AMENDED AND RESTATED TRUST AGREEMENT
dated as of July 25, 2002
by and between
ACCREDITED HOME LENDERS, INC.,
as Sponsor,
and
U.S. BANK TRUST, NATIONAL ASSOCIATION,
as Owner Trustee
ACCREDITED MORTGAGE LOAN TRUST 2002-1
Asset-Backed Notes, Series 2002-1
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Capitalized Terms...............................................................................1
Section 1.02. Other Definitional Provisions...................................................................5
ARTICLE II
ORGANIZATION
Section 2.01. Name............................................................................................7
Section 2.02. Office..........................................................................................7
Section 2.03. Purposes and Powers.............................................................................7
Section 2.04. Appointment of Owner Trustee....................................................................8
Section 2.05. Initial Capital Contribution of Owner Trust Estate..............................................8
Section 2.06. Declaration of Trust............................................................................8
Section 2.07. Liability of the Certificateholders.............................................................8
Section 2.08. Title to Trust Property.........................................................................8
Section 2.09. Situs of Trust..................................................................................9
Section 2.10. Representations and Warranties of the Sponsor...................................................9
Section 2.11. Federal Income Tax Treatment of the Trust......................................................10
Section 2.12. Covenants of the Sponsor.......................................................................11
Section 2.13. Covenants of the Certificateholders............................................................11
ARTICLE III
SUB-TRUSTS
Section 3.01. Series Trust...................................................................................13
Section 3.02. Establishment of Sub-Trust.....................................................................13
Section 3.03. Assets of Sub-Trust............................................................................13
Section 3.04. Liabilities of Sub-Trust.......................................................................13
ARTICLE IV
CERTIFICATES AND TRANSFER OF INTERESTS
Section 4.01. Initial Ownership..............................................................................15
Section 4.02. The Certificates...............................................................................15
Section 4.03. Execution, Authentication and Delivery of Certificates.........................................15
Section 4.04. Registration of Transfer and Exchange of Certificates..........................................15
Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates..............................................16
Section 4.06. Persons Deemed Owners..........................................................................17
Section 4.07. Access to List of Certificateholders' Names and Addresses......................................17
Section 4.08. Maintenance of Office or Agency................................................................17
Section 4.09. Restrictions on Transfers of Certificates......................................................17
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ARTICLE V
ACTIONS BY OWNER TRUSTEE
Section 5.01. Prior Notice to the Certificateholders with Respect to Certain Matters.........................21
Section 5.02. Action by Certificateholders with Respect to Bankruptcy........................................22
Section 5.03. Restrictions on Certificateholders' Power......................................................23
Section 5.04. Majority Control...............................................................................23
ARTICLE VI
TAX PROVISIONS; CERTAIN DUTIES
Section 6.01. Federal Income Tax Provisions..................................................................24
Section 6.02. Withholding Taxes..............................................................................27
Section 6.03. Accounting and Reports to the Certificateholders, the Internal Revenue
Service and Others.............................................................................28
Section 6.04. Signature on Returns...........................................................................28
ARTICLE VII
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 7.01. General Authority..............................................................................29
Section 7.02. General Duties.................................................................................29
Section 7.03. Action upon Instruction........................................................................29
Section 7.04. No Duties Except as Specified in this Agreement, the Basic Documents or any Instructions.......30
Section 7.05. No Action Except under Specified Documents or Instructions.....................................31
Section 7.06. Restrictions...................................................................................31
ARTICLE VIII
CONCERNING THE OWNER TRUSTEE
Section 8.01. Acceptance of Trusts and Duties................................................................32
Section 8.02. Furnishing of Documents........................................................................33
Section 8.03. Representations and Warranties of the Owner Trustee............................................33
Section 8.04. Reliance; Advice of Counsel....................................................................34
Section 8.05. Not Acting in Individual Capacity..............................................................35
Section 8.06. Owner Trustee Not Liable for the Certificates or Mortgage Loans................................35
Section 8.07. Owner Trustee May Own Certificates and Notes...................................................35
Section 8.08. Licenses.......................................................................................35
ARTICLE IX
COMPENSATION OF OWNER TRUSTEE
Section 9.01. Owner Trustee's Fees and Expenses..............................................................36
Section 9.02. Indemnification................................................................................36
Section 9.03. Payments to the Owner Trustee..................................................................37
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ARTICLE X
TERMINATION OF TRUST AGREEMENT
Section 10.01. Termination of Trust Agreement.................................................................38
ARTICLE XI
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 11.01. Eligibility Requirements for Owner Trustee.....................................................40
Section 11.02. Resignation or Removal of Owner Trustee........................................................40
Section 11.03. Successor Owner Trustee........................................................................41
Section 11.04. Merger or Consolidation of Owner Trustee.......................................................41
Section 11.05. Appointment of Co-Trustee or Separate Trustee..................................................42
ARTICLE XII
MISCELLANEOUS
Section 12.01. Supplements and Amendments.....................................................................44
Section 12.02. No Legal Title to Owner Trust Estate in Certificateholders.....................................45
Section 12.03. Limitations on Rights of Others................................................................45
Section 12.04. Notices........................................................................................45
Section 12.05. Severability...................................................................................46
Section 12.06. Separate Counterparts..........................................................................46
Section 12.07. Successors and Assigns.........................................................................46
Section 12.08. No Petition....................................................................................46
Section 12.09. No Recourse....................................................................................46
Section 12.10. Headings.......................................................................................46
Section 12.11. GOVERNING LAW..................................................................................46
Section 12.12. Grant of Certificateholder Rights to Note Insurer..............................................46
Section 12.13. Third-Party Beneficiary........................................................................47
Section 12.14. Suspension and Termination of Note Insurer's Rights............................................47
Section 12.15. Master Servicer................................................................................48
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EXHIBITS
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Investment Letter
EXHIBIT D Form of Transferor Certificate
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This AMENDED AND RESTATED TRUST AGREEMENT, dated as of July 25, 2002, is
by and between ACCREDITED HOME LENDERS, INC., as sponsor (the "SPONSOR"), and
U.S. BANK TRUST, NATIONAL ASSOCIATION, a national banking association, as owner
trustee (the "OWNER TRUSTEE").
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. CAPITALIZED TERMS. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"AGREEMENT" shall mean this Trust Agreement, as may be amended and
supplemented from time to time.
"ANNUAL TAX REPORTS" shall have the meaning assigned thereto in Section
6.01(c)(xi).
"AUTHORIZED OFFICER" shall have the meaning assigned thereto in Appendix
I to the Indenture.
"BACKUP SERVICER" shall mean Countrywide Home Loans Servicing LP, or any
successor backup servicer appointed pursuant to the Sale and Servicing
Agreement.
"BASIC DOCUMENTS" shall mean this Agreement, the Sale and Servicing
Agreement, the Indenture, the Insurance Agreement and the Indemnification
Agreement.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day that is either a legal holiday or a day on which the Note Insurer or
banking institutions in the State of New York, the State of Delaware, the State
of Minneapolis, the State of Maryland, or the state in which the Indenture
Trustee's office from which payments will be made to the Certificateholder, are
authorized or obligated by law, regulation or executive order to be closed.
"BUSINESS TRUST STATUTE" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from
time to time.
"CAPITAL ACCOUNT" shall have the meaning assigned thereto in Section
6.01(c)(i).
"CERTIFICATE" shall mean each Trust Certificate.
"CERTIFICATEHOLDER" shall mean each Person in whose name a Trust
Certificate is registered.
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"CERTIFICATE OF TRUST" shall mean the Certificate of Trust, in the form
of EXHIBIT B, to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall mean the
register mentioned and the registrar appointed pursuant to Section 4.04.
"CLASS" shall mean either the Class A-1 Notes or the Class A-2 Notes.
"CLASS A-1 NOTES" shall mean the Accredited Mortgage Loan Trust 2002-1,
Asset-Backed Notes, Series 2002-1, Class A-1.
"CLASS A-2 NOTES" shall mean the Accredited Mortgage Loan Trust 2002-1,
Asset-Backed Notes, Series 2002-1, Class A-2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and,
where appropriate in context, Treasury Regulations promulgated thereunder.
"CORPORATE TRUST OFFICE" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate
Trust Administration; or at such other address in the State of Delaware as the
Owner Trustee may designate by notice to the Certificateholders and the Sponsor,
or the principal corporate trust office of any successor Owner Trustee (the
address (which shall be in the State of Delaware) of which the successor Owner
Trustee will notify the Certificateholders and the Sponsor).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXPENSES" shall have the meaning assigned to such term in Section 9.02.
"GROUP I MORTGAGE LOANS" shall mean a pool of fixed rate mortgage loans,
as identified in the related Mortgage Loan Schedule.
"GROUP II MORTGAGE LOANS" shall mean a pool of adjustable-rate mortgage
loans, as identified in the related Mortgage Loan Schedule.
"HOLDER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning set forth
for "partner nonrecourse debt minimum gain" in Treasury Regulations Section
1.704-2(i)(2). A Certificateholder's share of Holder Nonrecourse Debt Minimum
Gain shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(5).
"INDEMNIFICATION AGREEMENT" shall mean the Indemnification Agreement,
dated as of July 1, 2002, among the Note Insurer, the Sponsor, the Trust and the
Underwriter.
"INDENTURE" shall mean the Indenture, dated as of July 1, 2002, by and
between the Trust and the Indenture Trustee.
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"INDENTURE TRUSTEE" means ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, a national banking association, as Indenture Trustee under the
Indenture.
"INSURANCE AGREEMENT" shall mean the Insurance and Indemnity Agreement
dated as of July 1, 2002 among the Note Insurer, the Trust and the Sponsor,
including any amendments and supplements thereto.
"INVESTMENT LETTER" shall have the meaning assigned to such term in
Section 4.04.
"LOAN GROUP" shall mean either Loan Group I or Loan Group II.
"LOAN GROUP I" shall mean the pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Loan Group I.
"LOAN GROUP II" shall mean the pool of Mortgage Loans identified in the
Mortgage Loan Schedule as having been assigned to Loan Group II.
"MASTER SERVICER" shall mean Accredited Home Loans, Inc., or any
successor master servicer appointed pursuant to the Sale and Servicing
Agreement.
"MORTGAGE LOANS" shall mean the Group I Mortgage Loans and the Group II
Mortgage Loans.
"NON-U.S. PERSON" shall mean an individual, corporation, partnership or
other person other than a citizen or resident of the United States, a
corporation, partnership or other entity treated as a corporation or-
partnership organized in or under the laws of the United States or any state
thereof including the District of Columbia, an estate that is subject to U.S.
federal income tax regardless of the source of its income or a trust if (i) a
court in the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States Persons have the
authority to control all substantial decisions of the trust. Notwithstanding the
last clause of the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence on August 20, 1996 and treated as
United States Persons prior to such date, may elect to continue to be United
States Persons.
"NOTEHOLDER" shall have the meaning assigned to such terms in the
Indenture.
"NOTE INSURANCE POLICY" shall mean the financial guaranty insurance
policy issued by the Note Insurer for the benefit of the Noteholders.
"NOTE INSURER" shall mean Ambac Assurance Corporation, a New York
financial guaranty insurance company.
"NOTE INSURER DEFAULT" shall have the meaning assigned to such term in
the Indenture.
"NOTE PRINCIPAL BALANCE" shall have the meaning assigned to such term in
the Indenture.
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"NOTES" shall mean the Class A-1 Notes and the Class A-2 Notes.
"OUTSTANDING" shall have the meaning assigned to such term in the
Indenture.
"OWNERSHIP INTEREST" means, with respect to any Certificate, any
ownership or security interest in such Certificate, including any interest in
such Certificate as the Certificateholder thereof and any other interest
therein, whether direct or indirect, legal or beneficial, as owner or as
pledgee.
"OWNER TRUST ESTATE" shall mean the Trust Estate, including the
contribution of $1,000 referred to in Section 2.05 hereof.
"OWNER TRUSTEE" shall mean U.S. Bank Trust, National Association, a
national banking association, not in its individual capacity but solely as owner
trustee under this Agreement, and any successor owner trustee hereunder.
"PAYMENT DATE" shall mean the 25th day of each month or, if such 25th
day is not a Business Day, the next succeeding Business Day, commencing August
26, 2002.
"PERCENTAGE INTEREST" shall mean with respect to any Certificate, the
percentage portion of the Certificates evidenced thereby as stated on the face
of such Certificate.
"PROSPECTIVE HOLDER" shall have the meaning set forth in Section
4.09(a).
"RATING AGENCY CONDITION" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
ten (10) days (or such shorter period as is acceptable to each Rating Agency)
prior notice thereof and that each of the Rating Agencies shall have notified
the Indenture Trustee, the Sponsor, the Master Servicer, the Note Insurer, the
Owner Trustee and the Trust in writing that such action will not result in a
reduction or withdrawal of the then current rating of the Notes that it
maintains without taking into account the Note Insurance Policy.
"RECORD DATE" shall mean, with respect to the Certificates and any
Payment Date, the last Business Day of the month immediately preceding the month
in which such Payment Date occurs.
"SALE AND SERVICING AGREEMENT" shall mean the Sale and Servicing
Agreement, dated as of July 1, 2002, among the Sponsor, the Trust, the Indenture
Trustee, the Backup Servicer and the Master Servicer.
"SECRETARY OF STATE" shall mean the Secretary of State of the State of
Delaware.
"SPONSOR" shall mean Accredited Home Lenders, Inc., a California
corporation.
"SUB-TRUST" shall have the meaning specified in Section 3.01 and
includes either Sub-Trust I or Sub-Trust II, each of which constitute a separate
series of interests in the Trust Estate pursuant to Section 3806(b)(2) of the
Business Trust Statute.
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"SUB-TRUST I" shall mean the portion of the Trust Estate assigned to
Sub-Trust I.
"SUB-TRUST II" shall mean the portion of the Trust Estate assigned to
Sub-Trust II.
"TAXABLE YEAR" shall have the meaning assigned thereto in Section
6.01(c)(x).
"TAX MATTERS PARTNER" shall have the meaning assigned thereto in Section
6.01(c)(xii).
"TRANSFER" means any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a
Certificate.
"TREASURY REGULATIONS" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"TRUST" shall mean the Accredited Home Equity Loan Trust 2002-1, the
Delaware business trust created pursuant to this Agreement.
"TRUST CERTIFICATE" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Trust consisting of Sub-Trust I and
Sub-Trust II, substantially in the form attached hereto as EXHIBIT A. "TRUST
MINIMUM GAIN" shall have the meaning set forth for "partnership minimum gain" in
Treasury Regulations 1.704-2(b)(2) and 1.704-2(d). In accordance with Treasury
Regulations Section 1.704-2(d), the amount of Trust Minimum Gain is determined
by first computing, for each nonrecourse liability of the Trust, any gain the
Trust would realize if it disposed of the property subject to that liability for
no consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. A Certificateholder's share of Trust
Minimum Gain shall be determined in accordance with Treasury Regulations Section
1.704-2(g)(1).
"UNDERWRITER" shall mean ▇▇▇▇▇▇ Brothers Inc.
"UNITED STATES PERSON" shall have the meaning assigned to such term in
the Indenture.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) Capitalized terms used
herein and not otherwise defined herein have the meanings assigned to them in
Appendix I to the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in
5
any such certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terns in this
Agreement or in any such certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such certificate or other
document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terns and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
6
ARTICLE II
ORGANIZATION
Section 2.01. NAME. The Trust governed hereby shall be known as "Accredited
Mortgage Loan Trust 2002-1," in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and ▇▇▇ and be sued on behalf of the Trust.
Section 2.02. OFFICE. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in the State of
Delaware as the Owner Trustee may designate by written notice to the
Certificateholders, Indenture Trustee, the Note Insurer and the Sponsor.
Section 2.03. PURPOSES AND POWERS. The purpose of the Trust is to engage in
the following activities:
(a) to issue the Notes pursuant to the Indenture and to sell such Notes;
(b) with the proceeds of the sale of the Notes and Certificates, to pay
the organizational, startup and transactional expenses of the Trust and to
purchase the Mortgage Loans to be included in the Owner Trust Estate from
the Sponsor with the balance of such funds pursuant to the Sale and
Servicing Agreement;
(c) to assign, grant, transfer, pledge, mortgage and convey the Owner
Trust Estate pursuant to the Indenture and to hold, manage and distribute
to the Certificateholders any portion of the Owner Trust Estate released
from the lien of, and remitted to the Trust pursuant to, the Indenture;
(d) to enter into and perform its obligations under the Basic Documents
to which it is or is to be a party;
(e) to engage in those activities, including entering into agreements,
that are necessary, suitable or convenient to accomplish the foregoing or
are incidental thereto or connected therewith;
(f) subject to compliance with the Basic Documents, to engage in such
other activities as may be required in connection with conservation of the
Owner Trust Estate and the making of distributions and payments to the
Noteholders and the Certificateholders; and
(g) to issue the Certificates pursuant to this Agreement.
The Trust is hereby authorized by the initial beneficiary and the
Certificateholders to engage in the foregoing activities. The Trust shall not
engage in any activity other than in connection with the foregoing or other than
as required or authorized by the terms of this Agreement or the other Basic
Documents.
7
Section 2.04. APPOINTMENT OF OWNER TRUSTEE. The Sponsor hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein and in the Business Trust
Statute, and the Owner Trustee hereby accepts such appointment.
The Owner Trustee may engage, in the name of the Trust or in its own name on
behalf of the Trust, in the activities of the Trust, make and execute contracts
on behalf of the Trust and ▇▇▇ on behalf of the Trust.
Section 2.05. INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE. The
Sponsor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1,000. The Owner Trustee hereby
acknowledges receipt in trust from the Sponsor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Payment Account. The Sponsor shall pay
organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee. Concurrently with the execution of this
Agreement, the Trust will enter into the Sale and Servicing Agreement pursuant
to which it will purchase the Mortgage Loans, to be designated to the related
Sub-Trust, which comprise the remainder of the Owner Trust Estate.
Section 2.06. DECLARATION OF TRUST. The Owner Trustee hereby declares that
it will hold the Owner Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Noteholders and the
Certificateholders, subject to the obligations of the Trust Under the Basic
Documents.
It is the intention of the parties hereto that, solely for income and
franchise tax purposes, the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a security
arrangement, with the assets of the Trust being the Sub-Trusts consisting of
each Loan Group. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual or
other necessary returns, reports and other forms, if any, consistent with the
characterization of the Trust, the Sub-Trusts and each Loan Group as provided in
the preceding sentence for such tax purposes. Effective as of the date hereof,
the Owner Trustee shall have all rights, powers and duties set forth herein and
in the Business Trust Statute with respect to accomplishing the purposes of the
Trust. The Owner Trustee shall file the Certificate of Trust with the Secretary
of State.
Section 2.07. LIABILITY OF THE CERTIFICATEHOLDERS. Subject to Section 2.05,
no Certificateholder shall have any personal liability for any liability or
obligation of the Trust. The Certificates shall be fully paid and nonassessable.
Section 2.08. TITLE TO TRUST PROPERTY.
(a) Subject to the Indenture, legal title to all of the Owner Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Owner
Trust Estate to be vested in a trustee or trustees, in which
8
case title shall be deemed to be vested in the Owner Trustee and/or a separate
trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any part of the
Owner Trust Estate. No transfer by operation of law or otherwise of any interest
of the Certificateholders shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of any part of the Owner Trust Estate.
Section 2.09. SITUS OF TRUST. The Trust will be located and administered in
the State of Delaware. All accounts maintained at a bank by the Owner Trustee on
behalf of the Trust shall be located in the State of New York or the State of
Delaware. The Trust shall not have any employees; PROVIDED, HOWEVER, that
nothing herein shall restrict or prohibit the Owner Trustee from having
employees within or without the State of Delaware. Payments will be received by
the Trust only in Delaware, and payments will be made by the Trust only from
Delaware. The only office of the Trust will be at the Corporate Trust Office in
the State of Delaware.
Section 2.10. REPRESENTATIONS AND WARRANTIES OF THE SPONSOR. The Sponsor
hereby represents and warrants to the Owner Trustee and the Note Insurer that:
(a) The Sponsor is duly organized and validly existing as a corporation in
good standing under the laws of the State of California, with power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted.
(b) The Sponsor has the power and authority to execute and deliver this
Agreement and to carry out its terms; the Sponsor has full power and authority
to transfer and assign the property to be transferred and assigned to and
deposited with the Trust and the Sponsor has duly authorized such transfer and
assignment and deposit to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly authorized
by the Sponsor by all necessary corporate action.
(c) The consummation of the transactions contemplated by this Agreement and
the fulfillment of the terms hereof do not conflict with, result in any breach
of any of the terns and provisions of, or constitute (with or without notice or
lapse of time) a default under, the articles of incorporation or by-laws of the
Sponsor, or any indenture, agreement or other instrument to which the Sponsor is
a party or by which it is bound; nor result in the creation or imposition of any
lien upon any of its properties pursuant to the terns of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, any order, rule or regulation applicable to the Sponsor of
any court or of any Federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Sponsor or its
properties.
(d) There are no proceedings or investigations pending or notice of which
has been received in writing before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Sponsor or its properties: (x) asserting the invalidity of this Agreement, (y)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement or (z) seeking any determination or ruling that
9
should reasonably be expected to materially and adversely affect the performance
by the Sponsor of its obligations under, or the validity or enforceability of,
this Agreement.
(e) The representations and warranties of the Sponsor in Article III of the
Sale and Servicing Agreement are true and correct.
(f) The Sponsor has duly executed and delivered this Agreement, and this
Agreement constitutes the legal, valid and binding obligation of the Sponsor,
enforceable against the Sponsor, in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
the application of equitable principles.
(g) The Sponsor is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
other governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or otherwise) or
operations of the Sponsor or its properties or might have consequences that
would materially and adversely affect its performance hereunder.
(h) The Sponsor will hold itself out to the public under its own name as a
separate and distinct entity and conduct its business so as not to mislead
others as to the identity of the entity under which those others are concerned.
Without limiting the generality of the foregoing, all oral and written
communications, including without limitations, all letters, invoices, contracts,
statements and applications will be made solely in the name of the Trust if they
are made on behalf of the Trust and solely in the name of the Sponsor if they
are made on behalf of the Sponsor.
Section 2.11. FEDERAL INCOME TAX TREATMENT OF THE TRUST.
(a) For so long as the Trust has one Certificateholder for federal income
tax purposes, it will, pursuant to Treasury Regulations promulgated under
Section 7701 of the Code, be disregarded as an entity distinct from the
Certificateholder for all federal income tax purposes. Accordingly, for federal
income tax purposes, the Certificateholder will be treated as (i) owning all
assets owned by the Trust, (ii) having incurred all liabilities incurred by the
Trust, and (iii) all transactions between the Trust and the Certificateholder
will be disregarded.
(b) In the event that the Trust has two or more Certificateholders for
federal income tax purposes, the Trust will be treated as a partnership. At any
such time that the Trust has two or more Certificateholders, this Agreement may
need to be amended, in accordance with Section 12.01 herein, and appropriate
provisions may need to be added so as to provide for treatment of the Trust as a
partnership.
(c) The Owner Trustee shall have no obligation or liability for its failure
to treat the Trust as a partnership prior to the earlier of its receipt of
notice or its having actual knowledge that the Trust has more than a single
equity owner.
(d) Neither the Owner Trustee nor any Certificateholder will, under any
circumstances, file a Form 8832, or any successor form, on behalf of the Trust.
10
Section 2.12. COVENANTS OF THE SPONSOR. The Sponsor agrees and covenants
for the benefit of each Certificateholder, the Note Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
(a) it shall not create, incur or suffer to exist any indebtedness or
engage in any business, except, in each case, as permitted by its articles of
incorporation and by-laws and the Basic Documents;
(b) it shall not, for any reason, institute proceedings for the Trust to be
adjudicated bankrupt or insolvent, or consent to or join in the institution of
bankruptcy or insolvency proceedings against the Trust, or file a petition
seeking or consenting to reorganization or relief under any applicable federal
or state law relating to the bankruptcy of the Trust, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of the property of the
Trust or cause or permit the Trust to make any assignment for the benefit of
creditors, or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the debt of
the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Basic Document to which
it or the Trust is a party and each other agreement entered into on or after the
date hereof to which it or the Trust is a party, an agreement by each such
counterparty that prior to the occurrence of certain events specified in such
agreement, such counterparty shall not institute against, or join any other
Person in instituting against, it or the Trust, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States; and
(d) it shall not, for any reason, withdraw or attempt to withdraw from this
Agreement or any other Basic Document to which it is a party, dissolve,
institute proceedings for it to be adjudicated a bankrupt or insolvent, or
consent to the institution of bankruptcy or relief under any applicable federal
or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of it or a substantial part of its property, or make any assignment
for the benefit of creditors, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt or
take any action in furtherance of any such action.
Section 2.13. COVENANTS OF THE CERTIFICATEHOLDERS. Each Certificateholder
by becoming a beneficial owner of the Certificate or by its acceptance of a
Certificate agrees:
(a) to be bound by the terns and conditions of the Certificates of which
such Certificateholder is the beneficial owner and of this Agreement and the
other Basic Documents, including any supplements or amendments hereto and
thereto and to perform the obligations of a Certificateholder as set forth
therein or herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee, the Note
Insurer and all other Certificateholders, present and future;
(b) to the appointment of the Owner Trustee as such Certificateholder's
agent and attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust
11
and, if requested by the Trust, to sign such federal income tax information
return in its capacity as holder of an interest in the Trust;
(c) not to take any position in such Certificateholder's tax returns
inconsistent with those taken in any tax returns filed by the Trust; and
(d) if such Certificateholder is other than an individual or other entity
holding its Certificate through a broker who reports securities sales on Form
1099-B, to notify the Owner Trustee in writing of any transfer by it of a
Certificate in a taxable sale or exchange, within 30 days of the date of the
transfer.
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ARTICLE III
SUB-TRUSTS
Section 3.01. SERIES TRUST. The assets of the Trust shall be divided into
designated series as provided in Section 3806(b)(2) of the Business Trust
Statute (each series, a "SUB-TRUST"). Accordingly, it is the intent of the
parties hereto that Articles II, IV and X of this Agreement shall apply also
with respect to each such Sub-Trust as if each such Sub-Trust were a separate
business trust under the Business Trust Statute, and each reference to the term
"Trust" in such Articles shall be deemed to be a reference to each such
Sub-Trust to the extent necessary to give effect to the foregoing intent. The
use of the terms "Trust" or "Sub-Trust" in this Agreement shall in no event
alter the intent of the parties hereto that the Trust receive the full benefit
of the limitation on interseries liability as set forth in Section 3804 of the
Business Trust Statute.
Section 3.02. ESTABLISHMENT OF SUB-TRUST.
The Owner Trustee hereby establishes and designates two initial
Sub-Trusts, as follows:
Sub-Trust I and Sub-Trust II
The provisions of this Article III shall be applicable to the above
designated Sub-Trusts.
Section 3.03. ASSETS OF SUB-TRUST. All consideration received by the Owner
Trust Estate for the issuance or sale of the Notes relating to a particular Loan
Group and Sub-Trust, together with the entire Owner Trust Estate in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong solely to that Sub-Trust for all purposes, subject only to
the rights of creditors of such Sub-Trust and except as may otherwise be
provided in the Sale and Servicing Agreement or required by applicable tax laws,
and shall be so recorded upon the books of account of the Trust. Separate and
distinct records shall be maintained for each Sub-Trust and the assets
associated with a Sub-Trust shall be held and accounted for separately from the
other assets of the Owner Trust Estate, and any other Sub-Trust. In the event
that there is any Owner Trust Estate, or any income, earnings, profits, and
proceeds thereof, or funds or payments which are not readily identifiable as
belonging to any particular Sub-Trust, the Owner Trustee shall allocate them to
the Certificates generally. Each such allocation by the Owner Trustee shall be
conclusive and binding upon all Noteholders and Certificateholders for all
purposes.
Section 3.04. LIABILITIES OF SUB-TRUST.
The Owner Trust Estate belonging to each particular Sub-Trust shall
be charged with the liabilities of the Trust in respect of that Sub-Trust and
only that Sub-Trust and all expenses, costs, charges and reserves attributable
to that Sub-Trust, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as belonging
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to any particular Sub-Trust shall be allocated and charged by the Owner Trustee
to the Certificateholders generally, based on their Ownership Interest. Each
allocation of liabilities, expenses, costs, charges and reserves by the Owner
Trustee shall be conclusive and binding upon all Noteholders and
Certificateholders for all purposes. The Owner Trustee shall have full
discretion, to the extent not inconsistent with applicable law, to determine
which items shall be treated as income and which items as capital, and each such
determination and allocation shall be conclusive and binding upon the
Noteholders and the Certificateholders. Every written agreement, instrument or
other undertaking made or issued by or on behalf of a particular Sub-Trust shall
include a recitation limiting the obligation or claim represented thereby to
that Sub-Trust and its assets.
Without limitation of the foregoing provisions of this Article, but
subject to the right of the Owner Trustee in its discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Sub-Trust shall be enforceable against the
assets of such Sub-Trust only, and not against the assets (i) of the Trust
generally or (ii) of any other Sub-Trust. Notice of this limitation on
interseries liabilities shall be set forth in the Certificate of Trust of the
Trust (whether originally or by amendment) as filed or to be filed in the Office
of the Secretary of State pursuant to the Business Trust Statute, and upon the
giving of such notice in the Certificate of Trust, the statutory provisions of
Section 3804 of the Business Trust Statute relating to limitations on
interseries liabilities (and the statutory effect under Section 3804 of setting
forth such notice in the Certificate of Trust) shall become applicable to the
Trust and each Sub-Trust. Every note, bond, contract, instrument, certificate or
other undertaking made or issued by or on behalf of a particular Sub-Trust shall
include a recitation limiting the obligation represented thereby to that
Sub-Trust and its assets in accordance with Section 3804(a) of the Business
Trust Statute.
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ARTICLE IV
CERTIFICATES AND TRANSFER OF INTERESTS
Section 4.01. INITIAL OWNERSHIP. Upon the formation of the Trust by the
contribution by the Sponsor pursuant to Section 2.05 and the filing of the
Certificate of Trust with the Secretary of State and until the issuance of the
Certificates, the Sponsor shall be the sole owner of the Trust.
Section 4.02. THE CERTIFICATES. The Certificates shall be issued as a
single certificate, substantially in the form of Exhibit A hereto, upon the
order of the Sponsor to the Owner Trustee concurrently with the sale and
assignment to the Trust of the Mortgage Loans. The Certificates shall represent
the entire beneficial ownership interest in the assets of the Trust subject to
the debt represented by the Notes. The Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof. The
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an Authorized Officer of the Owner Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be valid, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of authentication
and delivery of such Certificates.
A transferee of a Certificate shall become a Certificateholder, and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to Section 4.04.
Section 4.03. EXECUTION, AUTHENTICATION AND DELIVERY OF CERTIFICATES.
Concurrently with the initial transfer of the Mortgage Loans to the Trust
pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the
Certificates, representing 100% of the Percentage Interests of the Trust, to be
executed on behalf of the Trust, authenticated and delivered, at the written
direction of the Sponsor, to Accredited Home Lenders, Inc., as initial
Certificateholder. No Certificate shall entitle its holder to any benefit under
this Agreement, or shall be valid for any purpose, unless there shall appear on
such Certificate a certificate of authentication substantially in the form set
forth in EXHIBIT A, executed by the Owner Trustee or the Owner Trustee's
authenticating agent, by manual or facsimile signature; such authentication
shall constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
Section 4.04. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 4.08, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Owner Trustee shall be the initial
"Certificate Registrar."
15
Upon surrender for registration of transfer of any Certificate at
the office or agency maintained pursuant to Section 4.08, the Owner Trustee,
upon the satisfaction of the conditions set forth in Section 4.09(c), shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates of a like Percentage Interest dated
the date of authentication by the Owner Trustee or any authenticating agent. At
the option of a Certificateholder, Certificates may be exchanged for other
Certificates of a like Percentage Interest upon surrender of the Certificates to
be exchanged at the office or agency maintained pursuant to Section 4.08.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form, attached to the form of Certificate attached hereto as EXHIBIT A, or such
other form satisfactory to the Note Insurer, or, upon the occurrence and
continuation of a Note Insurer Default, satisfaction of the Rating Agency
Condition, duly executed by the Certificateholder or his attorney duly
authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The preceding provisions of this Section 4.04 notwithstanding, the
Certificate Registrar shall not register transfers or exchanges of Certificates
for a period of fifteen (15) days preceding the Payment Date with respect to the
Certificates.
Notwithstanding anything contained herein to the contrary, neither
the Certificate Registrar nor the Owner Trustee shall be responsible for
ascertaining whether any transfer complies with the registration provisions or
exemptions from the Securities Act of 1933, as amended, the Securities Act of
1934, as amended, applicable state securities law or the Investment Company Act
of 1940, as amended; PROVIDED, HOWEVER, that if an Investment Letter is
specifically required to be delivered to the Owner Trustee by a purchaser or
transferee of a Certificate, the Owner Trustee shall be under a duty to examine
the same to determine whether it conforms to the form of Investment Letter set
forth as EXHIBIT C hereto and shall promptly notify the party delivering the
same if such Investment Letter does not so conform.
Section 4.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any
mutilated Certificate shall be surrendered to the Certificate Registrar, or if
the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee, or
the Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like Percentage Interest. In connection with
the issuance of any new Certificate under this Section 4.05, the Owner Trustee
or the Certificate Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that
16
may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership in
the Trust, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 4.06. PERSONS DEEMED OWNERS. Each person by virtue of becoming a
Certificateholder in accordance with this Agreement shall be deemed to be bound
by the terns of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee or the Certificate Registrar may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 6.02 and for all other purposes
whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.
Section 4.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Certificate Registrar shall furnish or cause to be furnished to the Owner
Trustee, the Master Servicer, the Sponsor and the Indenture Trustee immediately
prior to each Payment Date, a list of the names and addresses of the
Certificateholders as of the most recent Record Date. If one or more
Certificateholder, together evidencing Percentage Interests totaling not less
than 25%, apply in writing to the Certificate Registrar, and such application
states that the applicants desire to communicate with other Certificateholders
with respect to their rights under this Agreement or under the Certificates and
such application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Certificate Registrar shall, within
five (5) Business Days after the receipt of such application, afford such
applicants access during normal business hours to the current list of
Certificateholders. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Sponsor, the
Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
Section 4.08. MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall
maintain an office or offices or agency or agencies where notices and demands to
or upon the Owner Trustee in respect of the Basic Documents may be served, and
so long as the Owner Trustee is the Certificate Registrar, where Certificates
may be surrendered for registration of transfer or exchange and notices and
demands to or upon the Certificate Registrar in respect of the Certificates, may
be served. The Owner Trustee initially designates the Corporate Trust Office as
its principal corporate trust office for such purposes. The Owner Trustee shall
give prompt written notice to the Note Insurer, the Indenture Trustee, the
Sponsor and the Certificateholders of any change in the location of the
Certificate Register or any such office or agency.
Section 4.09. RESTRICTIONS ON TRANSFERS OF CERTIFICATES. (a) Each
prospective purchaser and any subsequent transferee of a Certificate (each, a
"PROSPECTIVE HOLDER"), other than the Sponsor, shall execute and deliver to the
Owner Trustee and the Certificate Registrar and any of their respective
successors an Investment Letter in the form of Exhibit C hereto to the effect
that:
(i) Such Person is (A) a "qualified institutional buyer" as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and is aware that the seller of the Certificate may be
relying on the exemption from the registration requirements of the
Securities Act provided by Rule 144A and is acquiring such Certificate for
its own account or for the account of one or more qualified institutional
17
buyers for whom it is authorized to act, or (B) a Person involved in the
organization or operation of the Trust or an affiliate of such Person
within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as
amended (including, but not limited to, the Sponsor).
(ii) Such Person understands that the Certificates have not been
and will not be registered under the Securities Act and may be offered,
sold, pledged or otherwise transferred only to a person whom the seller
reasonably believes is (A) a qualified institutional buyer or (B) a Person
involved in the organization or operation of the Trust or an affiliate of
such Person, in a transaction pursuant to an effective registration
statement under the Securities Act and any applicable state securities laws
or exempt from the registration requirements of the Securities Act and any
such state securities laws.
(iii) Such Person understands that the Certificates bear a legend
to the following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY
OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF
(INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE
LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR
OPERATION OF THE TRUST OR AN AFFILIATE OF SUCH A PERSON
WITHIN THE MEANING OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED TO,
ACCREDITED HOME LENDERS, INC.) IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
CERTIFICATE UNDER THE ACT OR ANY STATE SECURITIES LAWS."
18
(b) By its acceptance of a Certificate, each Prospective Holder agrees
and acknowledges that no legal or beneficial interest in all or any portion of
any Certificate may be transferred directly or indirectly to an entity that
holds residual securities as nominee to facilitate the clearance and settlement
of such securities through electronic book-entry changes in accounts of
participating organizations (a "BOOK-ENTRY NOMINEE") and any such purported
transfer shall be void and have no effect.
The Certificates shall bear an additional legend referring to the
restrictions contained in preceding paragraph to the following effect:
THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED
TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE
REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE IS NOT
AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO
FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY
THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF
PARTICIPATING ORGANIZATIONS.
(c) No transfer of a Certificate or any beneficial interest therein
shall be made to any person unless the Note Insurer has given its prior written
consent to such transfer (or, upon the occurrence and continuance of a Note
Insurer Default, satisfaction of the Rating Agency Condition) and the Owner
Trustee has received a representation letter from the Prospective Holder to the
effect that such Prospective Holder (i) is not a person which is an employee
benefit plan, trust or account subject to Title I of ERISA or Section 4975 of
the Code or a governmental plan, as defined in Section 3(32) of ERISA, subject
to any federal, state or local law which is, to a material extent, similar to
the foregoing provisions of ERISA or the Code (any such person being a "PLAN"),
(ii) is not an entity, including an insurance company separate account or
general account, whose underlying assets include "plan assets" by reason of a
Plan's investment in the entity and (iii) is not directly or indirectly
purchasing such Certificate or interest therein on behalf of, as investment
manager of, as named fiduciary of, as trustee of, or with the assets of a Plan.
(d) The Owner Trustee shall not execute, and shall not countersign and
deliver, a Certificate in connection with any transfer thereof unless the
transferor shall have provided to the Owner Trustee an Investment Letter, signed
by the transferee, which certificate shall contain the consent of the transferee
to any amendments of this Agreement as may be required to effectuate further the
foregoing restrictions on transfer of the Certificates to Book-Entry Nominees,
and an agreement by the transferee that it will not transfer a Certificate
without providing to the Owner Trustee an Investment Letter.
(e) [Reserved].
19
(f) Unless the Prospective Holder delivers a certificate to the Owner
Trustee to the effect that it is a United States Person, the Prospective Holder,
other than Accredited Home Lenders, Inc. or an affiliate of the Accredited Home
Lenders, Inc., shall obtain and deliver to the Note Insurer and the Owner
Trustee an Opinion of Counsel satisfactory to the Note Insurer to the effect
that, as a matter of federal income tax law, the transfer of the Certificate to
such Prospective Holder will not result in the imposition of any U.S.
withholding tax on payments in respect of the Mortgage Loans or the Certificate.
(g) The Certificates may not be pledged or transferred without delivery
to the Certificate Registrar of an Opinion of Counsel satisfactory to the Note
Insurer to the effect that such transfer would not jeopardize the tax treatment
of the Trust, would not subject the Trust to an entity-level tax, and would not
jeopardize the status of the Notes as debt for all purposes.
(h) No pledge or transfer of the Certificates shall be effective unless
such purchase or transfer is (i) to a single beneficial owner and (ii)
accompanied by an Opinion of Counsel satisfactory to the Owner Trustee and the
Note Insurer, which Opinion of Counsel shall not, unless otherwise agreed, be an
expense of the Trust, the Certificate Registrar, the Master Servicer, the Backup
Servicer, the Note Insurer or the Sponsor, to the effect such pledge or transfer
will not cause the Trust to be treated for federal income tax purposes as a
taxable mortgage pool, association or a publicly traded partnership taxable as a
corporation.
20
ARTICLE V
ACTIONS BY OWNER TRUSTEE
Section 5.01. PRIOR NOTICE TO THE CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS. With respect to the following matters, the Owner Trustee shall
not take action (and the Certificateholders shall not direct the Owner Trustee
to take any action) unless at least thirty (30) days before the taking of such
action, the Owner Trustee shall have notified the Certificateholders (unless the
Certificateholders have directed the Owner Trustee to take action) and the Note
Insurer in writing of the proposed action and neither the Certificateholders nor
the Note Insurer shall have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders and/or the Note
Insurer have withheld consent or the Certificateholders have provided
alternative written direction (any direction by the Certificateholders shall
require the prior written consent of the Note Insurer):
(a) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection of the
Mortgage Loans) and the compromise of any action, claim or lawsuit brought
by or against the Trust (except with respect to the aforementioned claims
or lawsuits for collection of the Mortgage Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under
the Business Trust Statute);
(c) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Certificateholder is
required; PROVIDED, that notwithstanding this Section 5.01, the prior
written consent of the Note Insurer must be obtained for any amendment or
change to this Agreement or ally other Basic Document;
(d) the amendment or other change to this Agreement or any other
Basic Document in circumstances where the consent of any Certificateholder
is not required and such amendment materially adversely affects the
interest of the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar or the consent to the assignment by the
Note Registrar or Indenture Trustee or Certificate Registrar of their
respective obligations under the Indenture or this Agreement, as
applicable;
(f) the consent to the waiver of any default of any Basic
Document;
(g) the consent to the assignment by the Indenture Trustee or
Master Servicer of their respective obligations under any Basic Document;
(h) except as provided in Article X hereof, dissolve, terminate
or liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity,
or convey or transfer all or substantially all of the Trust's assets to any
other entity;
21
(j) cause the Trust to incur, assume or guaranty any indebtedness
other than as set forth in this Agreement or the other Basic Documents;
(k) do any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.03 hereof;
(l) confess a judgment against the Trust;
(m) possess Trust assets, or assign the Trust's right to
property, for other than a Trust purpose;
(n) cause the Trust to lend any funds to any entity; or
(o) change the Trust's purpose and powers from those set forth in
this Agreement.
In addition the Trust shall not commingle its assets with those of
any other entity. The Trust shall maintain its financial and accounting books
and records separate from those of any other entity. Except as expressly set
forth herein, the Trust shall pay its indebtedness, operating expenses and
liabilities from its own funds, and the Trust shall not pay the indebtedness,
operating expenses and liabilities of any other entity. The Master Servicer, on
behalf of the Trust, shall maintain appropriate minutes or other records of all
appropriate action. The Trust shall maintain its office separate from the
offices of the Sponsor and the Master Servicer.
Notwithstanding the other provisions of this Section 5.01, the
Owner Trustee shall not have the power, except upon the written direction of the
Certificateholders with the prior written consent of the Note Insurer, and to
the extent otherwise consistent with the Basic Documents, to (i) remove or
replace the Master Servicer or the Indenture Trustee, (ii) institute proceedings
to have the Trust declared or adjudicated bankrupt or insolvent, (iii) consent
to the institution of bankruptcy or insolvency proceedings against the Trust,
(iv) file a petition or consent to a petition seeking reorganization or relief
on behalf of the Trust under any applicable federal or state law relating to
bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or any similar official) of the Trust or a substantial
portion of the property of the Trust, (vi) make any assignment for the benefit
of the Trust's creditors, (vii) cause the Trust to admit in writing its
inability to pay its debts generally as they become due, (viii) take any action,
or cause the Trust to take any action, in furtherance of any of the foregoing
(any of the above, a "BANKRUPTCY ACTION"). So long as the Indenture and the
Insurance Agreement remain in effect and no Note Insurer Default exists, no
Certificateholder shall have the power to take, and shall not take, any
Bankruptcy Action with respect to the Trust or direct the Owner Trustee to take
any Bankruptcy Action with respect to the Trust.
Section 5.02. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY. The
Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior written consent and
approval of all Certificateholders and the prior written consent and approval of
the Note Insurer and the delivery to the Owner Trustee by each such
Certificateholder of a certification that such Certificateholder reasonably
believes
22
that the Trust is insolvent. The terms of this Section 5.02 shall survive for
one year and one day following the termination of this Agreement.
Section 5.03. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the other Basic
Documents or would be contrary to Section 2.03, nor shall the Owner Trustee be
obligated to follow any such direction, if given.
Section 5.04. MAJORITY CONTROL. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by holders of Certificates evidencing more than 50% of the Percentage
Interest in the Trust at the time of the delivery of such notice and such action
shall be binding upon all Certificateholders.
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ARTICLE VI
TAX PROVISIONS; CERTAIN DUTIES
Section 6.01. FEDERAL INCOME TAX PROVISIONS. (a) For so long as the Trust
has a single owner for federal income tax purposes, it will, pursuant to
Treasury Regulations promulgated under section 7701 of the Code, be disregarded
as an entity distinct from the Certificateholder for all federal income tax
purposes. Accordingly, for federal income tax purposes, the Certificateholder
will be treated as (i) owning all assets owned by the Trust, (ii) having
incurred all liabilities incurred by the Trust, and (iii) all transactions
between the Trust and the Certificateholder will be disregarded.
(b) Neither the Owner Trustee nor any Certificateholder will, under any
circumstances, and at any time, make an election of IRS Form 8832 or otherwise,
to classify the Trust as an association taxable as a corporation for federal,
state or any other applicable tax purpose.
(c) If the Trust is treated as a partnership (rather than disregarded
as a separate entity) for federal income tax purposes pursuant to Section 2.06,
the following provisions shall apply:
(i) A separate capital account (a "CAPITAL ACCOUNT") shall be
established and maintained for each Certificateholder by the Sponsor, in
accordance with Treasury Regulations Section 1.704-1 (b)(2)(iv). No
Certificateholder shall be entitled to interest on its Capital Account or
any capital contribution made by such Certificateholder to the Trust.
(ii) Upon termination of the Trust pursuant to Article X, any
amounts available for distribution to Certificateholders shall be
distributed to the Certificateholders with positive Capital Account
balances in accordance with such balances. For purposes of this Section
6.01(c)(ii), the Capital Account of each Certificateholder shall be
determined after all adjustments made in accordance with this Section 6.01
resulting from the Trust's operations and from all sales and dispositions
of all or any part of the assets of the Trust. Any distributions pursuant
to this Section 6.01(c)(ii) shall be made by the end of the Taxable Year in
which the termination occurs (or, if later, within 90 days after the date
of the termination).
(iii) No Certificateholder shall be required to restore any deficit
balance in its Capital Account. Furthermore, no Certificateholder shall be
liable for the return of the Capital Account of, or of any capital
contribution made to the Trust by, another Certificateholder.
(iv) Profit and loss of the Trust for each Taxable Year shall be
allocated to the Certificateholders in accordance with their respective
Percentage Interests.
(v) Notwithstanding any provision to the contrary, (i) any
expense of the Trust that is a "nonrecourse deduction" within the meaning
of Treasury Regulations Section 1.704-2(b)(1) shall be allocated in
accordance with the Certificateholders' respective Percentage Interests,
(ii) any expense of the Trust that is a "partner nonrecourse
24
deduction" within the meaning of Treasury Regulations Section 1.704-2(i)(2)
shall be allocated in accordance with Treasury Regulations Section
1.704-2(i)(1), (iii) if there is a net decrease in Trust Minimum Gain
within the meaning of Treasury Regulations Section 1.704-2(f)(1) for any
Taxable Year, items of gain and income shall be allocated among the
Certificateholders in accordance with Treasury Regulations Section
1.704-2(f) and the ordering rules contained in Treasury Regulations Section
1.704-2(i), and (iv) if there is a net decrease in Certificateholder
Nonrecourse Debt Minimum Gain within the meaning of Treasury Regulations
Section 1.704-2(i)(4) for any Taxable Year, items of gain and income shall
be allocated among the Certificateholders in accordance with Treasury
Regulations Section 1.704-2(i)(4) and the ordering rules contained in
Treasury Regulations Section 1.704-2(j). A Certificateholder's "interest in
partnership profits" for purposes of determining its share of the
nonrecourse liabilities of the Trust within the meaning of Treasury
Regulations Section 1.752-3(a)(3) shall be such Certificateholder's
Percentage Interest.
(vi) If a Certificateholder receives in any Taxable Year an
adjustment, allocation, or distribution described in subparagraphs (4),
(5), or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) that
causes or increases a negative balance in such Certificateholder's Capital
Account that exceeds the sum of such Certificateholder's shares of Trust
Minimum Gain and Certificateholder Nonrecourse Debt Minimum Gain, as
determined in accordance with Treasury Regulations Sections 1.704-2(g) and
1.704-2(i), such Certificateholder shall be allocated specially for such
Taxable Year (and, if necessary, later Taxable Years) items of income and
gain in an amount and manner sufficient to eliminate such negative Capital
Account balance as quickly as possible as provided in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of
income or gain to a Certificateholder in accordance with this Section
6.01(c)(vi), to the extent permitted by Regulations Section 1.704-1(b),
items of expense or loss shall be allocated to such Certificateholder in an
amount necessary to offset the income or gain previously allocated to such
Certificateholder under this Section 6.01(c)(vi).
(vii) Loss shall not be allocated to a Certificateholder to the
extent that such allocation would cause a deficit in such
Certificateholder's Capital Account (after reduction to reflect the items
described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and
(6)) to exceed the sum of such Certificateholder's shares of Trust Minimum
Gain and Certificateholder Nonrecourse Debt Minimum Gain. Any loss in
excess of that limitation shall be allocated to all the Certificateholders
in accordance with their respective Percentage Interests. After the
occurrence of an allocation of loss to a Certificateholder in accordance
with this Section 6.01(c)(vii), to the extent permitted by Treasury
Regulations Section 1.704-1(b), profit shall be allocated to such
Certificateholder in an amount necessary to offset the loss previously
allocated to such Certificateholder under this Section 6.01(c)(vii).
(viii) If a Certificateholder transfers any part or all of its
Percentage Interest and the transferee is admitted as a Certificateholder
as provided herein (a "TRANSFEREE CERTIFICATEHOLDER"), the distributive
shares of the various items of profit and loss allocable among the
Certificateholders during such Taxable Year shall be allocated between the
25
transferor and the Transferee Certificateholder (at the election of the
Certificateholders (including the transferor, but excluding the Transferee
Certificateholder)) either (i) as if the Taxable Year had ended on the date
of the transfer or (ii) based on the number of days of such Taxable Year
that each was a Certificateholder without regard to the results of Trust
activities in the respective portions of such Taxable Year in which the
transferor and Transferee Certificateholder were Certificateholders.
(ix) "Profit" and "loss" and any items of income, gain, expense or
loss referred to in this Section 6.01 shall be determined in accordance
with federal income tax accounting principles as modified by Treasury
Regulations Section 1.704-1(b)(2)(iv), except that profits and losses shall
not include items of income, gain, and expense that are specially allocated
pursuant to Sections 6.01(c)(v), 6.01(c)(vi) or 6.01(c)(vii) hereof. All
allocations of income, profits, gains, expenses, and losses (and all items
contained therein) for federal income tax purposes shall be identical to
all allocations of such items set forth in this Section 6.01, except as
otherwise required by Section 704(c) of the Code and Section 1.704-1(b)(4)
of the Treasury Regulations.
(x) The taxable year of the Trust (the "TAXABLE YEAR") shall be
the calendar year or such other taxable year as may be required by Section
706(b) of the Code.
(xi) At the Trust's expense, the Sponsor shall (i) prepare, or
cause to be prepared, and file or cause to be filed such tax returns
relating to the Trust (including a partnership information return, IRS Form
1065) as are required by applicable federal, state, and local law, (ii)
cause such returns to be signed in the manner required by law, (iii) make
such elections as may from time to time be required or appropriate under
any applicable law so as to maintain the Trust's classification as a
partnership for tax purposes, (iv) prepare and deliver, or cause to be
prepared and delivered, to the Certificateholders, no later than 120 days
after the close of each Taxable Year (or no later than April l5th), a
Schedule K-1, a copy of the Trust's informational tax return (IRS Form
1065), and such other reports (collectively, the "ANNUAL TAX REPORTS")
setting forth in sufficient detail all such information and data with
respect to the transactions effected by or involving the Trust during such
Taxable Year as shall enable each Certificateholder to prepare its federal,
state, and local income tax returns in accordance with the laws then
prevailing, and (v) collect, or cause to be collected, any withholding tax
as described in Section 5.02(c) with respect to income or distributions to
Certificateholders.
(xii) The Sponsor shall, if required, be designated as the tax
matters partner for the Trust within the meaning of Section 6231(a)(7) of
the Code (the "TAX MATTERS PARTNER"). The Tax Matters Partner shall have
the right and obligation to take all actions authorized and required,
respectively, by the Code for the Tax Matters Partner. The Tax Matters
Partner shall have the right to retain professional assistance in respect
of any audit or controversy proceeding initiated with respect to the Trust
by the Internal Revenue Service or any state or local taxing authority, and
all expenses and fees incurred by the Tax Matters Partner on behalf of the
Trust shall constitute expenses of the Trust. In the event the Tax Matters
Partner receives notice of a final partnership adjustment under Section
6223(a)(2) of the Code, the Tax Matters Partner shall either (i) file a
court petition for judicial review of such adjustment within the period
provided under Section
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6226(a) of the Code, a copy of which petition shall be mailed to all other
Holders on the date such petition is filed, or (ii) mail a written notice
to all other Holders, within such period, that describes the Tax Matters
Partner's reasons for determining not to file such a petition.
(xiii) Except as otherwise provided in this Section 6.01 and
Section 7.06, the Certificateholders shall instruct the Sponsor in writing
as to whether to make any available election under the Code or any
applicable state or local tax law on behalf of the Trust.
Section 6.02. WITHHOLDING TAXES. In the event that any withholding tax is
imposed under federal, state, or local law on the Trust's payment (or
allocations of income) to a Certificateholder, such tax shall reduce the amount
otherwise distributable to such Certificateholder in accordance with this
Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is hereby
authorized and directed to retain in the Payment Account from amounts otherwise
distributable to the Certificateholders sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not prevent
the Indenture Trustee from contesting any such tax in appropriate proceedings,
and withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The Sponsor will provide the Indenture Trustee with a
statement indicating the amount of any such withholding tax. The amount of any
withholding tax imposed with respect to a Certificateholder shall be treated as
cash distributed to such Certificateholder at the time it is withheld by the
Indenture Trustee and remitted to the appropriate taxing authority from the
Payment Account at the direction of the Indenture Trustee, on behalf of the
Owner Trustee. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a Certificateholder who is
a Non-U.S. Person), the Indenture Trustee may in its sole discretion withhold
such amounts in accordance with this paragraph. In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax, the
Owner Trustee and the Indenture Trustee shall reasonably cooperate with such
Certificateholder in making such claim so long as such Certificateholder agrees
in writing to reimburse the Owner Trustee for any out-of-pocket expenses
incurred.
Any Certificateholder which is organized under the laws of a
jurisdiction outside the United States shall, on or prior to the date such
Certificateholder becomes a Certificateholder, (a) so notify the Owner Trustee
and the Indenture Trustee, on behalf of the Trust, (b) (i) provide the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, with Internal Revenue
Service form 1001, 4224, 8709 or W-8, as appropriate, or (ii) notify the Owner
Trustee and the Indenture Trustee, on behalf of the Trust, that it is not
entitled to an exemption from United States withholding tax or a reduction in
the rate thereof on payments of interest. Any such Certificateholder agrees by
its acceptance of a Certificate, on an ongoing basis, to provide like
certification for each taxable year and to notify the Owner Trustee and the
Indenture Trustee, on behalf of the Trust, should subsequent circumstances arise
affecting the information provided. The Trust, the Owner Trustee and the
Indenture Trustee shall be fully protected in relying upon, and each
Certificateholder by its acceptance of a Certificate hereunder agrees to
indemnify and hold the Trust, the Owner Trustee and the Indenture Trustee
harmless against all claims or liability of any kind arising in connection with
or related to their reliance upon any documents, forms or information provided
by any Certificateholder. In addition, if the Indenture Trustee has
27
not withheld taxes on any payment made to any Certificateholder, and the
Indenture Trustee is subsequently required to remit to any taxing authority any
such amount not withheld, such Certificateholder shall return such amount to the
Indenture Trustee upon written demand by the Indenture Trustee. Neither the
Owner Trustee nor the Indenture Trustee shall be liable for damages to any
Certificateholder due to a violation of the Code unless and only to the extent
such liability is caused by the Owner Trustee's or the Indenture Trustee's
failure to act in accordance with its standard of care under this Agreement.
Section 6.03. ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS, THE
INTERNAL REVENUE SERVICE AND OTHERS. The Sponsor shall (a) maintain (or cause to
be maintained) the books of the Trust on a calendar year basis on the accrual
method of accounting, including, without limitation, the allocations of net
income under Section 6.01, and (b) deliver (or cause to be delivered) to each
Certificateholder such information, reports or statements as may be required by
the Code and applicable Treasury Regulations and as may be required to enable
each Certificateholder to prepare its respective federal and state income tax
returns. Consistent with the Trust's (and each Loan Groups' and Sub-Trusts')
characterization for tax purposes as a security arrangement for the issuance of
non-recourse debt, no federal income tax return shall be filed on behalf of the
Trust unless either (y) the Trust, the Sub-Trusts, the Owner Trustee or the
Certificateholders receive an Opinion of Counsel based on a change in applicable
law occurring after the date hereof that the Code requires such a filing or (z)
the Internal Revenue Service shall determine that the Trust (or a related Loan
Group or Sub-Trust) is required to file such a return. In the event that the
Trust (or a related Loan Group or Sub-Trust) is required to file tax returns,
the Owner Trustee shall elect under Section 1278 of the Code to include in
income currently any market discount that accrues with respect to the Mortgage
Loans. The Owner Trustee shall prepare or shall cause to be prepared any tax
returns required to be filed by the Trust or the Sub-Trusts and shall remit such
returns to the Sponsor at least five days before such returns are due to be
filed. The Sponsor, or any other such party required by law, shall promptly sign
such returns and deliver such returns after signature to the Owner Trustee and
such returns shall be filed by, or at the direction of, the Owner Trustee with
the appropriate tax authorities. In no event shall the Sponsor be liable for any
liabilities, costs or expenses of the Trust or the Sub-Trusts arising out of the
application of any tax law, including federal, state, foreign or local income or
excise taxes or any other tax imposed on or measured by income (or any interest,
penalty or addition with respect thereto or arising from a failure to comply
therewith), except for any such liability, cost or expense attributable to the
Sponsor's breach of its obligations under this Agreement.
Section 6.04. SIGNATURE ON RETURNS.
In the event that the Trust files a federal income tax return as
provided in Section 6.03, the Owner Trustee shall sign on behalf of the Trust or
the Sub-Trusts the tax returns of the Trust or the Sub-Trusts, if any, unless
applicable law requires a Sponsor to sign such documents, in which case such
documents shall be signed by the Sponsor.
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ARTICLE VII
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 7.01. GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article IV, in each case, as the
Sponsor shall approve, as evidenced conclusively by the Owner Trustee's
execution thereof. In addition, the Owner Trustee is authorized and directed, on
behalf of the Trust, to execute and deliver to the Authenticating Agent the
Trust Request and the Trust Orders referred to in Section 2.11 of the Indenture,
directly to the Authenticating Agent to authenticate and deliver Class A-1 Notes
in the Original Note Principal Balance of $68,704,000 and Class A-2 Notes in the
Original Note Principal Balance of $138,694,000. In addition to the foregoing,
the Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust, pursuant to the Basic Documents.
Section 7.02. GENERAL DUTIES. (a) It shall be the duty of the Owner
Trustee:
(i) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic
Documents to which the Trust is a party and to administer the Trust in the
interest of the Certificateholders, subject to the Basic Documents and in
accordance with the provisions of this Agreement; and
(ii) to obtain and preserve the Trust's qualification to do
business in the State of Delaware.
(b) The Owner Trustee shall not be responsible for taking any action on
behalf of the Trust under any Basic Document unless specifically directed in
writing to do so in accordance with Section 7.03 of this Agreement.
(c) The Owner Trustee shall not be responsible for any matter regarding
the Securities Act, the Exchange Act or the Investment Company Act of 1940, as
amended, or the rules or regulations thereunder.
Section 7.03. ACTION UPON INSTRUCTION. (a) Subject to Article V hereof, and
in accordance with the terms of the Basic Documents, the Certificateholders may
by written instruction direct the Owner Trustee in the management of the Trust
but only to the extent consistent with the limited purpose of the Trust. Such
direction may be exercised at anytime by written instruction of the
Certificateholders pursuant to Article V hereof. Without limiting the generality
of the foregoing, the Owner Trustee shall act as directed in writing by the
Certificateholders in connection with Note redemptions requested by the
Certificateholders, and shall take all actions and deliver all documents that
the Trust is required to take and deliver in accordance with Section 4.01 and
Article X of the Indenture in order to effect any redemption requested by the
Certificateholders.
29
(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trust or is contrary
to the terms hereof or of any other Basic Document or is otherwise contrary to
law.
(c) Subject to Article V hereof, whenever the Owner Trustee is unable
to decide between alternative courses of action permitted or required by the
terms of this Agreement or under any other Basic Document, the Owner Trustee
shall promptly give notice (in such form as shall be appropriate under the
circumstances) to the Certificateholders and the Note Insurer requesting
instruction from the Certificateholders as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Certificateholders received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten (10)
days of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
(d) Subject to Article V hereof, in the event that the Owner Trustee is
unsure as to the application of any provision of this Agreement or any other
Basic Document or any such provision is ambiguous as to its application, or is,
or appears to be, in conflict with any other applicable provision, or in the
event that this Agreement permits any determination by the Owner Trustee or is
silent or is incomplete as to the course of action that the Owner Trustee is
required to take with respect to a particular set of facts, the Owner Trustee
may give notice (in such form as shall be appropriate under the circumstances)
to the Certificateholders requesting instruction and, to the extent that the
Owner Trustee acts or refrains from acting in good faith in accordance with any
such instruction received, the Owner Trustee shall not be liable, on account of
such action or inaction, to any Person. If the Owner Trustee shall not have
received appropriate instruction within ten (10) days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the other Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
Section 7.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT, THE BASIC
DOCUMENTS OR ANY INSTRUCTIONS. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, this Agreement
or any document contemplated hereby to which the Trust is a party, except as
expressly provided by the terms of this Agreement, any other Basic Document or
in any document or written instruction received by the Owner Trustee pursuant to
Section 7.03; and no implied duties or obligations shall be read into this
Agreement or any other Basic Document against the Owner Trustee. The Owner
Trustee shall have no responsibility for filing any financing or continuation
statement in any public office at any time or to otherwise perfect or maintain
the perfection of any security interest or lien granted to it hereunder or to
prepare or file
30
any Securities and Exchange Commission filing for the Trust or to record this
Agreement or any other Basic Document. The Owner Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Owner Trust Estate that
result from actions by, or claims against, the Owner Trustee in its individual
capacity that are not related to the ownership or the administration of the
Owner Trust Estate.
Section 7.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR INSTRUCTIONS.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the other Basic Documents and (iii) in
accordance with any document or written instruction delivered to the Owner
Trustee pursuant to Section 7.03.
Section 7.06. RESTRICTIONS. Neither the Owner Trustee nor the Sponsor shall
take any action (a) that violates or results in a breach of or is inconsistent
with the purposes of the Trust set forth in Section 2.03 or (b) that, to the
actual knowledge of the Sponsor and the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section 7.06.
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ARTICLE VIII
CONCERNING THE OWNER TRUSTEE
Section 8.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts, but only upon the terms of this Agreement subject to the
other Basic Documents. The Owner Trustee also agrees to disburse all moneys
actually received by it constituting part of the Owner Trust Estate upon the
terms of the other Basic Documents and this Agreement. The Owner Trustee shall
not be answerable or accountable hereunder or under any other Basic Document
under any circumstances, except (i) for its own willful breach or misconduct or
gross negligence or (ii) in the case of the inaccuracy of any representation or
warranty contained in Section 8.03 expressly made by the Owner Trustee in its
individual capacity. In particular, but not by way of limitation (and subject to
the exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Responsible Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Certificateholders or the Note Insurer given in accordance with this Agreement;
(c) No provision of this Agreement or any other Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any other Basic Document if the Owner Trustee shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by the
Sponsor or for the form, character, genuineness, sufficiency, value or validity
of any of the Owner Trust Estate or for or in respect of the validity or
sufficiency of the Basic Documents, other than the certificate of authentication
on the Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty, or obligation to any Noteholder or to any Certificateholders,
other than as expressly provided for herein and in the other Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Indenture Trustee or the Master Servicer under any of the Basic Documents
or otherwise and the Owner Trustee shall have no obligation or liability to
perform the obligations of the Trust under this Agreement or the other Basic
Documents that are required to be performed by the Sponsor, the Indenture
Trustee or the Master Servicer;
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this
32
Agreement or otherwise or in relation to this Agreement or any Basic Document,
at the request, order or direction of the Sponsor, any of the Certificateholders
or the Note Insurer, unless such Certificateholders, the Sponsor or the Note
Insurer have offered to the Owner Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities that may be
incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee
to perform any discretionary act enumerated in this Agreement or in any other
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful breach or
misconduct in the performance of any such act; and
(h) Notwithstanding anything contained herein to the contrary, neither
U.S. Bank Trust, National Association in its individual capacity nor as Owner
Trustee shall be required to take any action in any jurisdiction other than in
the State of Delaware if the taking of such action will (i) require the consent
or approval or authorization or order of or the giving of notice to, or the
registration with or the taking of any other action in respect of, any state or
other governmental authority or agency of any jurisdiction other than the State
of Delaware; (ii) result in any fee, tax or other governmental charge under the
laws of any jurisdiction or any political subdivisions thereof in existence on
the date hereof other than the State of Delaware becoming payable by U.S. Bank
Trust, National Association; or (iii) subject U.S. Bank Trust, National
Association to personal jurisdiction in any jurisdiction other than the State of
Delaware for causes of action arising from acts unrelated to the consummation of
the transactions by U.S. Bank Trust, National Association in its individual
capacity or as Owner Trustee, as the case may be, contemplated hereby. The Owner
Trustee shall be entitled to obtain advice of counsel (which advice shall be an
expense of the Sponsor to determine whether any action required to be taken
pursuant to this Agreement or the other Basic Documents results in the
consequences described in clauses (i), (ii) and (iii) of the preceding sentence.
In the event that said counsel advises the Owner Trustee that such action will
result in such consequences, the Owner Trustee will appoint an additional
trustee pursuant to Section 11.05 hereof to proceed with such action.
Section 8.02. FURNISHING OF DOCUMENTS. Subject to Section 4.07, the Owner
Trustee shall furnish to the Certificateholders promptly upon receipt of a
written request therefor, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other instruments
furnished to the Owner Trustee under the Basic Documents. On behalf of the Owner
Trustee, the Sponsor shall furnish to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement and the Indenture.
Section 8.03. REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE. The
Owner Trustee hereby represents and warrants to the Sponsor and the
Certificateholders, that:
(a) It is a national banking association duly organized and validly
existing in good standing under the laws of the United States of America. It has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) It has taken all action necessary to authorize the execution and
delivery by it of this Agreement, and this Agreement will be executed and
delivered by one of its officers who is duly authorized to execute and deliver
this Agreement on its behalf.
33
(c) Neither the execution nor the delivery by it of this Agreement nor
the consummation by it of the transactions contemplated hereby nor compliance by
it with any of the terns or provisions hereof will contravene any Delaware or
Federal law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws.
(d) This Agreement has been duly authorized, executed and delivered by
the Owner Trustee and constitutes a valid, legal and binding obligation of the
Owner Trustee, enforceable against it in accordance with the terms hereof,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting the enforcement of creditors' rights generally and to
general principles of equity, regardless of whether such enforcement is
considered in a proceeding in equity or at law.
(e) The Owner Trustee is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which default might have consequences that
would materially and adversely affect the condition (financial or other) or
operations of the Owner Trustee or its properties or might have consequences
that would materially adversely affect its performance hereunder.
(f) No litigation is pending or, to the best of the Owner Trustee's
knowledge, threatened against the Owner Trustee which would prohibit its
entering into this Agreement or performing its obligations under this Agreement.
Section 8.04. RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, Note, or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of the determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the other
Basic Documents, the Owner Trustee (i) may, at the expense of the Trust, act
directly or through its agents or attorneys pursuant to agreements entered into
with any of them, and the Owner Trustee shall not be liable for the conduct or
misconduct of such agents or attorneys if such agents or attorneys shall have
been selected by the Owner Trustee with reasonable care, and (ii) may, at the
expense of the Trust, consult with counsel, Accountants and other skilled
persons to be selected with reasonable care and employed by it. The Owner
Trustee shall not be liable for anything done, suffered or omitted in good faith
by it in accordance with the written opinion or advice of any such counsel,
Accountants or other such persons and not contrary to this Agreement or any
other Basic Document.
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Section 8.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided in
Section 8.03, in accepting the trusts hereby created, U.S. Bank Trust, National
Association acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Agreement or any other Basic Document
shall look only to the Owner Trust Estate for payment or satisfaction thereof.
Section 8.06. OWNER TRUSTEE NOT LIABLE FOR THE CERTIFICATES OR MORTGAGE
LOANS. The recitals contained herein and in the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates) shall
be taken as the statements of the Sponsor, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
other Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates and as specified in
Section 8.03 hereof) or the Notes, or of any Mortgage Loans or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage Loan, or the perfection and priority of any security interest
created by any Mortgage Loan or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Owner Trust Estate or
its ability to generate the payments to be distributed to the Certificateholders
under this Agreement or the Noteholders under the Indenture, including, without
limitation, the existence, condition and ownership of any Mortgaged Property,
the existence and enforceability of any insurance thereon, the existence and
contents of any Mortgage Loan on any computer or other record thereof, the
validity of the assignment of any Mortgage Loan to the Trust or of any
intervening assignment, the completeness of any Mortgage Loan, the performance
or enforcement of any Mortgage Loan, the compliance by the Sponsor or the Master
Servicer with any warranty or representation made under any Basic Document or in
any related document or the accuracy of any such warranty or representation or
any action of the Indenture Trustee or the Master Servicer or any subservicer
taken in the name of the Owner Trustee.
Section 8.07. OWNER TRUSTEE MAY OWN CERTIFICATES AND NOTES. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of the Certificates or the Notes and may deal with the Sponsor, the Indenture
Trustee, the Master Servicer and the Backup Servicer in banking transactions
with the same rights as it would have if it were not Owner Trustee.
Section 8.08. LICENSES. The Sponsor shall cause the Trust to use its best
efforts to obtain and maintain the effectiveness of any licenses required in
connection with this Agreement and the other Basic Documents and the
transactions contemplated hereby and thereby until such time as the Trust shall
terminate in accordance with the terms hereof.
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ARTICLE IX
COMPENSATION OF OWNER TRUSTEE
Section 9.01. OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Master Servicer and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by
the Master Servicer for its other reasonable expenses hereunder as separately
agreed (the "OWNER TRUSTEE FEE").
Section 9.02. INDEMNIFICATION. The Sponsor shall be liable as obligor for,
and shall indemnify the Owner Trustee (in its individual and trust capacities)
and its successors, assigns, agents and servants (collectively, the "INDEMNIFIED
PARTIES") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "EXPENSES") which may at any time be
imposed on, incurred by, or asserted against any Indemnified Party in any way
relating to or arising out of this Agreement, the other Basic Documents, the
Owner Trust Estate, the administration of the Owner Trust Estate or the action
or inaction of the Owner Trustee hereunder, except only that the Sponsor shall
not be liable for or required to indemnify an Indemnified Party from and against
Expenses arising or resulting from any of the matters described in the third
sentence of Section 8.01. The indemnities contained in this Section 9.02 shall
survive the resignation or termination of the Owner Trustee or the termination
of this Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Sponsor will be entitled
to participate therein, with counsel selected by the Sponsor and reasonably
satisfactory to the Indemnified Parties, but after notice from an Indemnified
Party to the Sponsor of its election to assume the defense thereof, the Sponsor
shall not be liable to the Indemnified Party under this Section 9.02 for any
legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense of such action; PROVIDED, HOWEVER, that this
sentence shall not be in effect if (1) the Sponsor shall not have employed
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of commencement of the
action, (2) the Sponsor shall have authorized the employment of counsel for the
Indemnified Party at the expense of the Sponsor or (3) in the event any such
claim involves a possible imposition of criminal liability or penalty or a
material civil penalty on such Indemnified Party, a conflict of interest between
such Indemnified Party and the Sponsor or another indemnitee or the granting of
material injunctive relief against such Indemnified Party, and such Indemnified
Party informs the Sponsor that such Indemnified Party desires to be represented
by separate counsel, in which case, the reasonable fees and expenses of such
separate counsel shall be born by the Sponsor. If the Sponsor assumes the
defense of any such proceeding, they shall be entitled to settle such proceeding
without any liability being assessed against any Indemnified Party or, if such
settlement provides for release of any such Indemnified Party without any
liability being assessed against any Indemnified Party in connection with all
matters relating to the proceeding which have been asserted against such
Indemnified Party in such proceeding by the other parties to such settlement,
without the prior written consent of such Indemnified Party, but otherwise only
with the prior written consent of such Indemnified Party.
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Section 9.03. PAYMENTS TO THE OWNER TRUSTEE. Any amounts paid to the Owner
Trustee pursuant to this Article IX shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
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ARTICLE X
TERMINATION OF TRUST AGREEMENT
Section 10.01. TERMINATION OF TRUST AGREEMENT. (a) This Agreement (other
than Article IX) shall terminate and the Trust shall dissolve and be of no
further force or effect on the earlier of: (i) the final payment or other
liquidation of the Mortgage Loans and the disposition of all REO Properties and
the remittance of all funds due hereunder with respect to such Mortgage Loans
and REP Properties after the satisfaction and discharge of the Indenture
pursuant to Section 4.01 of the Indenture; and (ii) the expiration of 21 years
from the death of the last survivor of descendants of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the
late ambassador of the United States to the Court of St. ▇▇▇▇▇). The bankruptcy,
liquidation, dissolution, death or incapacity of the any Certificateholder or
the Sponsor shall not (x) operate to terminate this Agreement or the Trust, nor
(y) entitle Certificateholders' or the Sponsor's legal representatives or heirs
to claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Owner Trust Estate
nor (z) otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Except as provided in Section 10.01(a) above, none of the Sponsor,
the Master Servicer, the Backup Servicer, the Note Insurer nor the
Certificateholders shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Indenture Trustee for payment of the final distributions and cancellation, shall
be given by the Owner Trustee to the Certificateholders, the Note Insurer, the
Rating Agencies and the Indenture Trustee mailed within five (5) Business Days
of receipt by the Owner Trustee from the Master Servicer of notice of such
termination, which notice given by the Owner Trustee shall state (i) the Payment
Date upon or with respect to which final payment of the Certificates shall be
made upon presentation and surrender of the Certificates at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Indenture Trustee therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of Certificates, subject to
Section 3808 of the Business Trust Statute, amounts distributable on such
Payment Date pursuant to the terms of the Indenture.
(d) In the event that Certificateholders shall not surrender their
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Owner Trustee shall give a second written
notice to Certificateholders to surrender the Certificates for cancellation and
receive the final distribution with respect thereto. If within one year after
the second notice the Ownership Interest shall not have been surrendered for
cancellation, the Owner Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of the Certificates, and the cost thereof shall be paid out
of the funds and other assets that shall remain
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subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Indenture Trustee to the
Certificateholders.
(e) Upon the winding up of the Trust in accordance with Section 3808 of
the Business Trust Statute and its termination, the Owner Trustee shall cause
the Certificate of Trust to be canceled by filing a certificate of cancellation
with the Secretary of State in accordance with the provisions of Section 3810 of
the Business Trust Statute.
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ARTICLE XI
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 11.01. ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation or banking association satisfying
the provisions of Section 3807(a) of the Business Trust Statute; authorized to
exercise trust powers; having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or state
authorities; and having (or having a parent that has) a rating of at least
"Baa3" by ▇▇▇▇▇'▇ and "A-1" by S&P (or otherwise acceptable to the Rating
Agencies) and being acceptable to the Note Insurer. If such entity shall publish
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purpose of
this Section 11.01, the combined capital and surplus of such entity shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Owner Trustee shall
cease to be eligible in accordance with the provisions of this Section 11.01,
the Owner Trustee shall resign immediately in the manner and with the effect
specified in Section 11.02.
Section 11.02. RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner Trustee
may at any time resign and be discharged from the trusts hereby created by
giving written notice thereof to the Trust, the Sponsor, the Master Servicer,
the Backup Servicer, the Indenture Trustee and the Note Insurer. Upon receiving
such notice of resignation, the Note Insurer may (and, if the Note Insurer fails
to do so, the Sponsor shall promptly) appoint a successor Owner Trustee
(acceptable to the Note Insurer) by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Owner Trustee and one
copy to the successor Owner Trustee. If no successor Owner Trustee shall have
been so appointed and have accepted appointment within thirty (30) days after
the giving of such notice of resignation, the resigning Owner Trustee or the
Note Insurer may petition any court of competent jurisdiction for the
appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 11.01 and shall fail to resign after
written request therefor by the Certificateholders or the Sponsor, or if at any
time the Owner Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Owner Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Owner Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Note Insurer, or the Certificateholders or
the Sponsor with the written consent of the Note Insurer, may remove the Owner
Trustee. If the Certificateholders or the Sponsor or the Note Insurer shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Note Insurer, or the Sponsor with the written consent of the Note
Insurer, shall promptly appoint a successor Owner Trustee by written instrument
in duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee and payment
of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of
a successor Owner Trustee pursuant to any of the provisions of this Section
11.02 shall not become effective until acceptance of appointment by the
successor Owner Trustee pursuant to Section 11.03,
40
written approval by the Note Insurer and payment of all fees and expenses owed
to the outgoing Owner Trustee. The Master Servicer shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies, the
Indenture Trustee and the Note Insurer.
Section 11.03. SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 11.02 shall execute, acknowledge and deliver to
the Trust, the Sponsor, the Indenture Trustee, the Note Insurer and to its
predecessor Owner Trustee an instrument accepting such appointment under this
Agreement, and thereupon, subject to the payment of all fees and expenses owed
to the outgoing Owner Trustee, the resignation or removal of the predecessor
Owner Trustee shall become effective and such successor Owner Trustee (if
acceptable to the Note Insurer), without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties, and obligations
of its predecessor under this Agreement, with like effect as if originally named
as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees
and expenses deliver to the successor Owner Trustee all documents and statements
and moneys held by it under this Agreement; and the Sponsor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties, and
obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 11.01.
Upon acceptance of appointment by a successor Owner Trustee
pursuant to this Section 11.03, the Sponsor shall mail notice of the successor
of such Owner Trustee to the Certificateholders, the Indenture Trustee, the
Noteholders, the Note Insurer and the Rating Agencies. If the Sponsor fails to
mail such notice within ten (10) days after acceptance of appointment by the
successor Owner Trustee, the successor Owner Trustee shall cause such notice to
be mailed at the expense of the Sponsor.
Any successor Owner Trustee appointed pursuant to this Section
11.03 shall file an amendment to the Certificate of Trust with the Secretary of
State identifying the name and principal place of business of such successor
Owner Trustee in the State of Delaware.
Section 11.04. MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any corporation or
banking association into which the Owner Trustee may be merged or converted or
with which it may be consolidated or any corporation or banking association
resulting from any merger, conversion or consolidation to which the Owner
Trustee shall be a party, or any corporation or banking association succeeding
to all or substantially all of the corporate trust business of the Owner
Trustee, shall be the successor of the Owner Trustee hereunder, provided such
corporation or banking association shall be eligible pursuant to Section 11.01,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, except the filing of an amendment to the
Certificate of Trust, if appropriate, anything herein to the contrary
notwithstanding; PROVIDED, FURTHER, that the Owner Trustee shall mail notice of
such merger, conversion or consolidation to the Rating Agencies and; PROVIDED,
FURTHER, that the Owner Trustee shall file an amendment to the Certificate of
Trust as required under Section 11.03 above.
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Section 11.05. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Owner Trust Estate or any Mortgaged Property may at the
time be located, and for the purpose of performing certain duties and
obligations of the Owner Trustee with respect to the Trust and the Certificates,
the Owner Trustee shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and
acceptable to the Note Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
Owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 11.05, such powers, duties, obligations, rights and trusts as the Note
Insurer and the Owner Trustee may consider necessary or desirable. No co-trustee
or separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 11.01 and no notice of
the appointment of any co-trustee or separate trustee shall be required pursuant
to Section 11.03.
(b) Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provision and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Owner Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed, the Owner Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties, and obligations (including the holding of title to
the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Owner Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to the separate trustees and co-trustees, as
if given to each of them. Every instrument appointing any separate trustee or
co-trustee, other than this Agreement, shall refer to this Agreement and to the
conditions of this Article XI. Each separate trustee and co-trustee, upon its
acceptance of appointment, shall be vested with the estates specified in its
instrument of appointment, either jointly with the Owner Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Owner Trustee.
Each such instrument shall be filed with the Owner Trustee.
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(d) Any separate trustee or co-trustee may at any time appoint the
Owner Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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ARTICLE XII
MISCELLANEOUS
Section 12.01. SUPPLEMENTS AND AMENDMENTS. This Agreement may be amended by
the Sponsor and the Owner Trustee, with the prior written consent of the Note
Insurer, and with prior written notice to the Rating Agencies, but without the
consent of any of the Noteholders, the Certificateholders or the Indenture
Trustee, to cure any ambiguity, to correct or supplement any provisions in this
Agreement or for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions in this Agreement or of modifying in
any manner the rights of the Noteholders or the Certificateholders; PROVIDED,
HOWEVER, such action shall not adversely affect in any material respect the
interests of any Noteholder or Certificateholder. An amendment described above
shall be deemed not to adversely affect in any material respect the interests of
any Noteholder if the party requesting the amendment satisfies the Rating Agency
Condition with respect to such amendment.
This Agreement may also be amended from time to time by the Sponsor
and the Owner Trustee, with the prior written consent of the Rating Agencies and
with the prior written consent of the Indenture Trustee, the Note Insurer, the
Noteholders evidencing more than 50% of the Note Principal Balance of the
Outstanding Notes of all of the Classes and the Certificateholders evidencing
more than 50% of the Percentage Interests of the Trust, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; PROVIDED, HOWEVER, no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the Mortgage Loans or distributions
that shall be required to be made for the benefit of the Noteholders, the
Certificateholders or the Note Insurer, (b) reduce the aforesaid percentage of
the Outstanding Principal Balance of the Notes or the Percentage Interests
required to consent to any such amendment, in either case of clause (a) or (b)
without the consent of the holders of all the outstanding Notes, the Note
Insurer and the Certificateholders of all the outstanding Certificates.
Promptly after the execution of any such amendment or consent, the
Sponsor shall furnish written notification of the substance of such amendment or
consent to the Certificateholders, the Indenture Trustee, the Note Insurer and
each of the Rating Agencies.
It shall not be necessary for the consent of the
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
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Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent have
been met. The Owner Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Agreement or otherwise.
Section 12.02. NO LEGAL TITLE TO OWNER TRUST ESTATE IN CERTIFICATEHOLDERS.
The Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided beneficial ownership interest therein only in
accordance with Articles VI and X. No transfer, by operation of law or
otherwise, of any right, title, or interest of the Certificateholders to and in
their ownership interest in the Owner Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.
Section 12.03. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Sponsor, the
Certificateholders, the Note Insurer and, to the extent expressly provided
herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Owner Trust Estate
or under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
Section 12.04. NOTICES. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all communications provided for or permitted
hereunder shall be in writing and shall be deemed to have been given if (1)
personally delivered, (2) upon receipt by the intended recipient or three
Business Days after mailing if mailed by certified mail, postage prepaid (except
that notice to the Owner Trustee shall be deemed given only upon actual receipt
by the Owner Trustee), (3) sent by express courier delivery service and received
by the intended recipient or (4) except with respect to notices sent to the
Owner Trustee, transmitted by telex or facsimile transmission (or any other type
of electronic transmission agreed upon by the parties and confirmed by a writing
delivered by any of the means described in (1), (2) or (3), at the following
addresses: (i) if to the Owner Trustee, at its Corporate Trust Office; (ii) if
to the Sponsor, Accredited Home Lenders, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel, telecopy: (858)
676-2170; and (iii) if to the Note Insurer, Ambac Assurance Corporation, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, Attention: Accredited Mortgage
Loan Trust 2002-1, telecopy: (▇▇▇) ▇▇▇-▇▇▇▇; or, as to each such party, at such
other address as shall be designated by such party in a written notice to each
other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
45
Section 12.05. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 12.06. SEPARATE COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 12.07. SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Sponsor, the Note Insurer, the Owner Trustee and its successors and each
Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.
Section 12.08. NO PETITION. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the Sponsor
or the Trust, or join in any institution against the Sponsor or the Trust of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy law in connection with any obligations relating to the Certificates,
the Notes, this Agreement or any of the other Basic Documents.
This Section 12.08 will survive for one year and one day following
the termination of this Agreement.
Section 12.09. NO RECOURSE. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificate represents a
beneficial interest in the Trust only and does not represent an interest in or
an obligation of the Master Servicer, the Backup Servicer, the Sponsor, the
Owner Trustee or any Affiliate thereof and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated in
this Agreement, the Certificates or the other Basic Documents.
Section 12.10. HEADINGS. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 12.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.12. GRANT OF CERTIFICATEHOLDER RIGHTS TO NOTE INSURER. (a) In
consideration for the issuance of the Certificates and for the guarantee of the
Notes by the Note Insurer pursuant to the Note Insurance Policy, the
Certificateholders hereby grant to the Note Insurer the right to act
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as the holder of 100% of the outstanding Certificates for the purpose of
exercising the rights hereunder of the Certificateholders under this Agreement
without the consent of the Certificateholders, including the voting rights of
such Certificateholders hereunder, but excluding those rights requiring the
consent of all such Certificateholders, and any rights of such
Certificateholders to distributions under the Indenture; PROVIDED, that the
preceding grant of rights to the Note Insurer by the Certificateholders shall be
subject to Section 12.14.
(b) [Reserved].
(c) The duties and responsibilities of the Owner Trustee shall be
limited to those expressly provided for in this Agreement. The parties hereto
agree that except for purposes of the foregoing sentence, the Owner Trustee
shall have no management responsibilities or owe any fiduciary duties to the
Note Insurer (or the Noteholders in the event they succeed to the Note Insurer's
rights).
(d) Whenever in connection with its performance under this Agreement
the Owner Trustee receives inconsistent notices or advice from the Note Insurer
and the Certificateholders, the Owner Trustee shall, in the absence of a Note
Insurer Default, take the action required by the notices or advice received from
the Note Insurer.
Section 12.13. THIRD-PARTY BENEFICIARY. The Indenture Trustee and the Note
Insurer are intended third-party beneficiaries of this Agreement, and this
Agreement shall be binding upon and inure to the benefit of the Indenture
Trustee and the Note Insurer; PROVIDED, that, notwithstanding the foregoing, for
so long as a Note Insurer Default is continuing with respect to its obligations
under the Note Insurance Policy, the Certificateholders shall succeed to the
Note Insurer's rights hereunder. Without limiting the generality of the
foregoing, all covenants and agreements in this Agreement that expressly confer
rights upon the Note Insurer shall be for the benefit of and run directly to the
Note Insurer, and the Note Insurer shall be entitled to rely on and enforce such
covenants to the same extent as if it were a party to this Agreement.
Section 12.14. SUSPENSION AND TERMINATION OF NOTE INSURER'S RIGHTS. During
the continuation of a Note Insurer Default, rights granted or reserved to the
Note Insurer hereunder shall vest instead in the Certificateholders; PROVIDED,
that the Note Insurer shall be entitled to any distributions of reimbursements
as set forth in the Indenture and the Insurance Agreement and the Note Insurer
shall retain those rights under Section 12.01 to consent to any amendment of
this Agreement.
At such time as either (i) the outstanding Note Principal Balance
of the Notes has been reduced to zero or (ii) the Note Insurance Policy has been
terminated and in either case of (i) or (ii) the Note Insurer has been
reimbursed for all amounts owed under the Note Insurance Policy and the
Insurance Agreement (and the Note Insurer no longer has any obligation under the
Note Insurance Policy). Then the rights and benefits granted or reserved to the
Note Insurer hereunder (including the rights to direct certain actions and
receive certain notices) shall terminate and the Certificateholders shall be
entitled to the exercise of such rights and to receive such benefits of the Note
Insurer following such termination to the extent that such rights and benefits
are applicable to the Certificateholders.
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Section 12.15. MASTER SERVICER. The Master Servicer is authorized to
prepare, or cause to be prepared, execute and deliver on behalf of the Trust all
such documents, reports, filings, instruments, certificates and opinions as it
shall be the duty of the Trust, the Sponsor or Owner Trustee to prepare, file or
deliver pursuant to the Basic Documents. Upon written request, the Owner Trustee
shall execute and deliver to the Master Servicer a limited power of attorney
appointing the Master Servicer the Trust's agent and attorney-in-fact to
prepare, or cause to be prepared, execute and deliver all such documents,
reports, filings, instruments, certificates and opinions.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
ACCREDITED HOME LENDERS, INC.,
as Sponsor
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President
U.S. BANK TRUST, NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Child
----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. Child
Title: Vice President
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