall be due and payable on the earlier of the Final Distribution Date and
the Redemption Date, if any. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes may be declared, and upon such declaration shall
become, due and payable if an Event of Default shall have occurred and be
continuing, in the manner, with the effect and subject to the conditions
provided in the Indenture.
The Issuer shall pay interest on overdue installments of
interest at the Class A Note Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed
pursuant to Section 10.1 of the Indenture, in whole, but not in part, at the
option of the Issuer (with the consent of the Insurer under certain
circumstances), on any Distribution Date on or after the date on which the Class
A Note Principal Balance is less than or equal to 10% of the Original Class A
Note Principal Balance. The Issuer has agreed in the Insurance Agreement to
exercise such option upon the written request of the Insurer if the Class A Note
Principal Balance is less than or equal to 5% of the Original Class A Note
Principal Balance and the Insurer has exercised the right granted to it pursuant
to Section 10.01 of the Sale and Servicing Agreement to purchase the Mortgage
Loans and REO Property.
A-6
So long as this Note is registered in the name of a Depository
or its nominee, the Trustee will make payments of principal and interest on this
Note by wire transfers of immediately available funds to the Depository or its
nominee. Otherwise all distributions to the Holder of this Note under the
Indenture will be made or caused to be made by or on behalf of the Indenture
Trustee by wire transfer in immediately available funds to the account of the
Person entitled thereto if such Person shall have so notified the Indenture
Trustee in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
A-1 Notes the aggregate initial Note Principal Balance of which is in excess of
$5,000,000, or by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Note Register,
provided that the Indenture Trustee may deduct a reasonable wire transfer fee
from any payment made by wire transfer. Notwithstanding the above, the final
distribution on this Note will be made after due notice by the Indenture Trustee
of the pendency of such distribution and only upon presentation and surrender of
this Note at the office or agency appointed by the Trustee for that purpose as
provided in the Agreement.
Payments in respect of the Class A-1 Certificates are limited
recourse obligations of the Issuer payable solely from certain collections and
recoveries respecting the Mortgage Loans and payments under the Policy, all as
more specifically set forth herein, in the Indenture and the Policy. As provided
in the Sale and Servicing Agreement and the Indenture, withdrawals from the
Collection Account and the Distribution Account may be made from time to time
for purposes other than distributions to Noteholders, such purposes including
reimbursement of advances made, or certain expenses incurred, with respect to
the Mortgage Loans.
The Indenture and the Sale and Serving Agreement each permits,
with certain exceptions therein provided, the amendment thereof and the
modification of the rights and obligations of the Depositor, the Servicer, the
Indenture Trustee and the rights of the Noteholders under the Indenture and the
Sale and Servicing Agreement, as the case may be, at any time by the parties
thereto with the consent of the Holders of Notes entitled to at least 66% of the
Voting Rights and the Insurer. Any such consent by the Holder of this Note shall
be conclusive and binding on such Holder and upon all future Holders of this
Note and of any Note issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Note. The
Indenture and the Sale and Servicing Agreement each also permit the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Notes. In addition, pursuant to the Indenture and the Sale and
Servicing Agreement, the Insurer, so long as no Insurer Default shall have
occurred and be continuing, shall, except in limited circumstances, be entitled
to exercise all rights of the Noteholders (including voting rights) under the
Indenture and the Sale and Servicing Agreement without any further consent of
the Noteholders and, so long as no Insurer Default shall have occurred and be
continuing, the consent to any action or other matter of the Insurer shall be
deemed to also constitute the consent thereto of the requisite percentage of
Noteholders required by the Indenture in respect of such action or matter.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Note Register upon surrender of this Note for
A-7
registration of transfer at the offices or agencies appointed by the Indenture
Trustee as provided in the Indenture, (i) duly endorsed by, or accompanied by an
assignment in the form below or other written instrument of transfer in form
satisfactory to the Indenture Trustee and the Note Registrar duly executed by,
the Holder hereof or such Xxxxxx's attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Indenture
Trustee may require, and thereupon one or more new Notes of the same Class in
authorized denominations evidencing the same aggregate principal amount will be
issued to the designated transferee or transferees.
The Notes are issuable in fully registered form only without
coupons in Classes and denominations and in the original principal amounts
specified in the Indenture. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for new Notes of the same
Class in authorized denominations in the same aggregate principal amount, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of Notes.
The Depositor, the Servicer, the Indenture Trustee, the Owner
Trustee, the Insurer and the Note Registrar and any agent of the Depositor, the
Servicer, the Indenture Trustee, the Owner Trustee, the Insurer or the Note
Registrar may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, and none of the Depositor, the Servicer, the
Indenture Trustee, the Owner Trustee, the Insurer, the Note Registrar nor any
such agent shall be affected by notice to the contrary.
The recitals `contained herein shall be taken as statements of
the Issuer and the Indenture Trustee assumes no responsibility for their
correctness.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
connection therewith, against (i) the Sponsor, the Depositor, the Servicer, the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any owner, beneficiary,
agent, officer, director or employee of the Sponsor, the Depositor, the
Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity,
any holder of a beneficial interest in the Issuer, the Sponsor, the Depositor,
the Servicer, the Owner Trustee or the Indenture Trustee or of any successor or
assign of the Sponsor, the Depositor, the Servicer, the Indenture Trustee or the
Owner Trustee in its individual
A-8
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 owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in
the case of a Note Owner, a beneficial interest in a Note covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will not at
any time institute against the Sponsor, the Depositor, or the Issuer or join in
any institution against the Sponsor, the Depositor, or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings, under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of
this Note, the Issuer, the Indenture Trustee and the Insurer and any agent of
the Issuer, the Indenture Trustee or the Insurer may treat the Person in whose
name this Note (as of the day of determination or as of such other date as may
be specified in the Indenture) is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Issuer, the
Indenture Trustee nor any such agent shall be affected by notice to the
contrary.
The term "Issuer" as used in this Note includes any successor
to the Issuer under the Indenture.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest on
this Note at the times, place, and rate, and in the coin or currency herein
prescribed.
Anything herein to the contrary notwithstanding, except as
expressly provided in the Indenture or the Basic Documents, neither Wilmington
Trust Company in its individual capacity, any owner of a beneficial interest in
the Issuer, nor any of their respective beneficiaries, agents, officers,
directors, employees or successors or assigns shall be personally liable for,
nor shall recourse be had to any of them for, the payment of principal of or
interest on, or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in this Note or the Indenture, it
being expressly understood that said covenants, obligations and indemnifications
have been made by the Issuer for the sole purposes of binding the interests of
the Issuer in the assets of the Issuer. The Holder of this Note by the
acceptance hereof agrees that except as expressly provided in the Indenture or
the Basic Documents, in the case of a Default or an Event of Default under the
Indenture, the Holder shall have no claim
A-9
against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
A-10
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
_______________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:______________________________ ______________________________(1)
Signature Guaranteed:
______________________________
----------
(1) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-11
