Execution Copy
HOME EQUITY LOAN TRUST 2006-HSA3
Issuer
AND
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
Indenture Trustee
INDENTURE
Dated as of May 25, 2006
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HOME EQUITY LOAN-BACKED TERM NOTES
HOME EQUITY LOAN-BACKED VARIABLE FUNDING NOTES
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RECONCILIATION AND TIE BETWEEN TRUST INDENTURE
ACT OF 1939 AND INDENTURE PROVISIONS*
Trust Indenture
Act Section Indenture Section
310(a)(1)........................................... 6.11
(a)(2)............................................ 6.11
(a)(3)............................................ 6.10
(a)(4)............................................ Not Applicable
(a)(5)............................................ 6.11
(b)............................................... 6.08, 6.11
(c)............................................... Not Applicable
311(a)............................................. 6.12
(b).............................................. 6.12
(c).............................................. Not Applicable
312(a)............................................. 7.01, 7.02(a)
(b).............................................. 7.02(b)
(c).............................................. 7.02(c)
313(a)............................................. 7.04
(b).............................................. 7.04
(c).............................................. 7.03(a)(iii), 7.04
(d).............................................. 7.04
314(a)............................................. 3.10, 7.03(a)
(b)............................................. 3.07
(c)(1)........................................... 8.05(c), 10.01(a)
(c)(2)........................................... 8.05(c), 10.01(a)
(c)(3)........................................... Not Applicable
(d)(1)........................................... 8.05(c), 10.01(b)
(d)(2)........................................... 8.05(c), 10.01(b)
(d)(3)........................................... 8.05(c), 10.01(b)
(e).............................................. 10.01(a)
315(a)............................................. 6.01(b)
(b).............................................. 6.05
(c).............................................. 6.01(a)
(d).............................................. 6.01(c)
(d)(1)........................................... 6.01(c)
(d)(2)........................................... 6.01(c)
(d)(3)........................................... 6.01(c)
(e).............................................. 5.13
316(a)(1)(A)....................................... 5.11
316(a)(1)(B)....................................... 5.12
316(a)(2)........................................... Not Applicable
316(b).............................................. 5.07
317(a)(1)........................................... 5.04
317(a)(2)........................................... 5.03(d)
317(b).............................................. 3.03(a)
318(a).............................................. 10.07
*This reconciliation and tie shall not, for any purpose, be deemed to be part of the within
indenture.
TABLE OF CONTENTS
Page
ARTICLE I Definitions...............................................................2
Section 1.01. Definitions........................................................2
Section 1.02. Incorporation by Reference of Trust Indenture Act..................2
Section 1.03. Rules of Construction..............................................2
ARTICLE II Original Issuance of Notes................................................3
Section 2.01. Form...............................................................3
Section 2.02. Execution, Authentication and Delivery.............................3
ARTICLE III Covenants.................................................................4
Section 3.01. Collection of Payments with Respect to the Home Equity Loans.......4
Section 3.02. Maintenance of Office or Agency....................................4
Section 3.03. Money for Payments to Be Held in Trust; Paying Agent...............4
Section 3.04. Existence..........................................................6
Section 3.05. Payment of Principal and Interest; Defaulted Interest..............6
Section 3.06. Protection of Trust Estate.........................................8
Section 3.07. Opinions as to Trust Estate........................................9
Section 3.08. Performance of Obligations; Servicing Agreement....................9
Section 3.09. Negative Covenants................................................10
Section 3.10. Annual Statement as to Compliance.................................10
Section 3.11. Recording of Assignments..........................................11
Section 3.12. Representations and Warranties Concerning the Home Equity
Loans.............................................................11
Section 3.13. Assignee of Record of the Home Equity Loans.......................11
Section 3.14. Master Servicer as Agent and Bailee of the Indenture Trustee......11
Section 3.15. Investment Company Act............................................11
Section 3.16. Issuer May Consolidate, etc.......................................12
Section 3.17. Successor or Transferee...........................................13
Section 3.18. No Other Business.................................................13
Section 3.19. No Borrowing......................................................13
Section 3.20. Guarantees, Loans, Advances and Other Liabilities.................13
Section 3.21. Capital Expenditures..............................................14
Section 3.22. Owner Trustee Not Liable for Certificates or Related
Documents.........................................................14
Section 3.23. Restricted Payments...............................................14
Section 3.24. Notice of Events of Default.......................................14
Section 3.25. Further Instruments and Act.......................................14
Section 3.26. Statements to Noteholders.........................................15
Section 3.27. Determination of Note Rates.......................................15
Section 3.28. Payments under the Policy.........................................15
Section 3.29. Additional Representations of the Issuer..........................15
ARTICLE IV The Notes; Satisfaction and Discharge of Indenture.......................17
Section 4.01. The Notes; Increase of Maximum Variable Funding Balance;
Variable Funding Notes............................................17
Section 4.02. Registration of and Limitations on Transfer and Exchange of
Notes; Appointment of Certificate Registrar.......................18
Section 4.03. Xxxxxxxxx, Xxxxxxxxx, Lost or Stolen Notes........................21
Section 4.04. Persons Deemed Owners.............................................22
Section 4.05. Cancellation......................................................22
Section 4.06. Book-Entry Notes..................................................22
Section 4.07. Notices to Depository.............................................23
Section 4.08. Definitive Notes..................................................23
Section 4.09. Tax Treatment.....................................................24
Section 4.10. Satisfaction and Discharge of Indenture...........................24
Section 4.11. Application of Trust Money........................................25
Section 4.12. Subrogation and Cooperation.......................................26
Section 4.13. Repayment of Monies Held by Paying Agent..........................26
Section 4.14. Temporary Notes...................................................27
ARTICLE V Default and Remedies.....................................................27
Section 5.01. Events of Default.................................................27
Section 5.02. Acceleration of Maturity; Rescission and Annulment................27
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee.................................................28
Section 5.04. Remedies; Priorities..............................................30
Section 5.05. Optional Preservation of the Trust Estate.........................32
Section 5.06. Limitation of Suits...............................................32
Section 5.07. Unconditional Rights of Noteholders to Receive Principal and
Interest..........................................................33
Section 5.08. Restoration of Rights and Remedies................................33
Section 5.09. Rights and Remedies Cumulative....................................33
Section 5.10. Delay or Omission Not a Waiver....................................33
Section 5.11. Control by the Credit Enhancer or Noteholders.....................33
Section 5.12. Waiver of Past Default............................................34
Section 5.13. Undertaking for Costs.............................................34
Section 5.14. Waiver of Stay or Extension Laws..................................34
Section 5.15. Sale of Trust Estate..............................................35
Section 5.16. Action on Notes...................................................36
Section 5.17. Performance and Enforcement of Certain Obligations................37
ARTICLE VI The Indenture Trustee....................................................37
Section 6.01. Duties of Indenture Trustee.......................................37
Section 6.02. Rights of Indenture Trustee.......................................38
Section 6.03. Individual Rights of Indenture Trustee............................39
Section 6.04. Indenture Trustee's Disclaimer....................................39
Section 6.05. Notice of Event of Default........................................39
Section 6.06. Reports by Indenture Trustee to Holders...........................39
Section 6.07. Compensation and Indemnity........................................39
Section 6.08. Replacement of Indenture Trustee..................................40
Section 6.09. Successor Indenture Trustee by Xxxxxx.............................41
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee...........................................................41
Section 6.11. Eligibility; Disqualification.....................................42
Section 6.12. Preferential Collection of Claims Against Issuer..................43
Section 6.13. Representations and Warranties....................................43
Section 6.14. Directions to Indenture Trustee...................................43
Section 6.15. Indenture Trustee May Own Securities..............................44
ARTICLE VII Noteholders' Lists and Reports...........................................44
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders.......................................................44
Section 7.02. Preservation of Information; Communications to Noteholders........44
Section 7.03. Reports by Issuer.................................................44
Section 7.04. Reports by Indenture Trustee......................................45
Section 7.05. Exchange Act Reporting............................................45
ARTICLE VIII Accounts, Disbursements and Releases.....................................45
Section 8.01. Collection of Money...............................................45
Section 8.02. Trust Accounts....................................................46
Section 8.03. Officer's Certificate.............................................46
Section 8.04. Termination Upon Distribution to Noteholders......................46
Section 8.05. Release of Trust Estate...........................................47
Section 8.06. Surrender of Notes Upon Final Payment.............................47
ARTICLE IX SUPPLEMENTAL INDENTURES..................................................47
Section 9.01. Supplemental Indentures Without Consent of Noteholders............47
Section 9.02. Supplemental Indentures With Consent of Noteholders...............49
Section 9.03. Execution of Supplemental Indentures..............................50
Section 9.04. Effect of Supplemental Indenture..................................50
Section 9.05. Conformity with Trust Indenture Act...............................51
Section 9.06. Reference in Notes to Supplemental Indentures.....................51
ARTICLE X MISCELLANEOUS............................................................51
Section 10.01. Compliance Certificates and Opinions, etc.........................51
Section 10.02. Form of Documents Delivered to Indenture Trustee..................53
Section 10.03. Acts of Noteholders...............................................53
Section 10.04. Notices, etc., to Indenture Trustee, Issuer, Credit Enhancer
and Rating Agencies...............................................54
Section 10.05. Notices to Noteholders; Waiver....................................55
Section 10.06. Alternate Payment and Notice Provisions...........................55
Section 10.07. Conflict with Trust Indenture Act.................................55
Section 10.08. Effect of Headings................................................56
Section 10.09. Successors and Assigns............................................56
Section 10.10. Separability......................................................56
Section 10.11. Benefits of Indenture.............................................56
Section 10.12. Legal Holidays....................................................56
Section 10.13. GOVERNING LAW.....................................................56
Section 10.14. Counterparts......................................................56
Section 10.15. Recording of Indenture............................................56
Section 10.16. Issuer Obligation.................................................57
Section 10.17. No Petition.......................................................57
Section 10.18. Inspection........................................................57
EXHIBIT
Exhibit A-1 ..Form of Class A Notes A-1
Exhibit A-2 ...Form of Variable Funding Notes A-2
Exhibit B .....Form of Rule 144A Investment Representation B-1
Exhibit C .....Form of Investor Representation Letter C-1
Exhibit D .....Form of Transferor Representation Letter D-1
This Indenture, dated as of May 25, 2006, between HOME EQUITY LOAN TRUST
2006-HSA3, a Delaware statutory trust, as Issuer (the "Issuer"), and JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, as Indenture Trustee (the "Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's Series 2006-HSA3 Home Equity
Loan-Backed Term Notes and Home Equity Loan-Backed Variable Funding Notes (together, the
"Notes") and the Credit Enhancer.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as
trustee for the benefit of the Holders of the Notes, all of the Issuer's right, title and
interest in and to the Home Equity Loans and to all accounts, chattel paper, general
intangibles, payment intangibles, contract rights, certificates of deposit, deposit
accounts, instruments, documents, letters of credit, money, advices of credit, investment
property, goods and other property consisting of, arising under or related to whether now
existing or hereafter created in (a) the Home Equity Loans, (b) the Payment Account, all
funds on deposit or credited thereto from time to time and all proceeds thereof and (c) all
present and future claims, demands, causes and choses in action in respect of any or all of
the foregoing and all payments on or under, and all proceeds of every kind and nature
whatsoever in respect of, any or all of the foregoing and all payments on or under, and all
proceeds of every kind and nature whatsoever in the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, checks, deposit accounts, rights to payment of any
and every kind, and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the proceeds of any
of the foregoing (collectively, the "Trust Estate" or the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of and
interest on, and any other amounts owing in respect of, the Notes, equally and ratably
without prejudice, priority or distinction, and to secure compliance with the provisions of
this Indenture, all as provided in this Indenture.
The foregoing Grant shall inure to the benefit of the Credit Enhancer in
respect of draws made on the Policy and amounts owing to the Credit Enhancer from time to
time pursuant to the Insurance Agreement and payable to the Credit Enhancer pursuant to this
Indenture, and such Grant shall continue in full force and effect for the benefit of the
Credit Enhancer until all such amounts owing to it have been repaid in full.
The Indenture Trustee, as trustee on behalf of the Holders of the Notes, (i)
acknowledges such Grant, (ii) accepts the trust under this Indenture in accordance with the
provisions hereof, (iii) agrees to perform its duties as Indenture Trustee as required
herein and (iv) acknowledges receipt of the Policy and shall hold such Policy in accordance
with the terms of this Indenture for the benefit of the Holders of the Notes.
ARTICLE I
Definitions
Section 1.01. Definitions. For all purposes of this Indenture, except as otherwise
expressly provided herein or unless the context otherwise requires, capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in the Definitions
attached hereto as Appendix A which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
Section 1.02. Incorporation by Reference of Trust Indenture Act. Whenever this Indenture
refers to a provision of the Trust Indenture Act (the "TIA"), the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used in this
Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any other obligor
on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have the
meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to it in accordance
with generally accepted accounting principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the plural include the
singular; and
(vi) any agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such agreement, instrument
or statute as from time to time amended, modified or supplemented and includes (in the case
of agreements or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted successors and
assigns.
ARTICLE II
Original Issuance of Notes
Section 2.01. Form. The Term Notes and the Variable Funding Notes, in each case together
with the Indenture Trustee's certificate of authentication, shall be in substantially the
forms set forth in Exhibits A-1 and A-2, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by this Indenture
and may have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the officers
executing such Notes, as evidenced by their execution of the Notes. Any portion of the text
of any Note may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or produced by any
combination of these methods (with or without steel engraved borders), all as determined by
the Authorized Officers executing such Notes, as evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibits A-1 and A-2 are part of the terms of
this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall be executed on behalf
of the Issuer by any of its Authorized Officers. The signature of any such Authorized
Officer on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who were at any time
Authorized Officers of the Issuer shall bind the Issuer, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the authentication and
delivery of such Notes or did not hold such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and deliver Term Notes
for original issue in an aggregate initial principal amount of $201,014,000 and Variable
Funding Notes for original issue in an aggregate initial principal amount of $0. The
Security Balance of the Variable Funding Notes in the aggregate may not exceed the Maximum
Variable Funding Balance.
Each Note shall be dated the date of its authentication. The Notes shall be issuable
as registered Notes and the Class A Notes shall be issuable in the minimum initial Security
Balances of $100,000 and in integral multiples of $1 in excess thereof.
Each Variable Funding Note shall be initially issued with a Security Balance of $0
or, if applicable, with a Security Balance in the amount equal to the Additional Balance
Differential for the Collection Period related to the Payment Date following the date of
issuance of such Variable Funding Note pursuant to Section 4.01(b).
No Note shall be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose, unless there appears on such Note a certificate of
authentication substantially in the form provided for herein executed by the Indenture
Trustee by the manual signature of one of its authorized signatories, and such certificate
upon any Note shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
ARTICLE III
Covenants
Section 3.01. Collection of Payments with Respect to the Home Equity Loans. The Indenture
Trustee shall establish and maintain with itself the Payment Account in which the Indenture
Trustee shall, subject to the terms of this paragraph, deposit, on the same day as it is
received from the Master Servicer, each remittance received by the Indenture Trustee with
respect to the Home Equity Loans. The Indenture Trustee shall make all payments of
principal of and interest on the Notes, subject to Section 3.03, as provided in Section 3.05
herein from monies on deposit in the Payment Account.
Section 3.02. Maintenance of Office or Agency. The Issuer will maintain in the City of New
York, an office or agency where, subject to satisfaction of conditions set forth herein,
Notes may be surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The
Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the
foregoing purposes. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust Office, and the
Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
Section 3.03. Money for Payments to Be Held in Trust; Paying Agent. (a) As provided in
Section 3.01, all payments of amounts due and payable with respect to any Notes that are to
be made from amounts withdrawn from the Payment Account pursuant to Section 3.01 shall be
made on behalf of the Issuer by the Indenture Trustee or by the Paying Agent, and no amounts
so withdrawn from the Payment Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture Trustee to execute
and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree
with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so
agrees), subject to the provisions of this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with respect to the Notes in
trust for the benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee and the Credit Enhancer written notice of any default by
the Issuer of which it has actual knowledge in the making of any payment required to be made
with respect to the Notes;
(iii) at any time during the continuance of any such default, upon the written request of
the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by
such Paying Agent;
(iv) immediately resign as Paying Agent and forthwith pay to the Indenture Trustee all
sums held by it in trust for the payment of Notes, if at any time it ceases to meet the
standards required to be met by a Paying Agent at the time of its appointment;
(v) comply with all requirements of the Code with respect to the withholding from any
payments made by it on any Notes of any applicable withholding taxes imposed thereon and
with respect to any applicable reporting requirements in connection therewith; and
(vi) deliver to the Indenture Trustee a copy of the report to Noteholders prepared with
respect to each Payment Date by the Master Servicer pursuant to Section 4.01 of the
Servicing Agreement.
The Issuer may at any time, for the purpose of obtaining the satisfaction and
discharge of this Indenture or for any other purpose, by Issuer Request direct any Paying
Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums
to be held by the Indenture Trustee upon the same trusts as those upon which the sums were
held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with respect to such
money.
Subject to applicable laws with respect to escheat of funds, any money held by the
Indenture Trustee or any Paying Agent in trust for the payment of any amount due with
respect to any Note and remaining unclaimed for one year after such amount has become due
and payable shall be discharged from such trust and be paid to the Issuer on Issuer Request;
and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to
the Issuer for payment thereof (but only to the extent of the amounts so paid to the
Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such
trust money shall thereupon cease; provided, however, that the Indenture Trustee or such
Paying Agent, before being required to make any such repayment, shall at the expense and
direction of the Issuer cause to be published once, in an Authorized Newspaper, notice that
such money remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Issuer. The Indenture Trustee may also adopt and
employ, at the expense and direction of the Issuer, any other reasonable means of
notification of such repayment (including, but not limited to, mailing notice of such
repayment to Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in monies due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying Agent, at the last
address of record for each such Holder).
Section 3.04. Existence. The Issuer will keep in full effect its existence, rights and
franchises as a statutory trust under the laws of the State of Delaware (unless it becomes,
or any successor Issuer hereunder is or becomes, organized under the laws of any other state
or of the United States of America, in which case the Issuer will keep in full effect its
existence, rights and franchises under the laws of such other jurisdiction) and will obtain
and preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and enforceability of this
Indenture, the Notes, the Home Equity Loans and each other instrument or agreement included
in the Trust Estate.
Section 3.05. Payment of Principal and Interest; Defaulted Interest. (a) On each Payment
Date from amounts on deposit in the Payment Account (other than amounts deposited in the
nature of prepayment charges), the Paying Agent shall pay to the Noteholders, the
Certificate Paying Agent, on behalf of the Certificateholders, and to other Persons the
amounts to which they are entitled, as set forth in the statements delivered to the
Indenture Trustee pursuant to Section 4.01 of the Servicing Agreement, as set forth below in
the following order of priority:
(i) first, to the Class A Noteholders and the Variable Funding Noteholders, the Interest
Distribution Amount for the Class A Notes and the Variable Funding Notes for such Payment
Date, on a pro rata basis in accordance with their respective Interest Distribution Amounts;
(ii) second, to the Class A Noteholders and the Variable Funding Noteholders, as principal
on the Class A Notes and Variable Funding Notes, the Principal Collection Distribution
Amount with respect to the Class A Notes and the Variable Funding Notes for such Payment
Date, on a pro rata basis in accordance with the outstanding Security Balances thereof;
(iii) third, to the Class A Noteholders and the Variable Funding Noteholders, as principal
on the Class A Notes and Variable Funding Notes, on a pro rata basis in accordance with the
outstanding Security Balances thereof, the Liquidation Loss Distribution Amount for such
Payment Date;
(iv) fourth, to the Credit Enhancer, the amount of the premium for the Policy and any
previously unpaid premiums for the Policy, with interest thereon as provided in the
Insurance Agreement;
(v) fifth, to the Credit Enhancer, to reimburse it for prior draws made on the Policy
related to payments of principal and interest on the Class A Notes and the Variable Funding
Notes with interest thereon as provided in the Insurance Agreement;
(vi) sixth, to the Class A Noteholders and the Variable Funding Noteholders, as principal
on the Class A Notes and the Variable Funding Notes, on a pro rata basis in accordance with
the outstanding Security Balances thereof, the Overcollateralization Increase Amount, if
any, for such Payment Date;
(vii) seventh, to the Credit Enhancer, any other amounts owed to the Credit Enhancer
pursuant to the Insurance Agreement;
(viii) eighth, to the Class A Noteholders and the Variable Funding Noteholders, any Net WAC
Cap Shortfalls for that Payment Date and any Net WAC Cap Shortfalls for previous Payment
Dates and not previously paid (together with interest thereon at the Note Rate (as adjusted
from time to time)), on a pro rata basis in accordance with the respective amounts of Net
WAC Cap Shortfalls allocated to each such Class for such Payment Date and any previous
Payment Dates not previously paid (with interest thereon);
(ix) ninth, to pay to the holders of the Class A Notes and the Variable Funding Notes, pro
rata, any Relief Act Shortfalls incurred during the related Collection Period; and
(x) tenth, any remaining amount (other than amounts in the nature of prepayment charges)
to the Certificate Paying Agent on behalf of the holders of the Class SB Certificates and
any amounts in the nature of prepayment charges to the Certificate Paying Agent, on behalf
of the holders of the Class SB Certificates;
provided, however, in the event that on a Payment Date a Credit Enhancer Default shall have
occurred and be continuing, then the priorities of distributions described above will be
adjusted such that payments of any required payments of principal on the Notes on each
Payment Date pursuant to clause 3.05(a)(iii) above will include all Liquidation Loss Amounts
for such Payment Date and for all previous Collection Periods until paid or covered in full,
to the extent not otherwise covered by a Liquidation Loss Distribution Amount, a reduction
of the Overcollateralization Amount on such Payment Date or a draw on the Policy (up to the
outstanding Security Balance thereof).
On the Final Scheduled Payment Date or other final Payment Date for the Notes, the
amount to be paid pursuant to clause (iii) above shall be equal to the Security Balances of
the Notes immediately prior to such Payment Date. Notwithstanding anything herein to the
contrary, if the final Payment Date is a date on which the Master Servicer has exercised its
right to purchase all of the Home Equity Loans pursuant to Section 8.08 of the Servicing
Agreement, the priorities set forth in clauses (i) through (iii) above shall be disregarded,
and amounts on deposit in the Payment Account with respect to the Home Equity Loans will be
applied first, to pay the Interest Distribution Amount for the Class A Notes and Variable
Funding Notes, on a pro rata basis in accordance with their respective Interest Distribution
Amounts; and second, to pay principal on the Class A Notes and Variable Funding Notes on a
pro rata basis in accordance with their respective Security Balances, until the Security
Balances thereof have been reduced to zero and then in accordance with the priorities set
forth in clauses (iv) through (x) above.
(b) Relief Act Shortfalls on the Home Equity Loans will be allocated to the Class A Notes
and Variable Funding Notes on a pro rata basis in accordance with the amount of accrued
interest payable on that Class for such Payment Date, absent such reductions.
(c) On each Payment Date, the Certificate Paying Agent shall deposit in the Certificate
Distribution Account all amounts it received pursuant to this Section 3.05 for the purpose
of distributing such funds to the Certificateholders.
The amounts paid to Noteholders shall be paid in respect of the Term Notes or
Variable Funding Notes, as the case may be, in accordance with the applicable percentage as
set forth in paragraph (d) below. Interest will accrue on the Notes during an Interest
Period, on the basis of the actual number of days in such Interest Period and a year assumed
to consist of 360 days.
Any installment of interest or principal, if any, payable on any Note that is
punctually paid or duly provided for by the Issuer on the applicable Payment Date shall, if
such Holder holds Notes of an aggregate initial Security Balance or notional amount of at
least $1,000,000, be paid to each Holder of record on the preceding Record Date, by wire
transfer to an account specified in writing by such Holder reasonably satisfactory to the
Indenture Trustee as of the preceding Record Date or in all other cases or if no such
instructions have been delivered to the Indenture Trustee, by check to such Noteholder
mailed to such Holder's address as it appears in the Note Register the amount required to be
distributed to such Holder on such Payment Date pursuant to such Holder's Securities;
provided, however, that the Indenture Trustee shall not pay to such Holders any amount
required to be withheld from a payment to such Holder by the Code.
(d) Principal of each Note shall be due and payable in full on the Final Scheduled
Payment Date for such Note as provided in the related form of Note set forth in Exhibits A-1
and A-2. All principal payments on each of the Term Notes and Variable Funding Notes shall
be made in accordance with the priorities set forth in paragraphs (a) and (b) above to the
Noteholders entitled thereto in accordance with the related Percentage Interests represented
thereby. Upon written notice to the Indenture Trustee by the Issuer, the Indenture Trustee
shall notify the Person in whose name a Note is registered at the close of business on the
Record Date preceding the Final Scheduled Payment Date or other final Payment Date. Such
notice shall be mailed no later than five Business Days prior to such Final Scheduled
Payment Date or other final Payment Date and shall specify that payment of the principal
amount and any interest due with respect to such Note at the Final Scheduled Payment Date or
other final Payment Date will be payable only upon presentation and surrender of such Note
and shall specify the place where such Note may be presented and surrendered for such final
payment.
Section 3.06. Protection of Trust Estate. (a) The Issuer will from time to time execute
and deliver all such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments, and will
take such other action necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the priority thereof) of
this Indenture or carry out more effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant made or to be made by
this Indenture;
(iii) cause the Trust to enforce any of the Home Equity Loans; or
(iv) preserve and defend title to the Trust Estate and the rights of the Indenture Trustee
and the Noteholders and the Credit Enhancer in such Trust Estate against the claims of all
persons and parties.
(b) Except as otherwise provided in this Indenture, the Indenture Trustee shall not
remove any portion of the Trust Estate that consists of money or is evidenced by an
instrument, certificate or other writing from the jurisdiction in which it was held at the
date of the most recent Opinion of Counsel delivered pursuant to Section 3.07 (or from the
jurisdiction in which it was held as described in the Opinion of Counsel delivered at the
Closing Date pursuant to Section 3.07(a), if no Opinion of Counsel has yet been delivered
pursuant to Section 3.07(b)) unless the Indenture Trustee shall have first received an
Opinion of Counsel to the effect that the lien and security interest created by this
Indenture with respect to such property will continue to be maintained after giving effect
to such action or actions.
The Issuer hereby designates the Indenture Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument required to be
executed pursuant to this Section 3.06.
Section 3.07. Opinions as to Trust Estate. (a) On the Closing Date, the Issuer shall
furnish to the Indenture Trustee, the Credit Enhancer and the Owner Trustee an Opinion of
Counsel at the expense of the Issuer stating that, upon delivery of the Loan Agreements
relating to the Initial Home Equity Loans to the Indenture Trustee or the Custodian, the
Indenture Trustee will have a perfected, first priority security interest in the Home Equity
Loans.
(b) On or before December 31st in each calendar year, beginning in 2006, the Issuer shall
furnish to the Indenture Trustee an Opinion of Counsel at the expense of the Issuer either
stating that, in the opinion of such counsel, such action has been taken with respect to the
recording, filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the lien and
security interest in the Home Equity Loans and reciting the details of such action or
stating that in the opinion of such counsel no such action is necessary to maintain such
lien and security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental hereto and
any other requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest in the Home Equity Loans until December 31 in the following
calendar year.
Section 3.08. Performance of Obligations; Servicing Agreement. (a) The Issuer will
punctually perform and observe all of its obligations and agreements contained in this
Indenture, the Basic Documents and in the instruments and agreements included in the Trust
Estate.
(b) The Issuer may contract with other Persons to assist it in performing its duties
under this Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee in an Officer's Certificate of the Issuer shall be deemed to be action
taken by the Issuer.
(c) The Issuer will not take any action or permit any action to be taken by others which
would release any Person from any of such Person's covenants or obligations under any of the
documents relating to the Home Equity Loans or under any instrument included in the Trust
Estate, or which would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the documents relating to
the Home Equity Loans or any such instrument, except such actions as the Master Servicer is
expressly permitted to take in the Servicing Agreement.
(d) The Issuer may retain an administrator and may enter into contracts with other
Persons for the performance of the Issuer's obligations hereunder, and performance of such
obligations by such Persons shall be deemed to be performance of such obligations by the
Issuer.
Section 3.09. Negative Covenants. So long as any Notes are Outstanding, the Issuer shall
not:
(a) except as expressly permitted by this Indenture, sell, transfer, exchange or
otherwise dispose of the Trust Estate, unless directed to do so by the Indenture Trustee;
(b) claim any credit on, or make any deduction from the principal or interest payable in
respect of, the Notes (other than amounts properly withheld from such payments under the
Code) or assert any claim against any present or former Noteholder by reason of the payment
of the taxes levied or assessed upon any part of the Trust Estate;
(c) (i) permit the validity or effectiveness of this Indenture to be impaired, or permit
the lien of this Indenture to be amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly permitted hereby, (ii)
permit any lien, charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or otherwise arise
upon or burden the Trust Estate or any part thereof or any interest therein or the proceeds
thereof or (iii) permit the lien of this Indenture not to constitute a valid first priority
security interest in the Trust Estate; or
(d) impair or cause to be impaired the Issuer's interest in the Home Equity Loans, the
Purchase Agreement or in any Basic Document, if any such action would materially and
adversely affect the interests of the Noteholders or the Credit Enhancer.
Section 3.10. Annual Statement as to Compliance. The Issuer will deliver to the Indenture
Trustee, within 120 days after the end of each fiscal year of the Issuer (commencing with
the fiscal year 2006), an Officer's Certificate stating, as to the Authorized Officer
signing such Officer's Certificate, that:
(a) a review of the activities of the Issuer during such year and of its performance
under this Indenture and the Trust Agreement has been made under such Authorized Officer's
supervision; and
(b) to the best of such Authorized Officer's knowledge, based on such review, the Issuer
has complied with all conditions and covenants under this Indenture and the provisions of
the Trust Agreement throughout such year, or, if there has been a default in its compliance
with any such condition or covenant, specifying each such default known to such Authorized
Officer and the nature and status thereof.
Section 3.11. Recording of Assignments. The Issuer shall enforce the obligation of the
Seller under the Purchase Agreement to submit or cause to be submitted for recordation all
Assignments of Mortgages within 60 days of receipt of recording information by the Master
Servicer.
Section 3.12. Representations and Warranties Concerning the Home Equity Loans. The
Indenture Trustee, as pledgee of the Home Equity Loans, has the benefit of the
representations and warranties made by the Seller in Section 3.1(a) and Section 3.1(b) of
the Purchase Agreement concerning the Home Equity Loans and the right to enforce the
remedies against the Seller provided in such Section 3.1 to the same extent as though such
representations and warranties were made directly to the Indenture Trustee.
Section 3.13. Assignee of Record of the Home Equity Loans. As pledgee of the Home Equity
Loans, the Indenture Trustee shall hold record title to the Home Equity Loans by being named
as payee in the endorsements or assignments of the Loan Agreements and assignee in the
Assignments of Mortgage to be recorded under Section 2.1 of the Purchase Agreement. Except
as expressly provided in the Purchase Agreement or in the Servicing Agreement with respect
to any specific Home Equity Loan, the Indenture Trustee shall not execute any endorsement or
assignment or otherwise release or transfer such record title to any of the Home Equity
Loans until such time as the remaining Trust Estate may be released pursuant to Section
8.05(b).
Section 3.14. Master Servicer as Agent and Bailee of the Indenture Trustee. Solely for
purposes of perfection under Section 9-313 or 9-314 of the Uniform Commercial Code or other
similar applicable law, rule or regulation of the state in which such property is held by
the Master Servicer, the Issuer and the Indenture Trustee hereby acknowledge that the Master
Servicer is acting as agent and bailee of the Indenture Trustee in holding amounts on
deposit in the Custodial Account pursuant to Section 3.02 of the Servicing Agreement that
are allocable to the Home Equity Loans, as well as the agent and bailee of the Indenture
Trustee in holding any Related Documents released to the Master Servicer pursuant to Section
3.06(c) of the Servicing Agreement, and any other items constituting a part of the Trust
Estate which from time to time come into the possession of the Master Servicer. It is
intended that, by the Master Servicer's acceptance of such agency pursuant to Section 3.02
of the Servicing Agreement, the Indenture Trustee, as a pledgee of the Home Equity Loans,
will be deemed to have possession of such Related Documents, such monies and such other
items for purposes of Section 9-305 of the Uniform Commercial Code of the state in which
such property is held by the Master Servicer.
Section 3.15. Investment Company Act. The Issuer shall not become an "investment company"
or under the "control" of an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (or any successor or amendatory statute), and the
rules and regulations thereunder (taking into account not only the general definition of the
term "investment company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.15 if it shall
have obtained an order exempting it from regulation as an "investment company" so long as it
is in compliance with the conditions imposed in such order.
Section 3.16. Issuer May Consolidate, etc. (a) The Issuer shall not consolidate or merge
with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such consolidation or
merger shall be a Person organized and existing under the laws of the United States of
America or any state or the District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee, in form reasonably
satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and
interest on all Notes and to the Certificate Paying Agent, on behalf of the
Certificateholders and the performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Event of Default shall have
occurred and be continuing;
(iii) the Issuer receives the prior written consent of the Credit Enhancer and the Rating
Agencies shall have notified the Issuer that such transaction shall not cause the rating of
the Notes to be reduced, suspended or withdrawn or to be considered by either Rating Agency
to be below investment grade without taking into account the Policy;
(iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies
thereof to the Indenture Trustee and the Credit Enhancer) to the effect that such
transaction will not have any material adverse tax consequence to the Issuer, any Noteholder
or any Certificateholder;
(v) any action that is necessary to maintain the lien and security interest created by
this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and
an Opinion of Counsel each stating that such consolidation or merger and such supplemental
indenture comply with this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing required by the
Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or assets, including
those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the properties and assets of the
Issuer the conveyance or transfer of which is hereby restricted shall (i) be a United States
citizen or a Person organized and existing under the laws of the United States of America or
any state, (ii) expressly assumes, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture Trustee, the due
and punctual payment of the principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (iii) expressly agrees by means of such
supplemental indenture that all right, title and interest so conveyed or transferred shall
be subject and subordinate to the rights of Holders of the Notes, (iv) unless otherwise
provided in such supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense arising under or related
to this Indenture and the Notes and (v) expressly agrees by means of such supplemental
indenture that such Person (or if a group of Persons, then one specified Person) shall make
all filings with the Commission (and any other appropriate Person) required by the Exchange
Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default or Event of Default
shall have occurred and be continuing;
(iii) the Issuer receives the prior written consent of the Credit Enhancer and the Rating
Agencies shall have notified the Issuer that such transaction shall not cause the rating of
the Notes to be reduced, suspended or withdrawn, if determined without regard to the Policy;
(iv) the Issuer shall have received an Opinion of Counsel (and shall have delivered copies
thereof to the Indenture Trustee and the Credit Enhancer) to the effect that such
transaction will not have any material adverse tax consequence to the Issuer or any
Noteholder;
(v) any action that is necessary to maintain the lien and security interest created by
this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and
an Opinion of Counsel each stating that such conveyance or transfer and such supplemental
indenture comply with this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any filing required by the
Exchange Act).
Section 3.17. Successor or Transferee. (a) Upon any consolidation or merger of the Issuer
in accordance with Section 3.16(a), the Person formed by or surviving such consolidation or
merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise
every right and power of, the Issuer under this Indenture with the same effect as if such
Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the Issuer pursuant
to Section 3.16(b), the Issuer will be released from every covenant and agreement of this
Indenture to be observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Indenture Trustee of such conveyance
or transfer.
Section 3.18. No Other Business. The Issuer shall not engage in any business other than
financing, purchasing, owning and selling and managing the Home Equity Loans and the
issuance of the Notes and Certificates in the manner contemplated by this Indenture and the
Basic Documents and all activities incidental thereto.
Section 3.19. No Borrowing. The Issuer shall not issue, incur, assume, guarantee or
otherwise become liable, directly or indirectly, for any indebtedness except for the Notes.
Section 3.20. Guarantees, Loans, Advances and Other Liabilities. Except as contemplated by
this Indenture or the other Basic Documents, the Issuer shall not make any loan or advance
or credit to, or guarantee (directly or indirectly or by an instrument having the effect of
assuring another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase, repurchase or
acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
Section 3.21. Capital Expenditures. The Issuer shall not make any expenditure (by long-
term or operating lease or otherwise) for capital assets (either realty or personalty).
Section 3.22. Owner Trustee Not Liable for Certificates or Related Documents. The recitals
contained herein shall be taken as the statements of the Depositor, and the Owner Trustee
assumes no responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Indenture, of any Basic Document
or of the Certificates (other than the signatures of the Owner Trustee on the Certificates)
or the Notes, or of any Related Documents. The Owner Trustee shall at no time have any
responsibility or liability with respect to the sufficiency of the Trust Estate or its
ability to generate the payments to be distributed to Certificateholders under the Trust
Agreement or the Noteholders under this Indenture, including, the compliance by the
Depositor or the Seller with any warranty or representation made under any Basic Document or
in any related document or the accuracy of any such warranty or representation, or any
action of the Certificate Paying Agent, the Certificate Registrar or the Indenture Trustee
taken in the name of the Owner Trustee.
Section 3.23. Restricted Payments. The Issuer shall not, directly or indirectly, (i) pay
any dividend or make any distribution (by reduction of capital or otherwise), whether in
cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a
beneficial interest in the Issuer or otherwise with respect to any ownership or equity
interest or security in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire
for value any such ownership or equity interest or security or (iii) set aside or otherwise
segregate any amounts for any such purpose; provided, however, that the Issuer may make, or
cause to be made, (x) distributions to the Owner Trustee and the Certificateholders as
contemplated by, and to the extent funds are available for such purpose under the Trust
Agreement and (y) payments to the Master Servicer pursuant to the terms of the Servicing
Agreement. The Issuer will not, directly or indirectly, make payments to or distributions
from the Custodial Account except in accordance with this Indenture and the other Basic
Documents.
Section 3.24. Notice of Events of Default. The Issuer shall give the Indenture Trustee, the
Credit Enhancer and the Rating Agencies prompt written notice of each Event of Default
hereunder and under the Trust Agreement.
Section 3.25. Further Instruments and Acts. Upon request of the Indenture Trustee or the
Credit Enhancer, the Issuer will execute and deliver such further instruments and do such
further acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
Section 3.26. Statements to Noteholders. On each Payment Date, the Indenture Trustee and
the Certificate Registrar shall forward by mail to each Noteholder or make available on its
website initially located at "xxx.xxxxxxxx.xxx/xxx" and Certificateholder, respectively, the
statement delivered to it, on the Business Day following the related Determination Date
pursuant to Section 4.01 of the Servicing Agreement.
Section 3.27. Determination of Note Rates. On the second LIBOR Business Day immediately
preceding (i) the Closing Date in the case of the first Interest Period and (ii) the first
day of each succeeding Interest Period, the Indenture Trustee shall determine LIBOR and the
Note Rate for such Interest Period and shall inform the Issuer, the Master Servicer and the
Depositor at their respective facsimile numbers given to the Indenture Trustee in writing.
Section 3.28. Payments under the Policy. (a) On or prior to 12:00 noon New York City time
on the second Business Day before any Payment Date, the Indenture Trustee shall make a draw
on the Policy, in an amount, if any, equal to the Deficiency Amount with respect to the
Notes. For purposes of the foregoing, amounts in the Payment Account available for interest
distributions on the Notes on any Payment Date shall be deemed to include all amounts
distributed on the Home Equity Loans for such Payment Date, other than the Principal
Collection Distribution Amount distributed thereon. In addition, on the Final Scheduled
Payment Date, the Indenture Trustee shall make a draw on the Policy in the amount by which
the Security Balances on the Notes exceeds the payments otherwise available to be made to
the Holders thereof on the Final Scheduled Payment Date.
(b) The Indenture Trustee shall submit, if any Deficiency Amount is specified in any
statement to Holders of the Notes prepared by the Master Servicer pursuant to Section 4.01
of the Servicing Agreement and timely delivered to the Indenture Trustee, the notice (in the
form attached as Exhibit A to the Policy) in the amount of the Deficiency Amount to the
Credit Enhancer no later than 12:00 noon, New York City time, on the second Business Day
prior to the applicable Payment Date. Upon receipt of such Deficiency Amount in accordance
with the terms of the Policy, the Indenture Trustee shall deposit such Deficiency Amount in
the Payment Account for distribution to the Noteholders pursuant to Section 3.05.
Section 3.29. Additional Representations of the Issuer.
The Issuer represents and warrants to the Indenture Trustee and the Credit
Enhancer that as of the Closing Date, unless specifically stated otherwise:
(a) This Indenture creates a valid and continuing security interest (as defined in the
New York UCC) in the Mortgage Notes in favor of the Indenture Trustee, which security
interest is prior to all other Liens (except as expressly permitted otherwise in this
Indenture), and is enforceable as such as against creditors of and purchasers from the
Issuer.
(b) The Mortgage Notes constitute "instruments" within the meaning of the New York UCC
and the Delaware UCC.
(c) The Issuer owns and has good and marketable title to the Mortgage Notes free and
clear of any Lien of any Person.
(d) The original executed copy of each mortgage Note (except for any Mortgage Note with
respect to which a Lost Note Affidavit has been delivered to the Custodian) has been
delivered to the Custodian.
(e) The Issuer has received a written acknowledgment from the Custodian that the
Custodian is acting solely as agent of the Indenture Trustee for the benefit of the
Noteholders and the Credit Enhancer.
(f) Other than the security interest granted to the Indenture Trustee pursuant to this
Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or
otherwise conveyed any of the Mortgage Notes. The Issuer has not authorized the filing of
and is not aware of any financing statements against the Issuer that include a
description of collateral covering the Mortgage Notes other than any financing statement
relating to the security interest granted to the Indenture Trustee hereunder or any
security interest that has been terminated. The Issuer is not aware of any judgment or
tax lien filings against the Issuer.
(g) None of the Mortgage Notes has any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other than the Indenture Trustee,
except for (i) any endorsements that are part of a complete chain of endorsements from
the originator of the Mortgage Note to the Indenture Trustee, and (ii) any marks or
notations pertaining to Liens that have been terminated or released.
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture.
Section 4.01. The Notes; Increase of Maximum Variable Funding Balance; Variable Funding
Notes. (a) The Term Notes shall be registered in the name of a nominee designated by the
Depository. Beneficial Owners will hold interests in the Class A Notes as set forth in
Section 4.06 herein in minimum initial Security Balances of $100,000 and integral multiples
of $1 in excess thereof. The Capped Funding Notes will be issued as definitive notes in
fully registered form in minimum initial Security Balances of $10,000 and integral multiples
of $1 in excess thereof, together with any additional amount necessary to cover (i) the
aggregate initial Security Balance of the Capped Funding Notes surrendered at the time of
the initial denominational exchange thereof (with such initial Security Balance in each case
being deemed to be the Security Balance of the Capped Funding Notes at the time of such
initial denominational exchange thereof) or (ii) the aggregate initial Security Balance of
any Capped Funding Notes issued in an exchange described in subsection (d) below.
The Indenture Trustee may for all purposes (including the making of payments due on
the Notes) deal with the Depository as the authorized representative of the Beneficial
Owners with respect to the Term Notes for the purposes of exercising the rights of Holders
of Term Notes hereunder. Except as provided in the next succeeding paragraph of this
Section 4.01, the rights of Beneficial Owners with respect to the Term Notes shall be
limited to those established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08, Beneficial
Owners shall not be entitled to definitive certificates for the Term Notes as to which they
are the Beneficial Owners. Requests and directions from, and votes of, the Depository as
Holder of the Term Notes shall not be deemed inconsistent if they are made with respect to
different Beneficial Owners. The Indenture Trustee may establish a reasonable record date
in connection with solicitations of consents from or voting by Noteholders and give notice
to the Depository of such record date. Without the consent of the Issuer and the Indenture
Trustee, no Term Note may be transferred by the Depository except to a successor Depository
that agrees to hold such Note for the account of the Beneficial Owners.
In the event the Depository Trust Company resigns or is removed as Depository, the
Indenture Trustee with the approval of the Issuer may appoint a successor Depository. If no
successor Depository has been appointed within 30 days of the effective date of the
Depository's resignation or removal, each Beneficial Owner shall be entitled to certificates
representing the Notes it beneficially owns in the manner prescribed in Section 4.08.
The Notes shall, on original issue, be executed on behalf of the Issuer by the Owner
Trustee, not in its individual capacity but solely as Owner Trustee, authenticated by the
Note Registrar and delivered by the Indenture Trustee to or upon the order of the Issuer.
(b) On each Payment Date, the aggregate Security Balance of the Variable Funding Notes
shall be increased by an amount equal to the Additional Balance Differential for such
Payment Date, subject to the Maximum Variable Funding Balance and the terms and conditions
set forth below. The Maximum Variable Funding Balance may be increased as provided in
Section 9.01(a)(viii).
(c) The Variable Funding Notes issued on the Closing Date shall bear the Designation
"VFN-1" and each new Variable Funding Note for such Class of Variable Funding Note will bear
sequential numerical designations in the order of their issuance.
(d) Subject to the following conditions, the Variable Funding Notes may be exchanged
pursuant to Section 4.02 for one or more Capped Funding Notes. Prior to any such exchange,
the party requesting the exchange must provide an Opinion of Counsel, addressed to the
Credit Enhancer, the Issuer and the Indenture Trustee, to the effect that the Capped Funding
Notes shall qualify for federal income tax purposes as indebtedness of the Issuer and the
Issuer will not be characterized as an association (or a publicly traded partnership)
taxable as a corporation or a taxable mortgage pool within the meaning of Section 7701(i) of
the Code. If required by the Opinion of Counsel, the Capped Funding Notes may be issued
concurrently with a reduction in the Security Balance of the Variable Funding Notes and an
equivalent increase in the Security Balance of the Certificates, pursuant to Section 3.12 of
the Trust Agreement. Upon receipt of the Opinion of Counsel, the Indenture Trustee shall
issue the Capped Funding Notes with a Security Balance equal to the Security Balance
permitted under such Opinion of Counsel, in minimum denominations as set forth in subsection
(a) above. The Capped Funding Notes shall bear the designation "Capped" in addition to any
other applicable designation. In connection with such exchange, any Security Balance not
represented by either a Capped Funding Note or an increase in the Security Balance of the
Certificates referred to above shall result in the issuance of a new Variable Funding Note
having an initial Security Balance equal to the excess of the outstanding Security Balance
of the Variable Funding Note so surrendered over the initial Security Balances of the
related Capped Funding Notes and an increase in the Security Balance of the Certificates
referred to above. The Indenture Trustee and the Issuer agree to cooperate with each other
and the party requesting the exchange of Variable Funding Notes for Capped Funding Notes,
the Credit Enhancer, the Depositor, the Seller and the Owner Trustee and to cause no
unreasonable delay in issuing Capped Funding Notes in connection with this Section and
Section 3.12 of the Trust Agreement.
Section 4.02. Registration of and Limitations on Transfer and Exchange of Notes; Appointment
of Certificate Registrar. (a) The Issuer shall cause to be kept at the Indenture
Trustee's Corporate Trust Office a Note Register in which, subject to such reasonable
regulations as it may prescribe, the Note Registrar shall provide for the registration of
Notes and of transfers and exchanges of Notes as herein provided.
(b) Subject to the restrictions and limitations set forth below, upon surrender
for registration of transfer of any Note at the Corporate Trust Office, the Issuer shall
execute and the Note Registrar shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.
(c) No Variable Funding Note, other than any Capped Funding Notes, may be
transferred. Subject to the provisions set forth below, Capped Funding Notes may be
transferred, provided that with respect to the initial transfer thereof by the Seller, prior
written notification of such transfer shall have been given to the Rating Agencies and to
the Credit Enhancer by the Seller.
(d) No transfer, sale, pledge or other disposition of a Capped Funding Note shall
be made unless such transfer, sale, pledge or other disposition is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any applicable
state securities laws or is made in accordance with said Act and laws. In the event of any
such transfer, the Indenture Trustee or the Issuer shall require the transferee to execute
either (i)(a) an investment letter in substantially the form attached hereto as Exhibit B
(or in such form and substance reasonably satisfactory to the Indenture Trustee and the
Issuer) which investment letters shall not be an expense of the Trust, the Owner Trustee,
the Indenture Trustee, the Master Servicer, the Depositor or the Issuer and which investment
letter states that, among other things, such transferee (a) is a "qualified institutional
buyer" as defined under Rule 144A, acting for its own account or the accounts of other
"qualified institutional buyers" as defined under Rule 144A, and (b) is aware that the
proposed transferor intends to rely on the exemption from registration requirements under
the Securities Act of 1933, as amended, provided by Rule 144A or (ii)(a) a written Opinion
of Counsel (which may be in-house counsel) acceptable to and in form and substance
reasonably satisfactory to the Indenture Trustee and the Issuer that such transfer may be
made pursuant to an exemption, describing the applicable exemption and the basis therefor,
from said Act and laws or is being made pursuant to said Act and laws, which Opinion of
Counsel shall not be an expense of the Indenture Trustee or the Issuer and (b) the Indenture
Trustee shall require the transferee executes an investment letter in substantially the form
of Exhibit C hereto and the transferor executes a representation letter, substantially in
the form of Exhibit D hereto acceptable to and in form and substance reasonably satisfactory
to the Issuer and the Indenture Trustee certifying to the Issuer and the Indenture Trustee
the facts surrounding such transfer, which investment letter shall not be an expense of the
Indenture Trustee or the Issuer. The Holder of a Capped Funding Note desiring to effect
such transfer shall, and does hereby agree to, indemnify the Indenture Trustee, the Credit
Enhancer and the Issuer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws. In addition, any
Noteholder of a Capped Funding Note desiring to effect any such transfer shall deliver, if
any private placement memorandum or other offering document prepared in connection with the
offering of such Capped Funding Notes specifies that such delivery will be required, to the
Indenture Trustee and the Master Servicer, either (i) a certificate substantially to the
effect of the certification set forth in Exhibit G to the Trust Agreement or (ii) an Opinion
of Counsel that establishes to the satisfaction of the Indenture Trustee, the Credit
Enhancer and the Master Servicer that the purchase of Certificates is permissible under
applicable law, will not constitute or result in any non-exempt prohibited transaction under
ERISA or Section 4975 of the Code and will not subject the Indenture Trustee or the Master
Servicer to any obligation or liability (including obligations or liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in this Indenture, which Opinion
of Counsel shall not be an expense of the Indenture Trustee or the Master Servicer.
Notwithstanding the foregoing, the restrictions on transfer specified in this paragraph are
not applicable to any Capped Funding Notes that have been registered under the Securities
Act of 1933 pursuant to Section 2.4 of the Purchase Agreement.
(e)(i) In the case of any Class A Note (each such Note, a "Book-Entry Non-Restricted
Note") presented for registration in the name of any Person, such Person shall be deemed to
have represented to the Indenture Trustee, the Depositor and the Master Servicer that (A)
the Person is not a Plan Investor, or (B) the acquisition of the Note by that Person does
not constitute or give rise to a prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code for which no statutory, regulatory or administrative exemption is
available.
(ii) (A) If any Class A Note (or any interest therein) is acquired or held in
violation of the provisions of clause (e)(i) above, then the last preceding Transferee that
is not in violation of the provisions of clause (e)(i) above shall be restored, to the
extent permitted by law, to all rights and obligations as Note Owner thereof retroactive to
the date of such Transfer of such Book-Entry Non-Restricted Note. The Indenture Trustee
shall be under no liability to any Person for making any payments due on such Note to such
preceding Transferee.
(iii) Any Person investing assets of a Plan may not acquire any Note or any interest
therein if the Depositor, the Master Servicer, the Indenture Trustee, the Owner Trustee or
any affiliates of any such person (A) has investment or administrative discretion with
respect to those plan assets of such Plan; (B) has authority or responsibility to give or
regularly gives investment advice with respect to those plan assets for a fee and pursuant
to an agreement or understanding that such advice will serve as a primary basis for
investment decisions with respect to those plan assets and will be based on the particular
investment needs for the Plan; or (C) unless United States Department of Labor Prohibited
Transaction Class Exemption 90-1, 91-38 or 95-60 applies, is an employer maintaining or
contributing to the Plan.
(iv) Any purported Beneficial Owner whose acquisition or holding of any Book-Entry
Non-Restricted Note (or interest therein) was effected in violation of the restrictions in
this Section 4.02(e) shall indemnify and hold harmless the Depositor, the Indenture Trustee,
the Underwriter, the Master Servicer, any Subservicer, and the Trust from and against any
and all liabilities, claims, costs or expenses incurred by such parties as a result of such
acquisition or holding.
(f) Subject to the foregoing, at the option of the Noteholders, Notes may be
exchanged for other Notes of like tenor, in each case in authorized initial Security
Balances evidencing the same aggregate Percentage Interests upon surrender of the Notes to
be exchanged at the Corporate Trust Office of the Note Registrar. With respect to any
surrender of Capped Funding Notes for exchange the new Notes delivered in exchange therefor
will bear the designation "Capped" in addition to any other applicable designations.
Whenever any Notes are so surrendered for exchange, the Indenture Trustee shall execute and
the Note Registrar shall authenticate and deliver the Notes which the Noteholder making the
exchange is entitled to receive. Each Note presented or surrendered for registration of
transfer or exchange shall (if so required by the Note Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form reasonably satisfactory to the Note
Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing
with such signature guaranteed by a commercial bank or trust company located or having a
correspondent located in the city of New York. Notes delivered upon any such transfer or
exchange will evidence the same obligations, and will be entitled to the same rights and
privileges, as the Notes surrendered.
(g) No service charge shall be imposed for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any registration of
transfer or exchange of Notes.
(h) All Notes surrendered for registration of transfer and exchange shall be
cancelled by the Note Registrar and delivered to the Indenture Trustee for subsequent
destruction without liability on the part of either.
(i) The Issuer hereby appoints the Indenture Trustee as Certificate Registrar to
keep at its Corporate Trust Office a Certificate Register pursuant to Section 3.09 of the
Trust Agreement in which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of Certificates and of transfers
and exchanges thereof pursuant to Section 3.05 of the Trust Agreement. The Indenture
Trustee hereby accepts such appointment.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any mutilated Note is
surrendered to the Indenture Trustee, or the Indenture Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Note, and (ii) there is delivered to
the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer
and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona fide
purchaser, and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note of the same class; provided, however, that if any such destroyed, lost or
stolen Note, but not a mutilated Note, shall have become or within seven days shall be due
and payable, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost
or stolen Note when so due or payable without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to the proviso
to the preceding sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer and the
Indenture Trustee shall be entitled to recover such replacement Note (or such payment) from
the Person to whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered or any assignee of such Person, except a
bona fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer
or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section 4.03, the Issuer may
require the payment by the Holder of such Note of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other reasonable
expenses (including the fees and expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in replacement of any
mutilated, destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude (to the extent
lawful) all other rights and remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes.
Section 4.04. Persons Deemed Owners. Prior to due presentment for registration of transfer
of any Note, the Issuer, the Indenture Trustee, the Credit Enhancer and any agent of the
Issuer or the Indenture Trustee may treat the Person in whose name any Note is registered
(as of the day of determination) as the owner of such Note for the purpose of receiving
payments of principal of and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Issuer, the Indenture
Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to
the contrary.
Section 4.05. Cancellation. All Notes surrendered for payment, registration of transfer,
exchange or redemption shall, if surrendered to any Person other than the Indenture Trustee,
be delivered to the Indenture Trustee and shall be promptly cancelled by the Indenture
Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any
Notes previously authenticated and delivered hereunder which the Issuer may have acquired in
any manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section 4.05, except as expressly permitted by this
Indenture. All cancelled Notes may be held or disposed of by the Indenture Trustee in
accordance with its standard retention or disposal policy as in effect at the time unless
the Issuer shall direct by an Issuer Request that they be destroyed or returned to it;
provided however, that such Issuer Request is timely and the Notes have not been previously
disposed of by the Indenture Trustee.
Section 4.06. Book-Entry Notes. The Term Notes shall initially be issued as one or more
Term Notes held by the Book-Entry Custodian or, if appointed to hold such Term Notes as
provided below, the Depository Trust Company, the initial Depository, and registered in the
name of its nominee Cede & Co. Except as provided below, registration of such Term Notes
may not be transferred by the Indenture Trustee except to another Depository that agrees to
hold such Term Notes for the respective Beneficial Owners. The Indenture Trustee is hereby
initially appointed as the Book-Entry Custodian and hereby agrees to act as such in
accordance herewith and in accordance with the agreement that it has with the Depository
authorizing it to act as such. The Book-Entry Custodian may, and, if it is no longer
qualified to act as such, the Book-Entry Custodian shall, appoint, by a written instrument
delivered to the Depositor, the Master Servicer and, if the Indenture Trustee is not the
Book-Entry Custodian, the Indenture Trustee, any other transfer agent (including the
Depository or any successor Depository) to act as Book-Entry Custodian under such conditions
as the predecessor Book-Entry Custodian and the Depository or any successor Depository may
prescribe, provided that the predecessor Book-Entry Custodian shall not be relieved of any
of its duties or responsibilities by reason of any new appointment, except if the Depository
is the successor to the Book-Entry Custodian. If the Indenture Trustee resigns or is
removed in accordance with the terms hereof, the successor trustee or, if it so elects, the
Depository shall immediately succeed to its predecessor's duties as Book-Entry Custodian.
The Depositor shall have the right to inspect, and to obtain copies of, any Term Notes held
as Book-Entry Notes by the Book-Entry Custodian. No Beneficial Owner will receive a
Definitive Note representing such Beneficial Owner's interest in such Note, except as
provided in Section 4.08. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to Beneficial Owners pursuant to Section 4.08:
(i) the provisions of this Section 4.06 shall be in full force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be entitled to deal with the
Depository for all purposes of this Indenture (including the payment of principal of and
interest on the Notes and the giving of instructions or directions hereunder) as the sole
holder of the Term Notes, and shall have no obligation to the Owners of Term Notes;
(iii) to the extent that the provisions of this Section 4.06 conflict with any other
provisions of this Indenture, the provisions of this Section 4.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised only through the Depository and
shall be limited to those established by law and agreements between such Owners of Term
Notes and the Depository and/or the Depository Participants. Unless and until Definitive
Term Notes are issued pursuant to Section 4.08, the initial Depository will make book-entry
transfers among the Depository Participants and receive and transmit payments of principal
of and interest on the Notes to such Depository Participants; and
(v) whenever this Indenture requires or permits actions to be taken based upon
instructions or directions of Holders of Term Notes evidencing a specified percentage of the
Security Balances of the Term Notes, the Depository shall be deemed to represent such
percentage only to the extent that it has received instructions to such effect from
Beneficial Owners and/or Depository Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Term Notes and has delivered such
instructions to the Indenture Trustee.
Section 4.07. Notices to Depository. Whenever a notice or other communication to the Term
Note Holders is required under this Indenture, unless and until Definitive Term Notes shall
have been issued to Beneficial Owners pursuant to Section 4.08, the Indenture Trustee shall
give all such notices and communications specified herein to be given to Holders of the Term
Notes to the Depository, and shall have no obligation to the Beneficial Owners.
Section 4.08. Definitive Notes. If (i) the Depositor advises the Indenture Trustee in
writing that the Depository is no longer willing or able to properly discharge its
responsibilities with respect to the Term Notes and the Depositor is unable to locate a
qualified successor, (ii) the Depositor notifies the Depository of its intent to terminate
the book-entry system and, upon receipt of a notice of intent from the Depository, the
participants holding beneficial interest in the book-entry notes agree to initiate a
termination or (iii) after the occurrence of an Event of Default, Owners of Term Notes
representing beneficial interests aggregating at least a majority of the Security Balances
of the Term Notes advise the Depository in writing that the continuation of a book-entry
system through the Depository is no longer in the best interests of the Beneficial Owners,
then the Depository shall notify all Beneficial Owners and the Indenture Trustee of the
occurrence of any such event and of the availability of Definitive Term Notes to Beneficial
Owners requesting the same. Upon surrender to the Indenture Trustee of the typewritten Term
Notes representing the Book-Entry Notes by the Book-Entry Custodian or the Depository, as
applicable, accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Term Notes in accordance with the
instructions of the Depository. None of the Issuer, the Note Registrar or the Indenture
Trustee shall be liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the issuance of
Definitive Notes, the Indenture Trustee shall recognize the Holders of the Definitive Notes
as Noteholders.
In addition, if an Event of Default has occurred and is continuing, each Beneficial
Owner materially adversely affected thereby may at its option request a Definitive Note
evidencing such Beneficial Owner's Percentage Interest in the related Class of Notes. In
order to make such request, such Beneficial Owner shall, subject to the rules and procedures
of the Depository, provide the Depository or the related Depository Participant with
directions for the Note Registrar to exchange or cause the exchange of the Beneficial
Owner's interest in such Class of Notes for an equivalent Percentage Interest in fully
registered definitive form. Upon receipt by the Note Registrar of instructions from the
Depository directing the Note Registrar to effect such exchange (such instructions to
contain information regarding the Class of Notes and the Security Balance being exchanged,
the Depository Participant account to be debited with the decrease, the registered holder of
and delivery instructions for the Definitive Note, and any other information reasonably
required by the Note Registrar), (i) the Note Registrar shall instruct the Depository to
reduce the related Depository Participant's account by the aggregate Security Balance of the
Definitive Note, (ii) the Issuer shall execute and the Note Registrar shall authenticate and
deliver, in accordance with the registration and delivery instructions provided by the
Depository, a Definitive Note evidencing such Beneficial Owner's Percentage Interest in such
Class of Notes and (iii) the Issuer shall execute and the Note Registrar shall authenticate
a new Book-Entry Note reflecting the reduction in the aggregate Security Balance of such
Class of Notes by the amount of the Definitive Notes.
Section 4.09. Tax Treatment. The Issuer has entered into this Indenture, and the Notes will
be issued, with the intention that, for federal, state and local income, single business and
franchise tax purposes, the Notes will be treated as indebtedness for purposes of such
taxes. The Issuer, by entering into this Indenture, and each Noteholder, by its acceptance
of its Note (and each Beneficial Owner by its acceptance of an interest in the applicable
Book-Entry Note), agree to treat the Notes for federal, state and local income, single
business and franchise tax purposes as indebtedness for purposes of such taxes.
Section 4.10. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of
further effect with respect to the Notes except as to (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Notes, (iii) rights
of Noteholders to receive payments of principal thereof and interest thereon, (iv) Sections
3.03, 3.04, 3.06, 3.09, 3.16, 3.18 and 3.19, (v) the rights, obligations and immunities of
the Indenture Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.11) and (vi) the rights of
Noteholders and the Credit Enhancer as beneficiaries hereof with respect to the property so
deposited with the Indenture Trustee payable to all or any of them, and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i) Notes
that have been destroyed, lost or stolen and that have been replaced or paid as
provided in Section 4.03 and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Issuer and thereafter
repaid to the Issuer or discharged from such trust, as provided in Section 3.03) have
been delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee for
cancellation
a. have become due and payable,
b. will become due and payable at the Final Scheduled Payment Date
within one year, or
c. have been declared immediately due and payable pursuant to
Section 5.02.
and the Issuer, in the case of a. or b. above, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or direct obligations of or
obligations guaranteed by the United States of America (which will mature prior to the date
such amounts are payable), in trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes and Certificates then outstanding not
theretofore delivered to the Indenture Trustee for cancellation when due on the Final
Scheduled Payment Date;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder and under the Insurance Agreement by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee and the Credit
Enhancer an Officer's Certificate and an Opinion of Counsel, each meeting the
applicable requirements of Section 10.01 and each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with and, if the Opinion of Counsel relates to a deposit
made in connection with Section 4.10(A)(2)b. above, such opinion shall further be to
the effect that such deposit will not have any material adverse tax consequences to
the Issuer, any Noteholders or any Certificateholders.
Section 4.11. Application of Trust Money. All monies deposited with the Indenture Trustee
pursuant to Section 4.10 hereof shall be held in trust and applied by it, in accordance with
the provisions of the Notes and this Indenture, to the payment, either directly or through
any Paying Agent or Certificate Paying Agent, as the Indenture Trustee may determine, to the
Holders of Securities, of all sums due and to become due thereon for principal and interest;
but such monies need not be segregated from other funds except to the extent required herein
or required by law.
Section 4.12. Subrogation and Cooperation. The Issuer and the Indenture Trustee acknowledge
that (i) to the extent the Credit Enhancer makes payments under the Policy on account of
principal of or interest on the Home Equity Loans, the Credit Enhancer will be fully
subrogated to the rights of the Noteholders to receive such principal and interest from the
Home Equity Loans and any other Collateral and (ii) the Credit Enhancer shall be paid such
principal and interest but only from the sources and in the manner provided herein and in
the Insurance Agreement for the payment of such principal and interest.
The Indenture Trustee shall cooperate in all respects with any reasonable request or
direction by the Credit Enhancer for action to preserve or enforce the Credit Enhancer's
rights or interest under this Indenture or the Insurance Agreement, consistent with this
Indenture and without limiting the rights of the Noteholders as otherwise set forth in the
Indenture, including, without limitation, upon the occurrence and continuance of a default
under the Insurance Agreement, a request to take any one or more of the following actions:
(i) institute Proceedings for the collection of all amounts then payable on the Notes or
under this Indenture in respect of the Notes and all amounts payable under the Insurance
Agreement and to enforce any judgment obtained and collect from the Issuer monies adjudged
due;
(ii) sell the Trust Estate or any portion thereof or rights or interest therein, at one or
more public or private Sales (as defined in Section 5.15 hereof) called and conducted in any
manner permitted by law;
(iii) file or record all assignments that have not previously been recorded;
(iv) institute Proceedings from time to time for the complete or partial foreclosure of
this Indenture; and
(v) exercise any remedies of a secured party under the Uniform Commercial Code and take
any other appropriate action to protect and enforce the rights and remedies of the Credit
Enhancer hereunder.
Following the payment in full of the Notes, the Credit Enhancer shall continue to
have all rights and privileges provided to it under this Section and in all other provisions
of this Indenture, until all amounts owing to the Credit Enhancer have been paid in full.
Section 4.13. Repayment of Monies Held by Paying Agent. In connection with the satisfaction
and discharge of this Indenture with respect to the Notes, all monies then held by any
Person other than the Indenture Trustee under the provisions of this Indenture with respect
to such Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held
and applied according to Section 3.05 and thereupon such Paying Agent shall be released from
all further liability with respect to such monies.
Section 4.14. Temporary Notes. Pending the preparation of any Definitive Notes, the Issuer
may execute and upon its written direction, the Indenture Trustee may authenticate and make
available for delivery, temporary Notes that are printed, lithographed, typewritten,
photocopied or otherwise produced, in any denomination, substantially of the tenor of the
Definitive Notes in lieu of which they are issued and with such appropriate insertions,
omissions, substitutions and other variations as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be prepared
without unreasonable delay. After the preparation of the Definitive Notes, the temporary
Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at
the office or agency of the Indenture Trustee, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes, the Issuer shall execute and the
Indenture Trustee shall authenticate and make available for delivery, in exchange therefor,
Definitive Notes of authorized denominations and of like tenor and aggregate principal
amount. Until so exchanged, such temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Definitive Notes.
ARTICLE V
Default and Remedies
Section 5.01. Events of Default. The Issuer shall deliver to the Indenture Trustee and the
Credit Enhancer, within five days after learning of the occurrence any event which with the
giving of notice and the lapse of time would become an Event of Default under clause (iii)
of the definition of "Event of Default" written notice in the form of an Officer's
Certificate of its status and what action the Issuer is taking or proposes to take with
respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default
should occur and be continuing or if the Master Servicer shall purchase all of the Home
Equity Loans pursuant to Section 8.08 of the Servicing Agreement, then and in every such
case the Indenture Trustee or the Holders of Notes representing not less than a majority of
the Security Balances of all Notes with the written consent of the Credit Enhancer, or, the
Credit Enhancer may declare the Notes to be immediately due and payable, by a notice in
writing to the Issuer (and to the Indenture Trustee if given by Noteholders), and upon any
such declaration the unpaid principal amount of such class of Notes, together with accrued
and unpaid interest thereon through the date of acceleration, shall become immediately due
and payable.
At any time after such declaration of acceleration of maturity with respect to an
Event of Default has been made and before a judgment or decree for payment of the money due
has been obtained by the Indenture Trustee as hereinafter provided in this Article V, the
Holders of Notes representing a majority of the Security Balances of all Notes, by written
notice to the Issuer and the Indenture Trustee with the written consent of the Credit
Enhancer, or the Credit Enhancer, may in writing waive the related Event of Default and
rescind and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on the Notes and all
other amounts that would then be due hereunder or upon the Notes if the Event
of Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances of the
Indenture Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal of the Notes that
has become due solely by such acceleration, have been cured or waived as provided in Section
5.12.
No such rescission shall affect any subsequent default or impair any right consequent
thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.
(a) The Issuer covenants that if default in the payment of (i) any interest on any Note when
the same becomes due and payable, and such default continues for a period of five days, or
(ii) the principal of or any installment of the principal of any Note when the same becomes
due and payable, the Issuer shall, upon demand of the Indenture Trustee, pay to it, for the
benefit of the Holders of Notes or the Credit Enhancer to the extent the Credit Enhancer has
made a payment on the Policy, the whole amount then due and payable on the Notes for
principal and interest, with interest upon the overdue principal, and in addition thereto
such further amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon such demand, the
Indenture Trustee, in its own name and as trustee of an express trust, subject to the
provisions of Section 10.17 hereof may institute a Proceeding for the collection of the sums
so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon the Notes and collect in the
manner provided by law out of the property of the Issuer or other obligor upon the Notes,
wherever situated, the monies adjudged or decreed to be payable.
(c) If an Event of Default shall occur and be continuing, the Indenture Trustee subject
to the provisions of Section 10.17 hereof may, as more particularly provided in Section
5.04, in its discretion, proceed to protect and enforce its rights and the rights of the
Noteholders and the Credit Enhancer, by such appropriate Proceedings as the Indenture
Trustee shall deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other obligor upon the
Notes or any Person having or claiming an ownership interest in the Trust Estate,
Proceedings under Title 11 of the United States Code or any other applicable federal or
state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings relative to the
Issuer or other obligor upon the Notes, or to the creditors or property of the Issuer or
such other obligor, the Indenture Trustee, irrespective of whether the principal of any
Notes shall then be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention in such
Proceedings or otherwise:
(i) to file and prove a claim or claims for the entire amount of principal and interest
owing and unpaid in respect of the Notes and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Indenture Trustee (including
any claim for reasonable compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement
of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee
and each predecessor Indenture Trustee, except as a result of negligence, willful misconduct
or bad faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders
of Notes in any election of a trustee, a standby trustee or Person performing similar
functions in any such Proceedings;
(iii) to collect and receive any monies or other property payable or deliverable on any
such claims and to distribute all amounts received with respect to the claims of the
Noteholders and of the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee or the Holders of Notes
allowed in any judicial proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in any such
Proceeding is hereby authorized by each of such Noteholders to make payments to the
Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making
of payments directly to such Noteholders, to pay to the Indenture Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all
other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and
each predecessor Indenture Trustee except as a result of negligence, willful misconduct or
bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or the rights
of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim
of any Noteholder in any such proceeding except, as aforesaid, to vote for the election of a
trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture, or under any of
the Notes, may be enforced by the Indenture Trustee without the possession of any of the
Notes or the production thereof in any trial or other Proceedings relative thereto, and any
such action or proceedings instituted by the Indenture Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to the payment of
the expenses, disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the ratable
benefit of the Holders of the Term Notes or the Variable Funding Notes, as applicable.
(g) In any Proceedings brought by the Indenture Trustee (and also any Proceedings
involving the interpretation of any provision of this Indenture to which the Indenture
Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders
of the Notes, and it shall not be necessary to make any Noteholder a party to any such
Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall have occurred and be
continuing, the Indenture Trustee subject to the provisions of Section 10.17 hereof may with
the written consent of the Credit Enhancer, or shall at the written direction of the Credit
Enhancer do one or more of the following (subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express trust for the
collection of all amounts then payable on the Notes or under this Indenture with respect
thereto, whether by declaration or otherwise, and all amounts payable under the Insurance
Agreement, enforce any judgment obtained, and collect from the Issuer and any other obligor
upon such Notes monies adjudged due;
(ii) institute Proceedings from time to time for the complete or partial foreclosure of
this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and take any other appropriate
action to protect and enforce the rights and remedies of the Indenture Trustee and the
Holders of the Notes; and
(iv) sell the Trust Estate or any portion thereof or rights or interest therein, at one or
more public or private sales called and conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise liquidate the Trust
Estate following an Event of Default, unless (A) the Indenture Trustee obtains the consent
of the Credit Enhancer, which consent will not be unreasonably withheld, or, if a Credit
Enhancer Default has occurred and is continuing, the consent of the Holders of 100% of the
aggregate Security Balances of the Notes, (B) the proceeds of such sale or liquidation
distributable to Holders are sufficient to discharge in full all amounts then due and unpaid
upon the Notes for principal and interest and to reimburse the Credit Enhancer for any
amounts drawn under the Policy and any other amounts due the Credit Enhancer under the
Insurance Agreement or (C) the Indenture Trustee determines that the Home Equity Loans will
not continue to provide sufficient funds for the payment of principal of and interest on the
Notes as they would have become due if the Notes had not been declared due and payable, and
the Indenture Trustee obtains the consent of the Credit Enhancer, which consent will not be
unreasonably withheld; provided further that the Indenture Trustee shall not sell or
otherwise liquidate the Trust Estate if the proceeds of such sale or liquidation together
with amounts drawn under the Policy will not be sufficient to discharge in full all amounts
then due and unpaid upon the Notes for principal and interest and to reimburse the Credit
Enhancer for any amounts drawn under the Policy and any other amounts due the Credit
Enhancer under the Insurance Agreement unless the Indenture Trustee obtains the consent of
the Holders of 66-2/3% of the aggregate Security Balances of the Notes. In determining such
sufficiency or insufficiency with respect to clause (B) and (C), the Indenture Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed action and as
to the sufficiency of the Trust Estate for such purpose. Notwithstanding the foregoing, so
long as a Servicing Default has not occurred, any Sale of the Trust Estate shall be made
subject to the continued servicing of the Home Equity Loans by the Master Servicer as
provided in the Servicing Agreement.
(b) If the Indenture Trustee collects any money or property pursuant to this Article V,
it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section 6.07;
SECOND:to Holders of the Class A Notes and Variable Funding Notes for amounts
due and unpaid on the related Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on such Notes for
interest from amounts available in the Trust Estate for such Noteholders;
THIRD: to Holders of the Class A Notes and Variable Funding Notes for amounts
due and unpaid on the related Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on such Notes for
principal, from amounts available in the Trust Estate for such Noteholders, until the
Security Balances of such Notes have been reduced to zero;
FOURTH:to the payment of all amounts due and owing to the Credit Enhancer
under the Insurance Agreement;
FIFTH: to the Certificate Paying Agent for amounts due under Article VIII of
the Trust Agreement; and
SIXTH: to the payment of the remainder, if any, to the Issuer or any other
person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 5.04. At least 15 days before such record date, the
Indenture Trustee shall mail to each Noteholder a notice that states the record date, the
payment date and the amount to be paid.
Section 5.05. Optional Preservation of the Trust Estate. If the Notes have been declared to
be due and payable under Section 5.02 following an Event of Default and such declaration and
its consequences have not been rescinded and annulled, the Indenture Trustee may, but need
not, (but shall at the written direction of the Credit Enhancer) elect to take and maintain
possession of the Trust Estate. It is the desire of the parties hereto and the Noteholders
that there be at all times sufficient funds for the payment of principal of and interest on
the Notes and other obligations of the Issuer including payment to the Credit Enhancer, and
the Indenture Trustee shall take such desire into account when determining whether or not to
take and maintain possession of the Trust Estate. In determining whether to take and
maintain possession of the Trust Estate, the Indenture Trustee may, but need not, obtain and
rely upon an opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have any right to institute
any Proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless and subject
to the provisions of Section 10.17 hereof:
(i) such Holder has previously given written notice to the Indenture Trustee of a
continuing Event of Default;
(ii) the Holders of not less than 25% of the Security Balances of the Notes have made
written request to the Indenture Trustee to institute such Proceeding in respect of such
Event of Default in its own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee reasonable indemnity
against the costs, expenses and liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such notice, request and offer
of indemnity has failed to institute such Proceedings; and
(v) no direction inconsistent with such written request has been given to the Indenture
Trustee during such 60-day period by the Holders of a majority of the Security Balances of
the Notes or by the Credit Enhancer.
It is understood and intended that no one or more Holders of Notes shall have any right in
any manner whatever by virtue of, or by availing of, any provision of this Indenture to
affect, disturb or prejudice the rights of any other Holders of Notes or to obtain or to
seek to obtain priority or preference over any other Holders or to enforce any right under
this Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Holders of Notes, each representing less than a
majority of the Security Balances of the Notes, the Indenture Trustee in its sole discretion
may determine what action, if any, shall be taken, notwithstanding any other provisions of
this Indenture.
Section 5.07. Unconditional Rights of Noteholders to Receive Principal and Interest.
Notwithstanding any other provisions in this Indenture, the Holder of any Note shall have
the right, which is absolute and unconditional, to receive payment of the principal of and
interest, if any, on such Note on or after the respective due dates thereof expressed in
such Note or in this Indenture and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture
and such Proceeding has been discontinued or abandoned for any reason or has been determined
adversely to the Indenture Trustee or to such Noteholder, then and in every such case the
Issuer, the Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former positions hereunder,
and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall
continue as though no such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy herein conferred upon or
reserved to the Indenture Trustee, the Credit Enhancer or to the Noteholders is intended to
be exclusive of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of the Indenture
Trustee, the Credit Enhancer or any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and remedy
given by this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the Indenture
Trustee or by the Noteholders, as the case may be.
Section 5.11. Control by the Credit Enhancer or Noteholders. The Holders of a majority of
the Security Balances of Notes with the consent of the Credit Enhancer, or the Credit
Enhancer (so long as no Credit Enhancer Default exists) shall have the right to direct the
time, method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to the Indenture Trustee
to sell or liquidate the Trust Estate shall be by Holders of Notes representing not less
than 100% of the Security Balances of Notes with the consent of the Credit Enhancer, or the
Credit Enhancer (so long as no Credit Enhancer Default exists);
(iii) if the conditions set forth in Section 5.05 have been satisfied and the Indenture
Trustee elects to retain the Trust Estate pursuant to such Section, then any direction to
the Indenture Trustee by Holders of Notes representing less than 100% of the Security
Balances of Notes to sell or liquidate the Trust Estate shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed proper by the Indenture
Trustee that is not inconsistent with such direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject to Section
6.01, the Indenture Trustee need not take any action that it determines might involve it in
liability or might materially adversely affect the rights of any Noteholders not consenting
to such action unless the Indenture Trustee has received satisfactory indemnity from the
Credit Enhancer or the Noteholders.
Section 5.12. Waiver of Past Default. Prior to the declaration of the acceleration of the
maturity of the Notes as provided in Section 5.02, the Holders of Notes of not less than a
majority of the Security Balances of the Notes with the consent of the Credit Enhancer, or
the Credit Enhancer (so long as no Credit Enhancer Default exists) may waive any past Event
of Default and its consequences except an Event of Default (i) with respect to payment of
principal of or interest on any of the Notes or (ii) in respect of a covenant or provision
hereof which cannot be modified or amended without the consent of the Holder of each Note.
In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders of the
Notes shall be restored to their respective former positions and rights hereunder; but no
such waiver shall extend to any subsequent or other Event of Default or impair any right
consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be deemed to have
been cured and not to have occurred, for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other Event of Default or impair any right consequent
thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture agree, and each Holder
of any Note by such Xxxxxx's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Indenture Trustee for any action taken,
suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section 5.13 shall not
apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate more than 10% of
the Security Balances of the Notes or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after the
respective due dates expressed in such Note and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, or plead or in any manner
whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Issuer (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants that it
shall not hinder, delay or impede the execution of any power herein granted to the Indenture
Trustee, but will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 5.15. Sale of Trust Estate. (a) The power to effect any sale or other disposition
(a "Sale") of any portion of the Trust Estate pursuant to Section 5.04 is expressly subject
to the provisions of Section 5.05 and this Section 5.15. The power to effect any such Sale
shall not be exhausted by any one or more Sales as to any portion of the Trust Estate
remaining unsold, but shall continue unimpaired until the entire Trust Estate shall have
been sold or all amounts payable on the Notes and under this Indenture and under the
Insurance Agreement shall have been paid. The Indenture Trustee may from time to time
postpone any public Sale by public announcement made at the time and place of such Sale.
The Indenture Trustee hereby expressly waives its right to any amount fixed by law as
compensation for any Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust Estate, or any
portion thereof, unless:
(1) the Holders of all Notes and the Credit Enhancer consent to, or direct
the Indenture Trustee to make, such Sale, or
(2) the proceeds of such Sale would be not less than the entire amount
which would be payable to the Noteholders under the Notes, the Certificateholders
under the Certificates and the Credit Enhancer in respect of amounts drawn under the
Policy and any other amounts due the Credit Enhancer under the Insurance Agreement,
in full payment thereof in accordance with Section 5.02, on the Payment Date next
succeeding the date of such Sale, or
(3) the Indenture Trustee determines, in its sole discretion, that the
conditions for retention of the Trust Estate set forth in Section 5.05 cannot be
satisfied (in making any such determination, the Indenture Trustee may rely upon an
opinion of an Independent investment banking firm obtained and delivered as provided
in Section 5.05), and the Credit Enhancer consents to such Sale, which consent will
not be unreasonably withheld and the Holders representing at least 66-2/3% of the
Security Balances of the Notes consent to such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust Estate at a private
Sale shall not be deemed a Sale or other disposition thereof for purposes of this Section
5.15(b).
(c) Unless the Holders and the Credit Enhancer have otherwise consented or directed the
Indenture Trustee, at any public Sale of all or any portion of the Trust Estate at which a
minimum bid equal to or greater than the amount described in paragraph (2) of subsection (b)
of this Section 5.15 has not been established by the Indenture Trustee and no Person bids an
amount equal to or greater than such amount, the Indenture Trustee shall bid an amount at
least $1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate:
(1) any Holder or Holders of Notes may bid for and with the consent of the
Credit Enhancer purchase the property offered for sale, and upon compliance with the
terms of sale may hold, retain and possess and dispose of such property, without
further accountability, and may, in paying the purchase money therefor, deliver any
Notes or claims for interest thereon in lieu of cash up to the amount which shall,
upon distribution of the net proceeds of such sale, be payable thereon, and such
Notes, in case the amounts so payable thereon shall be less than the amount due
thereon, shall be returned to the Holders thereof after being appropriately stamped
to show such partial payment;
(2) the Indenture Trustee may bid for and acquire the property offered for
Sale in connection with any Sale thereof, and, subject to any requirements of, and to
the extent permitted by, applicable law in connection therewith, may purchase all or
any portion of the Trust Estate in a private sale, and, in lieu of paying cash
therefor, may make settlement for the purchase price by crediting the gross Sale
price against the sum of (A) the amount which would be distributable to the Holders
of the Notes and Holders of Certificates and amounts owing to the Credit Enhancer as
a result of such Sale in accordance with Section 5.04(b) on the Payment Date next
succeeding the date of such Sale and (B) the expenses of the Sale and of any
Proceedings in connection therewith which are reimbursable to it, without being
required to produce the Notes in order to complete any such Sale or in order for the
net Sale price to be credited against such Notes, and any property so acquired by the
Indenture Trustee shall be held and dealt with by it in accordance with the
provisions of this Indenture;
(3) the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the Trust Estate
in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the agent and
attorney- in-fact of the Issuer to transfer and convey its interest in any portion of
the Trust Estate in connection with a Sale thereof, and to take all action necessary
to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound to ascertain
the Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek and recover judgment
on the Notes or under this Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this Indenture. Neither the lien
of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders
shall be impaired by the recovery of any judgment by the Indenture Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of the Trust
Estate or upon any of the assets of the Issuer. Any money or property collected by the
Indenture Trustee shall be applied in accordance with Section 5.04(b).
Section 5.17. Performance and Enforcement of Certain Obligations. (a) Promptly following a
written request from the Credit Enhancer or the Indenture Trustee with the written consent
of the Credit Enhancer to do so, the Issuer, in its capacity as holder of the Home Equity
Loans, shall, with the written consent of the Credit Enhancer, take all such lawful action
as the Indenture Trustee may request to cause the Issuer to compel or secure the performance
and observance by the Seller and the Master Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Purchase Agreement and the
Servicing Agreement, and to exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with the Purchase Agreement and the
Servicing Agreement to the extent and in the manner directed by the Indenture Trustee, as
pledgee of the Home Equity Loans, including the transmission of notices of default on the
part of the Seller or the Master Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the Seller or the
Master Servicer of each of their obligations under the Purchase Agreement and the Servicing
Agreement.
(b) If an Event of Default has occurred and is continuing, the Indenture Trustee, as
pledgee of the Home Equity Loans, subject to the rights of the Credit Enhancer under the
Servicing Agreement may, and at the direction (which direction shall be in writing or by
telephone (confirmed in writing promptly thereafter)) of the Credit Enhancer (or if a Credit
Enhancer Default has occurred which is continuing, Holders of 66-2/3% of the Security
Balances of the Notes) shall, exercise all rights, remedies, powers, privileges and claims
of the Issuer against the Seller or the Master Servicer under or in connection with the
Purchase Agreement and the Servicing Agreement, including the right or power to take any
action to compel or secure performance or observance by the Seller or the Master Servicer,
as the case may be, of each of their obligations to the Issuer thereunder and to give any
consent, request, notice, direction, approval, extension or waiver under the Purchase
Agreement and the Servicing Agreement, as the case may be, and any right of the Issuer to
take such action shall not be suspended. In connection therewith, as determined by the
Indenture Trustee, the Issuer shall take all actions necessary to effect the transfer of the
Home Equity Loans to the Indenture Trustee.
ARTICLE VI
The Indenture Trustee
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default has occurred and is
continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations shall be
read into this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; provided, however, the Indenture Trustee shall examine the
certificates and opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent
in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it (A) pursuant to
Section 5.11 or (B) from the Credit Enhancer, which it is entitled to give under any of the
Basic Documents.
(d) The Indenture Trustee shall not be liable for interest on any money received by it
except as the Indenture Trustee may agree in writing with the Issuer.
(e) Money held in trust by the Indenture Trustee need not be segregated from other funds
except to the extent required by law or the terms of this Indenture or the Trust Agreement.
(f) No provision of this Indenture shall require the Indenture Trustee to expend or risk
its own funds or otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if it shall have reasonable
grounds to believe that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Indenture Trustee shall be subject to the provisions of
this Section and to the provisions of the TIA.
Section 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by the proper
person. The Indenture Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel. The Indenture Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on an Officer's
Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys or a custodian or
nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence
on the part of, or for the supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes or omits to take in
good faith which it believes to be authorized or within its rights or powers; provided,
however, that the Indenture Trustee's conduct does not constitute willful misconduct,
negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or opinion of counsel
with respect to legal matters relating to this Indenture and the Notes shall be full and
complete authorization and protection from liability in respect to any action taken, omitted
or suffered by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer or its Affiliates with the same rights it would have if it were not
Indenture Trustee. Any Note Registrar, co-registrar or co-paying agent may do the same with
like rights. However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee shall not be (i)
responsible for and makes no representation as to the validity or adequacy of this Indenture
or the Notes, (ii) accountable for the Issuer's use of the proceeds from the Notes or (iii)
responsible for any statement of the Issuer in this Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture Trustee's
certificate of authentication.
Section 6.05. Notice of Event of Default. If an Event of Default occurs and is continuing
and if it is known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee
shall give notice thereof to the Credit Enhancer. The Indenture Trustee shall mail to each
Noteholder notice of the Event of Default within 90 days after it occurs. Except in the
case of an Event of Default in payment of principal of or interest on any Note, the
Indenture Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the interests of
Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture Trustee shall deliver
to each Noteholder such information as may be required to enable such holder to prepare its
federal and state income tax returns. In addition, upon the Issuer's written request, the
Indenture Trustee shall promptly furnish information reasonably requested by the Issuer that
is reasonably available to the Indenture Trustee to enable the Issuer to perform its federal
and state income tax reporting obligations.
Section 6.07. Compensation and Indemnity. The Indenture Trustee shall be compensated and
indemnified by the Master Servicer in accordance with Section 6.06 of the Servicing
Agreement. The Indenture Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust.
Section 6.08. Replacement of Indenture Trustee. No resignation or removal of the Indenture
Trustee and no appointment of a successor Indenture Trustee shall become effective until the
acceptance of appointment by the successor Indenture Trustee pursuant to this Section 6.08.
The Indenture Trustee may resign at any time by so notifying the Issuer and the Credit
Enhancer. The Holders of a majority of Security Balances of the Notes or the Credit
Enhancer may remove the Indenture Trustee by so notifying the Indenture Trustee and the
Credit Enhancer and may appoint a successor Indenture Trustee. The Issuer shall remove the
Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the Indenture Trustee or its
property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the office
of the Indenture Trustee for any reason (the Indenture Trustee in such event being referred
to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor
Indenture Trustee with the consent of the Credit Enhancer which consent will not be
unreasonably withheld. In addition, the Indenture Trustee will resign to avoid being
directly or indirectly controlled by the Issuer.
A successor Indenture Trustee shall deliver a written acceptance of its appointment
to the retiring Indenture Trustee and to the Issuer. Thereupon, the resignation or removal
of the retiring Indenture Trustee shall become effective, and the successor Indenture
Trustee shall have all the rights, powers and duties of the Indenture Trustee under this
Indenture. The successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all property held by it
as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days after the
retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer
or the Holders of a majority of Security Balances of the Notes may petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Indenture Trustee and
the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to this Section,
the Issuer's obligations under Section 6.07 shall continue for the benefit of the retiring
Indenture Trustee.
Section 6.09. Successor Indenture Trustee by Xxxxxx. If the Indenture Trustee consolidates
with, merges or converts into, or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking association, the resulting, surviving
or transferee corporation without any further act shall be the successor Indenture Trustee;
provided, that such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating Agencies
written notice of any such transaction occurring after the Closing Date.
In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by this Indenture
any of the Notes shall have been authenticated but not delivered, any such successor to the
Indenture Trustee may adopt the certificate of authentication of any predecessor trustee,
and deliver such Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may authenticate such Notes
either in the name of any predecessor hereunder or in the name of the successor to the
Indenture Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate of the
Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the purpose of
meeting any legal requirement of any jurisdiction in which any part of the Trust Estate may
at the time be located, the Indenture Trustee shall have the power and may execute and
deliver all instruments to appoint one or more Persons to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the Trust
Estate, and to vest in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Trust Estate, or any part thereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts as the
Indenture Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor trustee under
Section 6.11 and no notice to Noteholders of the appointment of any co-trustee or separate
trustee shall be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by law, be
appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed upon the Indenture
Trustee shall be conferred or imposed upon and exercised or performed by the Indenture
Trustee and such separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any act or omission of
any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation of or remove any
separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as effectively as
if given to each of them. Every instrument appointing any separate trustee or co-trustee
shall refer to this Indenture and the conditions of this Article VI. Each separate trustee
and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the
estates or property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the provisions
of this Indenture, specifically including every provision of this Indenture relating to the
conduct of, affecting the liability of, or affording protection to, the Indenture Trustee.
Every such instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the Indenture Trustee,
its agent or attorney-in-fact with full power and authority, to the extent not prohibited by
law, to do any lawful act under or in respect of this Indenture on its behalf and in its
name. If any separate trustee or co-trustee shall die, become incapable of acting, resign
or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and
be exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee shall at all times
satisfy the requirements of TIAss.310(a). The Indenture Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent published annual
report of condition and it or its parent shall have a long-term debt rating of A or better
by Xxxxx'x. The Indenture Trustee shall comply with TIAss.310(b), including the optional
provision permitted by the second sentence of TIAss. 310(b)(9); provided, however, that
there shall be excluded from the operation of TIAss.310(b)(1) any indenture or indentures
under which other securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIAss.310(b)(1) are met.
Within 90 days after ascertaining the occurrence of an Event of Default which
shall not have been cured or waived, unless authorized by the Securities and Exchange
Commission, the Indenture Trustee shall resign with respect to one or more Classes of Notes
in accordance with Section 6.08 of this Indenture, and the Issuer shall appoint a successor
Indenture Trustee for such Classes. In the event the Indenture Trustee fails to comply with
the terms of the preceding sentence, the Indenture Trustee shall comply with clause (ii) of
TIAss.310(b).
In the case of the appointment hereunder of a successor Indenture Trustee with
respect to any Class of Notes pursuant to this Section 6.11, the Issuer, the retiring
Indenture Trustee and the successor Indenture Trustee with respect to such Class of Notes
shall execute and deliver an indenture supplemental hereto wherein each successor Indenture
Trustee shall accept such appointment and which (i) shall contain such provisions as shall
be necessary or desirable to transfer and confirm to, and to vest in, the successor
Indenture Trustee all the rights, powers, trusts and duties of the retiring Indenture
Trustee with respect to the Notes of the Class to which the appointment of such successor
Indenture Trustee relates, (ii) if the retiring Indenture Trustee is not retiring with
respect to all Classes of Notes, shall contain such provisions as shall be deemed necessary
or desirable to confirm that all the rights, powers, trusts and duties of the retiring
Indenture Trustee with respect to the Notes of each Class as to which the retiring Indenture
Trustee is not retiring shall continue to be vested in the Indenture Trustee, and (iii)
shall add to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more than one
Indenture Trustee, it being understood that nothing herein or in such supplemental indenture
shall constitute such Indenture Trustees co-trustees of the same trust and that each such
Indenture Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Indenture Trustee; and upon the
removal of the retiring Indenture Trustee shall become effective to the extent provided
therein.
Section 6.12. Preferential Collection of Claims Against Issuer. The Indenture Trustee shall
comply with TIAss.311(a), excluding any creditor relationship listed in TIAss.311(b). An
Indenture Trustee who has resigned or been removed shall be subject to TIAss.311(a) to the
extent indicated.
Section 6.13. Representations and Warranties. The Indenture Trustee hereby represents that:
(i) The Indenture Trustee is duly organized, validly existing and in good standing under
the laws of the United States with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is presently conducted.
(ii) The Indenture Trustee has the power and authority to execute and deliver this
Indenture and to carry out its terms; and the execution, delivery and performance of this
Indenture have been duly authorized by the Indenture Trustee by all necessary corporate
action.
(iii) The consummation of the transactions contemplated by this Indenture and the
fulfillment of the terms hereof do not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of time) a default
under, the articles of organization or bylaws of the Indenture Trustee or any agreement or
other instrument to which the Indenture Trustee is a party or by which it is bound.
(iv) To the Indenture Trustee's best knowledge, there are no proceedings or investigations
pending or threatened before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Indenture Trustee or its
properties: (A) asserting the invalidity of this Indenture (B) seeking to prevent the
consummation of any of the transactions contemplated by this Indenture or (C) seeking any
determination or ruling that might materially and adversely affect the performance by the
Indenture Trustee of its obligations under, or the validity or enforceability of, this
Indenture.
(v) The Indenture Trustee does not have notice of any adverse claim (as such terms are
used in Delaware UCC Section 8-302) with respect to the Home Equity Loans.
Section 6.14. Directions to Indenture Trustee. The Indenture Trustee is hereby directed:
(a) to accept the pledge of the Home Equity Loans and hold the assets of the Trust in
trust for the Noteholders and the Credit Enhancer;
(b) to authenticate and deliver the Notes substantially in the form prescribed by Exhibit
A in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the terms of this
Indenture.
Section 6.15. Indenture Trustee May Own Securities. The Indenture Trustee, in its
individual or any other capacity may become the owner or pledgee of Securities with the same
rights it would have if it were not Indenture Trustee.
ARTICLE VII
Noteholders' Lists and Reports
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders. The
Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five
days after each Record Date, a list, in such form as the Indenture Trustee may reasonably
require, of the names and addresses of the Holders of Notes as of such Record Date and, (b)
at such other times as the Indenture Trustee and the Credit Enhancer may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is furnished;
provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list
shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to Noteholders. (a) The
Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the
names and addresses of the Holders of Notes contained in the most recent list furnished to
the Indenture Trustee as provided in Section 7.01 and the names and addresses of Holders of
Notes received by the Indenture Trustee in its capacity as Note Registrar. The Indenture
Trustee may destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIAss.312(b) with other Noteholders with
respect to their rights under this Indenture or under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have the protection of
TIAss.312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the Issuer is required to file
the same with the Commission, copies of the annual reports and the information, documents
and other reports (or copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) that the Issuer may be required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Commission in accordance with rules and
regulations prescribed from time to time by the Commission such additional information,
documents and reports with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall transmit by mail to
all Noteholders described in TIAss.313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and (ii) of this Section
7.03(a) and by rules and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on
December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIAss.313(a), within 60 days
after each January 1, beginning with January 1, 2007, the Indenture Trustee shall mail to
each Noteholder as required by TIAss.313(c) and to the Credit Enhancer a brief report dated
as of such date that complies with TIAss.313(a). The Indenture Trustee also shall comply
with TIAss.313(b).
A copy of each report at the time of its mailing to Noteholders shall be filed by the
Indenture Trustee with the Commission, if required, and each stock exchange, if any, on
which the Term Notes are listed. The Issuer shall notify the Indenture Trustee if and when
the Term Notes are listed on any stock exchange.
Section 7.05. Exchange Act Reporting In connection with the preparation and filing of
periodic reports by the Master Servicer pursuant to Section 4.01 of the Servicing Agreement,
the Indenture Trustee shall timely provide to the Master Servicer (I) a list of Holders as
shown on the Note Register or Certificate Register as of the end of each calendar year, (II)
copies of all pleadings, other legal process and any other documents relating to any claims,
charges or complaints involving the Indenture Trustee, as indenture trustee hereunder, or
the Trust Estate that are received by the Indenture Trustee, (III) notice of all matters
that, to the actual knowledge of a Responsible Officer of the Indenture Trustee, have been
submitted to a vote of the Holders, other than those matters that have been submitted to a
vote of the Holders at the request of the Depositor or the Master Servicer, and (IV) notice
of any failure of the Indenture Trustee to make any payment to the Holders as required
pursuant to this Indenture. Neither the Master Servicer nor the Indenture Trustee shall
have any liability with respect to the Master Servicer's failure to properly prepare or file
such periodic reports resulting from or relating to the Master Servicer's inability or
failure to obtain any information not resulting from the Master Servicer's own negligence or
willful misconduct.
ARTICLE VIII
Accounts, Disbursements and Releases
Section 8.01. Collection of Money. Except as otherwise expressly provided herein, the
Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly
and without intervention or assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Indenture Trustee pursuant to this
Indenture. The Indenture Trustee shall apply all such money received by it as provided in
this Indenture. Except as otherwise expressly provided in this Indenture, if any default
occurs in the making of any payment or performance under any agreement or instrument that is
part of the Trust Estate, the Indenture Trustee may take such action as may be appropriate
to enforce such payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed thereafter as
provided in Article V.
Section 8.02. Trust Accounts. (a) On or prior to the Closing Date, the Issuer shall cause
the Indenture Trustee to establish and maintain, in the name of the Indenture Trustee, for
the benefit of the Noteholders and the Certificate Paying Agent, on behalf of the
Certificateholders and the Credit Enhancer, the Payment Account as provided in Section 3.01
of this Indenture.
(b) All monies deposited from time to time in the Payment Account pursuant to the
Servicing Agreement and all deposits therein pursuant to this Indenture are for the benefit
of the Noteholders and the Credit Enhancer and the Certificate Paying Agent, on behalf of
the Certificateholders and all investments made with such monies including all income or
other gain from such investments are for the benefit of the Master Servicer as provided in
Section 5.01 of the Servicing Agreement.
On each Payment Date, the Indenture Trustee shall distribute all amounts on deposit
in the Payment Account to Noteholders in respect of the Notes and in its capacity as
Certificate Paying Agent to Certificateholders in the order of priority set forth in Section
3.05 (except as otherwise provided in Section 5.04(b).
The Master Servicer shall direct the Indenture Trustee in writing to invest any funds
in the Payment Account in Permitted Investments maturing no later than the Business Day
preceding each Payment Date and shall not be sold or disposed of prior to the maturity.
Section 8.03. Officer's Certificate. The Indenture Trustee shall receive at least seven
days notice when requested by the Issuer to take any action pursuant to Section 8.05(a),
accompanied by copies of any instruments to be executed, and the Indenture Trustee shall
also require, as a condition to such action, an Officer's Certificate, in form and substance
satisfactory to the Indenture Trustee, stating the legal effect of any such action,
outlining the steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with.
Section 8.04. Termination Upon Distribution to Noteholders. This Indenture and the
respective obligations and responsibilities of the Issuer and the Indenture Trustee created
hereby shall terminate upon the distribution to the Noteholders, the Certificate Paying
Agent (on behalf of the Certificateholders) and the Indenture Trustee of all amounts
required to be distributed pursuant to Article III and the Insurance Agreement; provided,
however, that in no event shall the trust created hereby continue beyond the expiration of
21 years from the death of the survivor of the descendants of Xxxxxx X. Xxxxxxx, the late
ambassador of the United States to the Court of St. James's, living on the date hereof.
Section 8.05. Release of Trust Estate. (a) Subject to the payment of its fees and
expenses, the Indenture Trustee may, and when required by the provisions of this Indenture
or the Servicing Agreement shall, execute instruments to release property from the lien of
this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and
under circumstances that are not inconsistent with the provisions of this Indenture. No
party relying upon an instrument executed by the Indenture Trustee as provided in Article
VIII hereunder shall be bound to ascertain the Indenture Trustee's authority, inquire into
the satisfaction of any conditions precedent, or see to the application of any monies.
(b) The Indenture Trustee shall, at such time as (i) there are no Notes Outstanding, (ii)
all sums due the Indenture Trustee pursuant to this Indenture have been paid, and (iii) all
sums due the Credit Enhancer have been paid, release any remaining portion of the Trust
Estate that secured the Notes from the lien of this Indenture.
(c) The Indenture Trustee shall release property from the lien of this Indenture pursuant
to this Section 8.05 only upon receipt of a request from the Issuer accompanied by an
Officers' Certificate and a letter from the Credit Enhancer, stating that the Credit
Enhancer has no objection to such request from the Issuer.
(d) The Indenture Trustee shall, at the request of the Issuer or the Depositor, surrender
the Policy to the Credit Enhancer for cancellation, upon final payment of principal of and
interest on the Notes.
Section 8.06. Surrender of Notes Upon Final Payment. By acceptance of any Note, the Holder
thereof agrees to surrender such Note to the Indenture Trustee promptly, prior to such
Noteholder's receipt of the final payment thereon.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders. (a) Without the
consent of the Holders of any Notes but with prior notice to the Rating Agencies and with
the written consent of the Credit Enhancer (which consent shall not be unreasonably
withheld), unless a Credit Enhancer Default shall have occurred and is continuing, the
Issuer and the Indenture Trustee, when authorized by an Issuer Request, at any time and from
time to time, may enter into one or more indentures supplemental hereto (which shall conform
to the provisions of the TIA as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time subject to the lien
of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any
property subject or required to be subjected to the lien of this Indenture, or to subject to
the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable provisions hereof, of
another person to the Issuer, and the assumption by any such successor of the covenants of
the Issuer herein and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of the Holders of the Notes or
the Credit Enhancer, or to surrender any right or power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture
Trustee;
(v) to cure any ambiguity, to correct any error or to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with any other provision
herein or in any supplemental indenture;
(vi) to make any other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided, that such action shall not materially
and adversely affect the interests of the Holders of the Notes or the Credit Enhancer;
(vii) to evidence and provide for the acceptance of the appointment hereunder by a
successor trustee with respect to the Notes and to add to or change any of the provisions of
this Indenture as shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of Article VI;
(viii) to increase the Maximum Variable Funding Balance with the written consent of the
Credit Enhancer; or
(ix) to modify, eliminate or add to the provisions of this Indenture to such extent as
shall be necessary to effect the qualification of this Indenture under the TIA or under any
similar federal statute hereafter enacted and to add to this Indenture such other provisions
as may be expressly required by the TIA;
provided, however, that no such supplemental indenture shall be entered into unless the
Indenture Trustee and the Credit Enhancer shall have received an Opinion of Counsel to the
effect that the execution of such supplemental indenture will not give rise to any material
adverse tax consequence to the Noteholders.
The Indenture Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and stipulations that
may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by an Issuer Request, may, also
without the consent of any of the Holders of the Notes but with prior notice to the Rating
Agencies and with the consent of the Credit Enhancer, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in any manner
or eliminating any of the provisions of, this Indenture or of modifying in any manner the
rights of the Holders of the Notes under this Indenture; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, (i) adversely affect in any material
respect the interests of any Noteholder or the Credit Enhancer or (ii) cause the Issuer to
be subject to an entity level tax.
Section 9.02. Supplemental Indentures With Consent of Noteholders. The Issuer and the
Indenture Trustee, when authorized by an Issuer Request, also may, with prior notice to the
Rating Agencies and with the consent of the Holders of not less than a majority of the
Security Balances of the Notes affected thereby and the Credit Enhancer, by Act (as defined
in Section 10.03 hereof) of such Holders delivered to the Issuer and the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions of, this
Indenture or of modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without the consent
of the Holder of each Note affected thereby and the Credit Enhancer:
(i) change the date of payment of any installment of principal of or interest on any
Note, or reduce the principal amount thereof or the Note Rate thereon, change the provisions
of this Indenture relating to the application of collections on, or the proceeds of the sale
of, the Trust Estate to payment of principal of or interest on the Notes, or change any
place of payment where, or the coin or currency in which, any Note or the interest thereon
is payable, or impair the right to institute suit for the enforcement of the provisions of
this Indenture requiring the application of funds available therefor, as provided in Article
V, to the payment of any such amount due on the Notes on or after the respective due dates
thereof;
(ii) reduce the percentage of the Security Balances of any Class of Notes, the consent of
the Holders of which is required for any such supplemental indenture, or the consent of the
Holders of which is required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided for in this
Indenture;
(iii) modify or alter the provisions of the proviso to the definition of the term
"Outstanding" or modify or alter the exception in the definition of the term "Noteholder";
(iv) modify or alter the provisions of this Indenture regarding the voting of Notes held
by the Issuer, the Depositor or any of them;
(v) reduce the percentage of the Security Balances of the Notes required to direct the
Indenture Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant to
Section 5.04;
(vi) modify any provision of this Section 9.02 except to increase any percentage specified
herein or to provide that certain additional provisions of this Indenture or the other Basic
Documents cannot be modified or waived without the consent of the Holder of each Note
affected thereby;
(vii) modify any of the provisions of this Indenture in such manner as to affect the
calculation of the amount of any payment of interest or principal due on any Note on any
Payment Date (including the calculation of any of the individual components of such
calculation); or
(viii) permit the creation of any lien ranking prior to or on a parity with the lien of this
Indenture with respect to any part of the Trust Estate or, except as otherwise permitted or
contemplated herein, terminate the lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Note or the Credit Enhancer of the security
provided by the lien of this Indenture;
and provided, further, that any action listed in clauses (i) through (viii) above shall not,
as evidenced by an Opinion of Counsel, cause the Issuer to be subject to an entity level tax.
The Indenture Trustee may in its discretion determine whether or not any Notes would
be affected by any supplemental indenture and any such determination shall be conclusive
upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered
hereunder. The Indenture Trustee shall not be liable for any such determination made in
good faith.
It shall not be necessary for any Act (as defined in Section 10.03 hereof) of
Noteholders under this Section 9.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section 9.02, the Indenture Trustee shall mail to
the Holders of the Notes to which such amendment or supplemental indenture relates a notice
setting forth in general terms the substance of such supplemental indenture. Any failure of
the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
So long as there does not exist a failure by the Credit Enhancer to make a required
payment under the Policy, the Credit Enhancer shall have the right to exercise all rights of
the Holders of the Notes under this Indenture without any consent of such Holders, and such
Holders may exercise such rights only with the prior written consent of the Credit Enhancer,
except as provided herein.
Section 9.03. Execution of Supplemental Indentures. In executing, or permitting the
additional trusts created by, any supplemental indenture permitted by this Article IX or the
modification thereby of the trusts created by this Indenture, the Indenture Trustee shall be
entitled to receive, and subject to Sections 6.01 and 6.02, shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Indenture Trustee may, but
shall not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of any supplemental
indenture pursuant to the provisions hereof, this Indenture shall be and shall be deemed to
be modified and amended in accordance therewith with respect to the Notes affected thereby,
and the respective rights, limitations of rights, obligations, duties, liabilities and
immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders of the
Notes shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of this Indenture and
every supplemental indenture executed pursuant to this Article IX shall conform to the
requirements of the TIA as then in effect so long as this Indenture shall then be qualified
under the TIA.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes authenticated and
delivered after the execution of any supplemental indenture pursuant to this Article IX may,
and if required by the Indenture Trustee shall, bear a notation in form approved by the
Indenture Trustee as to any matter provided for in such supplemental indenture. If the
Issuer or the Indenture Trustee shall so determine, new Notes so modified as to conform, in
the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the Indenture
Trustee in exchange for Outstanding Notes.
ARTICLE X
MISCELLANEOUS
Section 10.01. Compliance Certificates and Opinions, etc. (a) Upon any application or
request by the Issuer to the Indenture Trustee to take any action under any provision of
this Indenture, the Issuer shall furnish to the Indenture Trustee and to the Credit Enhancer
(i) an Officer's Certificate stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with and (ii) an Opinion
of Counsel stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with, except that, in the case of any such application or request as
to which the furnishing of such documents is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has read or has caused
to be read such covenant or condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such signatory has made such
examination or investigation as is necessary to enable such signatory to express an informed
opinion as to whether or not such covenant or condition has been complied with;
(iv) a statement as to whether, in the opinion of each such signatory, such condition or
covenant has been complied with; and
(v) if the signer of such certificate or Opinion is required to be Independent, the
statement required by the definition of the term "Independent".
(b) (i) Prior to the deposit of any Collateral or other property or securities with the
Indenture Trustee that is to be made the basis for the release of any property or securities
subject to the lien of this Indenture, the Issuer shall, in addition to any obligation
imposed in Section 10.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee
an Officer's Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer of the
Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of any signer thereof as to the matters
described in clause (i) above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to the Issuer of the
securities to be so deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal year of the Issuer,
as set forth in the certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Security Balances of the Notes, but such a certificate need not
be furnished with respect to any securities so deposited, if the fair value thereof to the
Issuer as set forth in the related Officer's Certificate is less than $25,000 or less than
one percent of the Security Balances of the Notes.
(iii) Whenever any property or securities are to be released from the lien of this
Indenture, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as to the fair
value (within 90 days of such release) of the property or securities proposed to be released
and stating that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of any signer thereof as to the matters
described in clause (iii) above, the Issuer shall also furnish to the Indenture Trustee an
Independent Certificate as to the same matters if the fair value of the property or
securities and of all other property, other than property as contemplated by clause (v)
below or securities released from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required by clause (iii) above
and this clause (iv), equals 10% or more of the Security Balances of the Notes, but such
certificate need not be furnished in the case of any release of property or securities if
the fair value thereof as set forth in the related Officer's Certificate is less than
$25,000 or less than one percent of the then Security Balances of the Notes.
(v) Notwithstanding any provision of this Indenture, the Issuer may, without compliance
with the requirements of the other provisions of this Section 10.01, (A) collect upon, sell
or otherwise dispose of the Home Equity Loans as and to the extent permitted or required by
the Basic Documents or (B) make cash payments out of the Payment Account as and to the
extent permitted or required by the Basic Documents, so long as the Issuer shall deliver to
the Indenture Trustee every six months, commencing December 31, 2006, an Officer's
Certificate of the Issuer stating that all the dispositions of Collateral described in
clauses (A) or (B) above that occurred during the preceding six calendar months were in the
ordinary course of the Issuer's business and that the proceeds thereof were applied in
accordance with the Basic Documents.
Section 10.02. Form of Documents Delivered to Indenture Trustee. In any case where several
matters are required to be certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one or more
other such Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such certificate of an Authorized
Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the Seller or
the Issuer, stating that the information with respect to such factual matters is in the
possession of the Seller or the Issuer, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations with respect
to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other instruments under this
Indenture, they may, but need not, be consolidated and form one instrument.
Whenever in this Indenture, in connection with any application or certificate or
report to the Indenture Trustee, it is provided that the Issuer shall deliver any document
as a condition of the granting of such application, or as evidence of the Issuer's
compliance with any term hereof, it is intended that the truth and accuracy, at the time of
the granting of such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be construed
to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement
or opinion contained in any such document as provided in Article VI.
Section 10.03. Acts of Noteholders. (a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by agents duly appointed in writing;
and except as herein otherwise expressly provided such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee, and, where it is
hereby expressly required, to the Issuer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 6.01) conclusive in favor of the Indenture Trustee
and the Issuer, if made in the manner provided in this Section 10.03.
(b) The fact and date of the execution by any person of any such instrument or writing
may be proved in any manner that the Indenture Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Registrar.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other
action by the Holder of any Note shall bind the Holder of every Note issued upon the
registration thereof or in exchange therefor or in lieu thereof, in respect of anything
done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance
thereon, whether or not notation of such action is made upon such Note.
Section 10.04. Notices, etc., to Indenture Trustee, Issuer, Credit Enhancer and Rating
Agencies. Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture shall be in writing
and if such request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders is to be made upon, given or furnished to or filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with the
Indenture Trustee at the Corporate Trust Office. The Indenture Trustee shall promptly
transmit any notice received by it from the Noteholders to the Issuer, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder shall be sufficient for
every purpose hereunder if in writing and mailed first-class, postage prepaid to the Issuer
addressed to: Home Equity Loan Trust 2006-HSA3, in care of Wilmington Trust Company, or at
any other address previously furnished in writing to the Indenture Trustee by the Issuer.
The Issuer shall promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee, or
(iii) the Credit Enhancer by the Issuer, the Indenture Trustee or by any Noteholders shall
be sufficient for every purpose hereunder to in writing and mailed, first-class postage
pre-paid, or personally delivered or telecopied to: Financial Security Assurance Inc., 00
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Managing Director - Transaction
Oversight, Re: Home Equity Loan Trust 2006-HSA3. The Credit Enhancer shall promptly
transmit any notice received by it from the Issuer, the Indenture Trustee or the Noteholders
to the Issuer or Indenture Trustee, as the case may be.
Any consent or waiver under this Indenture or any Basic Document by the Credit
Enhancer must be in writing and signed by the Credit Enhancer to be effective.
Notices required to be given to the Rating Agencies by the Issuer, the Indenture
Trustee or the Owner Trustee shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, to (i) in the case of Standard & Poor's, at the
following address: Standard & Poor's Ratings Services, 00 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention of Asset Backed Surveillance Department and (ii) in the case of Moody's, at
the following address: Xxxxx'x Investors Service, Inc., ABS Monitoring Department, 00
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 10.05. Notices to Noteholders; Waiver. Where this Indenture provides for notice to
Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class, postage prepaid to each
Noteholder affected by such event, at such Person's address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed to any
particular Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice that is mailed in the manner herein provided shall conclusively
be presumed to have been duly given regardless of whether such notice is in fact actually
received.
Where this Indenture provides for notice in any manner, such notice may be waived in
writing by any Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall
be filed with the Indenture Trustee but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of a strike,
work stoppage or similar activity, it shall be impractical to mail notice of any event to
Noteholders when such notice is required to be given pursuant to any provision of this
Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture
Trustee shall be deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to give such
notice shall not affect any other rights or obligations created hereunder, and shall not
under any circumstance constitute an Event of Default.
Section 10.06. Alternate Payment and Notice Provisions. Notwithstanding any provision of
this Indenture or any of the Notes to the contrary, the Issuer may enter into any agreement
with any Holder of a Note providing for a method of payment, or notice by the Indenture
Trustee to such Holder, that is different from the methods provided for in this Indenture
for such payments or notices. The Issuer shall furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee shall cause payments to be made and notices to
be given in accordance with such agreements.
Section 10.07. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies
or conflicts with another provision hereof that is required to be included in this Indenture
by any of the provisions of the TIA, such required provision shall control.
The provisions of TIAss.ss.310 through 317 that impose duties on any Person (including
the provisions automatically deemed included herein unless expressly excluded by this
Indenture) are a part of and govern this Indenture, whether or not physically contained
herein.
Section 10.08. Effect of Headings. The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
Section 10.09. Successors and Assigns. All covenants and agreements in this Indenture and
the Notes by the Issuer shall bind its successors and assigns, whether so expressed or not.
All agreements of the Indenture Trustee in this Indenture shall bind its successors,
co-trustees and agents.
Section 10.10. Separability. In case any provision in this Indenture or in the Notes shall
be held invalid, illegal or unenforceable, the validity, legality, and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired thereby.
Section 10.11. Benefits of Indenture. Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, the Credit Enhancer, and any other party secured hereunder,
and any other Person with an ownership interest in any part of the Trust Estate, any benefit
or any legal or equitable right, remedy or claim under this Indenture. The Credit Enhancer
is a third-party beneficiary of this Indenture.
Section 10.12. Legal Holidays. In any case where the date on which any payment is due shall
not be a Business Day, then (notwithstanding any other provision of the Notes or this
Indenture) payment need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date on which nominally due,
and no interest shall accrue for the period from and after any such nominal date.
Section 10.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN
SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
Section 10.14. Counterparts. This Indenture may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 10.15. Recording of Indenture. If this Indenture is subject to recording in any
appropriate public recording offices, such recording is to be effected by the Issuer and at
its expense accompanied by an Opinion of Counsel (which may be counsel to the Indenture
Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect
that such recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.
Section 10.16. Issuer Obligation. No recourse may be taken, directly or indirectly, with
respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under this Indenture or any certificate or other writing delivered in connection
herewith or therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest
in the Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of
the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture Trustee and the
Owner Trustee have no such obligations in their respective individual capacities) and except
that any such partner, owner or beneficiary shall be fully liable, to the extent provided by
applicable law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Issuer hereunder, the
Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions
of Articles VI, VII and VIII of the Trust Agreement.
Section 10.17. No Petition. The Indenture Trustee, by entering into this Indenture, and each
Noteholder, by its acceptance of a Note, hereby covenant and agree that they will not at any
time institute against the Depositor or the Issuer, or join in any institution against the
Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the Notes, this
Indenture or any of other the Basic Documents.
Section 10.18. Inspection. The Issuer agrees that, on reasonable prior notice, it shall
permit any representative of the Indenture Trustee, during the Issuer's normal business
hours, to examine all the books of account, records, reports and other papers of the Issuer,
to make copies and extracts therefrom, to cause such books to be audited by Independent
certified public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and Independent certified public accountants, all at
such reasonable times and as often as may be reasonably requested. The Indenture Trustee
shall and shall cause its representatives to hold in confidence all such information except
to the extent disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the Indenture Trustee
may reasonably determine that such disclosure is consistent with its obligations hereunder.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused their names to
be signed hereto by their respective officers thereunto duly authorized, all as of the day
and year first above written.
HOME EQUITY LOAN TRUST 2006-HSA3,
as Issuer
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Assistant Vice President
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Assistant Vice President
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
hereby accepts the appointment as
Paying Agent pursuant to Section 3.03
hereof and as Note Registrar pursuant
to Section 4.02 hereof.
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: Assistant Vice President
STATE OF DELAWARE )
) ss.:
COUNTY OF NEWCASTLE )
On this 25th day of May, 2006, before me personally appeared Xxxxx Xxxxxx, to me
known, who being by me duly sworn, did depose and say, that s/he resides at in
_____________________ , that s/he is the Assistant Vice President of the Owner Trustee, one
of the corporations described in and which executed the above instrument; that s/he knows
the seal of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said corporation; and
that s/he signed her/his name thereto by like order.
Notary Public
STATE OF TEXAS )
) ss.:
COUNTY OF XXXXXX )
On this 25th day of May, 2006, before me personally appeared Xxxxxx Xxxxxx, to me
known, who being by me duly sworn, did depose and say, that s/he resides at
_________________ that s/he is the Assistant Vice President of JPMorgan Chase Bank, N.A., as
Indenture Trustee, one of the corporations described in and which executed the above
instrument; that s/he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that s/he signed her/his name thereto by like order.
Notary Public
NOTORIAL SEAL
Exhibit A-1
FORM OF CLASS A NOTES
UNLESS THIS TERM NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY TERM NOTE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS TERM NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS TERM NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS TERM NOTE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER,
THE DEPOSITOR, THE MASTER SERVICER, THE INDENTURE TRUSTEE, THE TRUSTEE OR GMAC MORTGAGE
GROUP, INC. OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN THE
INDENTURE OR THE BASIC DOCUMENTS.
HOME EQUITY LOAN TRUST 2006-HSA3
Home Equity Loan-Backed Term Note, Class A
Registered Principal Amount: $[ ]
No. 1 Note Rate: Floating
CUSIP NO.
Home Equity Loan Trust 2006-HSA3, a statutory trust duly organized and
existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for
value received, hereby promises to pay to Cede & Co. or registered assigns, the principal
sum of $[ ], payable on each Payment Date in an amount equal to the Percentage Interest
evidenced by this Term Note of the aggregate amount, if any, payable from the Payment
Account in respect of principal on the Term Notes pursuant to Section 3.05 of the Indenture
dated as of May 25, 2006 (the "Indenture") between the Issuer, as Issuer, and JPMorgan Chase
Bank, N.A., as Indenture Trustee (the "Indenture Trustee"); provided, however, that the
entire unpaid principal amount of this Term Note shall be due and payable on the Payment
Date in May 2036, to the extent not previously paid on a prior Payment Date. Capitalized
terms used but not defined herein are defined in Appendix A of the Indenture.
Interest on the Class A Notes will be paid monthly on each Payment Date at the
Note Rate for the related Interest Period subject to limitations which may result in Net WAC
Cap Shortfalls (as further described in the Indenture). The Note Rate for each Interest
Period will be a floating rate equal to the least of (i) LIBOR plus 0.13% per annum, (ii)
17.25% per annum and (iii) the Net WAC Rate. LIBOR for each applicable Interest Period will
be determined on the second LIBOR Business Day immediately preceding (i) the Closing Date in
the case of the first Interest Period and (ii) the first day of each succeeding Interest
Period by the Indenture Trustee as set forth in the Indenture. All determinations of LIBOR
by the Indenture Trustee shall, in the absence of manifest error, be conclusive for all
purposes, and each holder of this Term Note, by accepting this Term Note, agrees to be bound
by such determination. Interest on this Term Note will accrue for each Payment Date from
the most recent Payment Date on which interest has been paid (in the case of the first
Payment Date, from the Closing Date) to but excluding such Payment Date. Interest will be
computed on the basis of the actual number of days in each Interest Period and a year
assumed to consist of 360 days. Principal of and interest on this Term Note shall be paid
in the manner specified on the reverse hereof.
Principal of and interest on this Term Note are payable in such coin or
currency of the United States of America as at the time of payment is legal tender for
payment of public and private debts. All payments made by the Issuer with respect to this
Term Note shall be applied first to interest due and payable on this Term Note as provided
above and then to the unpaid principal of this Term Note.
Reference is made to the further provisions of this Term Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on the face of
this Term Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Term Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid
or obligatory for any purpose.
This Term Note is one of a duly authorized issue of Term Notes of the Issuer,
designated as its Home Equity Loan-Backed Term Notes, all issued under the Indenture, to
which Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the holders of the Term Notes. The Term Notes are subject to all terms of the
Indenture.
The Term Notes and the Variable Funding Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security therefor as
provided in the Indenture.
This Term Note is entitled to the benefits of an irrevocable and unconditional
financial guaranty insurance policy issued by Financial Security Assurance Inc.
Principal of and interest on this Term Note will be payable on each Payment
Date, commencing June 26, 2006, as described in the Indenture. "Payment Date" means the
twenty-fifth day of each month, or, if any such date is not a Business Day, then the next
Business Day.
The entire unpaid principal amount of this Term Note shall be due and payable
in full on the Payment Date in May 2036 pursuant to the Indenture, to the extent not
previously paid on a prior Payment Date. Notwithstanding the foregoing, if an Event of
Default shall have occurred and be continuing, then the Indenture Trustee or the holders of
Notes representing not less than a majority of the Security Balances of all Notes with the
consent of the Credit Enhancer, or the Credit Enhancer may declare the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the Indenture. All
principal payments on the Term Notes shall be made pro rata to the holders of Term Notes
entitled thereto.
Payments of interest on this Term Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full payment of
this Term Note, shall be made by check mailed to the Person whose name appears as the
Registered Holder of this Term Note (or one or more Predecessor Notes) on the Note Register
as of the close of business on each Record Date, except that with respect to Term Notes
registered on the Record Date in the name of the nominee of the Depository Agency
(initially, such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Term Note be
submitted for notation of payment. Any reduction in the principal amount of this Term Note
(or any one or more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future holders of this Term Note and of any Term Note issued upon
the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not
noted hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Term Note on a Payment
Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Registered Holder hereof as of the Record Date preceding such Payment
Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount
then due and payable shall be payable only upon presentation and surrender of this Term Note
at the address specified in such notice of final payment.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Term Note may be registered on the Note Register upon
surrender of this Term Note for registration of transfer at the Corporate Trust Office, duly
endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the holder hereof or such holder's attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Term Notes in authorized denominations and in the
same aggregate principal amount will be issued to the designated transferee or transferees.
No service charge will be charged for any registration of transfer or exchange of this Term
Note, but the Note Registrar shall require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any registration of transfer or
exchange of this Term Note.
Each holder or Beneficial Owner of a Term Note, by acceptance of a Term Note,
or, in the case of a Beneficial Owner of a Term Note, a beneficial interest in a Term Note,
covenants and agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer, the Owner Trustee, the Seller, the Master Servicer, the
Depositor or the Indenture Trustee on the Term Notes or under the Indenture or any
certificate or other writing delivered in connection therewith, against (i) the Indenture
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed and except that any such
partner, owner or beneficiary shall be fully liable, to the extent provided by applicable
law for any unpaid consideration for stock, unpaid capital contribution or failure to pay
any installment or call owing to such entity.
Each holder or Beneficial Owner of a Term Note, by acceptance of a Term Note
or, in the case of a Beneficial Owner of a Term Note, a beneficial interest in a Term Note,
covenants and agrees by accepting the benefits of the Indenture that such holder or
Beneficial Owner of a Term Note will not at any time institute against the Depositor or the
Issuer, or join in any institution against the Depositor, the Seller, the Master Servicer,
GMAC Mortgage Group, Inc. or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Term Notes, the Indenture or
the Basic Documents.
The Issuer has entered into the Indenture and this Term Note is issued with
the intention that, for federal, state and local income, single business and franchise tax
purposes, the Term Notes will qualify as indebtedness of the Issuer. Each holder of a Term
Note, by acceptance of a Term Note (and each Beneficial Owner of a Term Note by acceptance
of a beneficial interest in a Term Note), agrees to treat the Term Notes for federal, state
and local income, single business and franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Term Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may
treat the Person in whose name this Term Note is registered (as of the day of determination
or as of such other date as may be specified in the Indenture) as the owner hereof for all
purposes, whether or not this Term Note be overdue, and none of the Issuer, the Indenture
Trustee or any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the Issuer and the
Indenture Trustee and the rights of the holders of the Term Notes under the Indenture at any
time by the Issuer and the Indenture Trustee with the consent of the holders of Notes
representing a majority of the Security Balances of all Notes at the time Outstanding and
the Credit Enhancer and with prior notice to the Rating Agencies. The Indenture also
contains provisions permitting the holders of Notes representing specified percentages of
the Security Balances of all Notes, on behalf of the holders of all the Notes, to waive
compliance by the Issuer with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the holder of
this Term Note (or any one of more Predecessor Notes) shall be conclusive and binding upon
such holder and upon all future holders of this Term Note and of any Term Note issued upon
the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent or waiver is made upon this Term Note. The Indenture also permits
the Issuer and the Indenture Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of holders of the Term Notes issued thereunder
but with prior notice to the Rating Agencies and the Credit Enhancer.
The term "Issuer" as used in this Term Note includes any successor or the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the holders of Term
Notes under the Indenture.
The Term Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Term Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law provisions and the
obligations, rights and remedies of the parties hereunder and thereunder shall be determined
in accordance with such laws.
No reference herein to the Indenture and no provision of this Term Note or of
the Indenture shall alter or impair, the obligation of the Issuer, which is absolute and
unconditional, to pay the principal of and interest on this Term Note at the times, place
and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided
in the Basic Documents, none of Wilmington Trust Company in its individual capacity,
JPMorgan Chase Bank, N.A., in its individual capacity, any owner of a beneficial interest in
the Issuer, or any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall recourse be had
to any of them for, the payment of principal of or interest on this Term Note or performance
of, or omission to perform, any of the covenants, obligations or indemnifications contained
in the Indenture. The holder of this Term Note by its acceptance hereof agrees that, except
as expressly provided in the Basic Documents, in the case of an Event of Default under the
Indenture, the holder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; provided, however, that nothing contained herein shall be taken to
prevent recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this Term Note.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuer and not in its
individual capacity, has caused this Term Note to be duly executed.
HOME EQUITY LOAN TRUST 2006-HSA3,
By WILMINGTON TRUST COMPANY, not
in its individual capacity but solely as
Owner Trustee
Dated: May 25, 2006
By:
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Term Notes referred to in the within mentioned Indenture.
JPMORGAN CHASE BANK, N.A., not in
its individual capacity but solely as Indenture
Trustee
Dated: May 25, 2006
By:
Authorized Signatory
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
______________________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto
____________________________________________________________________________________________________________________________________________________________
(name and address of assignee)
the within Term Note and all rights thereunder, and hereby irrevocably constitutes and
appoints _____________________________________________________________, attorney, to
transfer said Term Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: ______________________________ */
Signature Guaranteed:
______________________________ */
* NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Term Note in every particular,
without alteration, enlargement or any change whatever. Such signature must be guaranteed
by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
Exhibit A-2
FORM OF VARIABLE FUNDING NOTES
THIS VARIABLE FUNDING NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR
TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER
APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4.02 OF
THE INDENTURE REFERRED TO HEREIN.
THE PRINCIPAL OF THIS VARIABLE FUNDING NOTE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS VARIABLE FUNDING NOTE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS VARIABLE FUNDING NOTE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
THE SELLER, THE DEPOSITOR, THE MASTER SERVICER, THE INDENTURE TRUSTEE, THE TRUSTEE OR GMAC
MORTGAGE GROUP, INC. OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN
THE INDENTURE OR THE BASIC DOCUMENTS.
HOME EQUITY LOAN TRUST 2006-HSA3
Home Equity Loan-Backed Variable Funding Note
Registered Initial Maximum Variable
Funding Note Balance: $0.00
No.VFN-1 Note Rate: Floating
Home Equity Loan Trust 2006-HSA3, a statutory trust duly organized and
existing under the laws of the State of Delaware (herein referred to as the "Issuer"), for
value received, hereby promises to pay to Residential Funding Corporation or registered
assigns, the principal amount set forth on Schedule A attached hereto (or otherwise owing
hereunder as determined pursuant to the Indenture as defined below), payable on each Payment
Date in an amount equal to the pro rata portion allocable hereto (based on the Security
Balances of all Variable Funding Notes immediately prior to such Payment Date) of the
aggregate amount, if any, payable from the Payment Account in respect of principal on the
Variable Funding Notes pursuant to Section 3.05 of the Indenture dated as of May 25, 2006
(the "Indenture") between the Issuer, as Issuer, and JPMorgan Chase Bank, N.A., as Indenture
Trustee (the "Indenture Trustee"); provided, however, that the entire unpaid principal
amount of this Variable Funding Note shall be due and payable on the Payment Date in May
2036 to the extent not previously paid on a prior Payment Date. Capitalized terms used but
not defined herein are defined in Appendix A of the Indenture.
Interest on the Variable Funding Notes will be paid monthly on each Payment
Date at the Note Rate for the related Interest Period subject to limitations which may
result in Net WAC Cap Shortfalls (as further described in the Indenture). The Note Rate for
each Interest Period will be a floating rate equal to the least of (i) LIBOR plus 0.13% per
annum, (ii) 17.25% per annum and (iii) the Net WAC Rate. LIBOR for each applicable Interest
Period will be determined on the second LIBOR Business Day immediately preceding (i) the
Closing Date in the case of the first Interest Period and (ii) the first day of each
succeeding Interest Period by the Indenture Trustee as set forth in the Indenture. All
determinations of LIBOR by the Indenture Trustee shall, in the absence of manifest error, be
conclusive for all purposes, and each holder of this Variable Funding Note, by accepting
this Variable Funding Note, agrees to be bound by such determination. Interest on this
Variable Funding Note will accrue for each Payment Date from the most recent Payment Date on
which interest has been paid (in the case of the First Payment Date, from the Closing Date)
to but excluding such Payment Date. Interest will be computed on the basis of the actual
number of days in each Interest Period and a year assumed to consist of 360 days. Principal
of and interest on this Variable Funding Note shall be paid in the manner specified on the
reverse hereof.
Principal of and interest on this Variable Funding Note are payable in such
coin or currency of the United States of America as at the time of payment is legal tender
for payment of public and private debts. All payments made by the Issuer with respect to
this Variable Funding Note shall be applied first to interest due and payable on this
Variable Funding Note as provided above and then to the unpaid principal of this Variable
Funding Note.
Reference is made to the further provisions of this Variable Funding Note set
forth on the reverse hereof, which shall have the same effect as though fully set forth on
the face of this Variable Funding Note.
Unless the certificate of authentication hereon has been executed by the
Indenture Trustee whose name appears below by manual signature, this Variable Funding Note
shall not be entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
This Variable Funding Note is one of a duly authorized issue of Variable
Funding Notes of the Issuer, designated as its Home Equity Loan-Backed Variable Funding
Notes (herein called the "Variable Funding Notes"), all issued under the Indenture, to which
Indenture and all indentures supplemental thereto reference is hereby made for a statement
of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and
the holders of the Variable Funding Notes. The Variable Funding Notes are subject to all
terms of the Indenture.
The Variable Funding Notes and the Term Notes (collectively, the "Notes") are
and will be equally and ratably secured by the collateral pledged as security therefor as
provided in the Indenture.
This Variable Funding Note is entitled to the benefits of an irrevocable and
unconditional financial guaranty insurance policy issued by Financial Security Assurance Inc.
Principal of and interest on this Variable Funding Note will be payable on
each Payment Date, commencing June 26, 2006, as described in the Indenture. "Payment Date"
means the twenty-fifth day of each month, or, if any such day is not a Business Day, then
the next Business Day.
The entire unpaid principal amount of this Variable Funding Note shall be due
and payable in full on the Payment Date in May 2036 pursuant to the Indenture, to the extent
not previously paid on a prior Payment Date. Notwithstanding the foregoing, if an Event of
Default shall have occurred and be continuing, then the Indenture Trustee or the holders of
Notes representing not less than a majority of the Security Balances of all Notes with the
consent of the Credit Enhancer, or the Credit Enhancer may declare the Notes to be
immediately due and payable in the manner provided in Section 5.02 of the Indenture. All
principal payments on the Variable Funding Notes shall be made pro rata to the holders of
Variable Funding Notes entitle thereto.
Payments of interest on this Variable Funding Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent not in full
payment of this Variable Funding Note, shall be made by check mailed to the Person whose
name appears as the Registered Holder of this Variable Funding Note (or one or more
Predecessor Notes) on the Note Register as of the close of business on each Record Date,
except that with respect to Variable Funding Notes registered on the Record Date in the name
of the nominee of the Depository Agency (initially, such nominee to be Cede & Co.), payments
will be made by wire transfer in immediately available funds to the account designated by
such nominee. Such checks shall be mailed to the Person entitled thereto at the address of
such Person as it appears on the Note Register as of the applicable Record Date without
requiring that this Variable Funding Note be submitted for notation of payment. Any
reduction in the principal amount of this Variable Funding Note (or any one or more
Predecessor Variable Funding Notes) effected by any payments made on any Payment Date shall
be binding upon all future holders of this Variable Funding Note and of any Variable Funding
Note issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as provided in
the Indenture, for payment in full of the then remaining unpaid principal amount of this
Variable Funding Note on a Payment Date, then the Indenture Trustee, in the name of and on
behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the
Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior
to such Payment Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Variable Funding Note at the address specified in such
notice of final payment.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Variable Funding Note may be registered on the Note Register
upon surrender of this Variable Funding Note for registration of transfer at the Corporate
Trust Office, duly endorsed by, and accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the holder hereof or such holder's
attorney duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in the Securities Transfer Agent's Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by the Note
Registrar in addition to or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended, and thereupon one or more new Variable Funding
Notes in authorized denominations and in the same aggregate principal amount will be issued
to the designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Variable Funding Note, but the Note Registrar
shall require payment of a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any registration of transfer or exchange of this Variable
Funding Note.
Each holder or Beneficial Owner of a Variable Funding Note, by acceptance of a
Variable Funding Note or, in the case of a Beneficial Owner of a Variable Funding Note, a
beneficial interest in a Variable Funding Note, covenants and agrees that no recourse may be
taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee, the Seller, the Master Servicer, the Depositor or the Indenture Trustee on the
Variable Funding Notes or under the Indenture or any certificate or other writing delivered
in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee
or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person
may have expressly agreed and except that any such partner, owner or beneficiary shall be
fully liable, to the extent provided by applicable law, for any unpaid consideration for
stock, unpaid capital contribution or failure to pay any installment or call owing to such
entity.
Each holder or Beneficial Owner of a Variable Funding Note, by acceptance of a
Variable Funding Note or, in the case of a Beneficial Owner of a Variable Funding Note, a
beneficial interest in a Variable Funding Note, covenants and agrees by accepting the
benefits of the Indenture that such holder or Beneficial Owner of a Variable Funding Note
will not at any time institute against the Depositor or the Issuer, or join in any
institution against the Depositor, the Seller, the Master Servicer, GMAC Mortgage Group,
Inc. or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Variable Funding Notes, the Indenture or
the Basic Documents.
The Issuer has entered into the Indenture and this Variable Funding Note is
issued with the intention that, for federal, state and local income, single business and
franchise tax purposes, the Variable Funding Notes will qualify as indebtedness of the
Issuer. Each holder of a Variable Funding Note, by acceptance of a Variable Funding Note
(and each Beneficial Owner of a Variable Funding Note, by acceptance of a beneficial
interest in a Variable Funding Note), agrees to treat the Variable Funding Notes for
federal, state and local income, single business and franchise tax purposes as indebtedness
of the Issuer.
Prior to the due presentment for registration of transfer of this Variable
Funding Note, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Variable Funding Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is registered
as the owner hereof for all purposes, whether or not this Variable Funding Note be overdue,
and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice
to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the Issuer and the
Indenture Trustee and the rights of the holders of the Variable Funding Notes under the
Indenture at any time by the Issuer and the Indenture Trustee with the consent of the
holders of Notes representing a majority of the Security Balances of all Notes at the time
Outstanding and the Credit Enhancer and with prior notice to the Rating Agencies. The
Indenture also contains provisions permitting the holders of Notes representing specified
percentages of the Security Balances of all Notes, on behalf of the holders of all the
Notes, to waive compliance by the Issuer with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such consent or
waiver by the holder of this Variable Funding Note (or any one of more Predecessor Variable
Funding Notes) shall be conclusive and binding upon such holder and upon all future holders
of this Variable Funding Note and of any Variable Funding Note issued upon the registration
of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Variable Funding Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture
without the consent of holders of the Variable Funding Notes issued thereunder but with
prior notice to the Rating Agencies and the Credit Enhancer.
The term "Issuer" as used in this Variable Funding Note includes any successor
to the Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Indenture Trustee and the holders of
Variable Funding Notes under the Indenture.
The Variable Funding Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain limitations therein set forth.
This Variable Funding Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder shall be
determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Variable Funding
Note or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Variable Funding
Note at the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly provided
in the Basic Documents, none of Wilmington Trust Company in its individual capacity,
JPMorgan Chase Bank, N.A., in its individual capacity, any owner of a beneficial interest in
the Issuer, or any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall recourse be had
to any of them for, the payment of principal of or interest on this Variable Funding Note or
performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in the Indenture. The holder of this Variable Funding Note by
its acceptance hereof agrees that, except as expressly provided in the Basic Documents, in
the case of an Event of Default under the Indenture, the holder shall have no claim against
any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that
nothing contained herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Variable Funding Note.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuer and not in its
individual capacity, has caused this Variable Funding Note to be duly executed.
HOME EQUITY LOAN TRUST 2006-HSA3,
By WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner
Trustee
Dated: May 25, 2006
By: ________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Variable Funding Note referred to in the within mentioned Indenture.
JPMORGAN CHASE BANK, N.A., not in
its individual capacity but solely as Indenture
Trustee
Dated: May 25, 2006
By: _____________________________
Authorized Signatory
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
______________________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto
____________________________________________________________________________________________________________________________________________________________
(name and address of assignee)
the within Variable Funding Note and all rights thereunder, and hereby irrevocably
constitutes and appoints _____________________________________________________________,
attorney, to transfer said Variable Funding Note on the books kept for registration thereof,
with full power of substitution in the premises.
Dated: ________________________________________*/
Signature Guaranteed:
________________________________________*/
* NOTICE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Term Note in every particular,
without alteration, enlargement or any change whatever. Such signature must be guaranteed
by an "eligible guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other "signature guarantee
program" as may be determined by the Note Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
SCHEDULE A
to
HOME EQUITY LOAN TRUST 2006-HSA3
Home Equity Loan-Backed Variable Funding Note
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Exhibit B
[FORM OF RULE 144A INVESTMENT REPRESENTATION]
Description of Rule 144A Securities, including numbers:
______________________________________________
______________________________________________
______________________________________________
______________________________________________
The undersigned seller, as registered holder (the "Seller"), intends to
transfer the Rule 144A Securities described above to the undersigned buyer (the "Buyer").
1. In connection with such transfer and in accordance with the agreements
pursuant to which the Rule 144A Securities were issued, the Seller hereby certifies the
following facts: Neither the Seller nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A Securities, any interest
in the Rule 144A Securities or any other similar security to, or solicited any offer to buy
or accept a transfer, pledge or other disposition of the Rule 144A Securities, any interest
in the Rule 144A Securities or any other similar security from, or otherwise approached or
negotiated with respect to the Rule 144A Securities, any interest in the Rule 144A
Securities or any other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or taken any other
action, that would constitute a distribution of the Rule 144A Securities under the
Securities Act of 1933, as amended (the "1933 Act"), or that would render the disposition of
the Rule 144A Securities a violation of Section 5 of the 1933 Act or require registration
pursuant thereto, and that the Seller has not offered the Rule 144A Securities to any person
other than the Buyer or another "qualified institutional buyer" as defined in Rule 144A
under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the Indenture
Trustee and the Issuer (as defined in the Indenture (the "Indenture"), dated as of May 25,
2006, between Home Equity Loan Trust 2006-HSA3, as Issuer, and JPMorgan Chase Bank, N.A., as
Indenture Trustee, pursuant to Section 4.02 of the Indenture, as follows:
a. The Buyer understands that the Rule 144A Securities have not
been registered under the 1933 Act or the securities laws of any state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of investment in the
Rule 144A Securities.
c. The Buyer has been furnished with all information regarding the
Rule 144A Securities that it has requested from the Seller, the Indenture Trustee,
the Owner Trustee or the Master Servicer.
d. Neither the Buyer nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A Securities, any
interest in the Rule 144A Securities or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other disposition of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to the Rule 144A Securities,
any interest in the Rule 144A Securities or any other similar security with, any
person in any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, that would constitute
a distribution of the Rule 144A Securities under the 1933 Act or that would render
the disposition of the Rule 144A Securities a violation of Section 5 of the 1933 Act
or require registration pursuant thereto, nor will it act, nor has it authorized or
will it authorize any person to act, in such manner with respect to the Rule 144A
Securities.
e. The Buyer is a "qualified institutional buyer" as that term is
defined in Rule 144A under the 1933 Act and has completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. The Buyer is
aware that the sale to it is being made in reliance on Rule 144A. The Buyer is
acquiring the Rule 144A Securities for its own account or the accounts of other
qualified institutional buyers, understands that such Rule 144A Securities may be
resold, pledged or transferred only (i) to a person reasonably believed to be a
qualified institutional buyer that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.
3. This document may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so executed, shall be
deemed to be an original; such counterparts, together, shall constitute one and the same
document.
IN WITNESS WHEREOF, each of the parties has executed this document as of the
date set forth below.
Print Name of Seller Print Name of Buyer
By: By:
Name: Name:
Title: Title:
Tax Payer Identification: Tax Payer Identification:
No. No.
Date: Date:
ANNEX 1 TO EXHIBIT B
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers Other Than Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule 144A
Investment Representation to which this Certification is attached:
1. As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.
2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities Act of 1933
("Rule 144A") because (i) the Buyer owned and/or invested on a discretionary basis
$____________________________________________** in securities (except for the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal year (such
amount being calculated in accordance with Rule 144A) and (ii) the Buyer satisfies the
criteria in the category marked below.
- Corporation, etc. The Buyer is a corporation (other than a bank, savings and loan
association or similar institution), Massachusetts or similar business trust,
partnership, or charitable organization described in Section 501(c)(3) of the
Internal Revenue Code.
- Bank. The Buyer (a) is a national bank or banking institution organized under the
laws of any State, territory or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the State or territorial
banking commission or similar official or is a foreign bank or equivalent
institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements, a copy of which is attached hereto.
- Savings and Loan. The Buyer (a) is a savings and loan association, building and loan
association, cooperative bank, homestead association or similar institution, which is
supervised and examined by a State or Federal authority having supervision over any
such institutions or is a foreign savings and loan association or equivalent
institution and (b) has an audited net worth of at least $25,000,000 as demonstrated
in its latest annual financial statements.
- Broker-Dealer. The Buyer is a dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
- Insurance Company. The Buyer is an insurance company whose primary and predominant
business activity is the writing of insurance or the reinsuring of risks underwritten
by insurance companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State or territory or the District
of Columbia.
- State or Local Plan. The Buyer is a plan established and maintained by a State, its
political subdivisions, or any agency or instrumentality of the State or its
political subdivisions, for the benefit of its employees.
- ERISA Plan. The Buyer is an employee benefit plan within the meaning of Title I of
the Employee Retirement Income Security Act of 1974.
- Investment Adviser. The Buyer is an investment adviser registered under the
Investment Advisers Act of 1940.
- SBIC. The Buyer is a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business Investment
Act of 1958.
- Business Development Company. The Buyer is a business development company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940.
- Trust Fund. The Buyer is a trust fund whose trustee is a bank or trust company and
whose participants are exclusively (a) plans established and maintained by a State,
its political subdivisions, or any agency or instrumentality of the State or its
political subdivisions, for the benefit of its employees, or (b) employee benefit
plans within the meaning of Title I of the Employee Retirement Income Security Act of
1974, but is not a trust fund that includes as participants individual retirement
accounts or H.R. 10 plans.
** Buyer must own and/or invest on a discretionary basis at least $100,000,000 in
securities unless Buyer is a dealer, and, in that case, Buyer must own and/or invest on a
discretionary basis at least $10,000,000 in securities.
3. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer, (ii) securities that are part of an unsold
allotment to or subscription by the Buyer, if the Buyer is a dealer, (iii) bank deposit
notes and certificates of deposit, (iv) loan participations, (v) repurchase agreements, (vi)
securities owned but subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost of such
securities to the Buyer and did not include any of the securities referred to in the
preceding paragraph. Further, in determining such aggregate amount, the Buyer may have
included securities owned by subsidiaries of the Buyer, but only if such subsidiaries are
consolidated with the Buyer in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such subsidiaries are
managed under the Buyer's direction. However, such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Rule 144A Securities are
relying and will continue to rely on the statements made herein because one or more sales to
the Buyer may be in reliance on Rule 144A.
Will the Buyer be purchasing the Rule 144A
Yes No Securities only for the Buyer's own account?
6. If the answer to the foregoing question is "no", the Buyer agrees that,
in connection with any purchase of securities sold to the Buyer for the account of a third
party (including any separate account) in reliance on Rule 144A, the Buyer will only
purchase for the account of a third party that at the time is a "qualified institutional
buyer" within the meaning of Rule 144A. In addition, the Buyer agrees that the Buyer will
not purchase securities for a third party unless the Buyer has obtained a current
representation letter from such third party or taken other appropriate steps contemplated by
Rule 144A to conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.
7. The Buyer will notify each of the parties to which this certification
is made of any changes in the information and conclusions herein. Until such notice is
given, the Buyer's purchase of Rule 144A Securities will constitute a reaffirmation of this
certification as of the date of such purchase.
Print Name of Buyer
By:
Name:
Title:
Date:
ANNEX 2 TO EXHIBIT B
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Buyers That Are Registered Investment Companies]
The undersigned hereby certifies as follows in connection with the Rule 144A
Investment Representation to which this certification is attached:
1. As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified institutional
buyer" as that term is defined in Rule 144A under the Securities Act of 1933 ("Rule 144A")
because Buyer is part of a Family of Investment Companies (as defined below), is such an
officer of the Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an investment
company registered under the Investment Company Act of 1940, and (ii) as marked below, the
Buyer alone, or the Buyer's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year. For purposes of determining the amount of securities owned
by the Buyer or the Buyer's Family of Investment Companies, the cost of such securities was
used.
- - The Buyer owned $ in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A).
- - The Buyer is part of a Family of Investment Companies which owned in the aggregate
$ in securities (other than the excluded securities
referred to below) as of the end of the Buyer's most recent fiscal year (such amount
being calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means two or
more registered investment companies (or series thereof) that have the same investment
adviser or investment advisers that are affiliated (by virtue of being majority owned
subsidiaries of the same parent or because one investment adviser is a majority owned
subsidiary of the other).
4. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer or are part of the Buyer's Family of Investment
Companies, (ii) bank deposit notes and certificates of deposit, (iii) loan participations,
(iv) repurchase agreements, (v) securities owned but subject to a repurchase agreement and
(vi) currency, interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that each of the
parties to which this certification is made are relying and will continue to rely on the
statements made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. The undersigned will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein. Until such
notice, the Buyer's purchase of Rule 144A Securities will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
Print Name of Buyer
By:
Name:
Title:
IF AN ADVISER:
Print Name of Buyer
Date:
EXHIBIT C
FORM OF INVESTOR REPRESENTATION LETTER
_______________ , 20__
Residential Funding Mortgage Securities II, Inc.
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxxx, XX 00000
JPMorgan Chase Bank, N.A.
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Corporate Trust Administration
Re: Home Equity Loan-Backed Capped Funding Notes
Series 2006-HSA3
Ladies and Gentlemen:
__________________ (the "Purchaser") intends to purchase from _________ (the
"Seller") $_______ Capped Funding Notes of Series 2006-HSA3 (the "Notes"), issued pursuant to
the Indenture (the "Indenture"), dated as of May 25, 2006 between Home Equity Loan Trust
2006-HSA3, as issuer (the "Issuer"), and JPMorgan Chase Bank, N.A., as indenture trustee
(the "Indenture Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Indenture. The Purchaser hereby certifies, represents and
warrants to, and covenants with, the Issuer and the Indenture Trustee that:
1. The Purchaser understands that (a) the Notes have not been and will not
be registered or qualified under the Securities Act of 1933, as amended (the "Act")
or any state securities law, (b) the Depositor is not required to so register or
qualify the Notes, (c) the Notes may be resold only if registered and qualified
pursuant to the provisions of the Act or any state securities law, or if an exemption
from such registration and qualification is available, (d) the Indenture contains
restrictions regarding the transfer of the Notes and (e) the Notes will bear a legend
to the foregoing effect.
2. The Purchaser is acquiring the Notes for its own account for investment
only and not with a view to or for sale in connection with any distribution thereof
in any manner that would violate the Act or any applicable state securities laws.
3. The Purchaser is (a) a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business matters, and,
in particular, in such matters related to securities similar to the Notes, such that
it is capable of evaluating the merits and risks of investment in the Notes, (b) able
to bear the economic risks of such an investment and (c) an "accredited investor"
within the meaning of Rule 501(a) promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an opportunity to
review (a) [a copy of the Private Placement Memorandum, dated
relating to the Notes (b)] a copy of the Indenture and [b]
[c] such other information concerning the Notes, the Home Equity Loans and the
Depositor as has been requested by the Purchaser from the Depositor or the Seller and
is relevant to the Purchaser's decision to purchase the Notes. The Purchaser has had
any questions arising from such review answered by the Depositor or the Seller to the
satisfaction of the Purchaser. [If the Purchaser did not purchase the Notes from the
Seller in connection with the initial distribution of the Notes and was provided with
a copy of the Private Placement Memorandum (the "Memorandum") relating to the
original sale (the "Original Sale") of the Notes by the Depositor, the Purchaser
acknowledges that such Memorandum was provided to it by the Seller, that the
Memorandum was prepared by the Depositor solely for use in connection with the
Original Sale and the Depositor did not participate in or facilitate in any way the
purchase of the Notes by the Purchaser from the Seller, and the Purchaser agrees that
it will look solely to the Seller and not to the Depositor with respect to any
damage, liability, claim or expense arising out of, resulting from or in connection
with (a) error or omission, or alleged error or omission, contained in the
Memorandum, or (b) any information, development or event arising after the date of
the Memorandum.]
5. The Purchaser has not and will not nor has it authorized or will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise transfer any
Note, any interest in any Note or any other similar security to any person in any
manner, (b) solicit any offer to buy or to accept a pledge, disposition of other
transfer of any Note, any interest in any Note or any other similar security from any
person in any manner, (c) otherwise approach or negotiate with respect to any Note,
any interest in any Note or any other similar security with any person in any manner,
(d) make any general solicitation by means of general advertising or in any other
manner or (e) take any other action, that (as to any of (a) through (e) above) would
constitute a distribution of any Note under the Act, that would render the
disposition of any Note a violation of Section 5 of the Act or any state securities
law, or that would require registration or qualification pursuant thereto. The
Purchaser will not sell or otherwise transfer any of the Notes, except in compliance
with the provisions of the Indenture.
6. The Purchaser is not a non-United States person.
Very truly yours,
By:
Name:
Title:
EXHIBIT D
FORM OF TRANSFEROR REPRESENTATION LETTER
__________________, 20___
Residential Funding Mortgage Securities II, Inc.
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxxx, XX 00000
JPMorgan Chase Bank, N.A.
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Corporate Trust Administration
Re: Home Equity Loan-Backed Capped Funding Notes
Series 2006-HSA3
Ladies and Gentlemen:
___________________(the "Purchaser") intends to purchase from ______ (the
"Seller") $_______ Capped Funding Notes of Series 2006-HSA3 (the "Notes"), issued pursuant to
the (the "Indenture"), dated as of May 25, 2006 between Home Equity Loan Trust 2006-HSA3, as
issuer (the "Issuer"), and JPMorgan Chase Bank, N.A., as indenture trustee (the "Indenture
Trustee"). All terms used herein and not otherwise defined shall have the meanings set
forth in the Indenture. The Seller hereby certifies, represents and warrants to, and
covenants with, the Issuer and the Indenture Trustee that:
Neither the Seller nor anyone acting on its behalf has (a) offered, pledged,
sold, disposed of or otherwise transferred any Note, any interest in any Note or any other
similar security to any person in any manner, (b) has solicited any offer to buy or to
accept a pledge, disposition or other transfer of any Note, any interest in any Note or any
other similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Note, any interest in any Note or any other similar security
with any person in any manner, (d) has made any general solicitation by means of general
advertising or in any other manner, or (e) has taken any other action, that (as to any of
(a) through (e) above) would constitute a distribution of the Notes under the Securities Act
of 1933 (the "Act"), that would render the disposition of any Note a violation of Section 5
of the Act or any state securities law, or that would require registration or qualification
pursuant thereto. The Seller will not act, in any manner set forth in the foregoing
sentence with respect to any Note. The Seller has not and will not sell or otherwise
transfer any of the Notes, except in compliance with the provisions of the Indenture.
Very truly yours,
(Seller)
By:
Name:
Title:
APPENDIX A
DEFINITIONS
Additional Balance: With respect to any Home Equity Loan, any future Draw made by the related
Mortgagor pursuant to the related Loan Agreement on and after the Cut-off Date; provided, however, that if an
Amortization Event occurs, then any Draw after such Amortization Event shall not be acquired by the Trust and
shall not be an Additional Balance.
Additional Balance Differential: With respect to any Payment Date, unless and until an
Amortization Event occurs, (x) up to and including the Payment Date occurring in the calendar month during
which the Revolving Period ends, the amount, if any, by which Additional Balances resulting from Draws under
the Home Equity Loans during the related Collection Period exceed Principal Collections during such
Collection Period and (y) after the Payment Date occurring in the calendar month during which the Revolving
Period ends, the aggregate amount of Additional Balances conveyed to the Trust during the related Collection
Period.
Additional Certificate Security Balance: With respect to the issuance of Capped Funding Notes
pursuant to Section 4.01(d) of the Indenture, the amount, if any, required in accordance with the Opinion of
Counsel in connection therewith to be added to the Security Balances of the Certificates in accordance with
Section 3.12 of the Trust Agreement. In addition, with respect to any Payment Date described in the second
sentence of Section 3.12(a) of the Trust Agreement, the "Additional Certificate Security Balance" shall
include the amount of the excess described in such sentence.
Adjusted Mortgage Rate: With respect to any Home Equity Loan and any date of determination,
the Loan Rate borne by the related Home Equity Loan, less the rate at which the related Subservicing Fee
accrues.
Affiliate: With respect to any Person, any other Person controlling, controlled by or under
common control with such Person. For purposes of this definition, "control" means the power to direct the
management and policies of a Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings correlative to the foregoing.
Aggregate Additional Balance Differential: With respect to any Payment Date and the Variable
Funding Notes, the sum of Additional Balance Differentials that have been added to the Security Balance of
Variable Funding Notes prior to such Payment Date.
Aggregate Security Balance: With respect to any Payment Date, the aggregate of the Security
Balances of all Securities or specified Classes of Securities as of such date.
Amortization Event: Any one of the following events:
(a) the failure on the part of the Seller (i) to make any payment or deposit required to be
made under the Purchase Agreement within five Business Days after the date such payment or deposit is
required to be made; or (ii) to observe or perform in any material respect any other covenants or
agreements of the Seller set forth in the Purchase Agreement, which failure continues unremedied for a
period of 60 days after written notice and such failure materially and adversely affects the interests
of the Securityholders or the Credit Enhancer;
(b) if any representation or warranty made by the Seller in the Purchase Agreement proves
to have been incorrect in any material respect when made and which continues to be incorrect in any
material respect for a period of 45 days with respect to any representation or warranty of the Seller
made in Section 3.1(a) of the Purchase Agreement or 90 days with respect to any representation or
warranty made in Section 3.1(b) of the Purchase Agreement after written notice and as a result of
which the interests of the Securityholders or the Credit Enhancer are materially and adversely
affected; provided, however, that an Amortization Event shall not be deemed to occur if the Seller has
repurchased or caused to be repurchased or substituted for the related Home Equity Loan or all Home
Equity Loans, if applicable, during such period (or within an additional 60 days with the consent of
the Indenture Trustee and the Credit Enhancer) in accordance with the provisions of the Indenture;
(c) the entry against the Seller or the Issuer of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship, receivership, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for
a period of 60 consecutive days;
(d) the Seller or the Issuer shall voluntarily go into liquidation, consent to the
appointment of a conservator, receiver, liquidator or similar person in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Seller or
the Issuer or of or relating to all or substantially all of its property, or a decree or order of a
court, agency or supervisory authority having jurisdiction in the premises for the appointment of a
conservator, receiver, liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of
its affairs, shall have been entered against the Seller or the Issuer and such decree or order shall
have remained in force undischarged, unbonded or unstayed for a period of 60 days; or the Seller or
the Issuer shall admit in writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors or voluntarily suspend payment of its obligations;
(e) the Issuer becomes subject to regulation by the Commission as an investment company
within the meaning of the Investment Company Act of 1940, as amended;
(f) a Servicing Default relating to the Master Servicer occurs under the Servicing
Agreement and the Master Servicer is the Seller;
(g) the occurrence of a draw on the Policy and the failure of the Credit Enhancer to be
reimbursed for such draw, which failure continues unremedied for a period of 90 days after written
notice to the Master Servicer; or
(h) the Issuer is determined to be an association taxable as a corporation for federal
income tax purposes.
In the case of any event described in (a), (b), (f) or (g), an Amortization Event will be
deemed to have occurred only if, after any applicable grace period described in such clauses, any of the
Indenture Trustee, the Credit Enhancer or, with the consent of the Credit Enhancer, Securityholders
evidencing not less than 51% of the Security Balance of each of the Term Notes and the Certificates, by
written notice to the Seller, the Master Servicer, the Depositor and the Owner Trustee (and to the Indenture
Trustee, if given by the Credit Enhancer or the Securityholders), declare that an Amortization Event has
occurred as of the date of such notice. In the case of any event described in clauses (c), (d), (e) or (h),
an Amortization Event will be deemed to have occurred without any notice or other action on the part of the
Indenture Trustee, the Noteholders or the Credit Enhancer immediately upon the occurrence of such event;
provided, that any Amortization Event may be waived and deemed of no effect with the written consent of the
Credit Enhancer and each Rating Agency, subject to the satisfaction of any conditions to such waiver.
Appraised Value: With respect to any Mortgaged Property, the lesser of (i) the appraised value
of such Mortgaged Property based upon the appraisal made at the time of the origination of the related Home
Equity Loan, and (ii) the sales price of the Mortgaged Property at such time of origination, except in the
case of a Mortgaged Property securing a refinanced or modified Home Equity Loan as to which it is either the
appraised value based upon the appraisal made at the time of origination of the loan which was refinanced or
modified or the appraised value determined in an appraisal at the time of refinancing or modification, as the
case may be.
Assignment of Mortgage: With respect to any Mortgage, an assignment, notice of transfer or
equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction in which the related
Mortgaged Property is located to reflect the conveyance of the Mortgage, which assignment, notice of transfer
or equivalent instrument may be in the form of one or more blanket assignments covering Mortgages secured by
Mortgaged Properties located in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the Borough of Manhattan, The City
of New York, printed in the English language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays.
Authorized Officer: With respect to the Issuer, any officer of the Owner Trustee who is
authorized to act for the Owner Trustee in matters relating to the Issuer and who is identified on the list
of Authorized Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing Date (as such
list may be modified or supplemented from time to time thereafter).
Bankruptcy Code: The Bankruptcy Code of 1978, as amended.
Bankruptcy Loss: With respect to any Home Equity Loan, a Deficient Valuation or a Debt Service
Reduction; provided, however, that neither a Deficient Valuation nor a Debt Service Reduction shall be deemed
a Bankruptcy Loss hereunder so long as the Master Servicer has notified the Indenture Trustee and the Credit
Enhancer in writing that the Master Servicer is diligently pursuing any remedies that may exist in connection
with the representations and warranties made regarding the related Home Equity Loan and either (A) the
related Home Equity Loan is not in default with regard to payments due thereunder or (B) delinquent payments
of principal and interest under the related Home Equity Loan and any premiums on any applicable primary
hazard insurance policy and any related escrow payments in respect of such Home Equity Loan are being
advanced on a current basis by the Master Servicer or a Subservicer, in either case without giving effect to
any Debt Service Reduction.
Basic Documents: The Trust Agreement, the Indenture, the Purchase Agreement, the Insurance
Agreement, the Policy, the Servicing Agreement, the Custodial Agreement, the Insurance Agreement, the
Indemnification Agreement and the other documents and certificates delivered in connection with any of the
above.
Beneficial Owner: With respect to any Term Note, the Person who is the beneficial owner of
such Note as reflected on the books of the Depository or on the books of a Person maintaining an account with
such Depository (directly as a Depository Participant or indirectly through a Depository Participant, in
accordance with the rules of such Depository).
Billing Cycle: With respect to any Home Equity Loan and Due Date, the calendar month preceding
such Due Date.
Book-Entry Custodian: The custodian appointed pursuant to Section 4.06 of the Indenture.
Book-Entry Notes: Beneficial interests in the Notes, ownership and transfers of which shall be
made through book entries by the Depository as described in Section 4.06 of the Indenture.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking
institutions in the States of New York, California, Minnesota, Illinois or Delaware are required or
authorized by law or executive order to be closed.
Capped Funding Note: Any Capped Funding Note issued in connection with an exchange pursuant to
Section 4.01(d) of the Indenture.
Cash Liquidation: As to any defaulted Home Equity Loan other than a Home Equity Loan as to
which an REO Acquisition occurred, a determination by the Master Servicer that it has received all Insurance
Proceeds, Liquidation Proceeds and other payments or cash recoveries which the Master Servicer reasonably and
in good faith expects to be finally recoverable with respect to such Home Equity Loan.
Certificate Distribution Account: The account or accounts created and maintained by the
Certificate Paying Agent pursuant to Section 3.10(c) of the Trust Agreement. The Certificate Paying Agent
will make all distributions on the Certificates from money on deposit in the Certificate Distribution Account.
Certificate Distribution Amount: For any Payment Date, the amount remaining in the Payment
Account following distributions pursuant to clauses (i) through (ix) of Section 3.05(a) of the Indenture.
Certificate of Trust: The Certificate of Trust filed for the Trust pursuant to Section 3810(a)
of the Statutory Trust Statute.
Certificate Paying Agent: The meaning specified in Section 3.10 of the Trust Agreement.
Certificate Percentage Interest: With respect to any Payment Date, the Certificate Percentage
Interest as stated on the face of such Certificate, which percentage may be recalculated in accordance with
Section 3.12 of the Trust Agreement.
Certificate Principal Balance: As of any Payment Date, with respect to any Certificate, an
amount equal to the then applicable Certificate Percentage Interest of such Certificate multiplied by the
Overcollateralization Amount.
Certificate Register: The register maintained by the Certificate Registrar in which the
Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges of
Certificates.
Certificate Registrar: Initially, the Indenture Trustee, in its capacity as Certificate
Registrar.
Certificateholder: The Person in whose name a Certificate is registered in the Certificate
Register except that, any Certificate registered in the name of the Issuer, the Owner Trustee or the
Indenture Trustee or any Affiliate of any of them shall be deemed not to be outstanding and the registered
holder will not be considered a Certificateholder or a holder for purposes of giving any request, demand,
authorization, direction, notice, consent or waiver under the Indenture or the Trust Agreement provided that,
in determining whether the Indenture Trustee or the Owner Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Certificates that the Indenture
Trustee or the Owner Trustee knows to be so owned shall be so disregarded. Owners of Certificates that have
been pledged in good faith may be regarded as Holders if the pledgee establishes to the satisfaction of the
Indenture Trustee or the Owner Trustee, as the case may be, the pledgee's right so to act with respect to
such Certificates and that the pledgee is not the Issuer, any other obligor upon the Certificates or any
Affiliate of any of the foregoing Persons.
Certificates: The Class SB Certificates.
Class: Collectively, all of the Notes or Certificates bearing the same designation.
Class A Notes: The Class A Home Equity Loan-Backed Term Notes, Series 2006-HSA3, in
substantially the form set forth in Exhibit A-1 to the Indenture.
Class Principal Balance: For each Class of Notes, the initial Security Balance thereof as
reduced on each successive Payment Date by principal distributed in respect thereof on such Payment Date
pursuant to Section 3.05 of the Indenture.
Class SB Certificates: The Class SB Home Equity Loan-Backed Certificates, Series 2006-HSA3,
substantially in the form of Exhibit A to the Trust Agreement.
Closing Date: May 25, 2006.
Code: The Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder.
Collateral: The meaning specified in the Granting Clause of the Indenture.
Collection Period: With respect to any Home Equity Loan and any Payment Date, the calendar
month preceding any such Payment Date.
Combined Loan-to-Value Ratio: With respect to any Home Equity Loan and any date, the
percentage equivalent of a fraction, the numerator of which is the sum of (i) the Credit Limit and (ii) the
outstanding principal balance as of the date of the origination of such Home Equity Loan (or any subsequent
date as of which such outstanding principal balance may be determined in connection with an increase or
decrease in the Credit Limit, to reduce the amount of primary insurance for such Home Equity Loan or to
approve a subordinate lien) and of all other mortgage loans, if any, that are secured by liens on the
Mortgaged Property that are senior or subordinate to the Mortgage and the denominator of which is the
Appraised Value of the related Mortgaged Property.
Commission: The Securities and Exchange Commission.
Corporate Trust Office: With respect to the Indenture Trustee, Certificate Registrar,
Certificate Paying Agent and Paying Agent, the principal corporate trust office of the Indenture Trustee and
Note Registrar at which at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at 000 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxx,
Xxxxx 00000, Attention: Worldwide Securities Services/Structured Finance Services. For purposes of Section
4.15 of the Indenture, however, such term shall mean the Indenture Trustee's agent, Chase Manhattan Trust
Company, National Association, located at 0000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000,
or such other office as the Indenture Trustee shall designate. With respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee at which at any particular time its corporate trust
business shall be administered, which office at the date of the execution of this Trust Agreement is located
at Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, Attention: Corporate Trust
Administration.
Credit Enhancer: Financial Security Assurance Inc., or any successor thereto.
Credit Enhancer Default: If the Credit Enhancer fails to make a payment required under the
Policy in accordance with its terms.
Credit Enhancer Premium Rate: The rate at which the Premium (as defined in the Insurance
Agreement) is calculated with respect to the Policy.
Credit Limit: With respect to any Home Equity Loan, the maximum Loan Balance permitted under
the terms of the related Loan Agreement.
Credit Limit Increase: As defined in Section 3.01 of the Servicing Agreement.
Credit Repository: Equifax, Transunion and Experian, or their successors in interest.
Credit Score: With respect to any Home Equity Loan, the numerical designation obtained from
credit reports provided by any credit reporting organization used to assess a borrower's credit-worthiness
and the relative degree of risk a borrower represents to a lender, as determined in accordance with the
applicable underwriting criteria.
Curtailment: Any Principal Prepayment made by a Mortgagor which is not a Principal Prepayment
in full.
Custodial Account: The account or accounts created and maintained by the Master Servicer
pursuant to Section 3.02(b) of the Servicing Agreement, in which the Master Servicer shall deposit or cause
to be deposited certain amounts in respect of the Home Equity Loans.
Custodial Agreement: The Custodial Agreement, dated as of May 25, 2006, among the Custodian,
the Indenture Trustee, the Issuer and the Master Servicer.
Custodian: Xxxxx Fargo Bank, National Association, and its successors and assigns.
Cut-off Date: May 1, 2006.
Cut-off Date Loan Balance: With respect to any Home Equity Loan, the unpaid principal balance
thereof as of the close of business on the last day of the Billing Cycle immediately prior to the Cut-off
Date.
Debt Service Reduction: With respect to any Home Equity Loan, a reduction in the scheduled
payment for such Home Equity Loan by a court of competent jurisdiction in a proceeding under the Bankruptcy
Code that becomes final and non-appealable, except such a reduction constituting a Deficient Valuation or any
reduction that results in a permanent forgiveness of principal.
Default: Any occurrence which is or with notice or the lapse of time or both would become an
Event of Default.
Deficiency Amount: As defined in the Policy.
Deficient Valuation: With respect to any Home Equity Loan, a valuation by a court of competent
jurisdiction of the Mortgaged Property in an amount less than the then outstanding indebtedness under the
Home Equity Loan and any senior lien on the Mortgaged Property, or any reduction in the amount of principal
to be paid in connection with any scheduled payment that constitutes a permanent forgiveness of principal,
which valuation or reduction results from a proceeding under the Bankruptcy Code that becomes final and
non-appealable.
Definitive Notes: The meaning specified in Section 4.06 of the Indenture.
Deleted Loan: A Home Equity Loan replaced or to be replaced with an Eligible Substitute Loan.
Delinquency Percentage: With respect to any Payment Date, the percentage equivalent of a
fraction (A) the numerator of which is the Loan Balance of the Home Equity Loans that are Delinquent for 60
days or more as of such Payment Date and (B) the denominator of which is the Pool Balance, in each case as of
the beginning of the related Collection Period, expressed as a percentage.
Delinquent: As used herein, a Home Equity Loan is considered to be: "30 to 59 days" or "30 or
more days" delinquent when a payment due on any scheduled due date remains unpaid as of the close of business
on the next following monthly due date. Since the determination as to whether a Home Equity Loan falls into
these categories is made as of the close of business on the last business day of each month, a Home Equity
Loan with a payment due on July 1 that remained unpaid as of the close of business on July 31 would still be
considered current as of July 31. If that payment remained unpaid as of the close of business on August 31,
the Home Equity Loan would then be considered 30-59 days delinquent. Delinquency information as of the
Cut-off Date is determined and prepared as of the close of business on the last business day immediately
prior to the Cut-off Date.
Depositor: Residential Funding Mortgage Securities II, Inc., a Delaware corporation, or its
successor in interest.
Depository or Depository Agency: The Depository Trust Company or a successor appointed by the
Indenture Trustee with the approval of the Depositor. Any successor to the Depository shall be an
organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act and the
regulations of the Securities and Exchange Commission thereunder.
Depository Participant: A Person for whom, from time to time, the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Derivative Contract: Any ISDA Master Agreement, together with the related Schedule and
Confirmation, entered into by the Owner Trustee and a Derivative Counterparty in accordance with Section 5.07
of the Trust Agreement.
Derivative Counterparty: Any counterparty to a Derivative Contract as provided in Section 5.07
of the Trust Agreement.
Determination Date: With respect to any Payment Date, the 20th day of the month in which such
Payment Date occurs or if such day is not a Business Day, the next succeeding Business Day.
Draw: With respect to any Home Equity Loan, a borrowing by the related Mortgagor under the
related Loan Agreement.
Draw Period: With respect to each Home Equity Loan, the period consisting of either the first
five, ten or fifteen years after the date of origination of such Home Equity Loan, during which the related
Mortgagor is permitted to make Draws.
Due Date: With respect to any Home Equity Loan, the day of the month the Minimum Monthly
Payment or fixed monthly payment is due as set forth in the related Mortgage Note.
Eligible Account: An account that is any of the following: (i) maintained with a depository
institution the short-term debt obligations of which have been rated by each Rating Agency in its highest
rating category available, or (ii) an account or accounts in a depository institution in which such accounts
are fully insured to the limits established by the FDIC, provided that any deposits not so insured shall, to
the extent acceptable to each Rating Agency, as evidenced in writing, be maintained such that (as evidenced
by an Opinion of Counsel delivered to the Indenture Trustee and each Rating Agency) the Indenture Trustee
have a claim with respect to the funds in such account or a perfected first security interest against any
collateral (which shall be limited to Permitted Investments) securing such funds that is superior to claims
of any other depositors or creditors of the depository institution with which such account is maintained, or
(iii) in the case of the Custodial Account, either (A) a trust account or accounts maintained at the
corporate trust department of the Indenture Trustee or (B) an account or accounts maintained at the corporate
trust department of the Indenture Trustee, as long as its short term debt obligations are rated P-1 by
Xxxxx'x and A-1 by Standard & Poor's (or the equivalent) or better by each Rating Agency and its long term
debt obligations are rated A by Standard & Poor's (or the equivalent) or better by each Rating Agency, or
(iv) in the case of the Custodial Account and the Payment Account, a trust account or accounts maintained in
the corporate trust division of the Indenture Trustee, or (v) an account or accounts of a depository
institution acceptable to each Rating Agency (as evidenced in writing by each Rating Agency that use of any
such account as the Custodial Account or the Payment Account will not reduce the rating assigned to any of
the Securities by such Rating Agency (if determined without regard to the Policy) below the lower of the
then-current rating or the rating assigned to such Securities (if determined without regard to the Policy) as
of the Closing Date by such Rating Agency).
Eligible Substitute Loan: A Home Equity Loan substituted by the Seller for a Deleted Loan
which must, on the date of such substitution, as confirmed in an Officer's Certificate delivered to the
Indenture Trustee, (i) have an outstanding principal balance, after deduction of the principal portion of the
monthly payment due in the month of substitution (or in the case of a substitution of more than one Home
Equity Loan for a Deleted Home Equity Loan, an aggregate outstanding principal balance, after such
deduction), not in excess of the outstanding principal balance of the Deleted Loan (the amount of any
shortfall to be deposited by the Seller in the Custodial Account in the month of substitution); (ii) comply
with each representation and warranty set forth in Section 3.1(b) of the Purchase Agreement (other than
clauses (xiii), (xxiv)(B), (xxv)(B), (xxvi), (xxvii), (xxxiv) and (xxxvi) thereof) as of the date of
substitution; (iii) have a Loan Rate, Net Loan Rate and Gross Margin no lower than and not more than 1% per
annum higher than the Loan Rate, Net Loan Rate and Gross Margin, respectively, of the Deleted Loan as of the
date of substitution; (iv) have a Combined Loan-to-Value Ratio at the time of substitution no higher than
that of the Deleted Loan at the time of substitution; (v) have a remaining term to stated maturity not
greater than (and not more than one year less than) that of the Deleted Loan and (vi) not be 30 days or more
delinquent.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Event of Default: With respect to the Indenture, any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) a default in the payment of any interest on any Note when the same becomes due and
payable, and such default shall continue for a period of five days; or
(ii) a default in the payment of the principal of or any installment of the principal of any
Note when the same becomes due and payable, and such default shall continue for a period of five days;
or
(iii) there occurs a default in the observance or performance of any covenant or agreement of
the Issuer made in the Indenture, or any representation or warranty of the Issuer made in the
Indenture or in any certificate or other writing delivered pursuant hereto or in connection herewith
proving to have been incorrect in any material respect as of the time when the same shall have been
made which has a material adverse effect on Securityholders or the Credit Enhancer, and such default
shall continue or not be cured, or the circumstance or condition in respect of which such
representation or warranty was incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days after there shall have been given, by registered or certified mail, to the Issuer by
the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 25% of the
outstanding Security Balance of the Notes or the Credit Enhancer, a written notice specifying such
default or incorrect representation or warranty and requiring it to be remedied and stating that such
notice is a notice of default hereunder; or
(iv) there occurs the filing of a decree or order for relief by a court having jurisdiction
in the premises in respect of the Issuer or any substantial part of the Trust Estate in an involuntary
case under any applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official of the Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or
(v) there occurs the commencement by the Issuer of a voluntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by the Issuer to the entry of an order for relief in an involuntary case under any such law,
or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial
part of the assets of the Trust Estate, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become
due, or the taking of any action by the Issuer in furtherance of any of the foregoing.
Event of Liquidation: Following the occurrence of an Event of Default under the Indenture, the
determination by the Indenture Trustee, as evidenced by a written notice provided to the Owner Trustee, the
Depositor and the Credit Enhancer, that all conditions precedent to the sale or liquidation of the Trust
Estate pursuant to Section 5.04 of the Indenture have been satisfied.
Event of Servicer Termination: With respect to the Servicing Agreement, a Servicing Default as
defined in Section 7.01 of the Servicing Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Excluded Amount: For any Payment Date on or after the occurrence of an Amortization Event, the
portion of the balance with respect to each Home Equity Loan attributable to all Draws not transferred to the
Trust, and the portion of the Principal Collections (other than Net Liquidation Proceeds to the extent that
the Excluded Amount of Liquidation Proceeds is not included in Net Liquidation Proceeds) and Interest
Collections thereon for each Collection Period allocated to such Excluded Amount based on a pro rata
allocation between the related Excluded Amount and the Loan Balance in proportion to the respective amounts
outstanding as of the end of the calendar month preceding such Collection Period.
Expenses: The meaning specified in Section 7.02 of the Trust Agreement.
Xxxxxx Xxx: Xxxxxx Xxx, formerly the Federal National Mortgage Association, or any successor
thereto.
FDIC: The Federal Deposit Insurance Corporation or any successor thereto.
Final Scheduled Payment Date: The Payment Date in May 2036.
Foreclosure Profit: With respect to a Liquidated Home Equity Loan, the amount, if any, by
which (i) the aggregate of Liquidation Proceeds net of Liquidation Expenses exceeds (ii) the related Loan
Balance (plus accrued and unpaid interest thereon at the applicable Loan Rate from the date interest was last
paid through the date of receipt of the final Liquidation Proceeds) of such Liquidated Home Equity Loan
immediately prior to the final recovery of its Liquidation Proceeds.
Form 10-K Certification: As defined in Section 4.04(b) of the Servicing Agreement.
Freddie Mac: Freddie Mac, formerly the Federal Home Loan Mortgage Corporation, or any
successor thereto.
Xxxxx: Pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer,
create, and xxxxx x xxxx upon and a security interest in and right of set-off against, deposit, set over and
confirm pursuant to the Indenture. A Grant of the Collateral or of any other agreement or instrument shall
include all rights, powers and options (but none of the obligations) of the granting party thereunder,
including the immediate and continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of such collateral or other agreement or instrument and all other moneys
payable thereunder, to give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
Gross Margin: With respect to any Home Equity Loan, the percentage set forth as the "Margin"
for such Home Equity Loan on the Home Equity Loan Schedule.
Guaranteed Payment Amount: The aggregate outstanding Security Balance of the Notes on the
Payment Date in May 2036, after giving effect to all other distributions of principal on the Notes on such
Payment Date from all sources other than the Policy.
Holder: Any of the Noteholders or Certificateholders.
Home Equity Loan: Each adjustable-rate, home equity revolving line of credit loan, including
Additional Balances, if any, together with the Related Documents, included in the Trust Estate.
Home Equity Loan Schedule: The initial schedule of Home Equity Loans as of the Cut-off Date
set forth in Exhibit A of the Servicing Agreement, which schedule sets forth as to each Home Equity Loan (as
applicable) (i) the Cut-off Date Loan Balance ("Principal Bal"), (ii) the Credit Limit, (iii) the Gross
Margin ("Margin"), (iv) the Maximum Rate ("Ceiling"), if any, (v) the lien position of the related Mortgaged
Property, (vi) the Depositor's Home Equity Loan identifying number, (vii) the Subservicer's Home Equity Loan
identifying number (viii) the city, state and zip code of the Mortgaged Property, (ix) a code indicating
whether the Mortgaged Property is owner-occupied, (x) the type of residential dwelling constituting the
Mortgaged Property, (xi) the original number of months to maturity, (xii) the remaining number of months to
maturity from the Cut-off Date, (xiii) as to any first lien Home Equity Loan, the Loan-to-Value Ratio at
origination and as to any second lien Home Equity Loan, the Combined Loan-to-Value Ratio at origination of
such second lien Home Equity Loan, (xiv) the Loan Rate in effect as of the Cut-off Date, (xv) the stated
maturity date, (xvi) the prior encumbrance principal balance (denoted as "Senior Lien" on the Home Equity
Loan Schedule), if any, (xvii) the Credit Score, (xviii) the Mortgagor's debt-to-income ratio, (xix) a code
indicating the product type, (xx) a code indicating the purpose of the Home Equity Loan, (xxi) the Mortgage
Note date, (xxii) the teaser expiration date, and (xxiii) the Appraised Value.
Indemnified Party: The meaning specified in Section 7.02 of the Trust Agreement.
Indenture: The indenture, dated as of the Closing Date, between the Issuer, as debtor, and the
Indenture Trustee, as indenture trustee.
Indenture Trustee: JPMorgan Chase Bank, National Association and its successors and assigns or
any successor indenture trustee appointed pursuant to the terms of the Indenture.
Indenture Trustee Information: As specified in Section 9.05(a)(i)(A) of the Servicing
Agreement.
Independent: When used with respect to any specified Person, the Person (i) is in fact
independent of the Issuer, any other obligor on the Notes, the Seller, the Depositor and any Affiliate of any
of the foregoing Persons, (ii) does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller, the Depositor or any Affiliate of any of the
foregoing Persons and (iii) is not connected with the Issuer, any such other obligor, the Seller, the
Depositor or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.
Independent Certificate: A certificate or opinion to be delivered to the Indenture Trustee
under the circumstances described in, and otherwise complying with, the applicable requirements of Section
10.01 of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such opinion or certificate shall
state that the signer has read the definition of "Independent" in this Indenture and that the signer is
Independent within the meaning thereof.
Index: With respect to any Home Equity Loan, the prime rate from time to time for the
adjustment of the Loan Rate set forth as such on the related Loan Agreement.
Initial Certificates: The Home Equity Loan-Backed Certificates, Series 2006-HSA3, issued on
the Closing Date, each evidencing undivided beneficial interests in the Issuer and executed by the Owner
Trustee.
Initial Security Balance: With respect to the Initial Certificates, $0.00, the Term Notes,
$201,014,000 and the Variable Funding Notes, $0.00.
Insolvency Event: With respect to a specified Person, (a) the filing of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of
its property in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or ordering the winding-up or
liquidation of such Person's affairs, and such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such
Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of its property, or the making
by such Person of any general assignment for the benefit of creditors, or the failure by such Person
generally to pay its debts as such debts become due or the admission by such Person in writing (as to which
the Indenture Trustee shall have notice) of its inability to pay its debts generally, or the adoption by the
Board of Directors or managing member of such Person of a resolution which authorizes action by such Person
in furtherance of any of the foregoing.
Insurance Agreement: The Insurance and Indemnity Agreement, dated as of May 25, 2006, among
the Master Servicer, the Seller, the Depositor, the Issuer and the Credit Enhancer, including any amendments
and supplements thereto.
Insurance Proceeds: Proceeds paid in respect of the Home Equity Loans pursuant to any
insurance policy covering a Home Equity Loan or amounts required to be paid by the Master Servicer pursuant
to the next to last sentence of Section 3.04(a) of the Servicing Agreement, to the extent such proceeds are
payable to the mortgagee, any Subservicer, the Master Servicer or the Indenture Trustee and are not applied
to the restoration of the related Mortgaged Property or released to the Mortgagor in accordance with the
procedures that the Master Servicer would follow in servicing mortgage loans held for its own account or
required to be paid to any holder of a mortgage senior to such Home Equity Loan.
Interest Collections: With respect to any Payment Date, the sum of all payments by or on
behalf of Mortgagors and any other amounts constituting interest (including without limitation such portion
of principal prepayments, Insurance Proceeds, Net Liquidation Proceeds and Repurchase Prices as is allocable
to interest on the applicable Home Equity Loans) as is paid by the Seller or the Master Servicer or is
collected by the Master Servicer under the Home Equity Loans (exclusive of the pro rata portion thereof
attributable to any Excluded Amounts not conveyed to the Trust following an Amortization Event), reduced by
the Servicing Fees for the related Collection Period and by any fees (including annual fees) or late charges
or similar administrative fees paid by Mortgagors during the related Collection Period with respect to the
Home Equity Loans. The terms of the related Loan Agreement shall determine the portion of each payment in
respect of such Home Equity Loan that constitutes principal or interest.
Interest Distribution Amount: With respect to any Payment Date, an amount equal to interest
accrued during the related Interest Period on the Notes on their respective Security Balance immediately
prior to that Payment Date, at the related Note Rate, minus the amount of any Relief Act Shortfalls on the
Home Equity Loans during the related Collection Period.
Interest Period: With respect to any Payment Date other than the first Payment Date, the period
beginning on the preceding Payment Date and ending on the day preceding such Payment Date, and in the case of
the first Payment Date, the period beginning on the Closing Date and ending on the day preceding the first
Payment Date.
Interest Rate Adjustment Date: With respect to each Home Equity Loan, the date or dates on
which the Loan Rate is adjusted in accordance with the related Loan Agreement.
Interim Certification: The meaning specified in Section 2.1(c) of the Purchase Agreement.
Issuer or Trust: The Home Equity Loan Trust 2006-HSA3, a Delaware statutory trust, or its
successor in interest.
Issuer Request: A written order or request signed in the name of the Issuer by any one of its
Authorized Officers and delivered to the Indenture Trustee.
LIBOR: For any Interest Period other than the first Interest Period, the rate for United
States dollar deposits for one month which appears on the Telerate Screen Page 3750 as of 11:00 A.M., London,
England time, on the second LIBOR Business Day prior to the first day of such Interest Period. With respect
to the first Interest Period, the rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London, England time, two LIBOR Business Days prior to the
Closing Date. If such rate does not appear on such page (or such other page as may replace that page on that
service, or if such service is no longer offered, such other service for displaying LIBOR or comparable rates
as may be reasonably selected by the Indenture Trustee after consultation with the Master Servicer and the
Credit Enhancer), the rate will be the Reference Bank Rate. If no such quotations can be obtained and no
Reference Bank Rate is available, LIBOR will be LIBOR applicable to the preceding Payment Date.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a day on which
banking institutions in the city of London, England are required or authorized by law to be closed.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation, assignment,
participation, deposit arrangement, encumbrance, lien (statutory or other), preference, priority right or
interest or other security agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing and the filing of any financing
statement under the UCC (other than any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided, however, that any assignment
pursuant to Section 6.02 of the Servicing Agreement shall not be deemed to constitute a Lien.
Limited Repurchase Right Holder: RFC Asset Holdings II, Inc. or it successor.
Liquidated Home Equity Loan: With respect to any Payment Date, any Home Equity Loan in respect
of which the Master Servicer has determined, in accordance with the servicing procedures specified in the
Servicing Agreement, as of the end of the related Collection Period that substantially all Liquidation
Proceeds which it reasonably expects to recover, if any, with respect to the disposition of the related Home
Equity Loan have been recovered. The Master Servicer will treat any Home Equity Loan that is 180 days or more
Delinquent as having been finally liquidated.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead) which are incurred by or
on behalf of the Master Servicer in connection with the liquidation of any Home Equity Loan and not recovered
under any insurance policy, such expenses including, without limitation, legal fees and expenses, any
unreimbursed amount expended (including, without limitation, amounts advanced to correct defaults on any
mortgage loan which is senior to such Home Equity Loan and amounts advanced to keep current or pay off a
mortgage loan that is senior to such Home Equity Loan) respecting the related Home Equity Loan and any
related and unreimbursed expenditures for real estate property taxes or for property restoration,
preservation or insurance against casualty loss or damage.
Liquidation Loss Amounts: With respect to any Payment Date and any Home Equity Loan that
became a Liquidated Home Equity Loan during the related Collection Period, the unrecovered portion of the
related Loan Balance thereof at the end of such Collection Period, after giving effect to the Net Liquidation
Proceeds applied in reduction of the Loan Balance. If a Bankruptcy Loss has occurred with respect to any
Home Equity Loan, the amount of the Bankruptcy Loss will be treated as a Liquidation Loss Amount.
Liquidation Loss Distribution Amount: With respect to any Payment Date, the aggregate of (A)
100% of the Liquidation Loss Amounts during the related Collection Period, plus (B) any such Liquidation Loss
Amounts remaining undistributed from any preceding Payment Date, provided that any Liquidation Loss Amount
shall not be distributed to the extent that the Liquidation Loss Amount was previously paid on the Class A
Notes and the Variable Funding Notes by means of a draw on the Policy, from collections on the Home Equity
Loans, or was reflected in the reduction of the Overcollateralization Amount; provided, that nothing in the
foregoing proviso shall limit the Credit Enhancer's right to be reimbursed for any Liquidation Loss Amounts
to the extent paid by a draw on the Policy.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not including amounts drawn
under the Policy) if any received in connection with the liquidation of any Home Equity Loan or related REO,
whether through trustee's sale, foreclosure sale or otherwise or any Subsequent Recoveries with respect to a
Liquidated Home Equity Loan.
Loan Agreement: With respect to any Home Equity Loan, the credit line account agreement,
executed by the related Mortgagor and any amendment or modification thereof.
Loan Balance: With respect to any Home Equity Loan, other than a Home Equity Loan which has
become a Liquidated Home Equity Loan, and as of any day, the related Cut-off Date Loan Balance, plus (i) any
Additional Balances in respect of such Home Equity Loan conveyed to the Trust, minus (ii) all collections
credited as principal in respect of any such Home Equity Loan in accordance with the related Loan Agreement
(except for any such collections that are allocable to any Excluded Amount) and applied in reduction of the
Loan Balance thereof. For purposes of this definition, a Liquidated Home Equity Loan shall be deemed to have
a Loan Balance equal to the Loan Balance of the related Home Equity Loan immediately prior to the final
recovery of substantially all related Liquidation Proceeds and a Loan Balance of zero thereafter.
Loan Rate: With respect to any Home Equity Loan and any day, the per annum rate of interest
applicable under the related Loan Agreement.
Lost Note Affidavit: With respect to any Home Equity Loan as to which the original Loan
Agreement has been permanently lost or destroyed and has not been replaced, an affidavit from the Seller or
the related Program Seller certifying that the original Loan Agreement has been lost, misplaced or destroyed
(together with a copy of the related Loan Agreement).
Master Servicer: Residential Funding Corporation, a Delaware corporation, and its successors
and assigns.
Master Servicing Fee: With respect to any Home Equity Loan and any Collection Period, the
product of (i) the Master Servicing Fee Rate divided by 12 and (ii) the related Loan Balance as of the first
day of such Collection Period.
Master Servicing Fee Rate: With respect to any Home Equity Loan, 0.08% per annum.
Maximum Rate: With respect to each Home Equity Loan with respect to which the related Loan
Agreement provides for a lifetime rate cap, the maximum Loan Rate permitted over the life of such Home Equity
Loan under the terms of such Loan Agreement, as set forth on the Home Equity Loan Schedule and initially as
set forth on Exhibit A to the Servicing Agreement.
Maximum Variable Funding Balance: The maximum Security Balance of the Variable Funding Notes,
which shall be an amount equal to $30,450,148 or such greater amount as may be permitted pursuant to Section
9.01 of the Indenture.
MERS: Mortgage Electronic Registration Systems, Inc., a corporation organized and existing
under the laws of the State of Delaware, or any successor thereto.
MERS(R)System: The system of recording transfers of Mortgages electronically maintained by MERS.
MIN: The Mortgage Identification Number for Home Equity Loans registered with MERS on the
MERS(R)System.
Minimum Monthly Payment: With respect to any Home Equity Loan and any month, the minimum
amount required to be paid by the related Mortgagor in such month.
MOM Loan: With respect to any Home Equity Loan, MERS acting as the mortgagee of such Home
Equity Loan, solely as nominee for the originator of such Home Equity Loan and its successors and assigns, at
the origination thereof.
Moody's: Xxxxx'x Investors Service, Inc. or its successor in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a first or second lien on
an estate in fee simple interest in real property securing a Home Equity Loan.
Mortgage File: The file containing the Related Documents pertaining to a particular Home
Equity Loan and any additional documents required to be added to the Mortgage File pursuant to the Purchase
Agreement or the Servicing Agreement.
Mortgage Note: With respect to a Home Equity Loan, the mortgage note pursuant to which the
related Xxxxxxxxx agrees to pay the indebtedness evidenced thereby and secured by a Mortgage on a related
Mortgaged Property, as modified or amended.
Mortgaged Property: The underlying property, including real property and improvements thereon,
securing a Home Equity Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
Net Liquidation Proceeds: With respect to any Liquidated Home Equity Loan, Liquidation
Proceeds (excluding any draws under the Policy) net of Liquidation Expenses (but not including the portion,
if any, of such net amount that exceeds the Loan Balance of the Home Equity Loan at the end of the Collection
Period immediately preceding the Collection Period in which such Home Equity Loan became a Liquidated Home
Equity Loan, plus accrued and unpaid interest on such Loan Balance from the date last paid to the date of
receipt of final Liquidation Proceeds).
Net Loan Rate: With respect to any Home Equity Loan and any day, the related Loan Rate less:
(1) 0.58% per annum and (2) the Credit Enhancer Premium Rate.
Net Principal Collections: With respect to any Payment Date, the excess, if any, of Principal
Collections for the related Collection Period over the amount of Additional Balances created during the
related Collection Period and conveyed to the Trust Estate.
Net WAC Cap Shortfall: On any Payment Date, an amount by which interest that would have accrued
on the Notes at the applicable Note Rate during the related Interest Period (without application of the Net
WAC Rate) exceeds interest accrued thereon at the Net WAC Rate.
Net WAC Rate: With respect to any Payment Date, a per annum rate equal to the weighted average
of the Net Loan Rates of the Home Equity Loans as of the beginning of the related Collection Period, weighted
by the outstanding Loan Balances thereof, adjusted by multiplying the Net WAC Rate by a fraction, the
numerator of which is 30 and the denominator of which is the actual number of days in the related Interest
Period.
Non-United States Person: Any Person other than a United States Person.
Note Owner: The Beneficial Owner of a Note.
Note Rate: With respect to the Class A Notes and the Variable Funding Notes, the least of (x)
a per annum rate equal to LIBOR plus 0.13%, (y) 17.25% per annum and (z) the Net WAC Rate.
Note Register: The register maintained by the Note Registrar in which the Note Registrar shall
provide for the registration of Notes and of transfers and exchanges of Notes.
Note Registrar: The Indenture Trustee, in its capacity as Note Registrar.
Noteholder: The Person in whose name a Note is registered in the Note Register, except that,
any Note registered in the name of the Depositor, the Issuer or the Indenture Trustee or any Affiliate of any
of them shall be deemed not to be outstanding and the registered holder will not be considered a Noteholder
or holder for purposes of giving any request, demand, authorization, direction, notice, consent or waiver
under the Indenture or the Trust Agreement provided that, in determining whether the Indenture Trustee shall
be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver,
only Notes that the Indenture Trustee or the Owner Trustee knows to be so owned shall be so disregarded.
Owners of Notes that have been pledged in good faith may be regarded as Holders if the pledgee establishes to
the satisfaction of the Indenture Trustee or the Owner Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Issuer, any other obligor upon the Notes or any Affiliate of any
of the foregoing Persons.
Notes: Collectively, the Term Notes and the Variable Funding Notes issued and outstanding at
any time pursuant to the Indenture.
Officer's Certificate: With respect to the Master Servicer, a certificate signed by the
President, Managing Director, a Director, a Vice President or an Assistant Vice President, of the Master
Servicer and delivered to the Indenture Trustee. With respect to the Issuer, a certificate signed by any
Authorized Officer of the Issuer, under the circumstances described in, and otherwise complying with, the
applicable requirements of Section 10.01 of the Indenture, and delivered to the Indenture Trustee. Unless
otherwise specified, any reference in the Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.
Opinion of Counsel: A written opinion of counsel. Any Opinion of Counsel for the Master
Servicer may be provided by in-house counsel for the Master Servicer if reasonably acceptable to the
Indenture Trustee, the Credit Enhancer and the Rating Agencies or counsel for the Depositor, as the case may
be.
Original Trust Agreement: The Trust Agreement, dated as of May 23, 2006, between the Owner
Trustee and the Depositor.
Outstanding: With respect to the Notes, as of the date of determination, all Notes theretofore
executed, authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to the Indenture
Trustee for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes have been executed,
authenticated and delivered pursuant to the Indenture unless proof satisfactory to the Indenture
Trustee is presented that any such Notes are held by a holder in due course;
provided, however, that for purposes of effectuating the Credit Enhancer's right of subrogation as set forth
in Section 4.12 of the Indenture only, all Notes that have been paid with funds provided under the Policy
shall be deemed to be Outstanding until the Credit Enhancer has been reimbursed with respect thereto.
Overcollateralization Amount: With respect to any Payment Date, the amount by which the Pool
Balance after applying payments received in the related Collection Period exceeds the aggregate Security
Balance of the Notes on such Payment Date (in each case, after application of Net Principal Collections or
Principal Collections, as the case may be, for such date and acquisition by the Trust of Additional Balances
on such Payment Date and any payments in respect of Liquidation Loss Amounts). On each Payment Date, the
Overcollateralization Amount available to cover Liquidation Loss Amounts on such Payment Date, if any, shall
be deemed to be reduced by an amount equal to any Liquidation Loss Amounts for such Payment Date on the Home
Equity Loans, except to the extent that such Liquidation Loss Amounts were covered on such Payment Date by
P&I Collections on the Home Equity Loans pursuant to Section 3.05(a) of the Indenture.
Overcollateralization Floor: An amount equal to 0.50% of the aggregate Cut-off Date Loan
Balances of the Home Equity Loans.
Overcollateralization Increase Amount: With respect to any Payment Date beginning on the
Payment Date in September 2006, an amount equal to the lesser of (i) P&I Collections on the Home Equity Loans
remaining after application of clauses (i) through (v) of Section 3.05(a) of the Indenture and (ii) the
excess, if any, of (x) the Required Overcollateralization Amount for that Payment Date over (y) the
Overcollateralization Amount for that Payment Date.
Ownership Interest: As 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: The corpus of the Issuer created by the Trust Agreement which consists of
the Home Equity Loans.
Owner Trustee: Wilmington Trust Company not in its individual capacity but solely as Owner
Trustee of the Trust, and its successors and assigns or any successor owner trustee appointed pursuant to the
terms of the Trust Agreement.
Paying Agent: Any paying agent or co-paying agent appointed pursuant to Section 3.03 of the
Indenture, which initially shall be the Indenture Trustee.
Payment Account: The account established by the Indenture Trustee pursuant to Section 8.02 of
the Indenture and Section 5.01 of the Servicing Agreement. Amounts deposited in the Payment Account will be
distributed by the Indenture Trustee in accordance with Section 3.05 of the Indenture.
Payment Date: The 25th day of each month, or if such day is not a Business Day, then the next
Business Day.
Percentage Interest: With respect to any Note and any Payment Date, the percentage obtained by
dividing the Security Balance of such Note by the aggregate of the Security Balances of all Notes (including
the Term Notes and the Variable Funding Notes) or all Notes of the same Class, as applicable, prior to such
Payment Date. With respect to any Certificate and any Payment Date, the Percentage Interest stated on the
face of such Certificate.
Permitted Investments: One or more of the following:
(i) obligations of or guaranteed as to timely payment of principal and interest by the United States or
any agency or instrumentality thereof when such obligations are backed by the full faith and credit of
the United States;
(ii) repurchase agreements on obligations specified in clause (i) maturing not more than one month from the
date of acquisition thereof, provided that the unsecured short-term debt obligations of the party
agreeing to repurchase such obligations are at the time rated by each Rating Agency in its highest
short-term rating available;
(iii) federal funds, certificates of deposit, demand deposits, time deposits and bankers' acceptances (which
shall each have an original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than 365 days or a remaining maturity
of more than 30 days) denominated in United States dollars of any U.S. depository institution or trust
company incorporated under the laws of the United States or any state thereof or of any domestic
branch of a foreign depository institution or trust company; provided that the debt obligations of
such depository institution or trust company at the date of acquisition thereof have been rated by
each Rating Agency in its highest short-term rating available; and, provided further that, if the
original maturity of such short-term obligations of a domestic branch of a foreign depository
institution or trust company shall exceed 30 days, the short-term rating of such institution shall be
A-1+ in the case of Standard & Poor's if Standard & Poor's is a Rating Agency;
(iv) commercial paper and demand notes (having original maturities of not more than 365 days) of any
corporation incorporated under the laws of the United States or any state thereof which on the date of
acquisition has been rated by each Rating Agency in its highest short-term rating available; provided
that such commercial paper shall have a remaining maturity of not more than 30 days;
(v) any mutual fund, money market fund, common trust fund or other pooled investment vehicle, the assets
of which are limited to instruments that otherwise would constitute Permitted Investments hereunder
and have been rated by each Rating Agency in its highest short-term rating available (in the case of
Standard & Poor's such rating shall be either AAAm or AAAm-G), including any such fund that is managed
by the Indenture Trustee or any affiliate of the Indenture Trustee or for which the Indenture Trustee
or any of its affiliates acts as an adviser; and
(vi) other obligations or securities that are acceptable to each Rating Agency as a Permitted Investment
hereunder and will not reduce the rating assigned to any Class of Notes by such Rating Agency (without
giving effect to any Policy (if any) in the case of Insured Notes (if any)) below the then-current
rating assigned to such Notes by such Rating Agency, as evidenced in writing;
provided, however, that no instrument shall be a Permitted Investment if it represents, either
(1) the right to receive only interest payments with respect to the underlying debt instrument or (2) the
right to receive both principal and interest payments derived from obligations underlying such instrument and
the principal and interest payments with respect to such instrument provide a yield to maturity greater than
120% of the yield to maturity at par of such underlying obligations. References herein to the highest rating
available on unsecured long-term debt shall mean AAA in the case of Standard & Poor's and Fitch and Aaa in
the case of Xxxxx'x, and for purposes of this Agreement, any references herein to the highest rating
available on unsecured commercial paper and short-term debt obligations shall mean the following: A-1 in the
case of Standard & Poor's, P-1 in the case of Xxxxx'x and F-1 in the case of Fitch; provided, however, that
any Permitted Investment that is a short-term debt obligation rated A-1 by Standard & Poor's must satisfy the
following additional conditions: (i) the total amount of debt from A-1 issuers must be limited to the
investment of monthly principal and interest payments (assuming fully amortizing collateral); (ii) the total
amount of A-1 investments must not represent more than 20% of the aggregate outstanding Security Balance of
the Notes and each investment must not mature beyond 30 days; (iii) the terms of the debt must have a
predetermined fixed dollar amount of principal due at maturity that cannot vary; and (iv) if the investments
may be liquidated prior to their maturity or are being relied on to meet a certain yield, interest must be
tied to a single interest rate index plus a single fixed spread (if any) and must move proportionately with
that index.
Person: Any legal individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government or any agency or political subdivision
thereof.
Plan: An employee benefit or other plan subject to the prohibited transaction restrictions or
the fiduciary responsibility requirements of ERISA or Section 4975 of the Code.
Plan Investor: A Plan, any Person acting, directly or indirectly, on behalf of any such Plan
or any Person using the "plan assets," within the meaning of the Department of Labor regulations at 29 C.F.R.
ss.2510.3-101, of a Plan.
Policy: The financial guaranty insurance policy (Policy No. 51733-N) issued by the Credit
Enhancer, dated as of May 25, 2006, with respect to the Notes.
Pool Balance: With respect to any date, the aggregate of the Loan Balances of all Home Equity
Loans as of such date.
Predecessor Note: With respect to any particular Note, every previous Note evidencing all or a
portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition,
any Note authenticated and delivered under Section 4.03 of the Indenture in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the mutilated, lost, destroyed or
stolen Note.
Principal Collection Distribution Amount: For any Payment Date, (i) at any time during the
Revolving Period, so long as an Amortization Event has not occurred, the Net Principal Collections and (ii)
following an Amortization Event or at any time after the end of the Revolving Period, the Principal
Collections; provided, however, on any Payment Date with respect to which the Overcollateralization Amount
that would result if determined without application of this proviso exceeds the Required
Overcollateralization Amount, the Principal Collection Distribution Amount will be reduced by the amount of
such excess to an amount not less than zero.
Principal Collections: With respect to any Payment Date and any Home Equity Loan, the
aggregate of the following amounts:
(i) the total amount of payments made by or on behalf of the Mortgagor, received and
applied as payments of principal on the Home Equity Loan during the related Collection Period, as
reported by the related Subservicer;
(ii) any Net Liquidation Proceeds, allocable as a recovery of principal, received in
connection with the Home Equity Loan during the related Collection Period;
(iii) if the Home Equity Loan was purchased by the Master Servicer pursuant to Section 3.15
of the Servicing Agreement or was repurchased by the Seller pursuant to the Purchase Agreement during
the related Collection Period, 100% of the Loan Balance of the Home Equity Loan as of the date of such
purchase or repurchase and if a Home Equity Loan was substituted for a Deleted Loan, the amount
deposited by the Seller as a Substitution Adjustment Amount; and
(iv) any other amounts received as payments on or proceeds of the Home Equity Loan during
the Collection Period to the extent applied in reduction of the principal amount thereof;
provided that Principal Collections shall not include any Foreclosure Profits, and shall be reduced by any
amounts withdrawn from the Custodial Account pursuant to clauses (c), (d) and (j) of Section 3.03 of the
Servicing Agreement, and provided further that Principal Collections shall not include any portion of such
amounts that are allocable to any Excluded Amount.
Principal Prepayment: Any payment of principal by a Mortgagor, which is received in advance of
its scheduled Due Date and is not accompanied by an amount as to interest representing scheduled interest on
such payment due on any date or dates in any month or months subsequent to the month of prepayment.
Proceeding: Any suit in equity, action at law or other judicial or administrative proceeding.
Program Guide: Together, the Seller's Seller Guide and Servicing Guide, as in effect from time
to time.
Program Seller: With respect to any Home Equity Loan, the Person that sold such Home Equity
Loan to the Seller.
Prospectus Supplement: The prospectus supplement dated May 24, 2006, relating to the Term
Notes.
Purchase Agreement: The Home Equity Loan Purchase Agreement, dated as of the Closing Date,
between the Seller, as seller, and the Depositor, as purchaser, with respect to the Home Equity Loans.
Purchase Price: The meaning specified in Section 2.2(a) of the Purchase Agreement.
Purchaser: Residential Funding Mortgage Securities II, Inc., a Delaware corporation, and its
successors and assigns.
P&I Collections: On any Payment Date, the sum of the Interest Collections for that Payment
Date and so long as an Amortization Event has not occurred and if during the Revolving Period, the Net
Principal Collections for that Payment Date, or if an Amortization Event has occurred or the Revolving Period
has ended, the Principal Collections for the applicable Payment Date.
Rating Agency: Any nationally recognized statistical rating organization, or its successor,
that rated the Securities at the request of the Depositor at the time of the initial issuance of the
Securities. Initially, Xxxxx'x and Standard & Poor's. If such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical rating organization, or other
comparable Person, designated by the Depositor, notice of which designation shall be given to the Indenture
Trustee. References herein to the highest short term unsecured rating category of a Rating Agency shall mean
A-1 or better in the case of Standard & Poor's or P-1 or better in the case of Xxxxx'x and in the case of any
other Rating Agency shall mean such equivalent ratings. References herein to the highest long-term rating
category of a Rating Agency shall mean "AAA" in the case of Standard & Poor's and "Aaa" in the case of
Xxxxx'x and in the case of any other Rating Agency, such equivalent rating.
Record Date: With respect to the Notes and any Payment Date, the close of business on the
Business Day next preceding such Payment Date.
Reference Bank Rate: With respect to any Interest Period, as follows: the arithmetic mean
(rounded upwards, if necessary, to the nearest one sixteenth of a percent) of the offered rates for United
States dollar deposits for one month which are offered by the Reference Banks as of 11:00 A.M., London,
England time, on the second LIBOR Business Day prior to the first day of such Interest Period to prime banks
in the London interbank market for a period of one month in amounts approximately equal to the sum of the
outstanding Security Balance of the Notes; provided that at least two such Reference Banks provide such
rate. If fewer than two offered rates appear, the Reference Bank Rate will be the arithmetic mean of the
rates quoted by one or more major banks in New York City, selected by the Indenture Trustee after
consultation with the Master Servicer and the Credit Enhancer, as of 11:00 a.m., New York time, on such date
for loans in U.S. Dollars to leading European Banks for a period of one month in amounts approximately equal
to the aggregate Security Balance of the Notes. If no such quotations can be obtained, the Reference Bank
Rate shall be the Reference Bank Rate applicable to the preceding Interest Period.
Reference Banks: Three major banks which are engaged in transactions in the London interbank
markets selected by the Indenture Trustee, after consultation with the Master Servicer and the Credit
Enhancer.
Registered Holder: The Person in whose name a Note is registered in the Note Register on the
applicable Record Date.
Regulation AB: Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17 C.F.R.
ss.ss.229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and
interpretation as have been provided by the Commission in the adopting release (Asset-Backed Securities,
Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (January 7, 2005)) or by the staff of the
Commission, or as may be provided by the Commission or its staff from time to time.
Related Documents: With respect to each Home Equity Loan, the documents specified in Section
2.1(c) of the Purchase Agreement and any documents required to be added to such documents pursuant to the
Purchase Agreement, the Trust Agreement or the Servicing Agreement.
Relief Act Shortfalls: With respect to any Payment Date, for any Home Equity Loan as to which
there has been a reduction in the amount of interest collectible thereon for the related Collection Period as
a result of the application of the Servicemembers Civil Relief Act or any other similar federal or state law,
the shortfall, if any, equal to (i) one month's interest on the Loan Balance of such Home Equity Loan at the
applicable Loan Rate, without application of such Act, over (ii) the interest collectible on such Home Equity
Loan during such Collection Period.
REO: A Mortgaged Property that is acquired by the Trust in foreclosure or by deed in lieu of
foreclosure.
REO Acquisition: The acquisition by the Master Servicer on behalf of the Indenture Trustee for
the benefit of the Noteholders and the Credit Enhancer of any REO Property pursuant to Section 3.07 of the
Servicing Agreement.
REO Disposition: As to any REO Property, a determination by the Master Servicer that it has
received substantially all Insurance Proceeds, Liquidation Proceeds, REO Proceeds and other payments and
recoveries (including proceeds of a final sale) which the Master Servicer expects to be finally recoverable
from the sale or other disposition of the REO Property.
REO Proceeds: Proceeds, net of expenses, received in respect of any REO Property (including,
without limitation, proceeds from the rental of the related Mortgaged Property) which proceeds are required
to be deposited into the Custodial Account only upon the related REO Disposition.
REO Property: A Mortgaged Property acquired by the Master Servicer through foreclosure or deed
in lieu of foreclosure in connection with a defaulted Home Equity Loan.
Repurchase Event: With respect to any Home Equity Loan, either (i) a discovery that, as of the
Closing Date, the related Mortgage was not a valid lien on the related Mortgaged Property subject only to (A)
the lien of any prior mortgage indicated on the Home Equity Loan Schedule, (B) the lien of real property
taxes and assessments not yet due and payable, (C) covenants, conditions, and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such Mortgage and such other
permissible title exceptions as are listed in the Program Guide and (D) other matters to which like
properties are commonly subject which do not materially adversely affect the value, use, enjoyment or
marketability of the related Mortgaged Property or (ii) with respect to any Home Equity Loan as to which the
Seller delivers a Lost Note Affidavit, a subsequent default on such Home Equity Loan if the enforcement
thereof or of the related Mortgage is materially and adversely affected by the absence of such original Loan
Agreement.
Repurchase Price: With respect to any Home Equity Loan required to be repurchased on any date
pursuant to the Purchase Agreement or purchased by the Master Servicer or the Limited Repurchase Right Holder
pursuant to the Servicing Agreement, an amount equal to the sum of (i) 100% of the Loan Balance thereof
(without reduction for any amounts charged off) (or, in the case of a purchase by the Limited Repurchase
Right Holder pursuant to Section 5.07 of the Trust Agreement, the fair market value thereof, if greater) and
(ii) unpaid accrued interest at the Loan Rate (or with respect to the last day of the month in the month of
repurchase, the Loan Rate will be the Loan Rate in effect as to the second to last day in such month) on the
outstanding principal balance thereof from the Due Date to which interest was last paid by the Mortgagor to
the first day of the month following the month of purchase. No portion of any Repurchase Price shall be
included in any Excluded Amount for any Payment Date.
Request for Release: The form attached as Exhibit 4 to the Custodial Agreement or an
electronic request in a form acceptable to the Custodian.
Required Insurance Policy: With respect to any Home Equity Loan, any insurance policy which is
required to be maintained from time to time under the Servicing Agreement, the Program Guide or the related
Subservicing Agreement in respect of such Home Equity Loan.
Required Overcollateralization Amount: With respect to any Payment Date prior to the Stepdown
Date, 1.60% of the aggregate Cut-off Date Loan Balances of the Home Equity Loans. With respect to any Payment
Date on or after the Stepdown Date, the lesser of (a) the initial Required Overcollateralization Amount and
(b) 3.20% of the Pool Balance for the Home Equity Loans after application of Interest Collections and
Principal Collections received during the related Collection Period but not less than the
Overcollateralization Floor; provided that, if a Trigger Event has occurred and is continuing on such Payment
Date, the Required Overcollateralization Amount will equal the Required Overcollateralization Amount for the
immediately preceding Payment Date.
The Required Overcollateralization Amount may be reduced with the prior written consent of the
Credit Enhancer, but without the consent of the Holders of the Notes so long as written confirmation is
obtained from each Rating Agency that the reduction will not reduce the rating assigned to any Class of Notes
by that Rating Agency below the lower of the then-current rating or the rating assigned to those Notes as of
the Closing Date by that Rating Agency without taking into account the Policy.
Responsible Officer: With respect to the Indenture Trustee, any officer of the Indenture
Trustee with direct responsibility for the administration of the Indenture and also, with respect to a
particular matter, any other officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
Revolving Period: The period commencing on the Closing Date and ending on May 31, 2011.
Rolling Three Month Delinquency Percentage: With respect to any Payment Date and the Home
Equity Loans, the arithmetic average of the Delinquency Percentages determined for such Payment Date and for
each of the two preceding Payment Dates.
Scheduled Payments: As defined in the Policy.
Securities Act: The Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Securitization Transaction: Any transaction involving a sale or other transfer of mortgage
loans directly or indirectly to an issuing entity in connection with an issuance of publicly offered or
privately placed, rated or unrated mortgage-backed securities.
Security: Any of the Certificates or Notes.
Security Balance: With respect to any Payment Date and the Term Notes, the Initial Security
Balance thereof prior to such Payment Date reduced by all payments of principal thereon prior to such Payment
Date. With respect to any Payment Date and the Variable Funding Notes, the Initial Security Balance thereof
prior to such Payment Date (i) increased by the Aggregate Additional Balance Differential immediately prior
to such Payment Date and (ii) reduced by all payments of principal thereon and Liquidation Loss Amounts
allocated thereto prior to such Payment Date. With respect to any Payment Date and the Certificates, the
Certificate Principal Balance thereof.
Securityholder or Holder: Any Noteholder or a Certificateholder.
Seller: Residential Funding Corporation, a Delaware corporation, and its successors and
assigns.
Seller's Agreement: The agreement between the Seller, as purchaser, and the related Program
Seller, as seller.
Servicing Agreement: The Servicing Agreement, dated as of the Closing Date, between the
Indenture Trustee, the Issuer and the Master Servicer.
Servicing Certificate: A certificate prepared by a Servicing Officer on behalf of the Master
Servicer in accordance with Section 4.01 of the Servicing Agreement.
Servicing Criteria: The "servicing criteria" set forth in Item 1122(d) of Regulation AB, as
such may be amended from time to time.
Servicing Default: The meaning specified in Section 7.01 of the Servicing Agreement.
Servicing Fee: With respect to any Home Equity Loan, the sum of the related Master Servicing
Fee and the related Subservicing Fee.
Servicing Fee Rate: With respect to any Home Equity Loan, the sum of the related Master
Servicing Fee Rate and the related Subservicing Fee Rate.
Servicing Officer: Any officer of the Master Servicer involved in, or responsible for, the
administration and servicing of the Home Equity Loans whose name and specimen signature appear on a list of
servicing officers furnished to the Indenture Trustee (with a copy to the Credit Enhancer) by the Master
Servicer, as such list may be amended from time to time.
Servicing Trigger: As of any Payment Date, for purposes of Section 7.04 of the Servicing
Agreement, the occurrence of any of the following scenarios:
(a) the Sixty-Plus Delinquency Percentage is greater than 27.00% for the then-current
Payment Date; or
(b) on or after the Payment Date in September 2008, the aggregate amount of Liquidation
Loss Amounts on the Home Equity Loans as a percentage of the Cut-Off Date Loan Balance exceeds the applicable
amount set forth below:
September 2008 to February 2009: 2.00% with respect to September 2008, plus
an additional 1/6th of 1.50% for each month
thereafter.
March 2009 to February 2010: 3.50% with respect to March 2009, plus an
additional 1/12th of 2.00% for each month
thereafter.
March 2010 to February 2011: 5.50% with respect to March 2010, plus an
additional 1/12th of 1.25% for each month
thereafter.
March 2011 to February 2012: 6.75% with respect to March 2011, plus an
additional 1/12th of 0.75% for each month
thereafter.
March 2012 and thereafter: 7.50%.
Single Certificate: A Certificate in the denomination of a Certificate Percentage Interest of
10.0000%.
Sixty-Plus Delinquency Percentage: With respect to any Payment Date and the Home Equity Loans,
the arithmetic average, for each of the three Payment Dates ending with such Payment Date, of the fraction,
expressed as a percentage, equal to (x) the aggregate Loan Balance of the Home Equity Loans that are 60 or
more days delinquent in payment of principal and interest for that Payment Date, including Home Equity Loans
in foreclosure and REO, over (y) the aggregate Loan Balance of all of the Home Equity Loans immediately
preceding that Payment Date.
Standard & Poor's: Standard & Poor's Ratings Services, a division of The XxXxxx-Xxxx
Companies, Inc. or its successor in interest.
Stated Value: With respect to any Home Equity Loan, the value of the Mortgaged Property as
stated by the related Mortgagor in his or her application.
Statutory Trust Statute: Chapter 38 of Title 12 of the Delaware Code, 12 Del. Codess.ss.3801 et
seq., as the same may be amended from time to time.
Stepdown Date: The later of (a) the Payment Date in December 2008 and (b) the Payment Date on
which the Pool Balance of the Home Equity Loans after applying payments received in the related Collection
Period is less than 50% of the aggregate Cut-off Date Loan Balances of the Home Equity Loans.
Subsequent Recoveries: As of any Payment Date, amounts received by the Master Servicer (net of
any related expenses permitted to be reimbursed pursuant to the Servicing Agreement) specifically related to
a Home Equity Loan that was treated as a Liquidated Home Equity Loan prior to the related Collection Period,
and that resulted in a Liquidated Loss Amount.
Subservicer: Any Person with whom the Master Servicer has entered into a Subservicing
Agreement as a Subservicer by the Master Servicer.
Subservicing Account: An Eligible Account established or maintained by a Subservicer as
provided for in Section 3.02(c) of the Servicing Agreement.
Subservicing Agreement: The written contract between the Master Servicer and any Subservicer
relating to servicing and administration of certain Home Equity Loans as provided in Section 3.01 of the
Servicing Agreement.
Subservicing Fee: With respect to any Collection Period, the fee retained monthly by the
Subservicer (or, in the case of a nonsubserviced Home Equity Loan, by the Master Servicer) equal to the
product of (i) the Subservicing Fee Rate divided by 12 and (ii) the Pool Balance as of the first day of such
Collection Period.
Subservicing Fee Rate: With respect to each Home Equity Loan, 0.50% per annum.
Substitution Adjustment Amounts: With respect to any Eligible Substitute Loan and any Deleted
Loan, the amount, if any, as determined by the Master Servicer, by which the aggregate principal balance of
all such Eligible Substitute Loans as of the date of substitution is less than the aggregate principal
balance of all such Deleted Loans (after application of the principal portion of the monthly payments due in
the month of substitution that are to be distributed to the Payment Account in the month of substitution).
Teaser Loan: Any Home Equity Loan which, as of the Cut-off Date, has a Loan Rate that is less
than the sum of the Index at the time of origination plus the applicable Gross Margin.
Telerate Screen Page 3750: The display designated as page 3750 on the Moneyline Telerate
Capital Markets Reports (or (i) such other page as may replace page 3750 on that service for the purpose of
displaying London interbank offered rates of major banks) or (ii) if such service is no longer offered, such
other service for displaying LIBOR or comparable rates as may be selected by the Indenture Trustee after
consultation with the Master Servicer and the Credit Enhancer.
Term Notes: The Class A Notes.
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation or other form of
assignment of any Ownership Interest in a Certificate.
Transfer Date: As defined in Section 3.15(c) of the Servicing Agreement.
Transfer Notice Date: As defined in Section 3.15(c) of the Servicing Agreement.
Transferee: Any Person who is acquiring by Transfer any Ownership Interest in a Certificate.
Transferor: Any Person who is disposing by Transfer of any Ownership Interest in a Certificate.
Treasury Regulations: 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.
Trigger Event: A Trigger Event is in effect with respect to any Payment Date and the Notes if
any of the following conditions are met:
(i) if the Payment Date is occurring on or after the Payment Date in September 2008 and
before the Payment Date in March 2009, the aggregate amount of Liquidation Loss Amounts on the Home Equity
Loans since the Cut-off Date exceeds 1.50% plus 1/6th of 0.50% for each Payment Date within such period of
the aggregate Cut-off Date Loan Balances of the Home Equity Loans; or
(ii) if the Payment Date is occurring on or after the Payment Date in March 2009 and before
the Payment Date in March 2010, the aggregate amount of Liquidation Loss Amounts on the Home Equity Loans
since the Cut-off Date exceeds 2.00% plus 1/12th of 0.50% for each Payment Date within such period of the
aggregate Cut-off Date Loan Balances of the Home Equity Loans; or
(iii) if the Payment Date is occurring on or after the Payment Date in March 2010 and before
the Payment Date in March 2011 the aggregate amount of Liquidation Loss Amounts on the Home Equity Loans
since the Cut-off Date exceeds 2.50% plus 1/12th of 0.50% for each Payment Date within such period of the
aggregate Cut-off Date Loan Balances of the Home Equity Loans; or
(iv) if the Payment Date is occurring on or after the Payment Date in March 2011 and before
the Payment Date in March 2012, the aggregate amount of Liquidation Loss Amounts on the Home Equity Loans
since the Cut-off Date exceeds 3.00% plus 1/12th of 0.50% for each Payment Date within such period of the
aggregate Cut-off Date Loan Balances of the Home Equity Loans; or
(v) if the Payment Date is occurring on or after the Payment Date in March 2012, the
aggregate amount of Liquidation Loss Amounts on the Home Equity Loans since the Cut-off Date exceeds 3.50% of
the aggregate Cut-off Date Loan Balances of the Home Equity Loans; or
(vi) if on any Payment Date on or after the Stepdown Date, the Rolling Three Month
Delinquency Percentage is equal to or in excess of 3.50%.
Trust: The Home Equity Loan Trust 2006-HSA3 to be created pursuant to the Trust Agreement.
Trust Agreement: The Amended and Restated Trust Agreement, dated as of the Closing Date,
between the Owner Trustee and the Depositor.
Trust Estate: The meaning specified in the Granting Clause of the Indenture.
Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as amended from time to time, as
in effect on any relevant date.
UCC: The Uniform Commercial Code, as amended from time to time, as in effect in the States of
New York, Delaware or Minnesota, as applicable.
Underwriters: Greenwich Capital Markets, Inc. and Residential Funding Securities Corporation.
Undercollateralization Amount: Initially equal to approximately $999,994. With respect to any
Payment Date, the amount, if any, by which the aggregate Security Balance of the Notes on such Payment Date
exceeds the Pool Balance as of the last day of the related Collection Period (after application of Net
Principal Collections or Principal Collections, as the case may be, for such date).
Uninsured Cause: Any cause of damage to property subject to a Mortgage such that the complete
restoration of such property is not fully reimbursable by the hazard insurance policies.
United States Person: A citizen or resident of the United States, a corporation, partnership or
other entity created or organized in, or under the laws of, the United States, any state thereof, or the
District of Columbia (except in the case of a partnership, to the extent provided in Treasury regulations) or
any political subdivision thereof, or an estate that is described in Section 7701(a)(30)(D) of the Code, or a
trust that is described in Section 7701(a)(30)(E) of the Code.
Variable Funding Notes: The Notes designated as the "Variable Funding Notes" in the Indenture,
including any Capped Funding Notes.
