EXHIBIT 4.2
EXECUTION COPY
TRUST AGREEMENT
dated as of February 1, 2000
by and between
ACCREDITED HOME LENDERS, INC.
as Sponsor,
and
WILMINGTON TRUST COMPANY,
as Owner Trustee
ACCREDITED MORTGAGE LOAN TRUST 2000-1
Asset-Backed Notes, Series 2000-1
Table of Contents
PAGE
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ARTICLE I
DEFINITIONS
Section 1.01. Capitalized Terms...............................................................................1
Section 1.02. Other Definitional Provisions...................................................................5
ARTICLE II
ORGANIZATION
Section 2.01. Name............................................................................................7
Section 2.02. Office..........................................................................................7
Section 2.03. Purposes and Powers.............................................................................7
Section 2.04. Appointment of Owner Trustee....................................................................8
Section 2.05. Initial Capital Contribution of Owner Trust Estate..............................................8
Section 2.06. Declaration of Trust............................................................................8
Section 2.07. Liability of the Certificateholders.............................................................8
Section 2.08. Title to Trust Property.........................................................................8
Section 2.09. Situs of Trust..................................................................................9
Section 2.10. Representations and Warranties of the Sponsor...................................................9
Section 2.11. Federal Income Tax Treatment of the Trust......................................................10
Section 2.12. Covenants of the Sponsor.......................................................................11
Section 2.13. Covenants of the Certificateholders............................................................11
ARTICLE III
SUB-TRUSTS
Section 3.01. Series Trust...................................................................................13
Section 3.02. Establishment of Sub-Trust.....................................................................13
Section 3.03. Assets of Sub-Trust............................................................................13
Section 3.04. Liabilities of Sub-Trust.......................................................................13
ARTICLE IV
CERTIFICATES AND TRANSFER OF INTERESTS
Section 4.01. Initial Ownership..............................................................................15
Section 4.02. The Certificates...............................................................................15
Section 4.03. Execution, Authentication and Delivery of Certificates.........................................15
Section 4.04. Registration of Transfer and Exchange of Certificates..........................................15
Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates..............................................16
Section 4.06. Persons Deemed Owners..........................................................................17
Section 4.07. Access to List of Certificateholders' Names and Addresses......................................17
Section 4.08. Maintenance of Office or Agency................................................................17
Section 4.09. Restrictions on Transfers of Certificates......................................................17
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ARTICLE V
ACTIONS BY OWNER TRUSTEE
Section 5.01. Prior Notice to the Certificateholders with Respect to Certain Matters.........................21
Section 5.02. Action by Certificateholders with Respect to Bankruptcy........................................22
Section 5.03. Restrictions on Certificateholders' Power......................................................23
Section 5.04. Majority Control...............................................................................23
ARTICLE VI
TAX PROVISIONS; CERTAIN DUTIES
Section 6.01. Federal Income Tax Provisions..................................................................24
Section 6.02. Withholding Taxes..............................................................................27
Section 6.03. Accounting and Reports to the Certificateholders, the Internal Revenue Service and
Others.....................................................................................28
Section 6.04. Signature on Returns...........................................................................28
ARTICLE VII
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 7.01. General Authority..............................................................................29
Section 7.02. General Duties.................................................................................29
Section 7.03. Action upon Instruction........................................................................29
Section 7.04. No Duties Except as Specified in this Agreement, the Basic Documents or any
Instructions...............................................................................30
Section 7.05. No Action Except under Specified Documents or Instructions.....................................31
Section 7.06. Restrictions...................................................................................31
ARTICLE VIII
CONCERNING THE OWNER TRUSTEE
Section 8.01. Acceptance of Trusts and Duties................................................................32
Section 8.02. Furnishing of Documents........................................................................33
Section 8.03. Representations and Warranties.................................................................33
Section 8.04. Reliance; Advice of Counsel....................................................................34
Section 8.05. Not Acting in Individual Capacity..............................................................35
Section 8.06. Owner Trustee Not Liable for the Certificates or Mortgage Loans................................35
Section 8.07. Owner Trustee May Own Certificates and Notes...................................................35
Section 8.08. Licenses.......................................................................................35
ARTICLE IX
COMPENSATION OF OWNER TRUSTEE
Section 9.01. Owner Trustee's Fees and Expenses..............................................................36
Section 9.02. Indemnification................................................................................36
Section 9.03. Payments to the Owner Trustee..................................................................37
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ARTICLE X
TERMINATION OF TRUST AGREEMENT
Section 10.01. Termination of Trust Agreement.................................................................38
ARTICLE XI
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 11.01. Eligibility Requirements for Owner Trustee.....................................................40
Section 11.02. Resignation or Removal of Owner Trustee........................................................40
Section 11.03. Successor Owner Trustee........................................................................41
Section 11.04. Merger or Consolidation of Owner Trustee.......................................................41
Section 11.05. Appointment of Co-Trustee or Separate Trustee..................................................42
ARTICLE XII
MISCELLANEOUS
Section 12.01. Supplements and Amendments.....................................................................44
Section 12.02. No Legal Title to Owner Trust Estate in Certificateholders.....................................45
Section 12.03. Limitations on Rights of Others................................................................45
Section 12.04. Notices........................................................................................45
Section 12.05. Severability...................................................................................46
Section 12.06. Separate Counterparts..........................................................................46
Section 12.07. Successors and Assigns.........................................................................46
Section 12.08. No Petition....................................................................................46
Section 12.09. No Recourse....................................................................................46
Section 12.10. Headings.......................................................................................46
Section 12.11. GOVERNING LAW..................................................................................46
Section 12.12. Grant of Certificateholder Rights to Note Insurer..............................................46
Section 12.13. Third-Party Beneficiary........................................................................47
Section 12.14. Suspension and Termination of Note Insurer's Rights............................................47
Section 12.15. Master Servicer................................................................................48
EXHIBITS
EXHIBIT A Form of Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Investment Letter
This TRUST AGREEMENT, dated as of February 1, 2000, by and
between ACCREDITED HOME LENDERS, INC., as sponsor (the "SPONSOR") and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner trustee
(the "OWNER TRUSTEE").
ARTICLE I
DEFINITIONS
Section 1.01. CAPITALIZED TERMS. For all purposes of this
Agreement, the following terms shall have the meanings set forth below:
"AGREEMENT" shall mean this Trust Agreement, as may be
amended and supplemented from time to time.
"ANNUAL TAX REPORTS" shall have the meaning assigned
thereto in Section 6.01(c)(xi).
"AUTHORIZED OFFICER" shall have the meaning assigned
thereto in Appendix I to the Indenture.
"BACKUP SERVICER" shall mean Advanta Mortgage Corp. USA, or
any successor backup servicer appointed pursuant to the Sale and Servicing
Agreement.
"BASIC DOCUMENTS" shall mean this Agreement, the Sale and
Servicing Agreement, the Indenture, the Insurance Agreement, the
Indemnification Agreement and the Premium Letter.
"BUSINESS DAY" shall mean any day other than (i) a Saturday
or Sunday or (ii) a day that is either a legal holiday or a day on which the
Note Insurer or banking institutions in the State of New York, the State of
Delaware, the State of Minneapolis, the State of Maryland, or the state in
which the Indenture Trustee's office from which payments will be made to the
Certificateholder, are authorized or obligated by law, regulation or
executive order to be closed.
"BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12
of the Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be
amended from time to time.
"CAPITAL ACCOUNT" shall have the meaning assigned thereto
in Section 6.01(c)(i).
"CERTIFICATE" shall mean each Trust Certificate.
"CERTIFICATEHOLDER" shall mean each Person in whose name a
Trust Certificate is registered.
"CERTIFICATE OF TRUST" shall mean the Certificate of Trust,
in the form of EXHIBIT B, to be filed for the Trust pursuant to Section
3810(a) of the Business Trust Statute.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall
mean the register mentioned and the registrar appointed pursuant to Section
4.04.
"CLASS" shall mean either the Class A-1 Notes or the Class
A-2 Notes.
"CLASS A-1 NOTES" shall mean the Accredited Mortgage Loan
Trust 2000-1, Asset-Backed Notes, Series 2000-1, Class A-1.
"CLASS A-2 NOTES" shall mean the Accredited Mortgage Loan
Trust 2000-1, Asset-Backed Notes, Series 2000-1, Class A-2.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and, where appropriate in context, Treasury Regulations promulgated
thereunder.
"CORPORATE TRUST OFFICE" shall mean, with respect to the
Owner Trustee, the principal corporate trust office of the Owner Trustee
located at Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000, Attention: Corporate Trust Administration; or at such other
address in the State of Delaware as the Owner Trustee may designate by notice
to the Certificateholders and the Sponsor, or the principal corporate trust
office of any successor Owner Trustee (the address (which shall be in the
State of Delaware) of which the successor owner trustee will notify the
Certificateholders and the Sponsor).
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
"EXPENSES" shall have the meaning assigned to such term in
Section 9.02.
"GROUP 1 MORTGAGE LOANS" shall mean a pool of fixed rate
mortgage loans, as identified in the related Mortgage Loan Schedule.
"GROUP 2 MORTGAGE LOANS" shall mean a pool of
adjustable-rate mortgage loans, as identified in the related Mortgage Loan
Schedule.
"HOLDER NONRECOURSE DEBT MINIMUM GAIN" shall have the
meaning set forth for "partner nonrecourse debt minimum gain" in Treasury
Regulations Section 1.704-2(i)(2). A Certificateholder's share of Holder
Nonrecourse Debt Minimum Gain shall be determined in accordance with Treasury
Regulations Section 1.704-2(i)(5).
"INDEMNIFICATION AGREEMENT": shall mean the Indemnification
Agreement, dated as of February 24, 2000, among the Note Insurer, the
Sponsor, the Trust and the Underwriter.
"INDENTURE" shall mean the Indenture, dated as of February
1, 2000, by and between the Trust and the Indenture Trustee.
"INDENTURE TRUSTEE" means Norwest Bank Minnesota, National
Association, a national banking association, as Indenture Trustee under the
Indenture.
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"INSURANCE AGREEMENT" shall mean the Insurance and
Indemnity Agreement dated as of February 1, 2000 among the Note Insurer, the
Trust and the Sponsor, including any amendments and supplements thereto.
"INVESTMENT LETTER" shall have the meaning assigned to such
term in Section 4.04.
"LOAN GROUP" shall mean either Loan Group 1 or Loan Group 2.
"LOAN GROUP 1" shall mean the pool of Mortgage Loans
identified in the Mortgage Loan Schedule as having been assigned to Loan
Group 1.
"LOAN GROUP 2" shall mean the pool of Mortgage Loans
identified in the Mortgage Loan Schedule as having been assigned to Loan
Group 2.
"MASTER SERVICER" shall mean Accredited Home Loans, Inc.,
or any successor master servicer appointed pursuant to the Sale and Servicing
Agreement.
"MORTGAGE LOANS" shall mean the Group 1 Mortgage Loans and
the Group 2 Mortgage Loans.
"NON-U.S. PERSON" shall mean an individual, corporation,
partnership or other person other than a citizen or resident of the United
States, a corporation, partnership or other entity treated as a corporation
or partnership organized in or under the laws of the United States or any
state thereof including the District of Columbia, an estate that is subject
to U.S. federal income tax regardless of the source of its income or a trust
if (i) a court in the United States is able to exercise primary supervision
over the administration of the trust and (ii) one or more United States
Persons have the authority to control all substantial decisions of the trust.
Notwithstanding the last clause of the preceding sentence, to the extent
provided in Treasury Regulations, certain trusts in existence on August 20,
1996 and treated as United States Persons prior to such date, may elect to
continue to be United States Persons.
"NOTEHOLDER" shall have the meaning assigned to such term
in the Indenture.
"NOTE INSURANCE POLICY" shall mean the financial guaranty
insurance policy issued by the Note Insurer for the benefit of the
Noteholders.
"NOTE INSURER" shall mean Financial Security Assurance
Inc., a New York financial guaranty insurance company.
"NOTE INSURER DEFAULT" shall have the meaning assigned to
such term in the Indenture.
"NOTE PRINCIPAL BALANCE" shall have the meaning assigned to
such term in the Indenture.
"NOTES" shall mean the Class A-1 Notes and the Class A-2
Notes.
"OUTSTANDING" shall have the meaning assigned to such term
in the Indenture.
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"OWNERSHIP INTEREST" means, with respect to any
Certificate, any ownership or security interest in such Certificate,
including any interest in such Certificate as the Certificateholder thereof
and any other interest therein, whether direct or indirect, legal or
beneficial, as owner or as pledgee.
"OWNER TRUST ESTATE" shall mean the Trust Estate, including
the contribution of $1 referred to in Section 2.05 hereof.
"OWNER TRUSTEE" shall mean Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity but solely as
owner trustee under this Agreement, and any successor owner trustee hereunder.
"PAYMENT DATE" shall mean the 25th day of each month or, if
such 25th day is not a Business Day, the next succeeding Business Day,
commencing March 27, 2000.
"PERCENTAGE INTEREST" shall mean with respect to any
Certificate, the percentage portion of the Certificates evidenced thereby as
stated on the face of such Certificate.
"PREMIUM LETTER" shall mean the Premium Letter dated as of
February 29, 2000 between the Note Insurer and the Sponsor.
"PROSPECTIVE HOLDER" shall have the meaning set forth in
Section 4.09(a).
"RATING AGENCY CONDITION" means, with respect to any action
to which a Rating Agency Condition applies, that each Rating Agency shall
have been given ten (10) days (or such shorter period as is acceptable to
each Rating Agency) prior notice thereof and that each of the Rating Agencies
shall have notified the Indenture Trustee, the Sponsor, the Master Servicer,
the Note Insurer, the Owner Trustee and the Trust in writing that such action
will not result in a reduction or withdrawal of the then current rating of
the Notes that it maintains without taking into account the Note Insurance
Policy.
"RECORD DATE" shall mean, with respect to the Certificates
and any Payment Date, the last Business Day of the month immediately
preceding the month in which such Payment Date occurs.
"SALE AND SERVICING AGREEMENT" shall mean the Sale and
Servicing Agreement, dated as of February 1, 2000, among the Sponsor, the
Trust, the Indenture Trustee, the Backup Servicer and the Master Servicer.
"SECRETARY OF STATE" shall mean the Secretary of State of
the State of Delaware.
"SPONSOR" shall mean Accredited Home Lenders, Inc., a
California corporation.
"SUB-TRUST" shall have the meaning specified in Section
3.01 and includes either Sub-Trust 1 or Sub-Trust 2, each of which constitute
a separate series of interests in the Trust Estate pursuant to Section
3806(b)(2) of the Business Trust Statute.
"SUB-TRUST 1" shall mean the portion of the Trust Estate
assigned to Sub-Trust 1.
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"SUB-TRUST 2" shall mean the portion of the Trust Estate
assigned to Sub-Trust 2.
"TAXABLE YEAR" shall have the meaning assigned thereto in
Section 6.01(c)(x).
"TAX MATTERS PARTNER" shall have the meaning assigned
thereto in Section 6.01(c)(xii).
"TRANSFER" means any direct or indirect transfer, sale,
pledge, hypothecation or other form of assignment of any Ownership Interest
in a Certificate.
"TREASURY REGULATIONS" shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References
herein to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"TRUST" shall mean the Accredited Home Equity Loan Trust
2000-1, the Delaware business trust created pursuant to this Agreement.
"TRUST CERTIFICATE" shall mean a certificate evidencing the
beneficial interest of a Certificateholder in the Trust consisting of
Sub-Trust 1 and Sub-Trust 2, substantially in the form attached hereto as
EXHIBIT A.
"TRUST MINIMUM GAIN" shall have the meaning set forth for
"partnership minimum gain" in Treasury Regulations 1.704-2(b)(2) and
1.704-2(d). In accordance with Treasury Regulations Section 1.704-2(d), the
amount of Trust Minimum Gain is determined by first computing, for each
nonrecourse liability of the Trust, any gain the Trust would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Certificateholder's share of Trust Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(g)(1).
"UNDERWRITER" shall mean Xxxxxx Brothers Inc.
"UNITED STATES PERSON" shall have the meaning assigned to
such term in the Indenture.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) Capitalized terms
used herein and not otherwise defined herein have the meanings assigned to
them in Appendix I to the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions
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of accounting terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement
or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
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ARTICLE II
ORGANIZATION
Section 2.01. NAME. The Trust governed hereby shall be known as
"Accredited Mortgage Loan Trust 2000-1," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and xxx and be sued on behalf of the Trust.
Section 2.02. OFFICE. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in the
State of Delaware as the Owner Trustee may designate by written notice to the
Certificateholders, Indenture Trustee, the Note Insurer and the Sponsor.
Section 2.03. PURPOSES AND POWERS. The purpose of the Trust is to
engage in the following activities:
(a) to issue the Notes pursuant to the Indenture and to sell
such Notes;
(b) with the proceeds of the sale of the Notes and
Certificates, to pay the organizational, startup and transactional
expenses of the Trust and to purchase the Mortgage Loans to be included
in the Owner Trust Estate from the Sponsor with the balance of such
funds pursuant to the Sale and Servicing Agreement;
(c) to assign, grant, transfer, pledge, mortgage and convey
the Owner Trust Estate pursuant to the Indenture and to hold, manage
and distribute to the Certificateholders any portion of the Owner Trust
Estate released from the lien of, and remitted to the Trust pursuant
to, the Indenture;
(d) to enter into and perform its obligations under the Basic
Documents to which it is or is to be a party;
(e) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith;
(f) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
and payments to the Noteholders and the Certificateholders; and
(g) to issue the Certificates pursuant to this Agreement.
The Trust is hereby authorized by the initial beneficiary and
the Certificateholders to engage in the foregoing activities. The Trust shall
not engage in any activity other than in connection with the foregoing or other
than as required or authorized by the terms of this Agreement or the other Basic
Documents.
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Section 2.04. APPOINTMENT OF OWNER TRUSTEE. The Sponsor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein and in the
Business Trust Statute.
Section 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE.
The Sponsor hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Sponsor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Payment Account. The Sponsor shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee. Concurrently with the execution of
this Agreement, the Trust will enter into the Sale and Servicing Agreement
pursuant to which it will purchase the Mortgage Loans, to be designated to
the related Sub-Trust, which comprise the remainder of the Owner Trust Estate.
Section 2.06. DECLARATION OF TRUST. The Owner Trustee hereby
declares that it will hold the Owner Trust Estate in trust upon and subject
to the conditions set forth herein for the use and benefit of the Noteholders
and the Certificateholders, subject to the obligations of the Trust under the
Basic Documents.
It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust constitute a business trust
under the Business Trust Statute and that this Agreement constitute the
governing instrument of such business trust. It is the intention of the
parties hereto that, solely for income and franchise tax purposes, the Trust
shall be treated as a security arrangement, with the assets of the Trust
being the Sub-Trusts consisting of each Loan Group. The parties agree that,
unless otherwise required by appropriate tax authorities, the Trust will file
or cause to be filed annual or other necessary returns, reports and other
forms, if any, consistent with the characterization of the Trust, the
Sub-Trusts and each Loan Group as provided in the preceding sentence for such
tax purposes. Effective as of the date hereof, the Owner Trustee shall have
all rights, powers and duties set forth herein and in the Business Trust
Statute with respect to accomplishing the purposes of the Trust. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State.
Section 2.07. LIABILITY OF THE CERTIFICATEHOLDERS. Subject to
Section 2.05, no Certificateholder shall have any personal liability for any
liability or obligation of the Trust. The Certificates shall be fully paid
and nonassessable.
Section 2.08. TITLE TO TRUST PROPERTY.
(a) Subject to the Indenture, legal title to all of the Owner Trust
Estate shall be vested at all times in the Trust as a separate legal entity
except where applicable law in any jurisdiction requires title to any part of
the Owner Trust Estate to be vested in a trustee or trustees, in which case
title shall be deemed to be vested in the Owner Trustee and/or a separate
trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any part of
the Owner Trust Estate. No transfer by operation of law or otherwise of any
interest of the Certificateholders shall
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operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of any part of the Owner
Trust Estate.
Section 2.09. SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All accounts maintained at a bank by
the Owner Trustee on behalf of the Trust shall be located in the State of New
York or the State of Delaware. The Trust shall not have any employees;
PROVIDED, HOWEVER, nothing herein shall restrict or prohibit the Owner
Trustee from having employees within or without the State of Delaware.
Payments will be received by the Trust only in Delaware, and payments will be
made by the Trust only from Delaware. The only office of the Trust will be at
the Corporate Trust Office in the State of Delaware.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. The
Sponsor hereby represents and warrants to the Owner Trustee and the Note
Insurer that:
(a) The Sponsor is duly organized and validly existing as a
corporation in good standing under the laws of the State of California, with
power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) The Sponsor has the power and authority to execute and deliver
this Agreement and to carry out its terms; the Sponsor has full power and
authority to transfer and assign the property to be transferred and assigned
to and deposited with the Trust and the Sponsor has duly authorized such
transfer and assignment and deposit to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement has
been duly authorized by the Sponsor by all necessary corporate action.
(c) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Sponsor, or any indenture, agreement or other
instrument to which the Sponsor is a party or by which it is bound; nor
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any law or, any
order, rule or regulation applicable to the Sponsor of any court or of any
Federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Sponsor or its properties.
(d) There are no proceedings or investigations pending or notice of
which has been received in writing before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Sponsor or its properties: (x) asserting the invalidity
of this Agreement, (y) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or (z) seeking any determination
or ruling that should reasonably be expected to materially and adversely
affect the performance by the Sponsor of its obligations under, or the
validity or enforceability of, this Agreement.
(e) The representations and warranties of the Sponsor in Article III
of the Sale and Servicing Agreement are true and correct.
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(f) The Sponsor has duly executed and delivered this Agreement, and
this Agreement constitutes the legal, valid and binding obligation of the
Sponsor, enforceable against the Sponsor, in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the application of equitable principles.
(g) The Sponsor is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or other governmental agency, which default might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Sponsor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder.
(h) The Sponsor will hold itself out to the public under its own
name as a separate and distinct entity and conduct its business so as not to
mislead others as to the identity of the entity under which those others are
concerned. Without limiting the generality of the foregoing, all oral and
written communications, including without limitations, all letters, invoices,
contracts, statements and applications will be made solely in the name of the
Trust if they are made on behalf of the Trust and solely in the name of the
Sponsor if they are made on behalf of the Sponsor.
Section 2.11. FEDERAL INCOME TAX TREATMENT OF THE TRUST.
(a) For so long as the Trust has one Certificateholder for federal
income tax purposes, it will, pursuant to Treasury Regulations promulgated
under section 7701 of the Code, be disregarded as an entity distinct from the
Certificateholders for all federal income tax purposes. Accordingly, for
federal income tax purposes, the Certificateholders will be treated as (i)
owning all assets owned by the Trust, (ii) having incurred all liabilities
incurred by the Trust, and (iii) all transactions between the Trust and the
Certificateholders will be disregarded.
(b) In the event that the Trust has two or more Certificateholders
for federal income tax purposes, the Trust will be treated as a partnership.
At any such time that the Trust has two or more Certificateholders, this
Agreement may need to be amended, in accordance with Section 12.01 herein,
and appropriate provisions may need to be added so as to provide for
treatment of the Trust as a partnership.
(c) The Owner Trustee shall have no obligation or liability for its
failure to treat the Trust as a partnership prior to the earlier of its
receipt of notice or its having actual knowledge that the Trust has more than
a single equity owner.
(d) Neither the Owner Trustee nor any Certificateholder will, under
any circumstances, file a Form 8832, or any successor form, on behalf of the
Trust.
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Section 2.12. COVENANTS OF THE SPONSOR. The Sponsor agrees and
covenants for the benefit of each Certificateholder, the Note Insurer and the
Owner Trustee, during the term of this Agreement, and to the fullest extent
permitted by applicable law, that:
(a) it shall not create, incur or suffer to exist any indebtedness
or engage in any business, except, in each case, as permitted by its articles
of incorporation and by-laws and the Basic Documents;
(b) it shall not, for any reason, institute proceedings for the
Trust to be adjudicated bankrupt or insolvent, or consent to or join in the
institution of bankruptcy or insolvency proceedings against the Trust, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to the bankruptcy of the Trust, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Trust or a substantial part
of the property of the Trust or cause or permit the Trust to make any
assignment for the benefit of creditors, or admit in writing the inability of
the Trust to pay its debts generally as they become due, or declare or effect
a moratorium on the debt of the Trust or take any action in furtherance of
any such action;
(c) it shall obtain from each counterparty to each Basic Document to
which it or the Trust is a party and each other agreement entered into on or
after the date hereof to which it or the Trust is a party, an agreement by
each such counterparty that prior to the occurrence of certain events
specified in such agreement, such counterparty shall not institute against,
or join any other Person in instituting against, it or the Trust, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United States
or any state of the United States; and
(d) it shall not, for any reason, withdraw or attempt to withdraw
from this Agreement or any other Basic Document to which it is a party,
dissolve, institute proceedings for it to be adjudicated a bankrupt or
insolvent, or consent to the institution of bankruptcy or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of it or a substantial part of its property, or make
any assignment for the benefit of creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or effect
a moratorium on its debt or take any action in furtherance of any such action.
Section 2.13. COVENANTS OF THE CERTIFICATEHOLDERS. Each
Certificateholder by becoming a beneficial owner of the Certificate or by its
acceptance of a Certificate agrees:
(a) to be bound by the terms and conditions of the Certificates of
which such Certificateholder is the beneficial owner and of this Agreement
and the other Basic Documents, including any supplements or amendments hereto
and thereto and to perform the obligations of a Certificateholder as set
forth therein or herein, in all respects as if it were a signatory hereto.
This undertaking is made for the benefit of the Trust, the Owner Trustee, the
Note Insurer and all other Certificateholders, present and future;
(b) to the appointment of the Owner Trustee as such
Certificateholder's agent and attorney-in-fact to sign any federal income tax
information return filed on behalf of the Trust
11
and, if requested by the Trust, to sign such federal income tax information
return in its capacity as holder of an interest in the Trust;
(c) not to take any position in such Certificateholder's tax returns
inconsistent with those taken in any tax returns filed by the Trust; and
(d) if such Certificateholder is other than an individual or other
entity holding its Certificate through a broker who reports securities sales
on Form 1099-B, to notify the Owner Trustee in writing of any transfer by it
of a Certificate in a taxable sale or exchange, within 30 days of the date of
the transfer.
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ARTICLE III
SUB-TRUSTS
Section 3.01. SERIES TRUST. The assets of the Trust shall be divided
into designated series as provided in Section 3806(b)(2) of the Business
Trust Statute (each series, a "SUB-TRUST"). Accordingly, it is the intent of
the parties hereto that Articles II, IV and X of this Agreement shall apply
also with respect to each such Sub-Trust as if each such Sub-Trust were a
separate business trust under the Business Trust Statute, and each reference
to the term "Trust" in such Articles shall be deemed to be a reference to
each such Sub-Trust to the extent necessary to give effect to the foregoing
intent. The use of the terms "Trust" or "Sub-Trust" in this Agreement shall
in no event alter the intent of the parties hereto that the Trust receive the
full benefit of the limitation on interseries liability as set forth in
Section 3804 of the Business Trust Statute.
Section 3.02. ESTABLISHMENT OF SUB-TRUST.
The Owner Trustee hereby establishes and designates two
initial Sub-Trusts, as follows:
Sub-Trust 1 and Sub-Trust 2
The provisions of this Article III shall be applicable to
the above designated Sub-Trusts.
Section 3.03. ASSETS OF SUB-TRUST. All consideration received by the
Owner Trust Estate for the issuance or sale of the Notes relating to a
particular Loan Group and Sub-Trust, together with the entire Owner Trust
Estate in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong solely to that Sub-Trust for all purposes,
subject only to the rights of creditors of such Sub-Trust and except as may
otherwise be provided in the Sale and Servicing Agreement or required by
applicable tax laws, and shall be so recorded upon the books of account of
the Trust. Separate and distinct records shall be maintained for each
Sub-Trust and the assets associated with a Sub-Trust shall be held and
accounted for separately from the other assets of the Owner Trust Estate, and
any other Sub-Trust. In the event that there is any Owner Trust Estate, or
any income, earnings, profits, and proceeds thereof, or funds or payments
which are not readily identifiable as belonging to any particular Sub-Trust,
the Owner Trustee shall allocate them to the Certificates generally. Each
such allocation by the Owner Trustee shall be conclusive and binding upon all
Noteholders and Certificateholders for all purposes.
Section 3.04. LIABILITIES OF SUB-TRUST.
The Owner Trust Estate belonging to each particular Sub-Trust
shall be charged with the liabilities of the Trust in respect of that Sub-Trust
and only that Sub-Trust and all expenses, costs, charges and reserves
attributable to that Sub-Trust, and any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular Sub-Trust shall be allocated and charged by the Owner Trustee
to the
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Certificateholders generally, based on their Ownership Interest. Each
allocation of liabilities, expenses, costs, charges and reserves by the Owner
Trustee shall be conclusive and binding upon all Noteholders and
Certificateholders for all purposes. The Owner Trustee shall have full
discretion, to the extent not inconsistent with applicable law, to determine
which items shall be treated as income and which items as capital, and each
such determination and allocation shall be conclusive and binding upon the
Noteholders and the Certificateholders. Every written agreement, instrument
or other undertaking made or issued by or on behalf of a particular Sub-Trust
shall include a recitation limiting the obligation or claim represented
thereby to that Sub-Trust and its assets.
Without limitation of the foregoing provisions of this
Article, but subject to the right of the Owner Trustee in its discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Sub-Trust
shall be enforceable against the assets of such Sub-Trust only, and not
against the assets (i) of the Trust generally or (ii) of any other Sub-Trust.
Notice of this limitation on interseries liabilities shall be set forth in
the Certificate of Trust of the Trust (whether originally or by amendment) as
filed or to be filed in the Office of the Secretary of State pursuant to the
Business Trust Statute, and upon the giving of such notice in the Certificate
of Trust, the statutory provisions of Section 3804 of the Business Trust
Statute relating to limitations on interseries liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the Certificate of
Trust) shall become applicable to the Trust and each Sub-Trust. Every note,
bond, contract, instrument, certificate or other undertaking made or issued
by or on behalf of a particular Sub-Trust shall include a recitation limiting
the obligation represented thereby to that Sub-Trust and its assets in
accordance with Section 3804(a) of the Business Trust Statute.
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ARTICLE IV
CERTIFICATES AND TRANSFER OF INTERESTS
Section 4.01. INITIAL OWNERSHIP. Upon the formation of the Trust by
the contribution by the Sponsor pursuant to Section 2.05 and the filing of
the Certificate of Trust with the Secretary of State and until the issuance
of the Certificates, the Sponsor shall be the sole owner of the Trust.
Section 4.02. THE CERTIFICATES. The Certificates shall be issued as
a single certificate, substantially in the form of Exhibit A hereto, upon the
order of the Sponsor to the Owner Trustee concurrently with the sale and
assignment to the Trust of the Mortgage Loans. The Certificates shall
represent the entire beneficial ownership interest in the assets of the Trust
subject to the debt represented by the Notes. The Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Owner Trustee, as evidenced by its execution
thereof. The Certificates shall be executed on behalf of the Trust by manual
or facsimile signature of an Authorized Officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who
were, at the time when such signatures shall have been affixed, authorized to
sign on behalf of the Trust, shall be valid, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices
at the date of authentication and delivery of such Certificates.
A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such transferee's acceptance
of a Certificate duly registered in such transferee's name pursuant to Section
4.04.
Section 4.03. EXECUTION, AUTHENTICATION AND DELIVERY OF
CERTIFICATES. Concurrently with the initial transfer of the Mortgage Loans to
the Trust pursuant to the Sale and Servicing Agreement, the Owner Trustee
shall cause the Certificates, representing 100% of the Percentage Interests
of the Trust, to be executed on behalf of the Trust, authenticated and
delivered, at the written direction of the Sponsor, to Accredited Home
Lenders, Inc., as initial Certificateholder. No Certificate shall entitle its
holder to any benefit under this Agreement, or shall be valid for any
purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in EXHIBIT A, executed by
the Owner Trustee or the Owner Trustee's authenticating agent, by manual or
facsimile signature; such authentication shall constitute conclusive evidence
that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
Section 4.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 4.08, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Certificate
Registrar shall provide for the registration of Certificates and of transfers
and exchanges of Certificates as herein provided. The Owner Trustee shall be
the initial "Certificate Registrar."
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Upon surrender for registration of transfer of any
Certificate at the office or agency maintained pursuant to Section 4.08, the
Owner Trustee, upon the satisfaction of the conditions set forth in Section
4.09(c), shall execute, authenticate and deliver (or shall cause its
authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Certificates of a like
Percentage Interest dated the date of authentication by the Owner Trustee or
any authenticating agent. At the option of a Certificateholder, Certificates
may be exchanged for other Certificates of a like Percentage Interest upon
surrender of the Certificates to be exchanged at the office or agency
maintained pursuant to Section 4.08.
Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of
transfer in form, attached to the form of Certificate attached hereto as
EXHIBIT A, or such other form satisfactory to the Note Insurer, or, upon the
occurrence and continuation of a Note Insurer Default, satisfaction of the
Rating Agency Condition, duly executed by the Certificateholder or his
attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any
transfer or exchange of Certificates.
The preceding provisions of this Section 4.04
notwithstanding, the Certificate Registrar shall not register transfers or
exchanges of Certificates for a period of fifteen (15) days preceding the
Payment Date with respect to the Certificates.
Notwithstanding anything contained herein to the contrary,
neither the Certificate Registrar nor the Owner Trustee shall be responsible
for ascertaining whether any transfer complies with the registration
provisions or exemptions from the Securities Act of 1933, as amended, the
Securities Act of 1934, as amended, applicable state securities law or the
Investment Company Act of 1940, as amended; PROVIDED, HOWEVER, that if an
Investment Letter is specifically required to be delivered to the Owner
Trustee by a purchaser or transferee of a Certificate, the Owner Trustee
shall be under a duty to examine the same to determine whether it conforms to
the form of Investment Letter set forth as EXHIBIT C hereto and shall
promptly notify the party delivering the same if such Investment Letter does
not so conform.
Section 4.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(a) any mutilated Certificate shall be surrendered to the Certificate
Registrar, or if the Certificate Registrar shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (b)
there shall be delivered to the Certificate Registrar and the Owner Trustee
such security or indemnity as may be required by them to save each of them
harmless, then in the absence of notice that such Certificate shall have been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Trust
shall execute and the Owner Trustee, or the Owner Trustee's authenticating
agent, shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Percentage Interest. In connection with the issuance of any new Certificate
under this Section 4.05, the Owner Trustee or the Certificate Registrar may
require the payment of a sum sufficient to cover any tax or other
governmental charge that
16
may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 4.06. PERSONS DEEMED OWNERS. Each person by virtue of becoming
a Certificateholder in accordance with this Agreement shall be deemed to be
bound by the terms of this Agreement. Prior to due presentation of a Certificate
for registration of transfer, the Owner Trustee or the Certificate Registrar may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 6.02 and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.
Section 4.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Certificate Registrar shall furnish or cause to be furnished to
the Owner Trustee, the Master Servicer, the Sponsor and the Indenture Trustee
immediately prior to each Payment Date, a list of the names and addresses of the
Certificateholders as of the most recent Record Date. If one or more
Certificateholder, together evidencing Percentage Interests totaling not less
than 25%, apply in writing to the Certificate Registrar, and such application
states that the applicants desire to communicate with other Certificateholders
with respect to their rights under this Agreement or under the Certificates and
such application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Certificate Registrar shall, within
five (5) Business Days after the receipt of such application, afford such
applicants access during normal business hours to the current list of
Certificateholders. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Sponsor, the
Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
Section 4.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall
maintain an office or offices or agency or agencies where notices and demands to
or upon the Owner Trustee in respect of the Basic Documents may be served, and
so long as the Owner Trustee is the Certificate Registrar, where Certificates
may be surrendered for registration of transfer or exchange and notices and
demands to or upon the Certificate Registrar in respect of the Certificates, may
be served. The Owner Trustee initially designates the Corporate Trust Office as
its principal corporate trust office for such purposes. The Owner Trustee shall
give prompt written notice to the Note Insurer, the Indenture Trustee, the
Sponsor and the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
Section 4.09. RESTRICTIONS ON TRANSFERS OF CERTIFICATES. (a) Each
prospective purchaser and any subsequent transferee of a Certificate (each, a
"PROSPECTIVE HOLDER"), other than the Sponsor, shall execute and deliver to the
Owner Trustee and the Certificate Registrar and any of their respective
successors an Investment Letter in the form of Exhibit C hereto to the effect
that:
(i) Such Person is (A) a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and is aware that the seller of the Certificate may
be relying on the exemption from the registration requirements of the
Securities Act provided by Rule 144A and is acquiring such Certificate
for its own account or for the account of one or more qualified
institutional
17
buyers for whom it is authorized to act, or (B) a Person involved in
the organization or operation of the Trust or an affiliate of such
Person within the meaning of Rule 3a-7 of the Investment Company Act of
1940, as amended (including, but not limited to, the Sponsor).
(ii) Such Person understands that the Certificates have not
been and will not be registered under the Securities Act and may be
offered, sold, pledged or otherwise transferred only to a person whom
the seller reasonably believes is (A) a qualified institutional buyer
or (B) a Person involved in the organization or operation of the Trust
or an affiliate of such Person, in a transaction pursuant to an
effective registration statement under the Securities Act and any
applicable state securities laws or exempt from the registration
requirements of the Securities Act and any such state securities laws.
(iii) Such Person understands that the Certificates bear a
legend to the following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN
A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR (II) A PERSON
INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR AN
AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF
THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT
NOT LIMITED TO, ACCREDITED HOME LENDERS, INC.) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED
TO REGISTER THIS CERTIFICATE UNDER THE ACT OR ANY STATE
SECURITIES LAWS."
(b) By its acceptance of a Certificate, each Prospective Holder
agrees and acknowledges that no legal or beneficial interest in all or any
portion of any Certificate may be transferred directly or indirectly to an
entity that holds residual securities as nominee to facilitate the clearance
and settlement of such securities through electronic book-entry changes in
accounts of
18
participating organizations (a "BOOK-ENTRY NOMINEE") and any such purported
transfer shall be void and have no effect.
The Certificates shall bear an additional legend referring
to the restrictions contained in preceding paragraph to the following effect:
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED
TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE
REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE IS NOT AN
ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO
FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY
THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF
PARTICIPATING ORGANIZATIONS.
(c) No transfer of a Certificate or any beneficial interest therein
shall be made to any person unless the Note Insurer has given its prior written
consent to such transfer (or, upon the occurrence and continuance of a Note
Insurer Default, satisfaction of the Rating Agency Condition) and the Owner
Trustee has received a representation letter from the Prospective Holder to the
effect that such Prospective Holder (i) is not a person which is an employee
benefit plan, trust or account subject to Title I of ERISA or Section 4975 of
the Code or a governmental plan, as defined in Section 3(32) of ERISA, subject
to any federal, state or local law which is, to a material extent, similar to
the foregoing provisions of ERISA or the Code (any such person being a "PLAN"),
(ii) is not an entity, including an insurance company separate account or
general account, whose underlying assets include "plan assets" by reason of a
Plan's investment in the entity and (iii) is not directly or indirectly
purchasing such Certificate or interest therein on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with the assets of a Plan.
(d) The Owner Trustee shall not execute, and shall not countersign and
deliver, a Certificate in connection with any transfer thereof unless the
transferor shall have provided to the Owner Trustee an Investment Letter, signed
by the transferee, which certificate shall contain the consent of the transferee
to any amendments of this Agreement as may be required to effectuate further the
foregoing restrictions on transfer of the Certificates to Book-Entry Nominees,
and an agreement by the transferee that it will not transfer a Certificate
without providing to the Owner Trustee an Investment Letter.
(e) [Reserved].
(f) Unless the Prospective Holder delivers a certificate to the Owner
Trustee to the effect that it is a United States Person, the Prospective Holder,
other than Accredited Home Lenders, Inc. or an affiliate of the Accredited Home
Lenders, Inc., shall obtain and deliver to the Note Insurer and the Owner
Trustee an Opinion of Counsel satisfactory to the Note Insurer to the effect
that, as a matter of federal income tax law, the transfer of the Certificate to
such Prospective Holder will not result in the imposition of any U.S.
withholding tax on payments in respect of the Mortgage Loans or the Certificate.
19
(g) The Certificates may not be pledged or transferred without delivery
to the Certificate Registrar of an Opinion of Counsel satisfactory to the Note
Insurer to the effect that such transfer would not jeopardize the tax treatment
of the Trust, would not subject the Trust to an entity-level tax, and would not
jeopardize the status of the Notes as debt for all purposes.
(h) No pledge or transfer of the Certificates shall be effective unless
such purchase or transfer is (i) to a single beneficial owner and (ii)
accompanied by an Opinion of Counsel satisfactory to the Owner Trustee and the
Note Insurer, which Opinion of Counsel shall not, unless otherwise agreed, be an
expense of the Trust, the Certificate Registrar, the Master Servicer, the Backup
Servicer, the Note Insurer or the Sponsor, to the effect such pledge or transfer
will not cause the Trust to be treated for federal income tax purposes as a
taxable mortgage pool, association or a publicly traded partnership taxable as a
corporation.
20
ARTICLE V
ACTIONS BY OWNER TRUSTEE
Section 5.01. PRIOR NOTICE TO THE CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS. With respect to the following matters, the Owner Trustee shall
not take action (and the Certificateholders shall not direct the Owner Trustee
to take any action) unless at least thirty (30) days before the taking of such
action, the Owner Trustee shall have notified the Certificateholders (unless the
Certificateholders have directed the Owner Trustee to take action) and the Note
Insurer in writing of the proposed action and neither the Certificateholders nor
the Note Insurer shall have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders and/or the Note
Insurer have withheld consent or the Certificateholders have provided
alternative written direction (any direction by the Certificateholders shall
require the prior written consent of the Note Insurer):
(a) the initiation of any claim or lawsuit by the Trust
(except claims or lawsuits brought in connection with the collection of
the Mortgage Loans) and the compromise of any action, claim or lawsuit
brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of the Mortgage
Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute);
(c) the amendment or other change to this Agreement or any
Basic Document in circumstances where the consent of any
Certificateholder is required; PROVIDED, that notwithstanding this
Section 5.01, the prior written consent of the Note Insurer must be
obtained for any amendment or change to this Agreement or any other
Basic Document;
(d) the amendment or other change to this Agreement or any
other Basic Document in circumstances where the consent of any
Certificateholder is not required and such amendment materially
adversely affects the interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor
Note Registrar, or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar or the consent to the assignment by the
Note Registrar or Indenture Trustee or Certificate Registrar of their
respective obligations under the Indenture or this Agreement, as
applicable;
(f) the consent to the waiver of any default of any Basic
Document;
(g) the consent to the assignment by the Indenture Trustee or
Master Servicer of their respective obligations under any Basic
Document;
(h) except as provided in Article X hereof, dissolve,
terminate or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other
entity, or convey or transfer all or substantially all of the Trust's
assets to any other entity;
21
(j) cause the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the other
Basic Documents;
(k) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.03 hereof;
(l) confess a judgment against the Trust;
(m) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(n) cause the Trust to lend any funds to any entity; or
(o) change the Trust's purpose and powers from those set forth
in this Agreement.
In addition the Trust shall not commingle its assets with
those of any other entity. The Trust shall maintain its financial and accounting
books and records separate from those of any other entity. Except as expressly
set forth herein, the Trust shall pay its indebtedness, operating expenses and
liabilities from its own funds, and the Trust shall not pay the indebtedness,
operating expenses and liabilities of any other entity. The Master Servicer, on
behalf of the Trust, shall maintain appropriate minutes or other records of all
appropriate action. The Trust shall maintain its office separate from the
offices of the Sponsor and the Master Servicer.
Notwithstanding the other provisions of this Section 5.01,
the Owner Trustee shall not have the power, except upon the written direction
of the Certificateholders with the prior written consent of the Note Insurer,
and to the extent otherwise consistent with the Basic Documents, to (i)
remove or replace the Master Servicer or the Indenture Trustee, (ii)
institute proceedings to have the Trust declared or adjudicated bankrupt or
insolvent, (iii) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (iv) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Trust under any applicable
federal or state law relating to bankruptcy, (v) consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or any similar
official) of the Trust or a substantial portion of the property of the Trust,
(vi) make any assignment for the benefit of the Trust's creditors, (vii)
cause the Trust to admit in writing its inability to pay its debts generally
as they become due, (viii) take any action, or cause the Trust to take any
action, in furtherance of any of the foregoing (any of the above, a
"BANKRUPTCY ACTION"). So long as the Indenture and the Insurance Agreement
remain in effect and no Note Insurer Default exists, no Certificateholder
shall have the power to take, and shall not take, any Bankruptcy Action with
respect to the Trust or direct the Owner Trustee to take any Bankruptcy
Action with respect to the Trust.
Section 5.02. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO
BANKRUPTCY. The Owner Trustee shall not have the power to commence a
voluntary proceeding in bankruptcy relating to the Trust without the
unanimous prior written consent and approval of all Certificateholders and
the prior written consent and approval of the Note Insurer and the delivery
to the Owner Trustee by each such Certificateholder of a certification that
such Certificateholder reasonably believes
22
that the Trust is insolvent. The terms of this Section 5.02 shall survive for
one year and one day following the termination of this Agreement.
Section 5.03. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the other Basic
Documents or would be contrary to Section 2.03 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
Section 5.04. MAJORITY CONTROL. Except as expressly provided herein,
any action that may be taken by the Certificateholders under this Agreement may
be taken by the holders of Certificates evidencing more than 50% of the
Percentage Interest in the Trust and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust at the time of the delivery of such notice and such action
shall be binding upon all Certificateholders.
23
ARTICLE VI
TAX PROVISIONS; CERTAIN DUTIES
Section 6.01. FEDERAL INCOME TAX PROVISIONS. (a) For so long as the
Trust has a single owner for federal income tax purposes, it will, pursuant to
Treasury Regulations promulgated under section 7701 of the Code, be disregarded
as an entity distinct from the Certificateholder for all federal income tax
purposes. Accordingly, for federal income tax purposes, the Certificateholder
will be treated as (i) owning all assets owned by the Trust, (ii) having
incurred all liabilities incurred by the Trust, and (iii) all transactions
between the Trust and the Certificateholder will be disregarded.
(a) Neither the Owner Trustee nor any Certificateholder will, under any
circumstances, and at any time, make an election of IRS Form 8832 or otherwise,
to classify the Trust as an association taxable as a corporation for federal,
state or any other applicable tax purpose.
(b) If the Trust is treated as a partnership (rather than disregarded
as a separate entity) for federal income tax purposes pursuant to Section 2.06,
the following provisions shall apply:
(i) A separate capital account (a "CAPITAL ACCOUNT") shall be
established and maintained for each Certificateholder by the Sponsor,
in accordance with Treasury Regulations Section 1.704-1 (b)(2)(iv). No
Certificateholder shall be entitled to interest on its Capital Account
or any capital contribution made by such Certificateholder to the
Trust.
(ii) Upon termination of the Trust pursuant to Article X, any
amounts available for distribution to Certificateholders shall be
distributed to the Certificateholders with positive Capital Account
balances in accordance with such balances. For purposes of this Section
6.01(c)(ii), the Capital Account of each Certificateholder shall be
determined after all adjustments made in accordance with this Section
6.01 resulting from the Trust's operations and from all sales and
dispositions of all or any part of the assets of the Trust. Any
distributions pursuant to this Section 6.01(c)(ii) shall be made by the
end of the Taxable Year in which the termination occurs (or, if later,
within 90 days after the date of the termination).
(iii) No Certificateholder shall be required to restore any
deficit balance in its Capital Account. Furthermore, no
Certificateholder shall be liable for the return of the Capital Account
of, or of any capital contribution made to the Trust by, another
Certificateholder.
(iv) Profit and loss of the Trust for each Taxable Year shall
be allocated to the Certificateholders in accordance with their
respective Percentage Interests.
(v) Notwithstanding any provision to the contrary, (i) any
expense of the Trust that is a "nonrecourse deduction" within the
meaning of Treasury Regulations Section 1.704-2(b)(1) shall be
allocated in accordance with the Certificateholders' respective
Percentage Interests, (ii) any expense of the Trust that is a "partner
nonrecourse deduction" within the meaning of Treasury Regulations
Section 1.704-2(i)(2) shall be
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allocated in accordance with Treasury Regulations
Section 1.704-2(i)(1), (iii) if there is a net decrease in Trust
Minimum Gain within the meaning of Treasury Regulations Section
1.704-2(f)(1) for any Taxable Year, items of gain and income shall be
allocated among the Certificateholders in accordance with Treasury
Regulations Section 1.704-2(f) and the ordering rules contained in
Treasury Regulations Section 1.704-2(i), and (iv) if there is a net
decrease in Certificateholder Nonrecourse Debt Minimum Gain within the
meaning of Treasury Regulations Section 1.704-2(i)(4) for any Taxable
Year, items of gain and income shall be allocated among the
Certificateholders in accordance with Treasury Regulations Section
1.704-2(i)(4) and the ordering rules contained in Treasury Regulations
Section 1.704-2(j). A Certificateholder's "interest in partnership
profits" for purposes of determining its share of the nonrecourse
liabilities of the Trust within the meaning of Treasury Regulations
Section 1.752-3(a)(3) shall be such Certificateholder's Percentage
Interest.
(vi) If a Certificateholder receives in any Taxable Year an
adjustment, allocation, or distribution described in subparagraphs (4),
(5), or (6) of Treasury Regulations Section 1.704-l(b)(2)(ii)(d) that
causes or increases a negative balance in such Certificateholder's
Capital Account that exceeds the sum of such Certificateholder's shares
of Trust Minimum Gain and Certificateholder Nonrecourse Debt Minimum
Gain, as determined in accordance with Treasury Regulations Sections
1.704-2(g) and 1.704-2(i), such Certificateholder shall be allocated
specially for such Taxable Year (and, if necessary, later Taxable
Years) items of income and gain in an amount and manner sufficient to
eliminate such negative Capital Account balance as quickly as possible
as provided in Treasury Regulations Section 1.704-l(b)(2)(ii)(d). After
the occurrence of an allocation of income or gain to a
Certificateholder in accordance with this Section 6.01(c)(vi), to the
extent permitted by Regulations Section 1.704-l(b), items of expense or
loss shall be allocated to such Certificateholder in an amount
necessary to offset the income or gain previously allocated to such
Certificateholder under this Section 6.01(c)(vi).
(vii) Loss shall not be allocated to a Certificateholder to
the extent that such allocation would cause a deficit in such
Certificateholder's Capital Account (after reduction to reflect the
items described in Treasury Regulations Section
1.704-l(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such
Certificateholder's shares of Trust Minimum Gain and Certificateholder
Nonrecourse Debt Minimum Gain. Any loss in excess of that limitation
shall be allocated to all the Certificateholders in accordance with
their respective Percentage Interests. After the occurrence of an
allocation of loss to a Certificateholder in accordance with this
Section 6.01(c)(vii), to the extent permitted by Treasury Regulations
Section 1.704-l(b), profit shall be allocated to such Certificateholder
in an amount necessary to offset the loss previously allocated to such
Certificateholder under this Section 6.01(c)(vii).
(viii) If a Certificateholder transfers any part or all of its
Percentage Interest and the transferee is admitted as a
Certificateholder as provided herein (a "TRANSFEREE
CERTIFICATEHOLDER"), the distributive shares of the various items of
profit and loss allocable among the Certificateholders during such
Taxable Year shall be allocated between the transferor and the
Transferee Certificateholder (at the election of the Certificateholders
25
(including the transferor, but excluding the Transferee
Certificateholder)) either (i) as if the Taxable Year had ended on the
date of the transfer or (ii) based on the number of days of such
Taxable Year that each was a Certificateholder without regard to the
results of Trust activities in the respective portions of such Taxable
Year in which the transferor and Transferee Certificateholder were
Certificateholders.
(ix) "Profit" and "loss" and any items of income, gain,
expense or loss referred to in this Section 6.01 shall be determined in
accordance with federal income tax accounting principles as modified by
Treasury Regulations Section 1.704-l(b)(2)(iv), except that profits and
losses shall not include items of income, gain, and expense that are
specially allocated pursuant to Sections 6.01(c)(v), 6.01(c)(vi) or
6.01(c)(vii) hereof. All allocations of income, profits, gains,
expenses, and losses (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items
set forth in this Section 6.01, except as otherwise required by Section
704(c) of the Code and Section 1.704-l(b)(4) of the Treasury
Regulations.
(x) The taxable year of the Trust (the "TAXABLE YEAR") shall
be the calendar year or such other taxable year as may be required by
Section 706(b) of the Code.
(xi) At the Trust's expense, the Sponsor shall (i) prepare, or
cause to be prepared, and file or cause to be filed such tax returns
relating to the Trust (including a partnership information return, IRS
Form 1065) as are required by applicable federal, state, and local law,
(ii) cause such returns to be signed in the manner required by law,
(iii) make such elections as may from time to time be required or
appropriate under any applicable law so as to maintain the Trust's
classification as a partnership for tax purposes, (iv) prepare and
deliver, or cause to be prepared and delivered, to the
Certificateholders, no later than 120 days after the close of each
Taxable Year (or no later than April 15th), a Schedule K-1, a copy of
the Trust's informational tax return (IRS Form 1065), and such other
reports (collectively, the "ANNUAL TAX REPORTS") setting forth in
sufficient detail all such information and data with respect to the
transactions effected by or involving the Trust during such Taxable
Year as shall enable each Certificateholder to prepare its federal,
state, and local income tax returns in accordance with the laws then
prevailing, and (v) collect, or cause to be collected, any withholding
tax as described in Section 5.02(c) with respect to income or
distributions to Certificateholders.
(xii) The Sponsor shall, if required, be designated as the tax
matters partner for the Trust within the meaning of Section 6231(a)(7)
of the Code (the "TAX MATTERS PARTNER"). The Tax Matters Partner shall
have the right and obligation to take all actions authorized and
required, respectively, by the Code for the Tax Matters Partner. The
Tax Matters Partner shall have the right to retain professional
assistance in respect of any audit or controversy proceeding initiated
with respect to the Trust by the Internal Revenue Service or any state
or local taxing authority, and all expenses and fees incurred by the
Tax Matters Partner on behalf of the Trust shall constitute expenses of
the Trust. In the event the Tax Matters Partner receives notice of a
final partnership adjustment under Section 6223(a)(2) of the Code, the
Tax Matters Partner shall either (i) file a court petition for judicial
review of such adjustment within the period provided under Section
6226(a) of the Code, a copy of which petition shall be mailed to all
other Holders on the
26
date such petition is filed, or (ii) mail a written notice to all other
Holders, within such period, that describes the Tax Matters Partner's
reasons for determining not to file such a petition.
(xiii) Except as otherwise provided in this Section 6.01 and
Section 7.06, the Certificateholders shall instruct the Sponsor in
writing as to whether to make any available election under the Code or
any applicable state or local tax law on behalf of the Trust.
Section 6.02. WITHHOLDING TAXES. In the event that any withholding
tax is imposed under federal, state, or local law on the Trust's payment (or
allocations of income) to a Certificateholder, such tax shall reduce the
amount otherwise distributable to such Certificateholder in accordance with
this Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is
hereby authorized and directed to retain in the Payment Account from amounts
otherwise distributable to the Certificateholders sufficient funds for the
payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Indenture Trustee from contesting any such tax in
appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The Sponsor will provide the
Indenture Trustee with a statement indicating the amount of any such
withholding tax. The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Indenture Trustee and
remitted to the appropriate taxing authority from the Payment Account at the
direction of the Indenture Trustee, on behalf of the Owner Trustee. If there
is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a Certificateholder who is a Non-U.S.
Person), the Indenture Trustee may in its sole discretion withhold such
amounts in accordance with this paragraph. In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax,
the Owner Trustee and the Indenture Trustee shall reasonably cooperate with
such Certificateholder in making such claim so long as such Certificateholder
agrees in writing to reimburse the Owner Trustee for any out-of-pocket
expenses incurred.
Any Certificateholder which is organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date such
Certificateholder becomes a Certificateholder, (a) so notify the Owner Trustee
and the Indenture Trustee, on behalf of the Trust, (b) (i) provide the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, with Internal Revenue
Service form 1001, 4224, 8709 or W-8, as appropriate, or (ii) notify the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, that it is not
entitled to an exemption from United States withholding tax or a reduction in
the rate thereof on payments of interest. Any such Certificateholder agrees by
its acceptance of a Certificate, on an ongoing basis, to provide like
certification for each taxable year and to notify the Owner Trustee and the
Indenture Trustee, on behalf of the Trust, should subsequent circumstances arise
affecting the information provided. The Trust, the Owner Trustee and the
Indenture Trustee shall be fully protected in relying upon, and each
Certificateholder by its acceptance of a Certificate hereunder agrees to
indemnify and hold the Trust, the Owner Trustee and the Indenture Trustee
harmless against all claims or liability of any kind arising in connection with
or related to their reliance upon any documents, forms or information provided
by any Certificateholder. In addition, if the Indenture Trustee has not withheld
taxes on any payment made to any Certificateholder, and the Indenture Trustee is
27
subsequently required to remit to any taxing authority any such amount not
withheld, such Certificateholder shall return such amount to the Indenture
Trustee upon written demand by the Indenture Trustee. Neither the Owner
Trustee nor the Indenture Trustee shall be liable for damages to any
Certificateholder due to a violation of the Code unless and only to the
extent such liability is caused by the Owner Trustee's or the Indenture
Trustee's failure to act in accordance with its standard of care under this
Agreement.
Section 6.03. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS, THE
INTERNAL REVENUE SERVICE AND OTHERS. The Sponsor shall (a) maintain (or cause
to be maintained) the books of the Trust on a calendar year basis on the
accrual method of accounting, including, without limitation, the allocations
of net income under Section 6.01, and (b) deliver (or cause to be delivered)
to each Certificateholder such information, reports or statements as may be
required by the Code and applicable Treasury Regulations and as may be
required to enable each Certificateholder to prepare its respective federal
and state income tax returns. Consistent with the Trust's (and each Loan
Groups' and Sub-Trusts') characterization for tax purposes as a security
arrangement for the issuance of non-recourse debt, no federal income tax
return shall be filed on behalf of the Trust unless either (y) the Trust, the
Sub-Trusts, the Owner Trustee or the Certificateholders receive an Opinion of
Counsel based on a change in applicable law occurring after the date hereof
that the Code requires such a filing or (z) the Internal Revenue Service
shall determine that the Trust (or a related Loan Group or Sub-Trust) is
required to file such a return. In the event that the Trust (or a related
Loan Group or Sub-Trust) is required to file tax returns, the Owner Trustee
shall elect under Section 1278 of the Code to include in income currently any
market discount that accrues with respect to the Mortgage Loans. The Owner
Trustee shall prepare or shall cause to be prepared any tax returns required
to be filed by the Trust or the Sub-Trusts and shall remit such returns to
the Sponsor at least five days before such returns are due to be filed. The
Sponsor, or any other such party required by law, shall promptly sign such
returns and deliver such returns after signature to the Owner Trustee and
such returns shall be filed by, or at the direction of, the Owner Trustee
with the appropriate tax authorities. In no event shall the Sponsor be liable
for any liabilities, costs or expenses of the Trust or the Sub-Trusts arising
out of the application of any tax law, including federal, state, foreign or
local income or excise taxes or any other tax imposed on or measured by
income (or any interest, penalty or addition with respect thereto or arising
from a failure to comply therewith), except for any such liability, cost or
expense attributable to the Sponsor's breach of its obligations under this
Agreement.
Section 6.04. SIGNATURE ON RETURNS.
In the event that the Trust files a federal income tax return
as provided in Section 6.03, the Owner Trustee shall sign on behalf of the Trust
or the Sub-Trusts the tax returns of the Trust or the Sub-Trusts, if any, unless
applicable law requires a Sponsor to sign such documents, in which case such
documents shall be signed by the Sponsor.
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ARTICLE VII
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 7.01. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article IV, in each case, as the
Sponsor shall approve, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition, the Owner Trustee is authorized and directed, on
behalf of the Trust, to execute and deliver to the Authenticating Agent the
Trust Request and the Trust Orders referred to in Section 2.11 of the Indenture,
directly to the Authenticating Agent to authenticate and deliver Class A-1 Notes
in the Original Note Principal Balance of $53,047,000 and Class A-2 Notes in the
Original Note Principal Balance of $120,429,000. In addition to the foregoing,
the Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust, pursuant to the Basic Documents.
Section 7.02. GENERAL DUTIES. (a) It shall be the duty of the Owner
Trustee:
(i) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic
Documents to which the Trust is a party and to administer the Trust in
the interest of the Certificateholders, subject to the Basic Documents
and in accordance with the provisions of this Agreement; and
(ii) to obtain and preserve the Trust's qualification to do
business in the State of Delaware.
(b) The Owner Trustee shall not be responsible for taking any action on
behalf of the Trust under any Basic Document unless specifically directed in
writing to do so in accordance with Section 7.03 of this Agreement.
(c) The Owner Trustee shall not be responsible for any matter regarding
the Securities Act, the Exchange Act or the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
Section 7.03. ACTION UPON INSTRUCTION. (a) Subject to Article V hereof,
and in accordance with the terms of the Basic Documents, the Certificateholders
may by written instruction direct the Owner Trustee in the management of the
Trust but only to the extent consistent with the limited purpose of the Trust.
Such direction may be exercised at anytime by written instruction of the
Certificateholders pursuant to Article V hereof. Without limiting the generality
of the foregoing, the Owner Trustee shall act as directed in writing by the
Certificateholders in connection with Note redemptions requested by the
Certificateholders, and shall take all actions and deliver all documents that
the Trust is required to take and deliver in accordance with Section 4.01 and
Article X of the Indenture in order to effect any redemption requested by the
Certificateholders.
29
(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is contrary
to the terms hereof or of any other Basic Document or is otherwise contrary to
law.
(c) Subject to Article V hereof, whenever the Owner Trustee is unable
to decide between alternative courses of action permitted or required by the
terms of this Agreement or under any other Basic Document, the Owner Trustee
shall promptly give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders and the Note Insurer requesting
instruction from the Certificateholders as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Certificateholders received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten (10)
days of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
(d) Subject to Article V hereof, in the event that the Owner Trustee is
unsure as to the application of any provision of this Agreement or any other
Basic Document or any such provision is ambiguous as to its application, or is,
or appears to be, in conflict with any other applicable provision, or in the
event that this Agreement permits any determination by the Owner Trustee or is
silent or is incomplete as to the course of action that the Owner Trustee is
required to take with respect to a particular set of facts, the Owner Trustee
may give notice (in such form as shall be appropriate under the circumstances)
to the Certificateholders requesting instruction and, to the extent that the
Owner Trustee acts or refrains from acting in good faith in accordance with any
such instruction received, the Owner Trustee shall not be liable, on account of
such action or inaction, to any Person. If the Owner Trustee shall not have
received appropriate instruction within ten (10) days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the other Basic Documents, as it shall deem to be in the bests interest of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
Section 7.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT, THE
BASIC DOCUMENTS OR ANY INSTRUCTIONS. The Owner Trustee shall not have any duty
or obligation to manage, make any payment with respect to, register,
record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to
otherwise take or refrain from taking any action under, or in connection with,
this Agreement or any document contemplated hereby to which the Trust is a
party, except as expressly provided by the terms of this Agreement, any other
Basic Document or in any document or written instruction received by the Owner
Trustee pursuant to Section 7.03; and no implied duties or obligations shall be
read into this Agreement or any other Basic Document against the Owner Trustee.
The Owner Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder or to prepare or file
30
any Securities and Exchange Commission filing for the Trust or to record this
Agreement or any other Basic Document. The Owner Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Owner Trust Estate that
result from actions by, or claims against, the Owner Trustee in its
individual capacity that are not related to the ownership or the
administration of the Owner Trust Estate.
Section 7.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose
of or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the
Owner Trustee pursuant to this Agreement, (ii) in accordance with the other
Basic Documents and (iii) in accordance with any document or written
instruction delivered to the Owner Trustee pursuant to Section 7.03.
Section 7.06. RESTRICTIONS. Neither the Owner Trustee nor the
Sponsor shall take any action (a) that violates or results in a breach of or
is inconsistent with the purposes of the Trust set forth in Section 2.03 or
(b) that, to the actual knowledge of the Sponsor and the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for Federal income
tax purposes. The Certificateholders shall not direct the Owner Trustee to
take action that would violate the provisions of this Section 7.06.
31
ARTICLE VIII
CONCERNING THE OWNER TRUSTEE
Section 8.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement subject
to the other Basic Documents. The Owner Trustee also agrees to disburse all
moneys actually received by it constituting part of the Owner Trust Estate
upon the terms of the other Basic Documents and this Agreement. The Owner
Trustee shall not be answerable or accountable hereunder or under any other
Basic Document under any circumstances, except (i) for its own willful breach
or misconduct or gross negligence or (ii) in the case of the inaccuracy of
any representation or warranty contained in Section 8.03 expressly made by
the Owner Trustee in its individual capacity. In particular, but not by way
of limitation (and subject to the exceptions set forth in the preceding
sentence):
(p) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(q) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of the Certificateholders or the Note Insurer given in
accordance with this Agreement;
(r) no provision of this Agreement or any other Basic Document
shall require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights
or powers hereunder or under any other Basic Document if the Owner
Trustee shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(s) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes;
(t) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Sponsor or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust
Estate or for or in respect of the validity or sufficiency of the Basic
Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur
any liability, duty, or obligation to any Noteholder or to any
Certificateholders, other than as expressly provided for herein and in
the other Basic Documents;
(u) the Owner Trustee shall not be liable for the default or
misconduct of the Indenture Trustee or the Master Servicer under any of
the Basic Documents or otherwise and the Owner Trustee shall have no
obligation or liability to perform the obligations of the Trust under
this Agreement or the other Basic Documents that are required to be
performed by the Sponsor, the Indenture Trustee or the Master Servicer;
32
(v) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any Basic Document, at
the request, order or direction of the Sponsor, any of the
Certificateholders or the Note Insurer, unless such Certificateholders,
the Sponsor or the Note Insurer have offered to the Owner Trustee
security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Owner Trustee
therein or thereby. The right of the Owner Trustee to perform any
discretionary act enumerated in this Agreement or in any other Basic
Document shall not be construed as a duty, and the Owner Trustee shall
not be answerable for other than its gross negligence or willful breach
or misconduct in the performance of any such act; and
(w) notwithstanding anything contained herein to the contrary,
neither Wilmington Trust Company in its individual capacity nor as
Owner Trustee shall be required to take any action in any jurisdiction
other than in the State of Delaware if the taking of such action will
(i) require the consent or approval or authorization or order of or the
giving of notice to, or the registration with or the taking of any
other action in respect of, any state or other governmental authority
or agency of any jurisdiction other than the State of Delaware; (ii)
result in any fee, tax or other governmental charge under the laws of
any jurisdiction or any political subdivisions thereof in existence on
the date hereof other than the State of Delaware becoming payable by
Wilmington Trust Company; or (iii) subject Wilmington Trust Company to
personal jurisdiction in any jurisdiction other than the State of
Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by Wilmington Trust Company in its
individual capacity or as Owner Trustee, as the case may be,
contemplated hereby. The Owner Trustee shall be entitled to obtain
advice of counsel (which advice shall be an expense of the Sponsor to
determine whether any action required to be taken pursuant to this
Agreement or the other Basic Documents results in the consequences
described in clauses (i), (ii) and (iii) of the preceding sentence. In
the event that said counsel advises the Owner Trustee that such action
will result in such consequences, the Owner Trustee will appoint an
additional trustee pursuant to Section 11.05 hereof to proceed with
such action.
Section 8.02. FURNISHING OF DOCUMENTS. Subject to Section 4.07, the
Owner Trustee shall furnish to the Certificateholders promptly upon receipt of a
written request therefor, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other instruments
furnished to the Owner Trustee under the Basic Documents. On behalf of the Owner
Trustee, the Sponsor shall furnish to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement and the Indenture.
Section 8.03. REPRESENTATIONS AND WARRANTIES. The Owner Trustee hereby
represents and warrants to the Sponsor and the Certificateholders, that:
(x) It is a Delaware banking corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware. It has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement.
33
(y) It has taken all action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will
be executed and delivered by one of its officers who is duly authorized
to execute and deliver this Agreement on its behalf.
(z) Neither the execution nor the delivery by it of this
Agreement nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any Delaware or Federal law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee
or any judgment or order binding on it, or constitute any default under
its charter documents or by-laws.
(aa) This Agreement has been duly authorized, executed and
delivered by the Owner Trustee and constitutes a valid, legal and
binding obligation of the Owner Trustee, enforceable against it in
accordance with the terms hereof, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the
enforcement of creditors' rights generally and to general principles of
equity, regardless of whether such enforcement is considered in a
proceeding in equity or at law.
(bb) The Owner Trustee is not in default with respect to any
order or decree of any court or any order, regulation or demand of any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Owner Trustee or
its properties or might have consequences that would materially
adversely affect its performance hereunder.
(cc) No litigation is pending or, to the best of the Owner
Trustee's knowledge, threatened against the Owner Trustee which would
prohibit its entering into this Agreement or performing its obligations
under this Agreement.
Section 8.04. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion,
Note, or other document or paper believed by it to be genuine and believed by
it to be signed by the proper party or parties. The Owner Trustee may accept
a certified copy of a resolution of the board of directors or other governing
body of any corporate party as conclusive evidence that such resolution has
been duly adopted by such body and that the same is in full force and effect.
As to any fact or matter the method of the determination of which is not
specifically prescribed herein, the Owner Trustee may for all purposes hereof
rely on a certificate, signed by the president or any vice president or by
the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith
in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
other Basic Documents, the Owner Trustee (i) may, at the expense of the
Trust, act directly or through its agents or attorneys pursuant to agreements
entered into with any of them, and the Owner Trustee shall not be liable for
the conduct or misconduct of such agents or attorneys if such agents or
attorneys shall have been
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selected by the Owner Trustee with reasonable care, and (ii) may, at the
expense of the Trust, consult with counsel, Accountants and other skilled
persons to be selected with reasonable care and employed by it. The Owner
Trustee shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the written opinion or advice of any such
counsel, Accountants or other such persons and not contrary to this Agreement
or any other Basic Document.
Section 8.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided
in Section 8.03, in accepting the trusts hereby created, Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim against the Owner Trustee by
reason of the transactions contemplated by this Agreement or any other Basic
Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
Section 8.06. OWNER TRUSTEE NOT LIABLE FOR THE CERTIFICATES OR
MORTGAGE LOANS. The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Owner Trustee on the
Certificates) shall be taken as the statements of the Sponsor, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Agreement, of any other Basic Document or of the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates and
as specified in Section 8.03 hereof) or the Notes, or of any Mortgage Loans
or related documents. The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage Loan, or the perfection and priority of any
security interest created by any Mortgage Loan or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the
Owner Trust Estate or its ability to generate the payments to be distributed
to the Certificateholders under this Agreement or the Noteholders under the
Indenture, including, without limitation, the existence, condition and
ownership of any Mortgaged Property, the existence and enforceability of any
insurance thereon, the existence and contents of any Mortgage Loan on any
computer or other record thereof, the validity of the assignment of any
Mortgage Loan to the Trust or of any intervening assignment, the completeness
of any Mortgage Loan, the performance or enforcement of any Mortgage Loan,
the compliance by the Sponsor or the Master Servicer with any warranty or
representation made under any Basic Document or in any related document or
the accuracy of any such warranty or representation or any action of the
Indenture Trustee or the Master Servicer or any subservicer taken in the name
of the Owner Trustee.
Section 8.07. OWNER TRUSTEE MAY OWN CERTIFICATES AND NOTES. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of the Certificates or the Notes and may deal with the Sponsor, the Indenture
Trustee, the Master Servicer and the Backup Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
Section 8.08. LICENSES. The Sponsor shall cause the Trust to use its
best efforts to obtain and maintain the effectiveness of any licenses required
in connection with this Agreement and the other Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
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ARTICLE IX
COMPENSATION OF OWNER TRUSTEE
Section 9.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Master Servicer and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Master Servicer for its other reasonable expenses hereunder as separately
agreed (the "OWNER TRUSTEE FEE").
Section 9.02. INDEMNIFICATION. The Sponsor shall be liable as obligor
for, and shall indemnify the Owner Trustee (in its individual and trust
capacities) and its successors, assigns, agents and servants (collectively, the
"INDEMNIFIED PARTIES") from and against, any and all liabilities, obligations,
losses, damages, taxes, claims, actions and suits, and any and all reasonable
costs, expenses and disbursements (including reasonable legal fees and expenses)
of any kind and nature whatsoever (collectively, "EXPENSES") which may at any
time be imposed on, incurred by, or asserted against any Indemnified Party in
any way relating to or arising out of this Agreement, the other Basic Documents,
the Owner Trust Estate, the administration of the Owner Trust Estate or the
action or inaction of the Owner Trustee hereunder, except only that the Sponsor
shall not be liable for or required to indemnify an Indemnified Party from and
against Expenses arising or resulting from any of the matters described in the
third sentence of Section 8.01. The indemnities contained in this Section 9.02
shall survive the resignation or termination of the Owner Trustee or the
termination of this Agreement. In any event of any claim, action or proceeding
for which indemnity will be sought pursuant to this Section, the Sponsor will be
entitled to participate therein, with counsel selected by the Sponsor and
reasonably satisfactory to the Indemnified Parties, but after notice from an
Indemnified Party to the Sponsor of its election to assume the defense thereof,
the Sponsor shall not be liable to the Indemnified Party under this Section 9.02
for any legal or other expenses subsequently incurred by such Indemnified Party
in connection with the defense of such action; PROVIDED, HOWEVER, that this
sentence shall not be in effect if (1) the Sponsor shall not have employed
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of commencement of the
action, (2) the Sponsor shall have authorized the employment of counsel for the
Indemnified Party at the expense of the Sponsor or (3) in the event any such
claim involves a possible imposition of criminal liability or penalty or a
material civil penalty on such Indemnified Party, a conflict of interest between
such Indemnified Party and the Sponsor or another indemnitee or the granting of
material injunctive relief against such Indemnified Party, and such Indemnified
Party informs the Sponsor that such Indemnified Party desires to be represented
by separate counsel, in which case, the reasonable fees and expenses of such
separate counsel shall be born by the Sponsor. If the Sponsor assumes the
defense of any such proceeding, they shall be entitled to settle such proceeding
without any liability being assessed against any Indemnified Party or, if such
settlement provides for release of any such Indemnified Party without any
liability being assessed against any Indemnified Party in connection with all
matters relating to the proceeding which have been asserted against such
Indemnified Party in such proceeding by the other parties to such settlement,
without the prior written consent of such Indemnified Party, but otherwise only
with the prior written consent of such Indemnified Party.
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Section 9.03. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the
Owner Trustee pursuant to this Article IX shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
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ARTICLE X
TERMINATION OF TRUST AGREEMENT
Section 10.01. TERMINATION OF TRUST AGREEMENT. (a) This Agreement
(other than Article IX) shall terminate and the Trust shall dissolve and be of
no further force or effect on the earlier of: (i) the final payment or other
liquidation of the Mortgage Loans and the disposition of all REO Properties and
the remittance of all funds due hereunder with respect to such Mortgage Loans
and REO Properties after the satisfaction and discharge of the Indenture
pursuant to Section 4.01 of the Indenture; and (ii) the expiration of 21 years
from the death of the last survivor of the descendants of Xxxxxx X. Xxxxxxx (the
late ambassador of the United States to the Court of St. Xxxxx). The bankruptcy,
liquidation, dissolution, death or incapacity of the any Certificateholder or
the Sponsor shall not (x) operate to terminate this Agreement or the Trust, nor
(y) entitle Certificateholders' or the Sponsor's legal representatives or heirs
to claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
nor (z) otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Except as provided in Section 10.01(a) above, none of the Sponsor,
the Master Servicer, the Backup Servicer, the Note Insurer nor the
Certificateholders shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Indenture Trustee for payment of the final distributions and cancellation, shall
be given by the Owner Trustee to the Certificateholders, the Note Insurer, the
Rating Agencies and the Indenture Trustee mailed within five (5) Business Days
of receipt by the Owner Trustee from the Master Servicer of notice of such
termination, which notice given by the Owner Trustee shall state (i) the Payment
Date upon or with respect to which final payment of the Certificates shall be
made upon presentation and surrender of the Certificates at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Indenture Trustee therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of Certificates, subject to
Section 3808 of the Business Trust Statute, amounts distributable on such
Payment Date pursuant to the terms of the Indenture.
In the event that Certificateholders shall not surrender
their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give
a second written notice to Certificateholders to surrender the Certificates
for cancellation and receive the final distribution with respect thereto. If
within one year after the second notice the Ownership Interest shall not have
been surrendered for cancellation, the Owner Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of the Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain
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subject to this Agreement. Any funds remaining in the Trust after exhaustion
of such remedies shall be distributed by the Indenture Trustee to the
Certificateholders.
(d) Upon the winding up of the Trust in accordance with Section 3808 of
the Business Trust Statute and its termination, the Owner Trustee shall cause
the Certificate of Trust to be canceled by filing a certificate of cancellation
with the Secretary of State in accordance with the provisions of Section 3810 of
the Business Trust Statute.
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ARTICLE XI
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 11.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation or banking association satisfying
the provisions of Section 3807(a) of the Business Trust Statute; authorized to
exercise trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or state
authorities; and having (or having a parent that has) a rating of at least
"Baa3" by Xxxxx'x and "A-1" by S&P (or otherwise acceptable to the Rating
Agencies) and being acceptable to the Note Insurer. If such entity shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section 11.01, the combined capital and surplus of such entity shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section 11.01,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 11.02.
Section 11.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Trust, the Sponsor, the Master Servicer,
the Backup Servicer, the Indenture Trustee and the Note Insurer. Upon receiving
such notice of resignation, the Note Insurer may (and, if the Note Insurer fails
to do so, the Sponsor shall promptly) appoint a successor Owner Trustee
(acceptable to the Note Insurer) by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee. If no successor Owner Trustee shall have
been so appointed and have accepted appointment within thirty (30) days after
the giving of such notice of resignation, the resigning Owner Trustee or the
Note Insurer may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of Section 11.01 and shall fail to resign
after written request therefor by the Certificateholders or the Sponsor, or
if at any time the Owner Trustee shall be legally unable to act, or shall be
adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Owner Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Note Insurer, or the
Certificateholders or the Sponsor with the written consent of the Note
Insurer, may remove the Owner Trustee. If the Certificateholders or the
Sponsor or the Note Insurer shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Note Insurer, or the
Sponsor with the written consent of the Note Insurer, shall promptly appoint
a successor Owner Trustee by written instrument in duplicate, one copy of
which instrument shall be delivered to the outgoing Owner Trustee so removed
and one copy to the successor Owner Trustee and payment of all fees owed to
the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and
appointment of a successor Owner Trustee pursuant to any of the provisions of
this Section 11.02 shall not become effective until acceptance of appointment
by the successor Owner Trustee pursuant to Section 11.03,
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written approval by the Note Insurer and payment of all fees and expenses
owed to the outgoing Owner Trustee. The Master Servicer shall provide notice
of such resignation or removal of the Owner Trustee to each of the Rating
Agencies, the Indenture Trustee and the Note Insurer.
Section 11.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 11.02 shall execute, acknowledge and deliver to
the Trust, the Sponsor, the Indenture Trustee, the Note Insurer and to its
predecessor Owner Trustee an instrument accepting such appointment under this
Agreement, and thereupon, subject to the payment of all fees and expenses owed
to the outgoing Owner Trustee, the resignation or removal of the predecessor
Owner Trustee shall become effective and such successor Owner Trustee (if
acceptable to the Note Insurer), without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties, and obligations
of its predecessor under this Agreement, with like effect as if originally named
as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees
and expenses deliver to the successor Owner Trustee all documents and statements
and moneys held by it under this Agreement; and the Sponsor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties, and
obligations.
No successor Owner Trustee shall accept appointment as
provided in this Section unless at the time of such acceptance such successor
Owner Trustee shall be eligible pursuant to Section 11.01.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section 11.03, the Sponsor shall mail notice of the successor
of such Owner Trustee to the Certificateholders, the Indenture Trustee, the
Noteholders, the Note Insurer and the Rating Agencies. If the Sponsor fails to
mail such notice within ten (10) days after acceptance of appointment by the
successor Owner Trustee, the successor Owner Trustee shall cause such notice to
be mailed at the expense of the Sponsor.
Any successor Owner Trustee appointed pursuant to this Section
11.03 shall file an amendment to the Certificate of Trust with the Secretary of
State identifying the name and principal place of business of such successor
Owner Trustee in the State of Delaware.
Section 11.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any
corporation or banking association into which the Owner Trustee may be merged or
converted or with which it may be consolidated or any corporation or banking
association resulting from any merger, conversion or consolidation to which the
Owner Trustee shall be a party, or any corporation or banking association
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation or banking association shall be eligible pursuant to Section
11.01, without the execution or filing of any instrument or any further act on
the part of any of the parties hereto, except the filing of an amendment to the
Certificate of Trust, if appropriate, anything herein to the contrary
notwithstanding; PROVIDED, FURTHER, that the Owner Trustee shall mail notice of
such merger, conversion or consolidation to the Rating Agencies and; PROVIDED,
FURTHER, that the Owner Trustee shall file an amendment to the Certificate of
Trust as required under Section 11.03 above.
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Section 11.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Owner Trust Estate or any Mortgaged Property may at the
time be located, and for the purpose of performing certain duties and
obligations of the Owner Trustee with respect to the Trust and the Certificates,
the Owner Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and
acceptable to the Note Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 11.05, such powers, duties, obligations, rights and trusts as the Note
Insurer and the Owner Trustee may consider necessary or desirable. No co-trustee
or separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 11.01 and no notice of
the appointment of any co-trustee or separate trustee shall be required pursuant
to Section 11.03.
(b) Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provision and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Owner Trustee joining
in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties, and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Owner Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to the separate trustees and co-trustees,
as if given to each of them. Every instrument appointing any separate trustee
or co-trustee, other than this Agreement, shall refer to this Agreement and
to the conditions of this Article XI. Each separate trustee and co-trustee,
upon its acceptance of appointment, shall be vested with the estates
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee.
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(d) Any separate trustee or co-trustee may at any time appoint the
Owner Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. SUPPLEMENTS AND AMENDMENTS. This Agreement may be
amended by the Sponsor and the Owner Trustee, with the prior written consent
of the Note Insurer, and with prior written notice to the Rating Agencies,
but without the consent of any of the Noteholders, the Certificateholders or
the Indenture Trustee, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions in this
Agreement or of modifying in any manner the rights of the Noteholders or the
Certificateholders; PROVIDED, HOWEVER, such action shall not adversely affect
in any material respect the interests of any Noteholder or Certificateholder.
An amendment described above shall be deemed not to adversely affect in any
material respect the interests of any Noteholder if the party requesting the
amendment satisfies the Rating Agency Condition with respect to such
amendment.
This Agreement may also be amended from time to time by the
Sponsor and the Owner Trustee, with the prior written consent of the Rating
Agencies and with the prior written consent of the Indenture Trustee, the
Note Insurer, the Noteholders evidencing more than 50% of the Note Principal
Balance of the Outstanding Notes of all of the Classes and the
Certificateholders evidencing more than 50% of the Percentage Interests of
the Trust, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying
in any manner the rights of the Noteholders or the Certificateholders;
PROVIDED, HOWEVER, no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on the Mortgage Loans or distributions that shall be required to be
made for the benefit of the Noteholders, the Certificateholders or the Note
Insurer, (b) reduce the aforesaid percentage of the Outstanding Principal
Balance of the Notes or the Percentage Interests required to consent to any
such amendment, in either case of clause (a) or (b) without the consent of
the holders of all the outstanding Notes, the Note Insurer and the
Certifcateholders of all the outstanding Certificates.
Promptly after the execution of any such amendment or consent,
the Sponsor shall furnish written notification of the substance of such
amendment or consent to the Certificateholders, the Indenture Trustee, the Note
Insurer and each of the Rating Agencies.
It shall not be necessary for the consent of the
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the
Certificate of Trust, the Owner Trustee shall cause the filing of such amendment
with the Secretary of State.
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Prior to the execution of any amendment to this Agreement or
the Certificate of Trust, the Owner Trustee shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent have
been met. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 12.02. NO LEGAL TITLE TO OWNER TRUST ESTATE IN
CERTIFICATEHOLDERS. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided beneficial ownership
interest therein only in accordance with Articles VI and X. No transfer, by
operation of law or otherwise, of any right, title, or interest of the
Certificateholders to and in their ownership interest in the Owner Trust Estate
shall operate to terminate this Agreement or the trusts hereunder or entitle any
transferee to an accounting or to the transfer to it of legal title to any part
of the Owner Trust Estate.
Section 12.03. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Sponsor, the
Certificateholders, the Note Insurer and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
Section 12.04. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been given if (1)
personally delivered, (2) upon receipt by the intended recipient or three
Business Days after mailing if mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee shall be deemed given only upon actual receipt
by the Owner Trustee), (3) sent by express courier delivery service and received
by the intended recipient or (4) except with respect to notices sent to the
Owner Trustee, transmitted by telex or facsimile transmission (or any other type
of electronic transmission agreed upon by the parties and confirmed by a writing
delivered by any of the means described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, at its Corporate Trust Office; (ii) if
to the Sponsor, Accredited Home Lenders, Inc., 00000 Xxxxxx xx Xxxxxxx, Xxxxx
000, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention: General Counsel, telecopy: (858)
676-2170; and (iii) if to the Note Insurer, Financial Security Assurance Inc.,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, Attention: Accredited Mortgage Loan
Trust 2000-1, telecopy: (000) 000-0000; or, as to each such party, at such other
address as shall be designated by such party in a written notice to each other
party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
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Section 12.05. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 12.06. SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 12.07. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Sponsor, the Note Insurer, the Owner Trustee and its successors and each owner
and its successors and permitted assigns, all as herein provided. Any request,
notice, direction, consent, waiver or other instrument or action by a
Certificateholder shall bind the successors and assigns of such
Certificateholder.
Section 12.08. NO PETITION. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Sponsor
or the Trust, or join in any institution against the Sponsor or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy law in connection with any obligations relating to the Certificates,
the Notes, this Agreement or any of the other Basic Documents.
This Section 12.08 will survive for one year and one day
following the termination of this Agreement.
Section 12.09. NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificate represents a
beneficial interest in the Trust only and does not represent an interest in or
an obligation of the Master Servicer, the Backup Servicer, the Sponsor, the
Owner Trustee or any Affiliate thereof and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated in
this Agreement, the Certificates or the other Basic Documents.
Section 12.10. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 12.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.12. GRANT OF CERTIFICATEHOLDER RIGHTS TO NOTE INSURER. (a)
In consideration for the issuance of the Certificates and for the guarantee of
the Notes by the Note Insurer pursuant to the Note Insurance Policy, the
Certificateholders hereby grant to the Note Insurer the
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right to act as the holder of 100% of the outstanding Certificates for the
purpose of exercising the rights hereunder of the Certificateholders under
this Agreement without the consent of the Certificateholders, including the
voting rights of such Certificateholders hereunder, but excluding those
rights requiring the consent of all such Certificateholders, and any rights
of such Certificateholders to distributions under the Indenture; PROVIDED,
that the preceding grant of rights to the Note Insurer by the
Certificateholders shall be subject to Section 12.14.
(a) [Reserved].
(b) The duties and responsibilities of the Owner Trustee shall be
limited to those expressly provided for in this Agreement. The parties hereto
agree that except for purposes of the foregoing sentence, the Owner Trustee
shall have no management responsibilities or owe any fiduciary duties to the
Note Insurer (or the Noteholders in the event they succeed to the Note
Insurer's rights).
(c) Whenever in connection with its performance under this Agreement
the Owner Trustee receives inconsistent notices or advice from the Note
Insurer and the Certificateholders, the Owner Trustee shall, in the absence
of a Note Insurer Default, take the action required by the notices or advice
received from the Note Insurer.
Section 12.13. THIRD-PARTY BENEFICIARY. The Indenture Trustee and
the Note Insurer are intended third-party beneficiaries of this Agreement,
and this Agreement shall be binding upon and inure to the benefit of the
Indenture Trustee and the Note Insurer; PROVIDED, that, notwithstanding the
foregoing, for so long as a Note Insurer Default is continuing with respect
to its obligations under the Note Insurance Policy, the Certificateholders
shall succeed to the Note Insurer's rights hereunder. Without limiting the
generality of the foregoing, all covenants and agreements in this Agreement
that expressly confer rights upon the Note Insurer shall be for the benefit
of and run directly to the Note Insurer, and the Note Insurer shall be
entitled to rely on and enforce such covenants to the same extent as if it
were a party to this Agreement.
Section 12.14. SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS.
During the continuation of a Note Insurer Default, rights granted or reserved
to the Note Insurer hereunder shall vest instead in the Certificateholders;
PROVIDED, that the Note Insurer shall be entitled to any distributions of
reimbursements as set forth in the Indenture and the Insurance Agreement and
the Note Insurer shall retain those rights under Section 12.01 to consent to
any amendment of this Agreement.
At such time as either (i) the outstanding Note Principal
Balance of the Notes has been reduced to zero or (ii) the Note Insurance
Policy has been terminated and in either case of (i) or (ii) the Note Insurer
has been reimbursed for all amounts owed under the Note Insurance Policy and
the Insurance Agreement (and the Note Insurer no longer has any obligation
under the Note Insurance Policy. Then the rights and benefits granted or
reserved to the Note Insurer hereunder (including the rights to direct
certain actions and receive certain notices) shall terminate and the
Certificateholders shall be entitled to the exercise of such rights and to
receive such benefits of the Note Insurer following such termination to the
extent that such rights and benefits are applicable to the Certificateholders.
47
Section 12.15. MASTER SERVICER. The Master Servicer is authorized to
prepare, or cause to be prepared, execute and deliver on behalf of the Trust all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Trust, the Sponsor or Owner Trustee to prepare, file or
deliver pursuant to the Basic Documents. Upon written request, the Owner Trustee
shall execute and deliver to the Master Servicer a limited power of attorney
appointing the Master Servicer the Trust's agent and attorney-in-fact to
prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.
[Remainder of Page Intentionally Left Blank]
48
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
ACCREDITED HOME LENDERS, INC.,
as Sponsor
By: /s/ XXXXX XXXXXXX
-------------------------------------
Name: Xxxxx Xxxxxxx
Title: General Counsel
WILMINGTON TRUST COMPANY, as Owner
Trustee under the Trust Agreement
By: /s/ XXXXX XXXXXX
-------------------------------------
Name: Xxxxx Xxxxxx
Title:
49
EXHIBIT A
FORM OF CERTIFICATE
THE EQUITY INTEREST IN THE TRUST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR
INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE
HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND OF SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE
ORGANIZATION OR OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON WITHIN
THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, ACCREDITED HOME LENDERS, INC.) IN A TRANSACTION
THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS
OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES
LAWS.
NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE
TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM
THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE (I) IS NOT A PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF
THE CODE OR A GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT
TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO
THE FOREGOING PROVISIONS OF ERISA OR THE CODE (ANY SUCH PERSON BEING A "PLAN"),
(II) IS NOT AN ENTITY, INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR
GENERAL ACCOUNT, WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A
PLAN'S INVESTMENT IN THE ENTITY AND (III) IS NOT DIRECTLY OR INDIRECTLY
PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OR, AS
INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS,
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE
AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A)
AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO
THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS
NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH
SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING
ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS
PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING TO THIS CERTIFICATE.
A-2
Certificate No. __ Percentage Interest:___
THIS CERTIFIES THAT ______________ (the
"CERTIFICATEHOLDER") is the registered owner of a ___% Percentage Interest in
Accredited Mortgage Loan Trust 2000-1 (the "TRUST") existing under the laws
of the State of Delaware and created pursuant to that certain Trust
Agreement, dated as of February 1, 2000 (the "TRUST AGREEMENT"), by and
between Accredited Home Lenders, Inc., as sponsor, and Wilmington Trust
Company, not its individual capacity but solely as owner trustee under the
Trust Agreement (the "OWNER TRUSTEE"). Capitalized terms used but not
otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement. The Owner Trustee, on behalf of the Trust and not in its
individual capacity, has executed this Certificate by one of its duly
authorized signatories as set forth below. This Certificate is one of the
Certificates referred to in the Trust Agreement and is issued under and is
subject to the terms, provisions and conditions of the Trust Agreement to
which the Certificateholder by virtue of the acceptance hereof agrees and by
which the Certificateholder hereof is bound. Reference is hereby made to the
Trust Agreement for the rights of the Certificateholder, as well as for the
terms and conditions of the Trust created by the Trust Agreement.
The recitals contained herein (other than the signature and
countersignature of the Owner Trustee) shall be taken as the statements of
the Sponsor, and the Owner Trustee assumes no responsibility for the
correctness thereof.
The Certificateholder, by its acceptance hereof, agrees not
to transfer this Certificate except in accordance with terms and provisions
of the Trust Agreement.
The Certificateholder, by its acceptance hereof, acknowledges
that such Certificateholder's Certificate represents a beneficial interest in
the Trust only and does not represent an interest in or an obligation of the
Master Servicer, the Backup Servicer, the Sponsor, the Owner Trustee or any
Affiliate thereof and no recourse may be had against such parties or their
assets, except as may be expressly set forth or contemplated herein, in the
Trust Agreement or the other Basic Documents.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-3
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust
and not in its individual capacity, has caused this Certificate to be duly
executed.
ACCREDITED MORTGAGE LOAN
TRUST 2000-1
By: WILMINGTON TRUST COMPANY, not in
its individual capacity but solely as
Owner Trustee under the Trust Agreement
By:
-------------------------------------------
Authorized Signatory
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee under the Trust Agreement
By:
-------------------------------------------
Authorized Signatory
Dated:
A-4
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
--------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
--------------------------------------------------------------------------------
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing __________ Attorney to transfer said Instrument on
the books of the Certificate Registrar, with full power of substitution in the
premises.
Dated:
*/
---------------------------------------
Signature Guaranteed:
*/
---------------------------------------
------------------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Instrument in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-5
EXHIBIT B
FORM OF CERTIFICATE OF TRUST
CERTIFICATE OF TRUST OF
ACCREDITED MORTGAGE LOAN TRUST 2000-1
THIS CERTIFICATE OF TRUST OF ACCREDITED MORTGAGE LOAN TRUST
2000-1 (the "Trust"), dated as of February __, 2000, is being duly executed
and filed by Wilmington Trust Company, a Delaware banking corporation, as
owner trustee (the "Owner Trustee"), to form a business trust under the
Delaware Business Trust Act (12 Del. Code, Section 3801 et seq.).
1. NAME. The name of the business trust formed hereby is
Accredited Mortgage Loan Trust 2000-1.
2. DELAWARE TRUSTEE. The name and business address of the
Owner Trustee of the Trust in the State of Delaware is Wilmington Trust
Company, Xxxxxx Square North, 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, Attention: Corporate Trust Administration.
3. SERIES. Pursuant to Section 3806(b)(2) of the Act, the
Trust shall issue one or more series of beneficial interests having the
rights and preferences set forth in the governing instrument of the
Trust, as the same may be amended from time to time (each, a "Series"
or "Sub-Trust").
4. NOTICE OF LIMITATION OF LIABILITIES OF EACH SERIES.
Pursuant to Section 3804(a) of the Act, there shall be a limitation on
liabilities of each Series such that (a) the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of the Trust
generally or the assets of any other Series thereof and (b) none of the
debts, liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to the Trust generally or any other
Series thereof shall be enforceable against the assets of such Series.
5. EFFECTIVE DATE. This Certificate of Trust shall be
effective at 12:01 a.m. on February __, 2000.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Owner Trustee under a Trust Agreement,
dated as of February 1, 2000.
By:
----------------------------------------
Name:
Title:
EXHIBIT C
FORM OF INVESTMENT LETTER
-------------------, ----
Accredited Home Lenders, Inc.
00000 Xxxxxx xx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Wilmington Trust Company
Xxxxxx Square North,
000 Xxxxx Xxxxxx Xxxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Re: Accredited Mortgage Loan Trust 2000-1 (the "Trust")
ASSET-BACKED NOTES, SERIES 2000-1
Ladies and Gentlemen:
_________________________________________ (the
"Certificateholder") has purchased or acquired, or intends to purchase or
acquire from ________________, the current Certificateholder (the "Current
Certificateholder"), a Trust Certificate representing a 100% Percentage Interest
(the "Certificate") in the Trust, which represents an interest in the Trust
created pursuant to that certain Trust Agreement, dated as of February 1, 2000
(the "Trust Agreement"), by and between Accredited Home Lenders, Inc., as
Sponsor, and Wilmington Trust Company, as Owner Trustee. Capitalized terms used
and not otherwise defined herein have the meanings assigned to such terms in the
Trust Agreement.
CERTIFICATION
The undersigned, as an authorized officer or agent of the
Certificateholder, hereby certifies, represents, warrants and agrees on behalf
of the Certificateholder as follows:
1. The Certificateholder is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it was formed
and is authorized to invest in the Certificate. The person executing this letter
on behalf of the Certificateholder is duly authorized to do so on behalf of the
Certificateholder.
2. The Certificateholder hereby acknowledges that no transfer
of the Certificate may be made unless such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"); and applicable state securities laws, or is made in
accordance with the Securities Act and such laws.
3. The Certificateholder understands that the Certificate
has not been and will not be registered under the Securities Act and may be
offered, sold, pledged or otherwise
transferred to a person whom the transferor reasonably believes is (A) a
qualified institutional buyer (as defined in Rule 144A under the Securities
Act) or (B) a Person involved in the organization or operation of the Trust
or an affiliate of such Person, in a transaction pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or exempt from the registration requirements of the
Securities Act and any such state securities laws. The Certificateholder
understands that the Certificate bears a legend to the foregoing effect.
4. The Certificateholder is acquiring the Certificate for
its own account or for accounts for which it exercises sole investment
discretion, and not with a view to or for sale or other transfer in
connection with any distribution of the Certificate in any manner that would
violate Section 5 of the Securities Act or any applicable state securities
laws, subject nevertheless to any requirement of law that the disposition of
the Certificateholder's property shall at all times be and remain within its
control.
5. The Certificateholder is (A) a "qualified institutional
buyer" (a "QIB") as defined in Rule 144A under the Securities Act, and is
aware that the transferor of the Certificate may be relying on an exemption
from the registration requirements of the Securities Act and is acquiring
such Certificate for its own account or for the account of one or more
qualified institutional buyers for whom it is authorized to act, or (B) a
Person involved in the organization or operation of the Trust or an affiliate
of such Person within the meaning of Rule 3a-7 of the Investment Company Act
of 1940, as amended (including, but not limited to, the Sponsor). The
Certificateholder is able to bear the economic risks of such an investment.
The Certificateholder is a QIB because [STATE FACTUAL BASIS FOR QIB STATUS]
6. If the Certificateholder sells or otherwise transfers
the registered ownership of such Certificate, the Certificateholder will
comply with the restrictions and requirements with respect to the transfer of
the ownership of the Certificate under the Trust Agreement, and the
Certificateholder will obtain from any subsequent purchaser or transferee
substantially the same certifications, representations, warranties and
covenants as required under the Trust Agreement in connection with such
subsequent sale or transfer thereof.
7. The Certificateholder is not an entity that will hold a
Certificate as nominee (a "Book Entry Nominee") to facilitate the clearance
and settlement of such security through electronic book-entry changes in
Accounts or participating organizations.
8. The Certificateholder (i) is not a person which is an
employee benefit plan, trust or account subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code or a governmental plan, as defined in Section 3(32) of ERISA, subject
to any federal, state or local law which is, to a material extent, similar to
the foregoing provisions of ERISA or the Code (any such person being a "Plan"),
(ii) is not an entity, including an insurance company separate account or
general account, whose underlying assets include "plan assets" by reason of a
Plan's investment in the entity and (iii) is not directly or indirectly
purchasing such Certificate on behalf of, as investment manager of, as named
fiduciary of, as trustee of, or with assets of a Plan.
B-2
9. The Certificateholder hereby agrees to indemnify each of
the Trust, the Indenture Trustee, the Note Insurer and the Owner Trustee
against any liability that may result if the Certificateholder's transfer of
a Certificate (or any portion thereof) is not exempt from the registration
requirements of the Securities Act and any applicable state securities laws
or is not made in accordance with such federal and state laws. Such
indemnification of the Trust, the Indenture Trustee and the Owner Trustee
shall survive the termination of the related Trust Agreement.
IN WITNESS WHEREOF, the Certificateholder has caused this
instrument to be executed on its behalf, pursuant to the authority of its
Board of Directors, by its duly authorized signatory this ____ day of
__________, 200_.
[NAME OF CERTIFICATEHOLDER]
By:
------------------------------
Name:
Title:
B-3
